By Julian Hattem - 04/22/14 02:27 PM EDT
Supreme Court justices on Tuesday struggled over whether a decision to effectively shut down a tech company offering broadcast content to viewers over the Internet might also have broader, unintended consequences.
Justices overall seemed skeptical that the tech service Aereo should be able to send consumers broadcast TV signals over the Internet without paying broadcasters for the rights.
Those competing concerns could leave justices on a tightrope as they try to determine whether to allow Aereo to keep its business model.
Justice Sonia Sotomayor encapsulated the difficult technical issues facing the court during Tuesday's oral arguments in ABC v. Aereo — a case that could determine the future of how audio-visual content is delivered to viewers, and how they pay for it.
Aereo uses farms of tiny, dime-sized antennas to send broadcast TV programming to people's computers, tablets and other devices for a small monthly fee. The company maintains that it's merely taking a free signal, which people could pick up with an antenna on their roof, and repackaging it.
Sotomayor compared the service to the unlicensed copying of vinyl records.
"It's not logical to me that you could make these millions of copies and essentially sell it to the public," she told Aereo's lawyer.
However, she also said she's worried that the court could set an overly broad definition so that everyone from the coaxial cable salesman on up would be forced to pay broadcasters licensing fees.
"This is really hard for me," she said.
Other justices indicated that they too will need to carefully weigh the effect of a ruling on companies other than Aereo. Justice Samuel Alito, who originally recused himself from the case but reversed that decision last week, said he needed to "understand, I think, what effect it will have on other technologies."
"I'm still uncertain that I understand it well enough," added Justice Stephen Breyer, who is considered friendlier to new technology.
"That isn't your problem, but it may turn out to be," he told the Aereo lawyer.
The legal question before the justices was whether Aereo's service amounts to a "public performance" under copyright law. If they decide it is, that could spell the end of the company's business model.
David Frederick, Aereo's lawyer, argued that the company merely allows users to rent the use of the mini antennas and was not providing any continual service, like cable or satellite companies.
"Aereo is an equipment provider," he said. "There's no content being provided. There's equipment being provided."
The Second Court of Appeals sided with Aereo last year, but the lone dissenting judge in that case claimed that the company used a "Rube Goldberg-like contrivance" to use a series of miniature antennas instead of one big one, which would unquestionably be a violation of the law. The effect is that each Aereo subscriber uses a single, tiny antenna, which the company hopes lets it avoid a finding that it is providing a "public" performance.
Chief Justice John Roberts said the company's infrastructure is a highly technical attempt to avoid the law.
"Your technological model is based solely on circumventing legal prohibitions that you don't want to comply with," he said.
Broadcasters similarly rejected Aereo's description of its service as one that repackages and sells free signals. They say Aereo has more in common with cable and satellite services than an antenna from RadioShack, and that the upstart company should have to obtain licenses to retransmit the programming.
Frederick maintained that the dozens of miniature antennas were necessary for a startup company like Aereo, which is currently only operating in 11 cities. The smaller devices make the infrastructure investment much cheaper than a major antenna, the construction of which would also entail a series of regulatory hoops to jump through, he said.
Part of the tech firm's argument was rooted in a 2008 appeals court decision that allowed the company Cablevision to use remote DVR machines to record TV shows.
In that case, the appeals court ruled that the service allowed people to pick and choose which programs they wanted to watch. Because the individual viewer, not the cable company, was in control, that amounted to a private performance and not a public one.
Justices seemed unwilling to overturn that decision on Tuesday.
Aereo has essentially bet its corporate life on the outcome of the Supreme Court case. The company has said it will shut down if the court says its operations violate the law.
Executives at Fox and CBS have indicated they could decide to end their free over-the-air broadcasts, and instead move to some type of online or paid service, if Aereo wins the case.
Paul Clement, the lawyer arguing on behalf of broadcasters, argued that TV companies would likely try to keep the firm afloat if it really provides a breakthrough technology.
However, "if all they have is a gimmick," he said, "then they probably will go out of business and no one should shed a tear."
Cable companies and other entrepreneurs also likely have their eye on the case. If Aereo is allowed to continue operating, it could herald a wave of copycats trying to avoid paying the expensive broadcaster fees.
But a ruling the other way could impact companies that rely on the cloud to store data, which could devastate a number of Internet businesses.
"The cloud computing industry is freaked out by this case," said Frederick.