Cox Appeal in Suit with Music Labels May Be Overreaching

On May 24, Cox Communications filed its opening brief at the Fourth Circuit Court of Appeals, asking that the panel either vacate the jury verdict holding the ISP liable for secondary copyright infringement or to at least order a new trial. Sony Music, joined by 57 other labels, sued Cox for vicarious and contributory infringement of 10,017 sound recordings and compositions, and a jury awarded Plaintiffs the unprecedented damage award of $1 billion. Cox’s appeal includes arguments against the foundations for that award, but of greater interest to copyright owners are the questions presented on the matter of secondary liability.

In fact, Sony Music et al v. Cox Communications may prove a landmark case in the ongoing battle that began in the 1990s, when it was first recognized that the internet would inevitably be used by consumers to pirate copyrighted works in volume. That assumption was the rationale for §512 of the DMCA, which the major ISPs of the era lobbied Congress to write as a conditional shield (“safe harbor”) against liability for copyright infringements committed by users of their services.

In the precedent case in the same circuit (BMG v. Cox), it was proven that Cox failed to meet the DMCA’s statutory conditions requiring account termination of repeat infringers and, thereby, voided its “safe harbor,” allowing both that trial and Sony to proceed. Losing DMCA immunity does not prove that an ISP is liable for infringements committed by users, but the two are related because losing the “safe harbor” and reaching the standards of secondary liability both entail considerations of law and fact as to what actions the ISP took, either to respond, or avoid responding, to infringements via its network, and why the ISP took, or failed to take, those actions.

Contributory Liability

Contributory liability exists when the accused party has knowledge of illegal conduct and materially supports or induces that conduct. On appeal, Cox argues that the district court erred at summary judgment by finding that notices sent at the direction of the RIAA were sufficient for establishing Cox’s knowledge of the infringements at issue. It also argues that the verdict cannot stand because the company’s decisions to avoid terminating the relevant subscribers does not reach the standard of “material support” as a matter of law. “…no reasonable juror could find that Cox materially contributed to each infringement for which it was held liable. The district court erroneously found that Cox materially contributed because internet access was necessary to each infringement,” the brief states.

Vicarious Liability

To be vicariously liable for copyright infringement, a party must receive a direct financial benefit from the infringement, and it must have the right and ability to stop or prevent the infringement. Here, Cox argues that because it provides access for flat fees, and because its service is provided for substantially non-infringing purposes, the ISP did not receive any direct financial benefit as a result of customers using its network to illegally download music. The brief argues, “The district court defied prevailing law in holding that Plaintiffs were not required to prove that” Cox had a direct financial interest in users downloading songs or that it promoted the opportunity to engage in infringement as a “draw” to consumers. “[The court] further erred in finding that Cox received a direct financial benefit by not terminating…subscribers who infringed.”

On the second prong of the vicarious liability question, Cox argues that it does not have the right and ability to “supervise the conduct of its six million customers” and further states that nobody should want an ISP to supervise consumers so invasively. In order to avoid the “crushing liability” implied in this case, Cox asserts that “ISPs would have no choice but to terminate subscribers the moment they are accused of a single infringement, stranding countless subscribers in an internet exile.”

Questions of Law and Fact

Cox appeals on matters of law, but it will be interesting to see what the panel makes of the more colorful generalizations in its brief, which may be there to obfuscate facts that go directly to the legal questions presented. For example, the brief’s first sentence declares, “The music industry is waging war on the internet.” A provocative and sweeping headline for the media, but the panel may find the fatal flaw in Cox’s appeal is that it too broadly asks the court to consider implications for “the internet” while eliding details germane to Cox’s conduct.

Specifically, on the matter of contributory liability, evidence was presented to the juries in both BMG and Sony indicating that Cox engaged in willful blindness and that it actively avoided taking measures leading to account termination, even for recidivist infringers. Both the district court and the juries found this conduct to be “material support.” On the question of vicarious liability, similar evidence was presented to show that the motive for Cox’s failure to terminate relevant accounts was its desire to preserve the revenue from those customers, and this was held to be “financial benefit.”

Indeed, it would seem difficult to argue before a reasonable jury that protecting about $94 million annually is not “financial benefit,” and that is roughly the value of the 1% of total customers Cox estimates are encompassed by the Sony claim.[1] And in perhaps another example of overreaching, this 1% number appears to be the rationale for the following assertion in the Cox brief:  “… unlike the offerings of Napster and its ilk, internet service is neither designed nor advertised to promote piracy. And on this record, 99% of Cox’s internet users never put it to that use.”

Even if Cox could prove that its other 5.94 million customers never engage in piracy, the comment reads like another distraction for the headlines because it is irrelevant to the questions presented. If Cox was shown to have materially supported repeat infringers for the purpose of protecting any of its revenue, it doesn’t matter what portion of the balance sheet that activity represents.

Although certain questions inherent to the case are not without difficulty (e.g. account termination is nothing to take lightly), it seems that Cox wants the court to hold that ISPs are inherently immune from secondary liability for copyright infringement. But if that were true, then §512 of the DMCA would not have been written in the first place. Why carve out a shield for a liability that cannot exist based on the general function of the enterprise being shielded?

This legal paradox has been steadily woven into the narrative for the past twenty years by the ISPs themselves. In the 1990s, it was Cox’s industry that lobbied for the “safe harbor,” and the conditions in §512 of the DMCA were substantially predicated on the infringement mitigation methods those companies claimed were technologically feasible. Those measures never really materialized. Instead, the narrative shifted during the intervening years to the declarations: We can’t supervise. You don’t want us to supervise. And the internet is too important to cancel anyone’s account ever. We’ll see, but I’m not sure the courts are going to buy it.

[1] 60,000 customers x $130 average monthly bill x 12 months.

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