There is no logic flaw whatsoever. A copyright violation is a copyright violation is a copyright violation...period. The Telecommunications Act of 1996 (Section 207) in conjunction with the FCC Over-the-Air Reception Devices Rule (OTARD) permit an individual to erect an OTA antenna on
their property (whether owned or leased) in which they have
exclusive rights of use, so they (an individual or family) can enjoy broadcast programming in accordance with copyright law and fair use restrictions - signals are not for redistribution without permission from the copyright holders.
AEREO redistributing copyrighted programming, without permission, and profiting from this venture under the guise of setting-up virtual OTA antennas is nonsense. It is a clear copyright violation! To be honest, my creating a virtual network so my guests (a virtual extension of my home) can watch cable programming just like they could could in my physical residence, can be considered less unlawful and less egregious than what AEREO is doing because at least I'm paying the copyright holders something instead of nothing, nodda, zip, nil, diddy-squat. Okay, perhaps I'm being somewhat facetious, but stealing is stealing.
Folks are free to erect an antenna on their own property (be it rabbit ears, attic or rooftop models) and watch broadcast television free-of-charge and in accordance with copyright law. However, if they lease an antenna, through a subscription service like AEREO, that is located elsewhere on not on property they have exclusive use...well, that's a pay television service and AEREO needs to license programming from the copyright holders prior to redistributing these service to customers.
I'll tell you what...I'll buy you a beer if AEREO wins this case.
One thing is for sure...telecommunications laws have not kept pace with the technology.