Thursday, June 26, 2014

Aereo Supreme Court Case: One Shot in a Battle Between the Online Mobile World and Everyone Else

By Jim Verdonik

I'm an attorney with Ward and Smith PA. I also write a column about business and law for American Business Journals, have authored multiple books and teach an eLearning course for entrepreneurs. You can reach me at or Or you can check out my eLearning course at or or you can purchase my books at

I thought you might be interested in my comments about how investors should be careful in the legal conflict between the Internet world and the physical world in this article published by WRAL Techwire yesterday about the US Supreme Court's decision in the Aereo case that upheld broadcast TV's rights over Aereo's service that charged mobile device users to see TV shows.

You cannot profit from other people's copyrighted content even if it goes through the air to others for free.  Copyright owners have the right to decide who can use it for free and who has to pay.

This will not be the last case where this type of legal  battle will be fought between Internet entrepreneurs and people who think their rights are being infringed.

Personally, I'm a neutral party in this war, but investors should be careful not be caught by surprise in the middle of this battleground.


VC attorney: Aereo case will deter investors, not entrepreneurs

Published: 2014-06-25 12:21:00
Updated: 2014-06-25 15:36:31

Technology startups aren't likely to be scared away from innovation due to Aereo's loss at the Supreme Court, but investors are going to "be more careful," says Jim Verdonik, a veteran attorney who works with venture capitals and startups.

The nation's High Court on Wednesday handed Aereo a stinging rebuke, ruling the company violated copyright laws by using innovative, miniature antennas to in data centers to capture and resend TV programs to subscribers who pay monthly fees.

But the biggest losers may be the investors, such as Barry Diller, who had poured close to $100 million into Aereo.

So while entrepreneurs will likely keep looking to upend existing businesses, investors need to be more cautious.

So says Verdonik, who works at Ward and Smith, P.A., in Raleigh and is one of the most respected legal minds in the region's startup community.

"Entrepreneurs will not be deterred by this case," he tells WRAL TechWire. "Entrepreneurs will always try to push the envelope."

But the caution flags have been raised for angels, VCs and others thinking about making a tech play.

"Investors, however, will be more careful about investing in companies that violate the rights of others," Verdonik explains.

"The technology/legal lesson is that just because you can do something with technology, it doesn't mean you should finance it."

And he blames part of Aereo's court failure on the money people who saw a chance to upend broadcasting and cable TV as we know it.

"Entrepreneurs by nature always have their feet on the accelerator. In this case investors forgot it was their job to apply the brakes," Verdonik says. "The result was a crash."

Ryan radia, associate director of technology studies at the Competitive Enterprise Institute, a think tank in Washington, D.C., also doesn't see innovation ending - as long as it's "legal."

“Today the Supreme Court ruled in favor of network television programming and the rights of its creators and distributors. Companies like Aereo, who had essentially been free-riding on broadcast content, will have to stop operating without permission," Radia said. “But, this isn’t the end of online television, since companies like Hulu, Netflix, iTunes all pay the networks for their content and share it in a legal way.

“People should not worry that this decision will halt innovation in online entertainment; this case was about protecting companies’ original content from unauthorized resell. It also does not endanger cloud computing; as the Court said, this decision does not render companies such as Dropbox and YouTube liable for uploads posted by individual subscribers.”

However, more crashes may be coming, Verdonik warns.

Et tu, Uber?

Uber, for example, which is already encountering strong headwinds in Europe.

"Uber faces similar issues," Verdonik says.

"Investors giving Uber an $18 billion valuation are ignoring legal issues. Investors hope that Uber can change legal reality.

"But powerful groups that include taxi owners and workers and city officials who want tax revenue are lining up against Uber. Time will tell who wins that battle, which will involve a mixture of legal issues and political clout."

Verdonik also cautions against belief that technology can lead to change when the opposition is well-armed.

"Looking at the big picture, I think you see increasing conflict between the online/mobile device world and the physical world," he says.

"The Arab Spring uprisings were attributed to the power of the Online device world. But the physical world of guns and boots on the ground seems to have quickly reversed initial losses.

"We should not be too quick to judge winners and losers in these struggles between the online world and the physical world. There will be many skirmishes in a long war."

And investors may soon learn in a very costly fashion that technology does have its limits - in court or in the street.


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