Tag: Cox Communications

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.

The Cox $1 Billion Copyright Damage Award is Not as Big as You Think

When it was announced last week that a jury awarded the major record labels a one billion-dollar-damage award in its copyright infringement case against COX Communications, certain anti-copyright voices were predictably shrill in their astonishment at such a stratospheric number.  Specifically, the plaintiffs represented by the RIAA were awarded $99,830.29 per infringement of just over 10,000 songs, which is actually less than the maximum statutory damage award of $150,000 per infringement.  

Regardless, the big price tag prompted Mike Masnick at Techdirt to do his shrieking mandrake bit (from Harry Potter), describing statutory damages for copyright infringement as “crazy,” “messed up,” and even “unconstitutional.”  And because comment threads are what they are, one reader at that Ministry of Disinformation opined, “the fact that .50-1.00 dollar [sic] songs magically become worth just under one-hundred thousand each simply highlights just how utterly insane copyright law is.”  

I’m not eager to pick on some anonymous commenter who does not appear to have a rudimentary knowledge of what he’s talking about; but then, many people do think Masnick knows what he’s talking about, which is one reason all this whinging nonsense seeps into public perception.  So, let’s review what Cox Communications did in this case; what statutory damages are for; and why the retail price of an individual song (or DVD, or movie ticket, or whatever) has nothing whatsoever to do with damages that may be awarded in a lawsuit.

Cox Was Not Merely Lax in Complying with the DMCA 

The Digital Millennium Copyright Act (1998) provides a liability shield (the “safe harbor”) to internet service providers whose customers use their services to commit copyright infringement—but only if the ISP meets certain conditions.  One of these conditions is that a service provider must have a policy in place whereby repeat infringers eventually face account termination for refusing to cease their infringing activity after receiving warnings sent by the provider. Separately, any party that materially contributes to a form of actionable conduct (including copyright infringement) may be held either civilly or criminally liable for the conduct.

Although the DMCA statute does not mandate how a “repeat infringer policy” must be structured, it was proven in the precedent and related case BMG v. Cox, that the defendant implemented a “thirteen-strike” policy, after which Cox still avoided account termination and was further shown to have taken affirmative action to avoid “knowing” about the scope of infringement claims it was receiving.  For instance as the record labels’ complaint states, “Rather than working with Plaintiffs to curb this massive infringement, Cox unilaterally imposed an arbitrary cap on the number of infringement notices it would accept from copyright holders, thereby willfully blinding itself to any of its subscribers’ infringements that exceeded its ‘cap.’”  [Emphasis added]

In his post, Masnick sweeps the evidence proving Cox’s “willful blindness” under his own invented narrative in which Judge Liam O’Grady of the Virginia Circuit Court simply “does not like the internet,” set in a world in which rightsholders expect ISPs to “wave magic wands to eliminate piracy.”  That’s all very cute and distracting, but what Masnick is really suggesting is that he and others think the liability shield for ISPs should be unconditional; that no internet user should ever face account termination for any reason; and that statutory damages for contributory copyright infringement—especially to the tune of a billion dollars!—are purely functions of greed on the part of the rightsholders.

Those are opinions that copyright critics are free to express and argue on the merits if they can, but I would remind them and everyone else that it was the ISPs themselves (originally AT&T, Verizon, et al) who proposed the “safe harbor” provisions (Section 512) of the DMCA in the late 1990s; and one of the premises upon which they argued this cause was the fact that they were technologically capable (without the use of magic wands) of substantially mitigating copyright infringement on their platforms.  This promise to use the tools at their disposal to collaborate with rightsholders was part of the deal that earned them the safe harbor in the first place—a bargain that has never actually been fulfilled.  

