Aereo, which uses tiny antennas to stream and record shows to computers and mobile devices, has been a special worry to the TV industry because courts have said it’s protected by a loophole in copyright law. The industry, however, received an unexpected gift when an erratic billionaire named Alki David launched a streaming service of his own — without the legal firepower to back it up.

According to a source familiar with the case, Alki’s arrival came as a nasty surprise and wrecked a large part of the U.S. chessboard where Aereo’s investors want to remake the rules of TV. The billionaire doesn’t see it that way. Here’s how the drama that could change TV has unfolded so far:

Buttoned-up Barry takes on TV

On the surface, the story of Aereo is about a brave startup that uses tiny antennas to bring broadcast TV stations — which are free to receive in the first place — to laptops and mobile devices. The service allows people to watch and record local channels for $8/month and, unlike conventional TV subscriptions, lets customers come and go as they like without contracts or equipment.

But Aereo is also the tip of the spear for a bigger gambit by media mogul Barry Diller to blow up what journalist Peter Kafka calls the “TV Industrial Complex.”

This desire to remake TV led Diller to put $20.5 millon into Aereo’s fledgling service in early 2012. The money, however, wasn’t just an endorsement of Aereo’s technology; it was also an attempt to leverage a controversial 2008 court decision. The decision, which involved remote DVRs, inspired Aereo to create a “one antenna, one viewer” system that — in the company’s view — creates private TV streams that are legal under copyright law.

According to the source, who did not want to be identified, Aereo was “buttoned up” and ready for a legal fight even before it went live in New York City in early 2012. The company had court briefs at the ready, and made sure that all legally-discoverable facts of the case backed up its “private viewing” theory of TV streaming.

When to no one’s surprise the major broadcasters sued to shut it down, Aereo fought hard — and won. The company then won an even bigger ruling this April, when a split Second Circuit Court of Appeals upheld the decision, after finding that: “Aereo functions much like a television with a remote Digital Video Recorder (“DVR”) and Slingbox.”

Enter Alki

Alkiviades David — everyone calls him “Alki” — is a 45-year-old heir to a shipping fortune who likes to host Hollywood parties and dabble in the entertainment industry. He’s had small parts in films like The Bank Job, but also runs a U.K.-based company called FilmOn that plucks TV signals from the air and streams them to computers.

When FilmOn launched in the United States in 2010, Alki offered to pay retransmission fees like those that cable networks pay to broadcasters through a complicated regulatory system. The broadcasters, however, didn’t bite and sued him instead. They quickly obtained court orders and that was the end of it — until, that is, Aereo won in New York court two years later.

The Aereo victory irked Alki and prompted him to relaunch FilmOn’s TV service under new corporate names. The names, “Aereokiller” and “BarryDriller,” were not just a legal trick but also a finger in the eye of Diller, the media mogul who is backing Aereo. Predictably, the networks sued Alki all over again. (Diller sued too, over misuse of his name.)

According to the source familiar with the case, Alki’s approach to litigation is slapdash and reckless — the very opposite of Aereo’s buttoned-up style. As a result, Alki’s reborn Aereokiller was easy-pickings for TV industry lawyers who had no trouble persuading a Los Angeles judge to issue an injunction.

Rani Molla

“Bad facts make for bad law,” said the source, adding the ruling was a big blow for Aereo and its carefully planned legal strategy. This is hardly surprising; the injunction applies not just to Los Angeles but the entire 9th Circuit, which sprawls across most of the western United States (see map at right.)

The LA decision was a setback for Alki but even more so for Aereo, which declined to comment for this story. The playboy’s antics not only shut down an enormous market; they also provided a California-sized foothold for the broadcasters to launch what could turn into a Supreme Court challenge to the new technology. (The broadcasters also sued him in the District of Columbia last week, possibly in the hopes of getting to the top court even quicker; FilmOn has since retreated).

As for Alki, he doesn’t regret a thing.

Alki explains

Alki speaks in a posh but kind British accent and, in a recent phone call, his manner was gentle and patient. He shares Aereo’s frustration with the TV Industrial Complex but also see Diller and Aereo as parvenus next to his own operation.

