A startup company trying to defend the legality of how it sends live TV programming to laptop computers, iPhones and other mobile devices encountered a skeptical appeals court panel on Friday.
Three judges of the 2nd U.S. Circuit Court of Appeals seemed poised to reverse a lower court judge who in July reluctantly gave a thumbs-up to the company, Aereo Inc. The decision by Judge Alison Nathan was appealed by broadcasters including Fox, ABC, CBS, NBC and others, who say Aereo without permission copies and retransmits their programs as they are first aired.
Broadcasters have said expansion of a business like Aereo could threaten the free broadcasting of events such as the Super Bowl.
At times, the appeals judges appeared to belittle the company's business model during an hour of arguments as they challenged its claims that individual dime-size antennas dedicated to each of its customers in the New York market give clients control over copies of programs and eliminate the need to pay licensing fees to content creators.
"The reason you have all of these tiny antennas is, in your view, a belt and suspenders approach (to avoiding copyright violations?" Judge John Gleeson asked.
"Is there a legitimate business reason for having all these little itty bitty antennas?" Judge Denny Chin asked.
Aereo attorney R. David Hosp responded: "The reason is to comply with the copyright act."
Hosp insisted the company went out of its way to comply with copyright laws as it provided a legal, alternate platform for free TV broadcasts. He accused broadcasters of trying to "punish us for following the law." He argued that the company lets users rent remotely located antennas to access content they could receive for free by installing the same equipment at home.
Gleeson questioned whether Aereo's business model is similar to "constructing a business to avoid taxes."
Aereo, to support its claim, urged the judges to look at a cable company case in which the 2nd Circuit in 2008 ruled that Cablevision Systems Corp. did not need a separate license with broadcasters to let customers store programs on a digital video recorder. The ruling upheld a lower-court decision by Chin before he was appointed to the 2nd Circuit.
Chin said the Aereo case was different because a cable company has an ongoing business relationship regardless of a customer's use of a DVR.
Lawyers for broadcasters said the Aereo case also was different because programs on a cable company's digital recorders are not watched as they are first aired.
"It's a retransmission service, plain and simple," broadcasters' attorney Bruce Keller said of Aereo. "Super Bowl comes in, Super Bowl goes out, all within seconds."
Another lawyer for the broadcasters, Paul Smith, told the appeals panel that Aereo was trying to take the Cablevision court case and turn it "into a complete carte blanche where people can violate copyrights."
Aereo has grown from 100 users to more than 3,500 in the last year and has expanded from Apple devices such as the iPhone and iPad to devices including Windows computers. It lets customers capture broadcasts from 29 local channels with subscriptions starting at $8 a month.
The appeals court did not immediately rule.