By Sara Randazzo
The already contentious bankruptcy of defunct TV-streaming
service Aereo Inc. turned even more so this week with the filing of
a lawsuit accusing major broadcasters of chilling the bidding in an
asset sale intended to raise money for Aereo's creditors.
The suit, filed Monday in U.S. Bankruptcy Court in New York,
says the broadcasters "have aggressively pursued litigation
strategies that are objectively baseless" and served no purpose
other than to hurt Aereo. Their actions, the company claims,
illegally stifled competition in the marketplace for audiovisual
content.
Aereo filed for bankruptcy in November, five months after
effectively shutting down following a landmark U.S. Supreme Court
loss that found Aereo violated copyright laws by allowing customers
to stream broadcast TV without paying a royalty to
broadcasters.
Since then, the broadcasters--including the Walt Disney Co.'s
ABC, CBS Corp., Fox Television Stations Inc. and Comcast Corp.'s
NBC--have challenged Aereo's every move despite repeated assurances
from Aereo that it doesn't plan to revive its business. Instead,
the company insisted its remaining video storage and streaming
technology could be used for a legal purpose by a new owner.
An auction held in February fell short of expectations, bringing
in less than $2 million. The company collected $1 million from
TV-recording pioneer TiVo Inc. for the rights to the company's name
and customer lists, $225,000 from patent-aggregator RPX Corp. for
its patent portfolio, and about half a million more for some of its
equipment.
The assets that were up for sale, Aereo says in the suit, "have
numerous substantial and valuable lawful uses but, through their
campaign of sham litigation, the New York Broadcasters caused
numerous well-capitalized potential purchasers to decline to
participate in the auction of the Debtor's assets."
Attorneys for the broadcasters didn't respond to requests for
comment Tuesday. In a filing of its own Monday, the broadcasters
opposed the language of the sale orders to TiVo and the other
buyers, saying they include an overly broad liability-release
provision. The broadcasters say in the filing that they aren't
opposing the sales themselves.
Aereo's largest debt in its bankruptcy is a damages payment
expected to be awarded in the long-running litigation with the
broadcasters, which the company has said could run into the tens of
millions of dollars. In addition, Aereo owes an estimated $4.2
million to vendors, suppliers, landlords, employees and others. The
company, which raised nearly $97 million in venture capital during
its 3 1/2 years of existence from backers including Barry Diller,
has no secured debt, a rarity in a bankruptcy case.
In its lawsuit, Aereo suggests bumping the broadcaster claim
below those of its other creditors. "The equities demand that the
costs of the New York Broadcasters' improper litigation tactics
should not be borne by innocent creditors," the company says in the
suit.
A bankruptcy judge is scheduled to weigh in on Aereo's pending
sales at a Wednesday hearing.
Write to Sara Randazzo at sara.randazzo@wsj.com
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