BMG Settles With Cox as Petitioner Asks Supreme Court to Interpret DMCA

On Saturday, Digital Music News reported that BMG Rights Management has reached a “substantial” settlement agreement with Cox Communications, thus ending a four-year legal battle that was teed up for a retrial in district court before the end of this month. In December of 2105, a jury awarded $25 million plus $8 million in fees to BMG, finding Cox guilty of contributory copyright infringement for the ISP’s role in the infringing activities of its customers.

For detailed discussion of this case, see posts here, here, and here.

Cox appealed to the 4th Circuit where most of its key defenses were rejected by the court with the exception of one procedural technicality—the instruction to the jury regarding the standard for contributory infringement. On that basis, the case was remanded for retrial, and in a new brief, Cox requested that copyright infringement not be referred to as “theft” or “stealing” during opening statements. Judge Liam O’Grady denied the request, writing, “Specifically, the Court does not find it appropriate to bar BMG from referring to copyright infringement as stealing, theft, or some other related term, as such language is not unduly prejudicial to Cox.” That news came on August 15th, nine days before the announced settlement agreement.

This case has been followed closely by both copyright advocates and digital rights groups as a potential landmark for online service providers with regard to their rights and responsibilities under the terms of the DMCA. Although Digital Music News is correct to report that a settlement does not render the force of legal precedent that a final decision in court would have, the fact-pattern and judicial opinions in BMG v. Cox will likely be instructive in future, similar litigation. Suffice to say, the general assumption that ISPs enjoy magical, blanket immunity vis-a-vis copyright infringement took a substantial beating at every phase of this case.

Evidence revealed that, by willfully avoiding any denial of service to repeat infringers, Cox vitiated its safe harbor under the DMCA. Its appeals to the “Sony standard” were rejected. Its attempts to redefine the term “repeat infringer” were rejected. Its claims to having no knowledge of infringing activity were rejected. And amici like EFF filing briefs in the case, asserting that denial of internet service for any reason was equivalent to cutting off someone’s access to water, were not persuasive due to the fact that account termination for repeat copyright infringement—if the ISP wants to be shielded from liability—is mandated by statute.

Most acutely, the facts, allegations, and defenses already presented and opined upon in this case do not bode well for Cox as it now faces a $1.5 billion lawsuit by several of the major record labels, including Sony, UMG, and Warner Music Group for “knowingly profiting from the infringing activity of its users.” It will be very interesting to see whether Cox even tries to fight this larger suit in court after the much smaller case has demonstrated how the narrative is likely to play out—and in the same circuit.

DMCA to SCOTUS?

In related DMCA news, pornographic producer Ventura Content has filed a petition for cert at the Supreme Court after the Ninth Circuit upheld a summary judgment in favor of the website Motherless, despite evidence that the site, like Cox, allegedly engaged in conduct that should have nullified the safe harbor shield. At the heart of the petition is Ventura’s assertion is that the Ninth Circuit in particular fosters “DMCA disarray” among various court interpretations of the statutes. “The result of the DMCA disarray is that abject bootlegging in the offline, brick-and-mortar world remains unlawful, but the same conduct online by and OSP-turned-publisher garners absolute summary judgment immunity,” the petition states.

Ventura alleges, for instance, that a split exists between the Ninth and other circuits with specific regard to the OSP’s requirement to maintain a repeat infringer policy, as was dispositive in Cox. The brief states …

“At root, the Second and Seventh Circuits have disallowed formulaic policies that allow OSPs to run brazen infringement machines and to purposefully engage in conduct to avoid knowledge—that is, behave like ostriches; in stark contrast, the Ninth Circuit in Ventura permitted a brazen infringement machine that is more actively involved in curating infringing content than even the business model this Court outright—and unanimously!—condemned in Grokster.”

Ventura argues that, after 20 years of “court gestation of online copyright standards,” it is time for the Supreme Court to provide guidance with a consistent reading of the statutes and to mitigate the unintended effect of the DMCA, which has too-often provided automatic immunity to online enterprises—an immunity that never be afforded to organizations or individuals operating in the real world. While it is always a safe bet the Supreme Court will not grant cert, Ventura’s petition summarizes the frustration rightholders of every size have felt, watching some of the largest platforms in the world grow rich on the infringement of their works, all shielded by elastic interpretations of the DMCA.

© 2018, David Newhoff. All rights reserved.

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