In a setback for ABC and other broadcasters, a federal judge has declined to enjoin a service that streams broadcast channels over the Internet for a monthly fee.

Southern District Judge Alison Nathan (See Profile) refused to grant the preliminary injunction sought by the networks against Aereo, a start-up funded by media mogul Barry Diller. Nathan said she was constrained by the U.S. Court of Appeals for the Second Circuit’s decision in Cartoon Network v. CSC Holdings, 536 F.3d 121 (2d Cir. 2008), known as the Cablevision case.

In Cablevision, the Second Circuit rejected claims of TV and film producers in holding that Cablevision’s remote storage digital recording system did not violate the Copyright Act.

Yesterday in a 52-page decision in American Broadcasting Companies v. Aereo, 12 Civ. 1540 and WNET v. Aereo, 12 Civ. 1543, Nathan turned aside the broadcasters’ arguments that the facts in Aereo distinguished this case from Cablevision.

The ruling follows a May 30 hearing in which CBS executive Martin Franks testified that Aereo would make it impossible for broadcasters to measure viewership for their programs, thus leading to a decline in advertising rates and lost revenue (NYLJ, May 31).

Nathan’s ruling sets up an interlocutory appeal by broadcasters to the Second Circuit.

Aereo was launched in March in New York City. The service grabs over-the-air signals sent from the Empire State Building and directs them to hundreds of tiny “antennas” on a building in Brooklyn.

Customers spend $12 per month to access one of the antennas over the Internet and view programs on computers, iPads or other mobile devices within seconds after the broadcast. They also are able to store recordings for viewing at their leisure.

With several thousand subscribers in New York City already, Diller and his fellow investors argued in court papers and at oral argument that Cablevision was controlling and urged the court to deny the injunction.

The broadcasters said these so-called “antennas” were really one big antenna. They claimed infringement of their public performance rights under 17 U.S.C. §106(4) of the Copyright Act and a contravention of their exclusive rights.

In their memorandum in support of an injunction, the broadcasters stated “Aereo provides a full-fledged transmission service through a system of shared resources that does much more than ‘enable consumers.’”

The unauthorized transmissions, the broadcasters argued, “violate the plain language” of the Transmit Clause in the Copyright Act, which gives plaintiffs the exclusive right to perform their works publicly by “transmitt[ing] or otherwise communicat[ing] a performance or display of the work…to the public by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times,” 17 U.S.C. §101.

Aereo, however, maintains that it does no more than provide the platform for consumers, who do the downloading, making the service no different from a DVR.

That distinction leaves them free from liability for infringement under Cablevision, they said.

“Based on the evidence at this stage of the proceedings,” Nathan said, “the Court finds that Aereo’s antennas function independently.”

At issue in Cablevision was Cablevision’s RS-DVR, which allows customers without a set-top box to record programming on hard drives maintained by the company at a remote location.

Judge John Walker (See Profile), who wrote for the circuit in Cablevision, said, “Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances ‘to the public,’ and therefore do not infringe any exclusive right of public performance” (NYLJ, Aug. 5, 2008).

Nathan, in Aereo, said, “Contrary to Plaintiffs’ arguments, the copies Aereo’s system creates are not materially distinguishable from those in Cablevision, which found that the transmission was made from those copies rather than from the incoming signal.”

She cited “the overall factual similarity of Aereo’s service to Cablevision, a similarity that suggests that Aereo’s service falls within the core of what Cablevision held lawful.”

“Another point of similarity between this case and Cablevision is found in the undercurrent to the Second Circuit’s reasoning suggesting that the Cablevision system merely allowed subscribers to enjoy a service that could be accomplished using any standard DVR or VCR,” she said.

The judge said she had no doubt the plaintiffs would suffer harm if their request for a preliminary injunction were denied, but she did not “believe that Plaintiffs will suffer the full magnitude of their claimed irreparable harm during the pendency of this litigation.”

Nor did she find that the evidence “establishes that Aereo’s continued activities during this litigation would irreparably damage Plaintiffs’ ability to enter the mobile viewing market.”

John Englander of Goodwin Procter represented Aereo at the hearing along with Michael Elkin of Winston & Strawn.

Bruce Keller, Jeffrey Cunard and Michael Potenza of Debevoise & Plimpton represented the plaintiffs at the hearing.