Watch out, Hulu. Meet the new Napster of television

By Eriq Gardner

Every once in a while, an upstart company will come along and tout some obscure provision of copyright law that would seemingly upend everything we think we know about the legalities of distributing entertainment content. 

Allow us to introduce ivi, Inc., which has raised $1 million in venture funding with a self-proclaimed "legal strategy" to rebroadcast television online without the permission of broadcasters or content-owners. If right, the company would be able to offer a service that would essentially be the Napster of television.

The company is utterly confident about its legal position. After launching a few weeks ago, ivi was immediately hit with cease-and-desist letters from NBC, CBS, Fox, Disney, MLB and others. However, the company isn't rolling over. Instead, ivi and its lawyers filed a lawsuit yesterday against those companies, seeking a declaratory judgment from a federal judge in Washington that its service is legitimate.

Here's how ivi works.

Users download a video player from the company's website that lets them watch retransmitted broadcast signals from around the country. It's a cross between Slingbox and Hulu -- except the technology is simpler than Slingbox and the company claims to have more content than Hulu. Viewers on the West Coast will be able to see primetime programming hours ahead of their neighbor watching on a set-top box. Fans of any NFL team would be able to watch out-of-market games without paying for for an expensive satellite subscription. And so on ...

The company offers users a free 30-day trial and then makes them pay $4.99 a month, and an extra $0.99 a month for DVR functionality.

How is it supposedly legal? The company claims it doesn't need to actually have permission from broadcasters or content owners. Instead, according to an interview given by ivi founder and CEO Todd Weaver to TechFlash, the company "pays the Copyright Office which in turn pays the stations an undisclosed amount to pick up the signal, which it does by either placing a physical encoder device at the station or capturing it from satellite or antennae."

In other words, ivi is claiming it only needs to pay a set statutory license fee.

This is also made clear by the company's just-filed complaint against CBS, NBC, Fox, etc.:

"The Copyright Act expressly authorizes secondary transmissions of copyrighted works embodied in primary transmissions. For example, the Copyright Act expressly approves of the secondary transmission of an original television broadcast where the secondary transmission is subject to a statutory license. Under Section 111 of the Copyright Act, statutory licensing fees are paid periodically to the Register of Copyrights in accordance with an established scale and schedule. Section 111 further provides that the secondary transmission of an over-the-air primary transmission is not an infringement of copyrights in the works contained in the primary transmission."

Here's Section 111, as well as a congressional report analyzing its meaning. We'll leave it to others to parse and debate whether this obscure provision of Copyright law about the arcane liability of cable television systems and exemptions for hotels, homes, and educators legitimizes this Internet TV venture. 

The company isn't the first to claim a statutory shield from copyright infringement based on a very fine reading of the law. For example, last year, BlueBeat.com started to sell tracks from the Beatles, and then claimed that Section 114 allowed them to obtain copyrights on re-recording "psycho-acoustic simulation" of old material. Are "secondary transmissions" the new "psycho-acoustic simulation" defense? We'll see.

In the meantime, Weaver says his 18-employee company won't harm the TV business as it provides viewership data to Nielsen so that broadcasters can factor this in when they sell advertisements.

"Whenever someone first hears that we are carrying their linear feed, the knee jerk reaction is: 'I must protect my content, always,'" Weaver tells TechFlash. "We do not disrupt the existing live distribution models."