The next-generation technology would let any cable subscriber with a digital cable box store TV shows on computer servers rather than on a hard drive in their home.
Cablevision's system was challenged by a group of Hollywood studios that claimed the remote-storage DVR service would have amounted to an unauthorized re-broadcast of their programs.
The Motion Picture Association of America, whose members include major movie and television companies, said in a statement it was reviewing the decision and "considering all legal options."
Cablevision, in arguing that control of the recording and playback was in the hands of the consumer, had relied on a landmark 1984 Supreme Court case which found Sony Corp. did not break copyright laws by letting viewers use videotape recorders to record shows for personal use.
Craig Moffett, a senior cable analyst at Sanford C. Bernstein, said the ruling "sent shock waves to every corner of the media landscape" by taking the availability of DVR-like function from 25 percent ot U.S. homes to nearly 50 percent.
That means many more viewers would be taping shows and watching them at their leisure, likely skipping many commercials. The ad-zapping ability of DVR devices has broadcasters and advertisers worried that fewer people will watch commercials.
The case has been closely watched in the industry as cable companies increasingly offer digital video recording services to their customers, and Moffett said it was likely to end up at the U.S. Supreme Court.
In its ruling, the appeals court said it did not see much difference between the user of a VCR and the user of a DVR.
"The person who actually presses the button to make the recording supplies the necessary element of volition, not the person who manufactures, maintains, or, if distinct from the operator, owns the machine," the three-judge panel wrote.
"Cablevision more closely resembles a store proprietor who charges customers to use a photocopier on his premises, and it seems incorrect to say, without more, that such a proprietor 'makes' any copies when his machines are actually operated by his customers," it added.
Cablevision first announced plans for a remote-storage DVR in early 2006.
Tom Rutledge, Cablevision's chief operating officer, called the appeals court decision "a tremendous victory for consumers." He said it would allow the company to make DVRs available to more people, faster and less expensively than would otherwise be possible.
