A U.S. appeals court on Monday declined to temporarily shut down Aereo Inc, an online television venture backed by billionaire Barry Diller, which broadcasters say is infringing their copyrights.
The 2nd U.S. Circuit Court of Appeals disagreed with the broadcasters, including Walt Disney Co's ABC and Comcast Corp's NBCUniversal, that Aereo should discontinue its service until litigation between the companies is resolved.
Subscribers to Aereo can stream live broadcasts of TV channels on mobile devices using miniature antennas each assigned to one subscriber. The service was launched in March 2012 in the New York area at a cost to subscribers of $12 a month. The company in January announced plans to expand to 22 U.S. cities.
The appeals court, upholding a lower court ruling, concluded that the broadcasters had not shown they were likely to prove their claims of copyright infringement because Aereo's transmissions are "unique copies" and are not "public performances" of the broadcaster's copyrighted works.
One of the ways a party can secure an injunction is to show it is likely to win on the merits of the case.
In a joint statement, News Corp's Fox, the Public Broadcasting Service and its New York station WNET, also plaintiffs in the litigation, called the decision "a loss for the entire creative community."
The "court has ruled that it is OK to steal copyrighted material and retransmit it without compensation," they said.
CBS, another plaintiff, said in a statement, "As the courts continue to consider this case and others like it, we are confident that the rights of content owners will be recognized, and that we will prevail."
An attorney for ABC and NBCUniversal could not immediately be reached for a comment.
Shares of CBS, Comcast, Disney and News Corp were all lower in afternoon trading on Monday. CBS was down 1.8 percent and Comcast was down 1 percent, while News Corp was down 0.6 percent and Disney was down 0.5 percent.
Aereo's chief executive, Chet Kanojia, said in a statement that the appeals court decision "validates that Aereo's technology falls square within the law" and called it "a great thing for consumers" who want more choice about how they watch television.
Attorneys for Aereo told the appeals court at oral arguments last November that the company's technology did not violate the broadcasters' rights. The judges listening to the arguments appeared skeptical, with Judge John Gleeson calling Aereo's method a "belt and suspenders approach" to avoiding copyright law.
Aereo argued that its technology was designed to conform to court precedent, specifically a 2008 2nd Circuit decision in favor of Cablevision Systems Corp for its remote-storage digital video recorder (RS-DVR) system.
Two of the three judges on the appeals court panel that heard the case agreed with Aereo that its system conforms to the Cablevision ruling.
Appeals court Judge Denny Chin dissented, writing that he believes Aereo's transmissions constitute copyright infringement.
Aereo's technology platform is "a sham," Chin wrote, saying there is "no technologically sound reason" to use a multitude of antennas other than to take advantage of "a perceived loophole in the law."
Dennis Wharton, executive vice president of the National Association of Broadcasters, a trade group, said he was disappointed in the decision and noted what he called Chin's "vigorous" dissent.
The cases are CBS Broadcasting Inc., et al v. AEREO, Inc. and WNET, et al v. AEREO, Inc, 2nd U.S. Circuit Court of Appeals, Nos. 12-2807 and 12-2786.