Streaming-television service Aereo plans to continue its fight for survival in a lower court, switching to a new legal argument: If the Supreme Court says we're a cable company, we want the cable companies' content license.
"Aereo temporarily suspended its operations...despite the fact that it believes that it can still operate with the terms of the Supreme Court's decision," the company wrote in a court filing with the Second Circuit Court of Appeals Wednesday.
Should Aereo's new strategy advance it to the next stage of its fight, the small startup faces a steep uphill climb. It is embarking on what is likely to be a very long and costly legal battle against some of the biggest and best funded corporations in the world. With its service suspended, Aereo is taking in no revenue while continuing to pay the costs of operating in its scaled-back state. And the startup's most vocal financial backer -- IAC Chairman Barry Diller -- had a bleak outlook immediately after the Supreme Court ruling. "We did try, but it's over now," he told CNBC.
Last month, the Supreme Court decided that Aereo -- a startup that uses arrays of tiny, individual antennas to pick up free over-the-air television and then stream that programming to paying customers -- was essentially the same as a cable provider with two major exceptions: It has different, fancier technology, and it fails to pay the required licensing fees to broadcasters that cable companies must. The latter shortcoming resulted in a 6-3 decision against Aereo on the grounds that it was infringing copyright under its model at the time.
Aereo's response Wednesday was to change its licensing model, switching from zero licensing to a type known as a statutory license. It is a royalty system set up in the Copyright Act of 1976 -- the same act the Supreme Court found Aereo to be violating -- that allows cable systems to retransmit copyrighted programming by paying royalty fees with the Licensing Division of the US Copyright Office.
Working in Aereo's favor, this is what is known as a compulsory license. That means Aereo doesn't need any approval from the broadcasters to pay its way and resume retransmissions. (CBS, the parent company of CNET, is among the broadcasters suing Aereo.)
"If Aereo is a 'cable system' as that term is defined in the Copyright Act, it is eligible for a statutory license, and its transmissions may not be enjoined," the company wrote in its letter to the Second Circuit. It added that it has begun to file the necessary paperwork and royalty fees under the statutory license.
CNET News has requested the broadcasters' response to the letter. The broadcasters Wednesday called the tactic astonishing in its presumption that the Supreme Court ruling against it transformed the company into a cable system, especially given its statements to courts previously that it was not, according to reports.
The decision by the Supreme Court sent the case back to Second Circuit Court of Appeals, where Aereo had initially triumphed over the preliminary injunction the broadcasters sought.
It is in the Second Circuit's hands now to decide whether to issue that preliminary injunction or to allow Aereo the opportunity to keep operating as it pursues this new line of argument to a trial. In the wake of the court's ruling, Aereo temporarily suspended its service.
Before the Supreme Court ruling, the company had more than 100,000 subscribers paying $8 to $12 a month, according to an analyst estimate.
"From the beginning, it has been our mission to build a lawful technology that would provide consumers with more choice and alternatives in how they watch television," Aereo CEO Chet Kanojia said in a statement on Wednesday. "We remain committed to building great technologies that create real, meaningful alternatives for consumers."
Update July 10 at 4:03 am PT:Added further details and background about the case.