- - Thursday, June 26, 2014

The U.S. Supreme Court on Wednesday may have dashed the hopes of Americans trying to find an inexpensive alternative to cable TV by ruling that video-streaming service Aereo Inc. violated copyright law in allowing its users to capture and view broadcast television content on portable devices.

The 6-3 ruling in American Broadcasting Cos. v. Aereo Inc. is a setback to Internet streaming companies and a key victory for television broadcasters such as CBS, NBC and Fox, which faced long-term financial consequences had the court ruled against ABC.

“I think if Aereo had been my client, it would have been a very difficult case to make,” said Paul Jorgensen, a copyright and trademark attorney in Washington, D.C. “The lower court may have come out in favor of Aereo, but the Supreme Court got bothered by two elements:

“First, there is a commercial element, where Aereo is making money, and second, the court didn’t buy the argument that an individual accessing the content doesn’t make it any less of a public performance … You can get this service to order up a pre-recorded program. It isn’t streaming ‘live’ from the networks like the old rabbit-ear antennas the justices on the court remember. It is something more personalized.”

CBS shares closed 6.2 percent higher after Wednesday afternoon, and network CEO Leslie Moonves told CNBC that the ruling was a “terrific victory for anybody who’s involved in the content business.”

Although the ruling is widely seen as a victory for cable television, legal experts say it does not take Aereo or video streaming completely out of the game, but rather holds them to the same standards as the television broadcasters and cable companies they compete against.

“Contrary to critics, it is important to note that this decision does not make Aereo or its technology illegal,” said Mark Schultz, co-director of the Center for the Protection of Intellectual Property at the George Mason School of Law. “Instead, it simply confirms that copyright owners and broadcasters continue to have the right to decide how their property is used and sold by commercial resellers.

“In other words, Aereo must play by the rules just like everybody else does — cable systems, Netflix, and broadcasters themselves. Among other things, they need to pay in the first place for what they are re-selling to consumers.”

The three conservative justices who dissented view it differently, however.

Justices Antonin Scalia, Clarence Thomas and Samuel Alito compared Aereo to a “copy shop that provides its patrons with a library card.”

Justice Scalia admitted that although he had the “evident feeling” that Aereo’s services “ought not to be allowed,” he still believed the majority misinterpreted copyright law, and that Congress should have the opportunity to develop a legislative alternative as opposed to “the crude looks-like-cable-TV solution the court invents.”

Reports indicate that the ruling will save broadcasters roughly $3 billion in transmission fees they receive from cable and TV satellite companies, and it will help professional sports leagues such as the National Football League avoid moving their broadcasts to cable TV.

Mr. Schultz said that Aereo’s system was a case of legal engineering rather than technical innovation, as it is hard to see any purpose for its design beyond exploiting perceived loopholes in the law.

One appellate judge who concurred with that viewpoint in an earlier decision described the Aereo system as a “Rube Goldberg-like contrivance” that redefined the rights of copyright owners in a technologically neutral way the result of which superseded Congress’ intent under the 1976 Copyright Act.

Still, Mr. Schultz believes the decision will be a boon, not a threat, to innovation.

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