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Why a Loss for Aereo Wouldn't Threaten Cloud Services

Aereo, which will fight for its life before the Supreme Court next month, has issued dire warnings that if its TV-streaming service is ruled illegal, it would spell the doom of "cloud-based" services like Dropbox or Google Drive.

"If the broadcasters succeed, the consequences to American consumers and the cloud industry are chilling," Aereo said this week, in a statement after filing its response brief with the court. "A decision against Aereo would upend and cripple the entire cloud industry."

Aereo's defense relies on a 2008 appellate court ruling that Cablevision Systems' remote-storage DVR was legal. The reasoning: An individual user (not Cablevision) initiates recording and playback, from dedicated hardware, ergo it's a private performance. Same thing with Aereo, according to Aereo.

SEE ALSO: Aereo: Broadcasters' Challenge 'Imperils' Cloud Computing

Cablevision likewise asserts that the broadcasters' legal strategy would threaten the cloud, but for an entirely different reason: The MSO doesn't want its network-based DVR suddenly found to be illegal - a reversal that would cost Cablevision millions. In the same breath, Cablevision agrees with broadcasters that Aereo is an illegal appropriation of TV content.

The Aereo case isn't really about "the cloud" at all. Rather, it's about the "Rube Goldberg-like contrivance" Aereo has built (in the words of the broadcast giants suing the startup), a sleight-of-hand to make a service that's actually a "public performance" appear as if it were a "private performance."

Aereo is not simply a cloud-storage service. Nor is it just the equivalent of an antenna-plus-Slingbox-plus-DVR in the cloud (the argument Aereo and its defenders use to posit its legality: I can buy all this stuff at RadioShack and set it up myself; the only difference is Aereo is doing the hosting and heavy lifting for me).

Aereo isn't a passive hosting service. Despite its gyrations to build a service that streams only individual TV shows from physically separate spinning disks to stay within the letter of the law, it's undeniable that Aereo uses a shared data-center infrastructure -- exactly like pay-TV providers, from whom broadcasters are entitled to receive compensation under federal law.

Moreover, Aereo's antennas are not actually dedicated to specific users. The system allocates each tiny antenna to a user when a TV channel is requested, then frees that up for another customer to use after the session is over, according to the startup's patent filings.

The Copyright Act specifically precludes businesses from profiting from copyrighted works in this way. Yes, individual Americans have a right to free, over-the-air broadcasts, but those rights can't be assumed by a service provider that's reselling the content. In a critical difference between Aereo and Cablevision's RS-DVR, the cable company already has those broadcast rights.

SEE ALSO: CBS Chief Moonves: We Can Go Over-the-Top If Aereo Wins at Supreme Court

Aereo would have you believe it's "just a technology service," not marketing or selling TV programming, another position aimed at dressing itself up as a Dropbox-style system. Aereo even avoids featuring TV shows or networks in its advertising and marketing, even though you'd think that would be an obvious thing to do, since that would undermine its legal arguments.

But the idea that Aereo is just like Dropbox is plain nonsense. The service is custom-built to present TV shows and networks in an easy-to-use way (in an interface that's actually pretty slick). Again, just like cable TV.

A Supreme Court finding that Aereo violates provisions of the Copyright Act, narrowly tailored to this case, won't kill Dropbox, Apple iCloud, Google Drive, Box, Microsoft OnDrive or Amazon Cloud Drive. Those services aren't jury-rigged to pull in content from third-party sources without permission. Cablevision, as noted, already has content rights.

The U.S. Solicitor General and the Copyright Office agree that a ruling against Aereo would not jeopardize cloud services. "A consumer's playback of her own lawfully-acquired copy of a copyrighted work to herself will ordinarily be a non-infringing private performance, and it may be protected by fair-use principles as well," they said in a Supreme Court brief this month.

Now, what about a hypothetical "cloud" service called, say, AereoBooks? That might be a service that would check out books from the local library on your behalf, scan them into digital form -- and voila, Dan Brown and J.K. Rowling on your iPhone! True, such a service would have to be impractically Rube Goldberg-esque, operating at the local library level to pass legal muster -- even more contorted than Aereo's market-by-market TV service.

But if Aereo is OK, so should AereoBooks. Authors and publishers would lose money from lower sales of e-book and physical books. But hey, that's the price of innovation.

"Innovation" is the magical term Aereo throws around to justify its existence. As Aereo chief Chet Kanojia wrote in a message to users yesterday, "Our innovative technology leverages the power of the Internet to create a smarter, more sophisticated over-the-air antenna for the digital world, and an easy-to-use cloud-based DVR that you can control and watch from a smart phone, tablet, computer or Internet-connected television."

See? Innovation trumps copyrights. The message is: Deal with it, content creators -- you can't fight progress.

Aereo and its fans say the broadcasters are in a fuss because they want to have their cake and eat it, too: TV stations are obligated to provide free broadcasts under their government-granted spectrum licenses, enjoying virtually universal access for their ad-supported programming, while they also want to cash in on multibillion-dollar retransmission payments from cable, satellite and telco TV providers.

But that has nothing to do with the fact that Aereo is repackaging and profiting from content it doesn't have the rights to. All content owners must be able to control how their works are distributed and monetized. And no "innovative" service should be allowed to wrest that out of their hands.

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