According to the evidence presented in BMG (which also controls in the subsequent suit by the labels), Cox clearly made executive decisions that went far beyond Masnick’s flabby description that the ISP did “not adequately follow its own repeat infringer policy,” as though the conduct at issue were a mere lapse in maintaining compliance, rather than one of engaging in non-compliance as a matter of company policy.  One email entered into evidence written by the former head of Cox’s Abuse Group stated, “Fuck the DMCA,” which appears to characterize the attitude that caused the ISP to lose so badly in these suits, and also why statutory damages are actually essential when giant players like this are involved. 

A Billion Here a Billion There

Especially where major corporate entities are engaged in any kind of wrongful conduct, it is axiomatic that if damages awarded in litigations are not punitive, the prospect of further legal action can be factored into the cost of doing business and will, therefore, have no effect in correcting the underlying harmful conduct.  Yet, bizarrely, Masnick points to the fact that the RIAA made a little under $10 billion in 2018 as a rationale for describing a damage award one-tenth that size a form of insanity.  This is no less naïve than the aforementioned Techdirt commenter, who seems to have no frame of reference at all for how the law actually works.  Damage awards in a wide range of litigation are not based solely on recouping the “street value” of the estimated financial loss to a plaintiff.  This would never do as a form of justice.

Take this subject out of copyright law for a moment and imagine a man who is maimed as the result of negligence by some corporation.  If he can no longer work as a janitor, should his damage award from a lawsuit be limited to his annual janitor’s salary multiplied by the number of years he can be expected to live?  Though many might prefer such a cold and narrow remedy, it would neither deliver adequate justice to the injured party nor satisfy society’s compelling interest in punishing the corporation for its negligence severely enough that it would incentivize remediation of the harmful conduct.  Damage awards that exceed these parallel aims may be held by a court to be excessive violations of due process (hence Masnick’s allusion to constitutionality); but is the Cox award actually excessive in context?

Cox has about six million subscribers.  If just 20% of those customers are chronic users of pirate sites—this is below statistical piracy averages—that would be roughly one million customers whom Cox could potentially be required to warn and possibly cancel under the provisions of the DMCA.  This subscriber base is worth around two-billion dollars in regular access fees each year,* which gives us a rough idea of the kind of revenue an ISP like Cox may be seeking to protect by engaging in “willful blindness” with regard to its consumers’ scope of infringement.  

So, if we consider that one-billion dollars is one half of one year’s revenue from about one-sixth of Cox’s total customer base, this damage award begins to look like what a damage award is supposed to be—painful enough to effect change in the defendant’s (and related providers’) behavior, but not wildly out of scope with the business dynamics in the circumstance at issue.  Or we can do the math in reverse and even reduce the chronic piracy number to 10% of Cox’s users (i.e. one-billion in revenue per year), and a one-time fine of one-billion dollars is not quite as madly disproportionate as it looks in the headlines.  

Masnick is not wrong to allude to the fact that a damage award can be unconstitutional, but he is wrong to imply that statutory damages are inherently unconstitutional, or immoral, just because he and his friends do not like (or seem to understand) copyright.  People are free to hate the RIAA or Cox or both, but if they’re not willing to unpack any of the pesky details in these cases, then the simple, objective story here is that two different juries concluded, based on evidence, that one big-ass entity willfully harmed the interests of other big-ass entities; and this does tend to result in what looks like big-ass money changing hands.  And there is nothing all that crazy about it.   

___________

*Average bill of $120-160 times 1 million.

BMG v Cox Goes to 4th Circuit Appellate Court

Amicus briefs were filed recently in the 4th Circuit Court of Appeals in the case of BMG Rights Management v Cox Communications. In November of 2014, BMG sued Cox (an ISP) for contributory copyright infringement, and a US District Court found for the plaintiff in December of 2015, awarding $25 million in damages. The suit was based on evidence that Cox was willfully ignoring and/or failing to address the use of its service by repeat infringers.

“Digital rights” groups and (let’s be honest) people who support piracy decried the outcome, which Cox has now appealed. A decision may expected by early Spring, and if the court were to find Cox’s arguments persuasive, this would have a very damaging effect for rights holders—further aggravating the weakness in the DMCA as a mechanism of enforcement.

