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Broadcasters, Aereo Duel In Court Over Upstart's TV Technology

By William Launder Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- A lawyer representing TV startup Aereo Inc. on Wednesday argued that the company's new television-streaming service doesn't violate copyright law because it records show content before transmitting it to viewers, similar to digital recording devices that broadcasters have accepted as standard viewing technology. Aereo, backed by Barry Diller's IAC Interactive Corp. (IACI), is being sued by broadcasters which allege that the start-up company doesn't have a right to the copyrighted content it transmits. The broadcasters want an injunction on Aereo's service. The broadcasters include Comcast Corp.'s (CMCSA, CMCSK) NBC, Walt Disney Co.'s (DIS) ABC, CBS Corp. (CBS), News Corp.'s (NWS, NWSA) Fox and a unit of Univision Communications Inc. News Corp. also Dow Jones & Co., publisher of Dow Jones Newswires. The case is being heard in a Manhattan courtroom Wednesday and Thursday, although a bench ruling by U.S. District Judge Alison Nathan isn't expected immediately. Much of Wednesday morning's testimony involved detailed explanations of the recording and transmitting technology used by Aereo, which attorneys from both parties pointed to as support for their arguments. Steven Fabrizio, an attorney representing the broadcasters, accused Aereo of copyright infringement by creating a public copy of networks' show content, which requires a license under copyright law, and for reprocessing proprietary network signals for viewers on computers, tablet computers and other viewing devices. Meanwhile, Aereo attorney John Englander told the court that "the Aereo system operates just like DVRs in the marketplace. That's not the live retransmission of TV." Englander argued that Aereo's technology created only a private performance for viewers because it delivers show content using tiny, individual antennas for each unique viewer. Lawyers further directed questions at Martin Franks, an executive from CBS responsible for planning, policy and government relations. Franks said Aereo threatened the network's core advertising revenue because data tracker Nielson doesn't calculate Aereo viewers in its ratings, which are a benchmark for the advertising industry. Big networks such as CBS earn revenue primarily by charging advertisers and through what is known as the retransmission fees they levy on distributors to carry their content. They have historically proven steady opponents of new technology, such as DVRs, which risk undercutting their business model, and have pressured Nielson to revise its ratings criteria to incorporate new viewer technology ranging from recording devices to tablet computers. Aereo has said it has no plans to pay retransmission fees to the networks. Franks further said that CBS had decided to sue Aereo only after determining the company was an established, credible threat to its business and wasn't what is known as "vaporware," or technology that represented only a theoretical risk to its fee-based revenue streams. "We don't sue lightly," Franks said, dismissing suggestions that CBS decided to sue Aereo only after learning that Diller's IAC had become an investor in the company. Aereo launched its new $12-per-month service to subscribers in New York in March, and had said it would continue expanding the service to other cities depending on the outcome of the lawsuits. -By William Launder, Dow Jones Newswires; 212-416-3412; william.launder@dowjones.com

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