Suppose I could offer you a choice of two technologies for watching TV online. Behind Door Number One sits a free-to-watch service that uses off-the-shelf technology and that buffers just enough of each show to put the live stream on the Internet. Behind Door Number Two lies a subscription service that requires custom-designed hardware and makes dozens of copies of each show. Which sounds easier to build—and to use? More importantly, which is more likely to be legal?

If you went with Door Number One, then you are a sane person, untainted by the depravity of modern copyright law. But you are also wrong. The company behind Door Number One, iCraveTV, was enjoined out of existence a decade ago. The company behind Door Number Two, Aereo, just survived its first round in court and is still going strong.

The difference between them—and the reason for Aereo's willfully perverse design—originated in a critical 2008 DVR decision by the federal Second Circuit Court of Appeals in Cartoon Network v. CSC Holdings (which everyone just calls "Cablevision"). The tech at issue in Cablevision was a "DVR in the cloud," and because of the way the Second Circuit answered the question of whether a DVR "performs" a copyrighted TV show when the user hits "play," the decision opened a whole range of possibilities for entrepreneurs willing to mash up technologies in ways God never intended.

This is the story of Cablevision, the companies that followed in its wake, and how we got to the strange place where wasting resources on thousands of tiny antennas made you legal—but where using one antenna broke the law.

Backdrop

To understand what Cablevision decided and why it matters, we need to understand a bit about how copyright law treats broadcasting and streaming. For a very long time, copyright has covered more than just making copies. In 1856, for example, Congress gave playwrights an exclusive right to stage their plays in public. That "public performance right" has gradually expanded to cover almost everything that can be copyrighted and performed, from movies to musicals.

The meaning of a "public performance," however, has been surprisingly hard to pin down. For more than a century, technologists have been coming up with unexpected ways of bringing media to people. Some cases were easy: the courts quickly decided that showing movies in theaters and broadcasting songs on the radio were public performances requiring permission of the rightsholder, while mere audition (in English, that's "listening to the radio") was not.

If the Internet is a copyright minefield, Cablevision had just right-clicked a new safe square for startups to stand on.

Cable TV, though, broke the mold. Back when the typical cable TV operator was an edgy upstart, the cable business model was retransmission without the express written consent of anyone. A cable network would put up an antenna somewhere with good TV reception, lay wires over the hills and far away to communities with terrible TV reception, and relay the signals to paying subscribers there.

In a pair of decisions, 1968's Fortnightly v. United Artists and 1974's Teleprompter v. CBS, the Supreme Court held that cable retransmission was not a "performance" for copyright purposes and so didn't need copyright owners' permission.

"Broadcasters perform. Viewers do not perform," the court explained in Fortnightly. A cable network was just a way to help viewers receive distant TV broadcasts, like a gigantic pair of rabbit ears.

But the Supreme Court had meddled with the primal forces of nature, and Congress promptly swung into action, revising the law to override Fortnightly and Teleprompter. The 1976 Copyright Act added a "transmit clause" to its definitions to make clear that whether a work was performed "by means of any device or process" and whether the public received it "in the same place or in separate places and at the same time or at different times," it would still infringe if transmitted without permission.

Meanwhile, Congress bought off the cable companies—who didn't like this at all—with a complicated licensing scheme. In essence, copyright law was sucked into telecommunications law's gravity well. In time, satellite TV broadcasters got the same deal: they were subject to copyright, but with their own crazy-intricate licensing system spelling out exactly what they could do and how much it would cost.

Harmony and order returned to the universe—until the Internet came along.

Son of cable

The Internet has never played nice with carefully crafted regulatory schemes. Since streaming became practical in the 1990s, a series of adventuresome dot-com entrepreneurs have been searching for a way to repeat the cable systems' original legal coup, bringing live TV to Joe User—preferably without paying to do so. (It's hard to make a living by streaming video when copyright owners can always turn around and grab back your profits by demanding higher licensing fees. Exhibit 1: Netflix. Exhibit B: Hulu.)

The first high-profile try was the aforementioned service behind Door Number One, the Canadian website iCraveTV. It hoisted an antenna in Toronto, picked up TV signals from Buffalo, New York then turned around and streamed those signals on the Internet (surrounded, of course, with ads). It tried to lock out Americans, but it didn't try very hard (it asked users to enter a Canadian area code) and nearly half of its viewership came from the United States. When the movie studios sued in the United States, the court had little difficulty claiming jurisdiction over iCraveTV and its officers. An injunction was entered; goodbye, iCraveTV.

More recently, websites like FilmOn and ivi have tried to solve the copyright problem by fleeing back into telecommunications law. Both of them restream over-the-air TV on the Internet. ivi argued that it was a "cable system" and was therefore entitled to the Copyright Act's special license for cable companies; FilmOn called itself a "carrier" with a similar goal.

Neither ended well. A federal court shut down ivi, giving a long history of the cable license and pointing out, rather inconveniently for ivi, that the company hadn't even attempted to comply with any of the FCC's extensive rules for cable licensing. The appeals court agreed—an Internet streaming server is not a "cable system." (While the FCC is slowly considering whether to start treating pure TV-over-IP services like cable systems, it's not there yet.)

FilmOn agreed to an injunction and to pay $1.6 million.

Hope for the rebroadcasters, however, came from an unlikely place: the cable industry.