“Barry and I share many mutual friends but have never met. I tried to reach out a few times before the launch of Aereo,” said Alki, adding that he chose to needle Diller with “Aereokiller” and “BarryDriller” because Aereo sounded too much like an earlier version of his streaming products called “Arrow.”

Alki makes a legitimate case against TV industry inertia and a Nielsen ratings system that, in his eyes, is considered broken by everyone in Hollywood.  He is rational on our call — even though that is not his reputation.

The source familiar with the legal case says Alki is an erratic, bull-in-a-china-shop strategist. A different source who knows Alki slightly recalls receiving a bizarre, rambling phone call at four in the morning. And an October profile in the Hollywood Reporter portrays Alki as a sincere but volatile personality who likes to cultivate controversy and run with outsiders.

“I haven’t drunk alcohol in 15 years. I like to have fun and play practical jokes,” Alki says. As for suggestions that he is derailing Barry Diller’s careful campaign to remake TV, Alki is all magnanimity.

“FilmOn has been in live TV much longer and is doing a better job … We’re not trying to ruin Aereo’s game. We’re very grateful for Aereo’s success with the [DVR] concept.”

It’s doubtful Aereo feels as generous but, for better or worse, the future of the TV bundle could well be determined by the playboy who crashed the party.

Next moves

In early January, Aereo announced plans to expand to 22 more cities with the help of $38 million in new funding from Diller and others. The expansion was supposed to take place in “late spring” but, as of June, Aereo has only expanded to Boston.

The Aereo investors may be holding back on releasing more money, and turning on more antennas, until California’s 9th Circuit rules on Alki’s appeal later this summer — but that is only speculation. If the 9th Circuit follows the New York courts’ reasoning, and lifts the injunction, Aereo will have a green light on both coasts; most lawyers, however, say that’s a longshot.

As for Alki, he is busy issuing a strange stream of fulminations about the TV industry’s plot to get him.  On May 30, he shared what he says is a “death threat” that warns him to “leave the networks and Aereo alone.”

Consumers, meanwhile, are stuck with expensive cable bundles for the foreseeable future. Aereo has taken the most clever, calculated shot to date at the TV Industrial Complex but, for now, both Aereo and Alki are a ways from forcing the industry to sell rational bundles of channels at a rational price.

FilmOn says it will be offering the content in partnership with XOS Digital, a company that provides digital asset management services to college sports organizations. It already offers its own sports on-demand service, XOS Sports, in which it offers paid rentals and full downloads of college games.

FilmOn’s channels, already live, offer viewers live games as well as archived fixtures. Users also have the option of recording programs to watch later either over TV, Internet or mobile devices using iOS or Android apps, or to subscribe to HD versions of the channels for a monthly fee. FilmOn offers a combination of free channels and those that require a subscription to watch.

It’s not clear just how extensive FilmOn’s coverage of NCAA fixtures will be — will it include the championships and all divisions? — or how FilmOn’s services work in conjunction with other rights deals between the NCAA and other media outlets: ESPN (NYSE: DIS), for example, extended its rights for NCAA Basketball in the U.S. and internationally earlier this month. That deal included both broadcast and streaming rights.

We have contacted FilmOn for further clarification and will update this post as we learn more.

At the very least, the equal content offering seems to be something that FilmOn is trying to exploit for its own marketing purposes: “We are going head to head with the industry’s top sports programmers,” the company’s outspoken founder Alki David boasts in the news release announcing the deal.

Frankfurt-based, UK/Beverly Hills-operated FilmOn has steadily been building up its catalog of premium sports content: earlier this year the company launched an international soccer channel with the UK Premiership and the Football Association, which will kick off (pun!) with football games from the Russian Premier League.

Last year, it came under some controversy when it was accused by the four major broadcasters in the U.S. of violating copyright by showing their programs. It was served at the time with a temporary restraining order. It then fought back against CBS and CNET with suits of its own (later dropped “put on hold” until November, David tells us.)

