On Wednesday, the U.S. Supreme Court held that startup company Aereo Inc. violated Federal copyright laws. The startup offers online streaming of major television networks without paying licensing fees. The Court found that each time the startup made a program available without paying a licensing fee, it engaged in “public performance” in violation of copyright laws. of  The 6-3 decision is a huge success for the Plaintiff major television networks including ABC, NBC and CBS.

Founded in 2012 by Chet Kanojia, the online service allows users in 11 cities to stream and record their favorite network programs over the Internet. Thousands of dime sized Aereo antennas capture television broadcast signals, transform them into data and deliver them to users for fees of $1 a day up to $80 a year.

The issue before the Court today was whether or not the startup had to pay major broadcasters a fee for transmitting their programs. Per copyright laws, cable providers must pay broadcasting companies a licensing fee to broadcast their program signals. Unlike ordinary cable companies which pay retransmission fees for the right to rebroadcast the programs, Aereo picks up the signals for free and sells them to users for a profit. Aereo users are able to watch their programs for a lot less than they would have to pay for traditional cable.

Earlier this year the major broadcasters were outraged with Aereo’s business tactics and claimed their actions were “transparent theft” amounting to “public performance” under copyright laws. The major broadcasters argued the startup’s business threatened the billions of dollars in profit they make from retransmission and licensing fees. Cable and satellite companies pay the networks billions for the right to rebroadcast television. Profits are projected to reach $4 billion by the end of 2014.

The startup argued before the Court that their services and designs did not violate any copyright laws related to the major broadcasters’ rights to the public performance of their works. However Justice Stephen G. Breyer, speaking for the Court stated: “For all practical purposes,” Aereo was acting like “a traditional cable system … If cable and satellite companies are required to pay licensing fees before transmitting copyrighted TV signals, so is Aereo.”

In a statement released by company CEO, Kanojia stated: “today’s decision by the United States Supreme Court is a massive setback for the American consumer. We’ve said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry.”

Startup CEO Chet Kanojia

He went on to say: “we are disappointed in the outcome, but our work is not done. We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.” The startup must negotiate a deal with broadcasters that adapts their business model.

Topics: Aereo, Copyright, Intellectual Property, Small Business, Startups