The defunct TV-streaming service claims big broadcasters’ legal actions illegally stifled competition
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.