» Amazon could have two sizes of tablet in mind for a launch: a seven-inch model to come out this year; and a 10-inch design to be released in 2012. The company has also been looking at a redesign of its main site to make it more tablet-friendly. (via TNW)

» Not all developers love iOS, it seems: a recent iOS conference in China found that many developers saw it as high-risk investment, citing issues around discoverability and the approvals process. (via DoNews)

» More on Apple (NSDQ: AAPL) and China, by way of Wikileaks: Apparently the cables released this week by Wikileaks have also revealed that the company has hired an expert in fake Viagra to combat counterfeiting. (via Sophos, Cult of Mac)

» Apple is looking at a way of diagnosing iOS devices over the web for its employees — a sign of a service that could get rolled out externally in the future? (via 9to5mac, Hardmac)

» GupShup, which runs an SMS-based social network in India, has raised $10 million in venture funding. (via Economic Times)

» FilmOn, the HD Internet-based video service, has launched a football channel showing premium matches and notes its live-TV app now number-one free app in the UK, Netherlands and Belgium. (via FilmOn)

» Sony (NYSE: SNE), Toshiba and Hitachi are merging their LDC operations, and taking $2.6 billion in funding from the Japanese government, to help boost competitiveness against South Korea and Taiwan. (via Reuters)

» Loopt, the check-in service to competes against the likes of Foursquare and Gowalla, has started to expand internationally. (via Loopt)

» PaymentOne has signed a carrier billing deal with Telefonica (NYSE: TEF), the second billing deal the mobile operator has announced this week. (via PaymentOne)

UK-based FilmOn also claims that it has reached the number-one spot on the “European” Apple (NSDQ: AAPL) App Store with its free iPhone and iPad app. Recently it has additionally launched an HDi player, available as a free download on its site.

FilmOn says it has deals with some 120 content providers for its service, with Paramount, Associated Press and Bloomberg among the bigger names. Although it offers a fair whack of free content — including several terrestrial channels in the UK — it also has around 120 subscription and pay-per-view channels on offer.

No stats offered today on takeup of those services, although now that the company is listed we may start to see more transparent reporting on these details.

In July, FilmOn dropped a lawsuit it had filed against CBS’s tech site CNET, after finding only six examples of the content that it claimed CNET infringed by distributing Limewire file-sharing software. FilmOn founder Alki David says he is preparing a further action against CBS (NYSE: CBS), with which it has been sparring over unlicensed content since last year.

The initial market capitalization for FilmOn’s current listing is €43 million ($62 million). That’s a far cry from the €500 million valuation it had when it first listed in 2009. Between then and now the company has been personally funded by David, a producer, actor and musician.

The company says it will be buying back shares sold in 2009 from any investor, taking 10 percent interest paid on the price at which the stock was bought.

What does CBS’ ownership of Download.com have to do with its dispute with FilmOn? On the face of it, not much. But since his lawsuit against the TV networks floundered, David has seemed particularly obsessed with CBS, which he has accused of being run by “thieving, hypocritical liars.”

A CBS spokeswoman responded to David’s suit by noting CBS’ win in the FilmOn case last year, and added: “This latest move by Mr. David is a desperate attempt to distract copyright holders like us from continuing our rightful claims. His lawsuit against CBS affiliates is riddled with inaccuracies, and we are confident that we will prevail, just as we did in the injunction hearing involving his company.”

Limewire, for those who don’t know, was one of the most popular peer-to-peer file-sharing systems from about 2006 until it was shut down by court order late last year, after it was found liable for encouraging users to break copyright law. (Perhaps not coincidentally, a jury trial began yesterday which will determine how much money Limewire has to pay to record labels.)

Alki, who is an actor, has joined together with a group of artists, mainly R&B and hip hop musicians, to file this lawsuit against Limewire. But they didn’t stop there; they’re also suing CNET and its parent company CBS, saying that CNET’s Download.com site must bear some responsibility, as the main distributor of Limewire, a piece of software that was ruled illegal by a federal judge last year. According to Alki’s lawsuit, more than 220 million internet users acquired Limewire from Download.com, representing more than 95 percent of all copies of Limewire in use worldwide. CNET makes money from Download.com both through advertising and also by offering “Premium” accounts to some software publishers.

