Aereo loses appeal to be recognized as cable operator

After a Supreme Court ruling, the streaming TV service changed its licensing model in an attempt to stay in business.

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Steven Musil
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Aereo's fight for survival was dealt a setback on Thursday when a federal court rejected the streaming television service's argument that it should be recognized as a cable-TV service.

The shuttered company, which the Supreme Court said in June was illegally retransmitting broadcast TV over the Internet, will have to take its case to a federal district court to continue its cable-TV defence, the US Circuit Court of Appeals ruled Thursday. Aereo, a startup that operated in 11 US cities, used arrays of tiny, individual antennas to pick up free over-the-air television and then stream that programming to paying customers.

In a victory to the broadcasters suing to shut down Aereo, the Supreme Court concluded that the streaming TV service was fundamentally the same as a cable company but doesn't pay broadcasters the same fees cable companies must, a violation of the Copyright Act. (CBS, the parent company of CNET, is one of the broadcasters suing Aereo.)

The company responded at the time by changing its legal argument, switching from zero licensing model to a type known as a statutory license, a royalty system set up in the Copyright Act of 1976 that allows cable systems to retransmit copyrighted programming by paying royalty fees with the Licensing Division of the US Copyright Office. The change would allow Aereo to pay its way and resume retransmissions without broadcasters' approval.

The case was returned to the Second Court of Appeals, which previously rejected a preliminary injunction to stop Aereo, following the Supreme Court's reversal two months ago. In response to the ruling, Aereo announced it would "pause" operations as it figures out its next move, adding that the company's "journey is far from done."

Aereo appealed the injunction to the Second Court of Appeals for further consideration of whether it was a cable company entitled to statutory license. The court denied that request in a brief ruling Thursday.

"We leave it to the district court to consider whether the issues are properly raised in these cases and, if so, to rule on the issues in the first instance," the court said in its two-page ruling.

An Aereo spokeswoman declined to comment on the ruling.

CNET's Joan E. Solsman contributed to this report.