Another court has upheld Aereo’s service to stream broadcast TV. Here’s why that matters.

October 11, 2013

Aereo's service uses thousands of tiny antennas to help it stay within the bounds of copyright law. (Aereo)

A startup that lets users record and play back broadcast television over the Internet scored another legal victory on Tuesday as a Massachusetts court ruled that a broadcaster was unlikely to prove that the service violated its copyright. The ruling is the latest sign of the far-reaching implications of a 2008 court decision that has become the legal cornerstone of the modern cloud-based media services.

In recent years, users have trusted more and more of their data to online services. Rather than storing data on a device in the user's home, "cloud-based" applications like Gmail and Dropbox store users' information on a remote server and provide access to it over the Internet. This approach allows data to be backed up automatically and accessed from any device.

When technology companies have built cloud-based online services focused on music or video content, copyright holders have objected. They argue that the law requires online service providers to get a license from each copyright holder whose content they host.

One of the first such services was a "music locker" service called My.MP3.com that launched in 2000. It allowed users who owned a physical CD to stream a copy of that same CD from MP3.com's servers. The service was forced out of business by a recording industry lawsuit, and few dared to follow in the firm's footsteps.

That changed in 2008. The cable company Cablevision developed a new type of digital video recorder that stored recorded TV shows in a Cablevision server room instead of on a set-top box. TV content producers sued, arguing that the service violated their copyrights. Copyright law might allow individuals to record programs for personal use, the companies argued, but Cablevision can't help them do it unless they have permission from broadcasters.

When the case reached the U.S. Court of Appeals for the Second Circuit, the broadcasters lost. The recordings might be stored in Cablevision's data centers, the court ruled, but for purposes of copyright law, the copies had been made by customers, not by Cablevision. Since Cablevision wasn't making any copies, it didn't need to get broadcasters' permission.

That ruling has proved to have far-reaching implications. Within three years Google and Amazon had announced cloud music services that provided functionality like MP3.com had offered a decade earlier. The firms were tight-lipped about their legal justification. But legal experts at the time believed that the Cablevision ruling would feature prominently in their legal defense of their products should they be sued. So far, they haven't been.

The Cablevision precedent was also extended earlier this year after the Fox network sued the satellite TV company Dish over its Hopper DVR. The Hopper offerS a number of features, including automatic commercial-skipping, that antagonized broadcasters. But the Ninth Circuit Court of Appeals followed the Second Circuit's lead, ruling that as far as copyright law was concerned, it was consumers, not Dish, who were recording TV shows.

Aereo may be the most audacious attempt to capitalize on the Cablevision decision. The subscription-based service lets users stream broadcast television programming over the Web, and Aereo doesn't pay broadcasters a dime for the privilege. A key factor in Cablevision's victory was that the company made a separate copy of content for each customer. To ensure it stayed within the bounds of the Cablevision precedent, Aereo built a vast array of tiny antennas so that each user could receive video from a distinct physical antenna.

When Aereo launched in New York, broadcasters sued for copyright infringement. The case was heard in the Second Circuit, the same appeals court that had decided the Cablevision case a few years earlier. The court sided with Aereo, holding that the Aereo service was essentially just a TV tuner with a really, really long cable. The court found that the user, not Aereo, was responsible for copies that were created.

Broadcasters sued again when Aereo expanded to Boston. Boston is in the First Circuit, so the courts there are not obligated to follow the Second Circuit's precedents. But this week, Massachusetts federal judge Nathaniel Gorton sided with Aereo, citing the Second Circuit's Cablevision ruling.

"Holding a media company liable just because it provides technology that enables users to make copies of programming would be the rough equivalent of holding the owner of a copy machine liable because people use the machine to illegally reproduce copyrighted materials," Gorton writes.

But Aereo's victory is not yet assured. Last year a California trial court ruled that FilmOn, an Aereo competitor that uses a similar "tiny antennas" scheme, wasn't protected by the Cablevision precedent. The same firm lost in a Washington D.C. trial court last month. If appeals courts uphold those rulings, it could create a conflict among appellate jurisdictions, a situation that often triggers review by the Supreme Court.

That could have implications well beyond the viability of Aereo's ludicrous "tiny antennas" business model. A growing number of technology companies are building cloud-based businesses based on the Cablevision holding. If the Supreme Court reviews the lower courts' work in this area, it will need to tread carefully to avoid creating uncertainty for other firms that have sprung up to build cloud media services based on the Cablevision ruling.

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Brian Fung | October 11, 2013