The idea of creating an artist-driven pile-on to Limewire might be effective; after all, publishing companies already did that and quickly scored a settlement. But dragging CBS and CNET into the Limewire mess just for distributing the software seems like a much higher hurdle. The thing is, peer-to-peer distribution is simply a very efficient method of moving data; and file-sharing software has many perfectly legal uses. Limewire only “became” illegal after a judge reviewed the evidence, and found that the company running Limewire had done a variety of things that actually encouraged users to break copyright laws. (The legal term here is “inducement.”)

Some of the points raised about CNET’s involvement in distributing Limewire:

»  The lawsuit at least implies that CNET had direct involvement in developing Limewire’s most copyright-infringing features. The lawsuit claims, without providing much detail, that “for each version of Limewire, for example, Download.com staff corresponded with the Limewire Defendants’ representatives regarding the features in the client program.” If CNET staffers were actually asking Limewire for features that had the specific purpose of making it easier to break copyright law, that could be a real problem; but if Alki and his lawyers have evidence like that, it isn’t in this complaint.

»  The lawsuit claims that CNET editors performed speed tests to see how effective Limewire’s software was, and downloaded copyrighted material as part of that speed test. The lawsuit describes a CNET video review this way: “As the viewer looks at the screen demonstrating a sample search, they see a list of copyrighted works, including those from several well-known musical artists. In the same video, Defendants admit that they downloaded files generated by these searches to test the speeds that Limewire could deliver for users.” But unless the downloads by CNET editors were files actually copyrighted by the plaintiffs in this suit, it’s hard to see how this matters much; remember, Limewire will already have to pay record labels as a result of the damages trial going on this week.

»  Other gripes are basically with how CNET handled editorial on the site. FOr example, it gave the Limewire software four and a half stars out of five; it continues to provide access to software like FrostWire, which one CNET user described as “practically indistinguishable” from LimeWire; and the CNET editor who wrote the Limewire review stated that peer-to-peer software “is primarily used for copyright infringement.” But complaints like this raise a free speech problem–CNET and other news outlets do need to be able to talk about software, even if it is illegal software.

Alki David, et al v. CBS Interactive, CNET, Lime Wire and Lime Group

He claims that because CNET’s download.com site distributed Limewire peer-to-peer software, now banned by court order, CNET and its parent company, CBS, should have to pay damages for copyright infringement. David says CNET contributed to Limewire’s copyright crimes, because the great majority of Limewire software was distributed over CNET’s download.com.

The problem with that argument is that until a court order banning distribution of the Limewire software came into effect in November, distributing the free software was perfectly legal. (And CNET has stopped distributing the software.) Limewire, like any peer-to-peer file distribution software, does have non-infringing uses; so until a federal judge stopped the software with an injunction, it was perfectly legal to distribute it.

David says that CNET staff were actively encouraging users to download illegal software like Limewire and DRM-cracking tools. “These people are manipulating the minds of the youth,” he seethes. “This is truly diabolical.” 

This video is actually a follow-up to an earlier rant against CBS calling the company “thieving, hypocritical liars.” And there have been other bizarre home movies from him as well.

David’s latest video has other quirks, such as looping and repeating phrases like you’d hear in some kind of hip-hop remix with heavy sampling. (Skip to about 14:30 to hear “*YouTube* Celebrity” Mike Mozart talk about how CBS threw the “entire music industry under the bus-under the bus-under the bus.”) The presentation, with its jerky footage, makes you wonder if there’s been some kind of falling-out between the billionaire community and videographers.

The whole legal tussle between the four major U.S. TV networks and FilmOn started when FilmOn began distributing television channels over the internet without permission. The company was quickly hit with an injunction banning those transmissions. Ultimately, David hopes that FilmOn will be ruled a cable system under U.S. law, which would allow it to make those online broadcasts. But the lawyer he hired quickly after getting sued has already jumped ship, citing “irreconcilable differences” with his client. Now, David has a new firm defending that suit, and has hired another serious IP lawyer, Michael Zeller of the Quinn Emanuel law firm, to help him with the planned class-action copyright suit.

