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The New York Second Circuit Court of Appeals has refused a request by the big networks to shutter the TV streaming service Aereo set up by billionaire media mogul Barry Diller.

Aereo used thousands of tiny antennas at its base station in Brooklyn to pick up TV signals and either store or stream them directly to subscribers in New York who pay $80 a year to watch on their smartphones and tablets. Using individual antennas enables the company to get around paying licensing fees to the networks for streaming – or so the company has been arguing – because it provides a one-on-one link up.

Because of the technical limitations of such a strategy, the service is available only in New York – but, not surprisingly, the TV networks are fighting back. A combined suit by 17 TV stations sought to block the service within a week of its launch.

They chose to fight the case on the principle that the service was a public broadcast, but the court rejected this argument. Now, by a 2-1 margin, the appeals court has upheld that verdict. The network's legal eagles will now be looking to refine their strategy to kill off the service.

"Today's ruling to uphold Judge Nathan's decision sends a powerful message that consumer access to free-to-air broadcast television is still meaningful in this country and that the promise and commitment made by the broadcasters to act in the public interest in exchange for the public's spectrum, remains an important part of our American fabric," said Chet Kanojia, Aereo CEO in a statement.

"We may be a small start-up, but we've always believed in standing up and fighting for our consumers," he said. "We are grateful for the court's thoughtful analysis and decision and we look forward to continuing to build a successful business that puts consumers first."

Aereo's system of using racks of multiple antennas, each the size of a dime, isn't particularly efficient, but does have the advantage of providing a form of legal cloak for the service. It's backed by the billionaire former boss of Paramount and Fox Barry Diller, a man who knows a thing or six about the ins and outs of the TV business.

The company now plans to expand its footprint outside of the Big Apple, with another 22 cities planned to receive services. The legal battle isn't done yet, but so far it looks as though a nifty technical fix is protecting the company against litigation from content providers. ®

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