Television broadcasters and online-video startup Aereo Inc. will square off at the U.S. Supreme Court on Tuesday in a battle over copyright law that could shake up the industry.
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Aereo is aiming to become an increasing player in the market for consumers who want an Internet-based alternative to cable television. The company's service allows its subscribers to stream their local over-the-air broadcasts to an array of electronic devices, along with the functionality to record shows and watch them later.
The broadcasters, including Walt Disney Co.'s ABC, Comcast Corp.'s NBC, CBS Corp. and 21st Century Fox Inc., are aiming to sink Aereo, saying the service is operating illegally by engaging in wide-scale, unauthorized exploitation of their copyrighted programming without paying for it.
(Until June of last year, 21st Century Fox and Wall Street Journal parent News Corp were part of the same company.)
The high court will hear oral arguments Tuesday morning on whether the Aereo service violates the broadcasters' exclusive rights under federal copyright law to the public performance of their works.
In the run-up to the arguments, the broadcasters argued in written briefs that there is "no serious dispute" that Aereo is retransmitting their programming to the public. The startup, they said, was seeking to take advantage of a potential technical loophole in the law. Congress wanted the law to be flexible enough to protect copyrighted works even in the face of new technological advances, the broadcasters argued.
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Broadcasters are worried that if the court finds Aereo legal, it could undercut the billions of dollars in revenue the networks receive from cable and satellite companies, which pay to retransmit the networks' programming.
Aereo says it is undisputed that broadcasters' content is delivered free over the airwaves and consumers have a right to make their own personal recordings of broadcasts. The company says its service is the functional equivalent of what a consumer has the legal right to do with home-based equipment, only it is cheaper and more efficient. The company has done little marketing so far and the Supreme Court case could provide it with a publicity boost if it prevails.
Aereo argues that copyright laws aren't intended to discourage new technologies. The broadcasters' lawsuit "looks suspiciously like an attempt to extend their monopoly," the company said in its written arguments.
The Aereo service, currently available in 11 cities, relies on thousands of dime-size antennas that are assigned to individual subscribers who log on to watch and record local broadcasts.
In a bid to avoid problems under U.S. copyright law, Aereo designed its system so that no two customers share the same antenna or digital recording, a setup that means the service isn't a public transmission, the company says. Aereo modeled its technology after a 2008 ruling by the New York-based U.S. Second Circuit Court of Appeals that upheld the legality of a Cablevision Systems Corp. remote-storage digital video recorder.
A divided U.S. appeals court in New York refused to shut down Aereo last year.
The Supreme Court has heard from a wide range of interested parties that weighed in on the case. Movie and television producers, professional sports leagues and groups representing authors, composers and publishers all filed briefs supporting the networks. The Obama administration also sided with the broadcasters, a position that could carry weight with the court.
Consumer groups are among those backing Aereo, saying broadcasters have unreasonably restricted viewers' options for how to watch programming.
Groups representing software and computer makers, meanwhile, filed briefs urging the court to be careful that any ruling on Aereo's cloud-based service not threaten the broader cloud-computing industry.
A high-court decision is expected by the end of June.