A spokeswoman for CNET’s parent company, CBS, declined to comment on David’s new video but did reference a statement the company offered last month saying that David’s litigation with FilmOn isn’t going well: “Mr. David is clearly not feeling very good about his prospects in the court system. He is hardly an expert on intellectual property rights. CNET respects such rights, and meanwhile the court has issued a temporary restraining order against Mr. David and his company. We continue to think that the court is the best venue to determine the outcome of this case, one in which unauthorized use of our content has been distributed illegally.”

David says he’ll keep fighting his case against CBS, too, and will ultimately be vindicated.

Another recently launched company, ivi TV, is making a similar legal argument in the same New York court that is hearing FilmOn’s case. So far, ivi TV’s court case seems to be faring better; at least, it hasn’t been hit with an injunction yet.

In webcam videos posted to YouTube (NSDQ: GOOG) as “CBSYouSuck“, Alki David says: “CBS (NYSE: CBS), through its subsidiary CNET, has distributed over one billion pirate illegal file sharing softwares, as well as DRM cracking softwares…”

CBS-owned CNET makes software available through its Download.com site, either via hosted download or via off-site link. “Even the editors’ notes tell you what to do and how good that software is,” says David, suggesting hypocrisy.

Whilst Download.com makes available many P2P and Bit Torrent applications, neither protocol is in itself illegal, and Download.com has, for example, delisted the Limewire application, whose maker received its own court order barring distribution.

FilmOn has not actually stated whether it will appeal the order in court. The online videos from David – a Hollywood actor, producer and webcam exhibitionist – won’t affect the order, though his point is effectively made…

“Guess what, Mr CBS, we’re not going anywhere, we’re going to fight you, we’re going to show exactly the way things are and how to do it right. Dunne, Moonves, Redstone – the lot of you are a bunch of hypocritical, thieving liars – you have single-handedly destroyed the entertainment business in the twenty-first century.”

FilmOn’s lawyer in the case has withdrawn from representing the service, saying: “I have an irreconcilable conflict with Alki David,” according to court documents. The judge is now waiting for FilmOn to appoint a new counsel, lest it risk her making a default order against it, and to inform her whether it will again oppose the TV networks in court.

FilmOn did announce some supposedly legal business last week – a deal with a small cable company, FTTH Communications, allowing its 1,200 customers in the Tri-State and Minnesota areas to watch their cable network TV channels over web and mobile. It involves FilmOn taking a share of FTTH’s customer fee for this screen-shifting service.

This HD video distribution business, which doesn’t get mentioned much in FilmOn write-ups, may be the most promising legal business avenue for the company. The recent furore over TV restreaming may turn out to have been just a technology proof-of-concept that could win FilmOn actual partners in the online content distribution market.

But there are a few key differences between the two streaming services that have been largely overlooked. And those differences have already led to different legal outcomes for the two companies, and are likely to impact their chances going forward as well.

»  Free vs. Paid: ivi TV charges, while FilmOn doesn’t. Or at least, it didn’t. FilmOn has been broadcasting licensed international channels for two years, according to FilmOn CEO Alki David, but launched its unlicensed broadcasts of U.S. networks, for free, on Sept. 23. But that was just to make a splash-in an interview with paidContent, David said that starting Monday, FilmOn will become a subscription-only service.

FilmOn’s release of network content out on the open internet is likely the biggest reason why it has already been slapped with a temporary restraining order by the New York federal judge overseeing the separate copyright lawsuits against both companies. When that order was put in place two weeks ago, ivi TV CEO Todd Weaver even sent out a press release saying he agreed with the networks’ position: that FilmOn was infringing copyright law, because it was simply allowing content to go online without any restrictions.

ivi TV, by contrast, charges $4.99 a month and another $.99 for certain premium features like pausing and rewinding. In an interview with paidContent, Weaver said the creation of a “closed loop” is key to why he fits into the legal definition of a “cable system” while FilmOn doesn’t.

