By Andrew Chung
NEW YORK (Reuters) - A U.S. judge ruled on Thursday that online television service FilmOn X LLC should be treated like a traditional cable system in order to transmit the programs of the nation's broadcasters over the Internet.
The ruling, coming as consumer TV-watching habits are increasingly migrating to the Internet, is the first to first to view a streaming service like a cable provider and could have major implications for broadcasters if it is upheld by higher courts.
Broadcasters have been aggressively litigating against such services, contending they violate their copyrights and threaten their ability to generate advertising and control subscription fees.
U.S. District Judge George Wu in Los Angeles said in his ruling that FilmOn X is entitled to a compulsory license under the Copyright Act to retransmit the broadcasters' programs if it meets the law's requirements.
Acknowledging the major commercial consequences of his decision, Wu said he would allow an immediate appeal to the 9th U.S. Circuit Court of Appeals.
He also left in place an injunction against FilmOn X's operations that the broadcasters had won in 2012, so FilmOn will still not able to stream their content pending the appeal.
"The broadcasters have been trying to keep their foot on the throat of innovation," said FilmOn X's lawyer, Ryan Baker, in an interview. "The court's decision today is a win for technology and for the American public."
In a statement, Fox Networks said the opinion "contravenes all legal precedent" and vowed to appeal.
The dispute stems from two lawsuits that Fox, Walt Disney Co's ABC network, CBS Corp (NYSE:CBS), Comcast (NASDAQ:CMCSA) Corp's NBCUniversal and several others filed against FilmOn X in 2012.
The networks successfully shut down Aereo, a more prominent competitor to FilmOn X, when the U.S. Supreme Court in June, 2014 said that company violated the broadcasters' copyrights in retransmitting their programs to subscribers' devices via the Internet.
Aereo then tried to argue in a Manhattan federal court it should be seen as analogous to cable, eligible for a compulsory license. The judge in that case disagreed. The company, backed by Barry Diller's IAC/InterActiveCorp, has since gone bankrupt.
Both Aereo and FilmOn X, founded by Internet entrepreneur Alki David, use similar technology that allows viewers to watch network television captured via remote antennas and sent over the Internet.
The case is Fox Television Stations, Inc v. FilmOn X, LLC, in the U.S. District Court for the Central District of California, No. 12-cv-6921.