NEW YORK — An Internet company offering inexpensive live broadcast television feeds to computers, tablets, and smartphones doesn’t violate US copyright law, a divided federal appeals court said Monday.
The 2-to-1 ruling by the Second US Circuit Court of Appeals cleared the way for Aereo Inc.’s expansion of its $8-a-month service, which had been limited to New York City until this year. Several weeks ago, the company expanded to New York City suburbs, including New Jersey and parts of Connecticut, and it has announced plans to expand to Boston, Chicago, Philadelphia, Washington, and 18 other US markets later this year.
Broadcasters including Fox, ABC, CBS, NBC, and others had sued, saying Aereo copies and retransmits their programs without permission.
The ruling came in a preliminary stage of the case in federal court in Manhattan. More evidence must be presented to a lower court judge before she issues a final decision. Other legal challenges have been filed elsewhere against a budding industry that stands to challenge the dominance of cable or satellite companies that offer their licensed programming to consumers.
Aereo positions itself as a cheaper alternative to cable and satellite, though it offers far fewer channels, since it is only retransmitting the broadcast networks freely available to anyone with an antenna. (The exception is Bloomberg TV, the financial news channel that reached a deal with Aereo.)
In a majority opinion, the appeals court said Aero does not appear to violate copyright law because subscribers are assigned to their own tiny antennas at Aereo’s Brooklyn data center.
Broadcasters have said in court documents that allowing Aereo to proceed without licenses could threaten the ability of broadcasters to produce marquee sports or awards show events, including the Academy Awards and the Grammys. They also say cable and satellite operators may decide to adopt Aereo’s technology or cause revenues from those paying licensing fees to decline because the content is devalued. And they say Aereo’s success would hurt their ability to license content on an on-demand basis over the Internet.
In a majority opinion written by Judge Christopher F. Droney, the appeals court said the Barry Diller-backed Internet company does not appear to violate copyright law because subscribers are assigned to their own tiny antennas at Aereo’s Brooklyn data center. The antennas grab free over-the-air broadcasts, and Aereo streams the video to subscribers over the Internet.
In a forcefully written dissent, Judge Denny Chin said Aereo violates the Copyright Act and called the company’s individual tiny antennas a ‘‘sham.’’ He said the company’s system was a ‘‘Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.’’
Dennis Wharton, executive vice president of the National Association of Broadcasters in Washington, said the group was disappointed.
‘‘We agree with Judge Chin’s vigorous dissent and, along with our members, will be evaluating the opinions and options going forward,’’ he said.
CBS 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.’’
Aereo CEO Chet Kanojia said he was grateful for the ruling, which he said ‘‘validates that Aereo’s technology falls squarely within the law.’’