Still, the free launch gave the networks legal ammunition they didn’t have against ivi TV. In asking for the TRO against FilmOn, the networks’ lawyers noted that “FilmOn makes its service available to the public at large without registration, payment, or the downloading of any software, in standard mobile phone and computer web browsers”-an argument they couldn’t make against ivi TV.

»  Legal results so far: While FilmOn is languishing under a temporary restraining order preventing it from re-broadcasting content belonging to the U.S. networks, ivi TV is being allowed to continue to transmit similar broadcasts. Judge Naomi Buchwald, who is overseeing both lawsuits, has chosen to let ivi TV continue its operations until preliminary injunction motions are heard. And those won’t be heard until a venue dispute is resolved (the question is whether ivi TV’s case will be heard in Seattle, where ivi TV is based, or New York). That means the judge may be granting ivi TV months of broadcast time-time she was unwilling to give FilmOn.

David maintains that while he’s respecting the judge’s decision to grant a TRO to the networks, the judge was “totally unqualified” to make a decision. “She wasn’t educated about the internet,” he says.

In addition, the networks tried to lump the lawsuits together, but Judge Buchwald rejected that strategy. Instead, she returned the later-filed FilmOn lawsuit to the “wheel” that randomly assigns federal cases to judges in the Southern District of New York. (Coincidentally, she wound up pulling the FilmOn case from the random assignment system, which is why she is now overseeing both cases.)

»  Can a “cable system” possibly include the internet?While it may sound like a wild idea at first glance, take a look at the section of U.S. copyright law defining a “cable system”: It consists of “a facility” that “receives signals transmitted or programs broadcast by one or more television stations… and makes secondary transmissions of such signals or programs by wires, cables, microwaves, or other communications channels to subscribing members of the public who pay for such service.” [emphasis mine] That seems like a law that could be read to encompass a lot of new communications technologies-although not free ones. ivi TV founder Weaver says that Congress wrote the statute deliberately broad to accommodate new technologies.

And while it certainly isn’t standard business practice today, it is actually legal for a cable system to transmit network content without permission. That content is subject to a “compulsory license” under copyright law. As long as cable systems pay a portion of their revenue to the copyright office to reimburse any TV stations they re-broadcast, they’re in the clear. Both ivi TV and FilmOn say they will pay those fees in full. That percentage depends on the size of the cable company, but it’s less than 1 percent.

Make no mistake about it: ivi TV still has an uphill legal battle against well-funded incumbent players. But Weaver seems to at least have a shot. And he’s cognizant of the history of the satellite and, yes, cable systems that came before him-and that have already won this battle.

For FilmOn, already operating under a TRO, the battle to get the rights to transmit the networks’ content may be insurmountable. The law firm David usually works with was conflicted out of representing him against the television networks, so FilmOn is being represented by New York attorney Scott Zarin, who just came on board at the end of October. But David says that he’s looking towards expanding the site with or without the networks’ content-he’s set to add more than a dozen new channels next week.

A judge has issued a temporary restraining order against UK-based FilmOn.com, in the latest development in the copyright-infringement case brought against the online service by America’s four major TV networks.

Fox, CBS (NYSE: CBS), ABC (NYSE: DIS) and NBC (NYSE: GE) sued FilmOn in October, arguing that by retransmitting their programming over the web, FilmOn was violating copyright law. The order will stop FilmOn from streaming any content from those networks until a decision is made about whether or not to issue a preliminary injunction, which could keep the ban in place for a longer period.

FilmOn CEO David Alki said his company respects the court’s decision, but will argue that FilmOn’s broadcasts are protected by the same laws that allow cable companies to re-broadcast content that also goes over the air. Alki added that he has formed partnerships with several independent broadcast channels and will “be able to keep a compelling live offering online in the near future.” He continued: “Coupled with our own library of content and that of our partners, FilmOn will remain open for business.”

But FilmOn now has to convince a judge that it’s a legit service before it can resume broadcasting any content from the four big networks. According to the court docket, FilmOn hasn’t yet made its initial answer to the complaint; that response is due Nov. 25. (The court docket doesn’t show the temporary restraining order either, however, so it may not have been updated.)

