Antitrust Law Daily Wrap Up, ANTITRUST NEWS: TV broadcasters used sham copyright litigation to prevent competition, Aereo charges, (Mar 10, 2015)

By Linda O’Brien, J.D., LL.M.

A group of major television networks pursued a concerted campaign of tortious conduct by using sham copyright infringement litigation to stifle and extinguish lawful competition in the market for consumer access to audiovisual content, according to an adversary proceeding complaint filed in the federal bankruptcy court in New York City (In re Aereo, Inc., March 9, 2015).

Aereo, Inc. developed online technology that allowed subscribers to view live and time-shifted streams of over-in-air television broadcasts on various Internet-connected devices, such as personal computers, tablet devices and “smartphones.”

The complaint alleges that in 2012 a group of major television broadcasting networks commenced two actions in the New York federal district court, seeking to enjoin Aereo from offering its innovative individual antenna, DVR, and streaming technology to consumers to allow them to receive over-the-air broadcast content. The broadcasting companies contended that Aereo infringed the rights of copyright holders. The district court decision, finding that Aereo did not “publicly perform” the broadcasting companies’ content within the meaning of the Copyright Act by providing individual antennas and DVR recording capability to consumers, was affirmed by the Second Circuit Court of Appeals.

According to the complaint, in June 2014, the U.S. Supreme Court reversed the Second Circuit decision and ruled that Aereo was analogous to cable companies and therefore “publicly performed” the content that consumers viewed using Aereo technology. Thus, Aereo was required to obtain permission from the copyright owners of the programs it transmitted. On remand to the district court, the broadcasting companies’ motion for a preliminary injunction to prevent consumers from using Aereo technology for playback of copyrighted broadcast content while the underlying programs were still airing was granted.

Since the Supreme Court decision, Aereo attempted to formulate new legal strategies and potential business models consistent with the Court’s ruling. Aereo also invested considerable resources in an effort to attract new capital or effect an out-of-court sale of its business. Those efforts were unsuccessful. In November 2014, Aereo filed a Chapter 11 bankruptcy petition and moved to approve bidding procedures in the proposed sale of its assets, the complaint states.

The Bankruptcy Code provides the debtor with the ability to sell its assets for the best price possible in an open and fair process, free of the broadcasting companies prepetition claims. The debtor’s video storage and streaming technology have numerous substantial and valuable lawful uses. Through a campaign of sham litigation, the broadcasting companies caused several well-capitalized potential purchasers to decline to participate in the auction of the debtor’s assets, Aereo claimed. The companies’ conduct has harmed competition in the market for consumer access to audiovisual content, interfered with the debtor’s estate’s prospective economic advantage, chilled bidding with the bankruptcy auction process, and substantially reduced the value of the debtor’s estate for all creditors, the complaint alleges.

The complaint also states that Aereo has expended its limited resources to defend moot and unnecessary litigation, thereby exhausting its assets to the detriment of its general unsecured creditors. The broadcasting companies have continued their objectively baseless efforts to obtain a permanent injunction against Aereo and any party who would purchase the debtor’s assets. This scheme has been pursued for illegitimate and anticompetitive purposes.

The plaintiff asserts claims for attempted monopolization in violation of Section 2 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 14-13200.

Attorneys: William R. Baldiga and R. Benjamin Chapman for Aereo, Inc.

Companies: American Broadcasting Companies, Inc.; Disney Enterprises, Inc.; CBS Broadcasting, Inc.; NBC Studios, LLC; Universal Network Television, Telemundo Network Group, LLC; Twentieth Century Fox Film Corporation; Fox Broadcasting Company; Public Broadcasting Service

News: Antitrust NewYorkNews