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Supreme Court Will Decide Whether Tech Co. Is Selling Pirated IP or ‘Antenna Rental’

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Communication_antennaIt doesn’t look like much. But a tiny piece of metal about the size of a nickel and shaped like the letter “W” has roused the anger of the broadcast television industry and landed its creators before the Supreme Court of the United States.

The broadcast industry is expressing its ire through a lawsuit seeking injunctive relief against Aereo, a New York-based technology company that launched in 2012. Aereo has placed servers containing thousands of those tiny, W-shaped antennas at facilities in 11 of the country’s largest metropolitan areas. The broadcast industry says that Aereo is using that army of antennas to steal and resell the intellectual property to which it has exclusive broadcast rights.

For $8 a month, Aereo customers in one of the company’s 11 coverage areas can receive a video stream of any broadcast television signal in their area, delivered to devices including a smartphone, tablet, laptop or television set. Those customers optionally may record programs on a cloud-based virtual DVR, in a service similar to that offered by many cable companies.

Aereo argues, in essence, that it is not distributing content but rather that it is renting antennas and DVRs to its customers, who connect their devices through an Internet connection rather than physical cables connected to a television set. The signals picked up by Aereo’s aerials are available for free to anyone with a television antenna; according to Aereo, the fact that its customers are watching the signal’s output on a remote device, miles away from the antenna, is irrelevant. This is the argument that successfully swayed two members of a three judge panel on a federal appeals court in 2013.

The Supreme Court case, ably dissected by Fortune magazine legal editor and former attorney Roger Parloff, is likely to hinge on whether the justices believe that Aereo’s services constitute a “public performance” of the broadcasted content.

Suppose for a moment that Aereo’s equipment comprised a single antenna, and that all its customers’ video streams originated from TV tuners connected to that single antenna. Though technically feasible, that shared setup would immediately run afoul of broadcast laws. Any time more than one Aereo customer watched the same channel, Aereo would be hosting a “public performance” of that broadcast content. A cable company can share a single antenna to provide broadcast content to its own subscribers, but since Congress passed the Copyright Act of 1976, those companies have paid the broadcasters billions in retransmission fees for the privilege of doing so.

Because each of Aereo’s subscribers is connecting to a video stream fed by its own exclusive antenna, though, every “performance” of a program is technically private, seen only by the single Aereo subscriber currently connected to that antenna. 

Notably, Aereo does not allow customers in, say, Detroit’s broadcast area to subscribe to channels received by its Miami facility. There’s no technical reason why they couldn’t, but doing so would immediately call into question the company’s claim that it is merely renting access to cloud-based antennas. For comparison, assuming you could still find a dusty pair of “rabbit ear” antennas for sale at your local electronics box retailer, you couldn’t plug them into your television in Dallas and receive a CBS affiliate in New York City.

Aereo’s efforts to artificially give its cloud-based antenna service some of the constraints of a physical television antenna didn’t impress all the Supreme Court justices during oral arguments in April. Justices Ruth Bader Ginsberg, John Roberts, Jr., and Antonin Scalia all asked whether there was any business reason – aside from evading the letter of the Copyright Act of 1976 – for Aereo to deploy thousands of antennas in each city, rather than just one. In doing so, they seemed to echo Denny Chin, the dissenting appeals court judge in the April 2013 ruling, who called Aereo’s service “a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act.”

A ruling in the case is expected in June. Pundits are generally betting against Aereo, but if the same argument that swayed the lower courts also sways the Supreme Court, it seems only a matter of time before cable companies start cribbing from Aereo’s technology playbook while broadcast industry lobbyists pressure Congress to close “the Aereo exception” in copyright law.