For Aereo, a Failure of Innovation Through Litigation

For Aereo, a Failure of Innovation Through Litigation Diego M. Radzinschi Aereo founder and CEO Chet Kanojia.

Lawyers like to brag about coming to their clients’ rescue in “bet-the-company” cases. And for the country’s top litigators, often it’s a fair boast.

Then there’s Aereo Inc., which both epitomized bet-the-company litigation and turned the formula inside out. Aereo’s lawyers weren’t rescuers as much as expert midwives, called on to ensure the company’s viability in the courts before there was even a proven market for its services. And on Wednesday, at the U.S. Supreme Court, Aereo lost the bet.

By a 6-3 majority, the justices rejected Aereo’s clever but tortured strategy for streaming unlicensed television content to paying subscribers without running afoul of copyright law. Justice Stephen Breyer was careful to insist that the court’s ruling won’t disrupt online innovation, but for Aereo it probably means the end of the line. (Read more on the decision from The National Law Journal.)

As we’ve detailed, Aereo designed its business model and its core technology around a reading of copyright law that was not only risky, but certain to invite existential challenges from the country’s top media companies. Using a system that one skeptical judge called “a Rube Goldberg-like contrivance,” Aereo parcels out the use of itsy-bitsy antennas to its subscribers, who use them to stream and record television content on their favored devices. By relying on individually assigned antennas instead of a few big ones to capture network TV content, Aereo’s lawyers hoped to take advantage of—and expand on—a bit of favorable precedent on what it means to “publicly perform” copyrighted work in the digital age.

To the credit of Aereo’s lawyers, the strategy paid off in the all-important New York market, where the courts served as a petri dish for the company’s experiment. In 2012 we named R. David Hosp of Goodwin Procter (now at Fish & Richardson) and Michael Elkin of Winston & Strawn Litigators of the Week for persuading a district court judge not to enjoin Aereo’s service. The Second Circuit affirmed in April 2013, handing a huge win to Hosp and Elkin and cocounsel Seth Greenstein of Constantine Cannon.

Of course, the Supreme Court was always going to be the big test. And there Aereo’s lawyers—led by counsel of record David Frederick of Kellogg, Huber, Hansen, Todd, Evans & Figel—came up two votes short. The majority sided with Bancroft’s Paul Clement, who represented the broadcasters suing Aereo for infringement, and with the powerful amici who argued that Aereo’s business undermines Congress’s intent to protect copyright-holders.

It’s easy to see why Aereo terrified the broadcasters, and why the company’s story was irresistible to IP lawyers, technology writers and cable cord-cutters. Aereo’s founder, Chet Kanojia, called Wednesday’s decision a “massive setback for consumers” and vowed to keep fighting. And the company’s lawyers? They had a great run, and an enviable assignment that meant helping to create a company and trying to save it at the same time. But on this particular front in the content wars, the battle’s over.

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