FilmOn isn’t the only internet re-broadcaster the television networks are going after right now. Just a few days before the FilmOn suit, ivi TV was sued for offering a similar service. Both cases were filed in New York, and are being overseen by the same judge, Naomi Reice Buchwald, of the federal court for the Southern District of New York. In the ivi TV case, lawyers are still jockeying over venue-ivi TV wants the case to be heard in Seattle, where the company is based, rather than in New York.

Following the order, ivi TV sent out an e-mail applauding the FilmOn loss, and emphasizing the differences between its service and FilmOn. Because ivi TV has paying subscribers, copyright law treats it differently, the company explained. Other key differences: ivi TV only broadcasts in the U.S., and encrypts its content. “The Court’s ruling gives us faith in the judicial system to effectively separate those operating in good faith abiding by every letter of the law, and those like FilmOn who publicly brag about being ‘cavalier’ towards copyright law,” ivi TV founder Todd Weaver said in a statement.

FilmOn also restreams UK and European channels in Britain, whose commercial public-service broadcasters iTV, Channel 4 and Five this month told paidContent:UK: “”FilmOn is not an authorized service and we reserve the right to pursue any site or service we believe to be infringing our copyright or using our content in an unlicensed, illegal capacity.” The trio are already due to meet a similar site, TVCatchUp, in London’s High Court next year.

The mysterious site – which was developed in London, Odessa and Geneva in September and founded by billionaire former shipping magnate Alki David – re-streams UK public-service channels and others including CNN International, Sky News and adult channels.

It has also attracted a lawsuit in the U.S. – where it carries ABC (NYSE: DIS), NBC (NYSE: GE), CBS (NYSE: CBS) and Fox – from CBS, NBC, Universal, KNBC-TV, Twentieth Century Fox, Fox, ABC and Disney.

In a joint statement, the UK’s commercial public service channels ITV (LSE: ITV), Channel 4 and Five told paidContent:UK: “FilmOn is not an authorised service and we reserve the right to pursue any site or service we believe to be infringing our copyright or using our content in an unlicensed, illegal capacity.”

FilmOn has not responded to our questions, including whether it has direct broadcaster agreements. David has previously told journalists: “Without a doubt, the (UK) Copyright Act upholds what we are doing. There is no difference between the internet and satellite … People need to stop being afraid of opening up doors to digital technology.”

This is apparently the same reasoning given by two comparable European services, Zattoo and TVCatchUp, which have previously or still do re-stream TV channels. They have claimed legality under Sections 73 and 73A of the UK’s Copyright Act, which allow cable platforms to re-transmit public service channels in the public interest.

Broadcasters disagree. Whilst they successfully persuaded Switzerland-based Zattoo to stop retransmissions, effectively shutting it down in the UK, TVCatchUp continues re-streaming. ITV, C4 and Five filed jointly against TVCatchUp in London’s High Court in March and now tell paidContent:UK: “Litigation is continuing with a trial date fixed for next year.”

The supposed loophole in the act, which was written in 1998, could be shaky. The act states…

“The re-transmission by cable shall be treated as licensed by the owner of the copyright in the work, subject only to the payment to him by the person making the broadcast of such reasonable royalty or other payment in respect of the re-transmission by cable of the broadcast as may be agreed or determined in default of agreement by the Copyright Tribunal.”

In other words, cable operators can retransmit TV stations, but only if they pay an agreed license fee to channels, or only if the broadcasters take such operators to the Copyright Tribunal to win fees. Interestingly, they have eschewed the Copyright Tribunal route and taken the complaint straight to court. TVCatchUp has upped the ante in the last few weeks by inserting its own pre-roll video ads before viewers can watch the broadcast channels.

FilmOn is curious indeed – just one of myriad businesses run by its exuberant founder, a webcam performer and some-time TV actor (check his Wikipedia profile). Its exact nature is unclear, but it appears a proof site for a HD video management and distribution service run by holding company 111Pix.

FilmOn says it floated in Frankfurt in 2008 at a massive £587 million valuation, but delisted in 2009 after taking £43 million in funding from Global Emerging Markets investment group. It all sounds a bit too good to be true.