4th Circuit Remands BMG v. COX, But …

Good news for authors, creators, and sanity was delivered yesterday by the 4th Circuit Court of Appeals. Despite remanding the case back to the district court for retrial on a specific matter of jury instruction, the opinion eviscerates two of COX’s most strained interpretations of copyright law, either of which could have had devastating effects for rights holders. BMG Rights Management sued ISP Cox Communications for contributory infringement in 2014 and was awarded $25 million in damages in December of 2015. Cox appealed, and these posts from January 2017 and November 2017 detail the company’s key defenses with my commentary.

DMCA Safe Harbor Still Doesn’t Apply

In its appeal, Cox argued that the district court erred in denying it the safe harbor defense as provided in the DMCA. As noted many times, despite the rhetoric of “digital rights” activists, the safe harbor is not unconditional; and one of the conditions is that a service provider must have a repeat-infringer policy in place that ultimately leads to account termination. The circuit court agreed with the lower court that Cox’s “thirteen-strike policy,” which only tended to lead to account reinstatement did not fulfill the intent of the DMCA that a policy should act as a deterrent to repeat infringement.

Most bizarrely Cox argued on appeal that the term “repeat infringers” in the statute could only mean people who’ve been held liable for multiple infringements in a court of law. As noted in my January 2017 post, this would be almost nobody since very few individuals are ever defendants in a single copyright infringement case, let alone one that actually goes to trial. The appeals court rejected Cox’s claim in less prosaic terms, including the citation of congressional reports on the drafting of DMCA, which the court summarizes thus:

“The passage does not suggest that they [users] should risk losing Internet access only once they have been sued in court and found liable for multiple instances of infringement. Indeed, the risk of losing one’s Internet access would hardly constitute a ‘realistic threat’ capable of deterring infringement if that punishment applied only to those already subject to civil penalties and legal fees as adjudicated infringers.”

Denied Appeal to Sony

The other extraordinary appeal by Cox was its assertion that the jury in the district court should have been instructed to consider the ISP’s protection under the principle established in the 1984 Sony case, namely that its internet service can be used for substantially non-infringing purposes. As explored at length in my November 2017 post, were Cox to prevail on this point, it would effectively immunize all internet providers against any form of liability for copyright infringement, and this begs the question as to why the ISPs petitioned for the DMCA safe harbors in the late 1990s if Sony had already established this immunity.

The 4th Circuit called Cox’s appeal to Sony “meritless,” stating that in Grokster (2005), the Supreme Court clarified that simply because a product is “capable of substantial lawful use,” this does not preclude the possibility that the producer or provider can never be held liable for contributory infringement. “Because the instruction Cox requested misstates the law, the district court did not err in refusing to give it [instruction to consider Sony],” states the opinion.

Remand for Retrial

Where the appeals court agreed with Cox, and the reason for remanding for retrial, was in regard to the district court’s instructions to the jury on the standard of intent for contributory infringement. Again citing Grokster the opinion quotes, “[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement.” Thus, the word intentionally suggests a distinction between “knowledge” of infringing activity (or any crime for that matter) and “negligence” that may cause a party to inadvertently contribute to criminal activity. Because the district court instructed the jury to consider whether “Cox knew or should have known of such infringing activity,” the circuit court held this to be in error. The term “should have known,” is described in the opinion as equivalent to “negligence,” which is often insufficient to establish secondary liability for criminal conduct.

It will be interesting to see whether Cox opts for a retrial or proposes a settlement. The facts presented have already been viewed by a district court judge, a jury, and now an appeals court panel as compelling evidence that Cox knew about repeat infringers and adopted a policy of avoiding account termination in its own financial interests. In fact, my favorite example cited in the 4th Circuit opinion is this one quoting a company email:

“But when Cox received another complaint, a manager directed the employee not to terminate, but rather to ‘suspend this Customer, one LAST time,’ noting that ‘[t]his customer pays us over $400/month’ and that ‘[e]very terminated Customer becomes lost revenue.’”

So, even with new jury instructions, evidence like this suggests Cox would have a hard time convincing anyone it had no knowledge of infringing activity. But the reason this quote is my favorite is that it’s a twofer—not only implicating an ISPs attempt to stretch the law beyond reason but also giving lie to so many rationalizations for media piracy by users. I mean this dude has the money to pay his ISP about $5,000 a year for bandwidth but won’t pay for music, movies, games, etc.? Damn that’s some big-ticket hypocrisy right there. He could probably pay an ISP about 35% of that total, acquire his entertainment legally, and still save money.

© 2018, David Newhoff. All rights reserved.

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