Traditional TV broadcasting companies are so eager to take out TV-over-Internet upstart Aereo that they keep filing court cases. But they also keep losing.

A coalition of broadcasters sued Aereo in March 2012, saying that the company's strategy of renting each customer a tiny antenna was a thinly veiled excuse to avoid copyright law. The TV companies want Aereo to pay retransmission fees like traditional cable companies do.

The broadcasters lost, and then lost again on appeal three months ago. Then they made a broader challenge, asking the US Court of Appeals for the 2nd Circuit to take the case "en banc," meaning all 13 of the judges on the New York-based court would hear it. They asked the court to actually reconsider the key decision that protects Aereo's business: the Cablevision decision.

The court didn't accept that strategy, though. The votes are in, and the court declined to take the broadcasters' case.

One judge was recused, and 10 of the 12 remaining judges voted to let Aereo's win stand. Two judges signed on to a vigorous dissent written by Judge Denny Chin. Chin is the same judge that oversees the authors' class-action lawsuit against Google Books, and he still presides over that case despite having taken up his position on the federal appeals court in 2010.

Now there's nowhere for the broadcasters to appeal except the Supreme Court. It's not crazy to think such a high-profile technology case may end up at the high court. First, the broadcasters are already pursuing a strategy of testing out their case in states that lie outside the 2nd Circuit to see if a different set of appeals judges will see things differently. A dissent like Judge Chin's may give hope to the broadcasters that at least some of the nation's 179 appeals judges may see things their way. The broadcasters are already trying their luck outside New York as Aereo expands; a Heart-owned TV station sued Aereo in Boston, which is in the 1st Circuit.

CBS gave a statement that made their en banc loss sound like no biggie. "This decision comes as no surprise and all industry lawsuits against Aereo and similar services that steal our content are going forward as planned,” the network told AllThingsD.

The networks will still get to try their case against Aereo in district court—technically all they have lost on appeal is their motion for a preliminary injunction to shut down Aereo before a trial. But the nature of Aereo's business has been subject to a hard-fought legal argument for more than a year now, and it's hard to imagine what evidence the networks could find that will swing this particular case their way.

Strong dissent defends “retransmission fees”

Chin's dissent is scathing but not unexpected. He was on the original appeals panel and voted against Aereo then, describing their business model as a "sham."

Fundamentally, Chin doesn't accept Aereo's argument that the performances the startup transmits are private rather than public performances. US copyright law specifies that in some situations, those who "transmit" a copyrighted work to the public are engaging in a public performance. "Under this theory, Aereo maintains that it may, for example, stream the Super Bowl 'live' to 50,000 subscribers ... because each subscriber has an individual antenna and a 'unique' copy of the broadcast," writes Chin.

The Cablevision precedent that Aereo is relying on "has been misapplied by the majority and should not be extended to the circumstances of this case," he adds.

Chin also seems to wholeheartedly accept the view that there's nothing wrong with television companies trying to capture "retransmission fees" wherever they can find them, despite the fact that this is a relatively new source of revenue that over-the-air broadcasters have not been historically entitled to. He even expresses concern that the court's decisions are hurting stock prices of major media companies. Chin writes:

In recent years, with greater competition from cable and the Internet, television broadcasters have come to rely more heavily on retransmission fees, rather than advertising revenue, to make their free public broadcasts profitable. In fact, as with newspaper companies, broadcasters are relying increasingly on subscriber fees to fund the creation of content. The majority's decision, which permits Aereo to retransmit television broadcasts without paying a fee, undermines this model. Indeed, the filing of this Court's decision on April 1, 2013 caused the share price for major media firms to drop because of the threat it posed to a vital source of their revenue.

Finally, Chin says the court is being inconsistent in how it treats TV-over-Internet startups. In a case involving ivi TV, the 2nd Circuit found that broadcasting TV-over-Internet did constitute a public performance. Chin doesn't see a reason why Aereo should be treated differently just because it uses many antennas, rather than one.

Chin is right that judges have taken different stands on copyright law, seemingly branding some business models "good" and others "bad." But a wide reading of the public performance right could give copyright owners a veto power over many innovations, from remote DVRs onward. In the Aereo case, the hunger for retransmission fees also threatens the basic public bargain that was struck at the beginning of the broadcast business: over-the-air television in the United States is free, period.

Today's strong 10-2 vote from a New York appeals court that is hardly unfriendly to copyright owners means the Cablevision decision will now stand as strong precedent. The decision allows for at least some innovation on the part of those who move content, not just those who create it. And it wasn't a fluke.