Having failed in the lower court to convince either judge or jury that Cox had sufficiently maintained its liability shield (safe harbor) under the DMCA, the company now seeks to argue on appeal that the DMCA says something other what it says.  And true to form, Public Knowledge and the Electronic Frontier Foundation have chimed in (via joint amicus brief) to propose that if the Cox ruling is upheld, it could lead to disenfranchisement of people from internet access and…y’know…destroy free speech. Again.

Anyway, let’s review.

Although one might get the idea from general discussion that DMCA is either a blanket liability shield for ISPs or a blanket takedown mechanism for rights holders, it is neither of these things. Instead, the DMCA statutes define the conditions and responsibilities of service providers with regard to users uploading or accessing unlicensed, copyrighted material onto their platforms. In simple terms, the law states how an ISP may conditionally retain its safe harbor liability shield, and it is these conditions which tend to get lost in the broader reporting on DMCA-related stories.

A service provider like Cox, which sells internet access to consumers, generally would not be concerned with hosting infringing material the way a platform like YouTube will be, but they can be liable for contributory infringement if the company is aware of subscribers using its service to repeatedly infringe copyright and takes no action to stop the infringing activity. The statute in DMCA §512(i) states that a service provider must have “a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers.”  Note that the DMCA explicitly anticipates conditions by which the provider must eventually terminate the accounts of repeat infringers—logically, those who refuse to stop after some amount of warning.

So, for all of EFF’s and PK’s dramatics about the cruelty of account termination—their brief compares it to “cutting off a tenant’s water”—one might get the idea that in writing the DMCA, Congress never imagined such a remedy; but termination is precisely what the law says.  (A more reasonable comparison would be made to the prospect of losing a driver’s license, which can be quite damaging to an individual, but which is also a penalty imposed only after some degree of willful abuse.)  What the DMCA does not say is how much infringement makes a “repeat infringer,” or how an ISP must design its policy for addressing repeat infringers where account termination is a possible consequence.

This ambiguity can be exploited by service providers, and in this case, BMG presented substantial evidence to the court that Cox’s policies seemed purposely designed to avoid taking action against repeat infringers within a reasonable interpretation of the DMCA.  The district court opinion written by Judge Liam O’Grady states, “Unfortunately for Cox, the record was replete with evidence that foreclosed any assertion by Cox that it had reasonably implemented a repeat infringer policy.”

Who’s a repeat infringer?

In its appeal, Cox seeks to argue that “repeat infringers” in DMCA §512(i) can only mean “subscribers who have been found liable for infringement by a court or a jury on more than one occasion.” In other words, BMG’s evidence of users consistently accessing unlicensed material does not make those users “repeat infringers” unless they’ve already been found guilty of infringement in a court of law—more than once.

Cox is relying on a specific interpretation of the word “infringer” in the statute, hoping that the appellate court will agree that a “repeat infringer” can only be an individual who has lost at least two copyright infringement cases in court.  That population may be a number barely large enough to fill a small cafe, which is considerably smaller than the billions of users anticipated by the architects of the DMCA. And because it is obvious to any reasonable person that one can be guilty of a violation without being held liable—if you’re let go for speeding with a warning, it doesn’t mean you weren’t speeding—any reasonable person should conclude that Congress’ use of the word “infringer” in this case was meant to describe individuals engaged in unlicensed access to, or use of, copyrighted material, even if the rights holders do not intend to pursue litigation against them.

It is a truly bizarre argument, which overtly pretends the DMCA is something other than what it is.  The background, intent, and language of the law is known, by the parties involved in its writing, to have been designed as a process by which ISPs and rights holders would collaborate to mitigate infringement—no matter where the users reside or who they are—without costly litigation.  For example, a “repeat infringer” under the DMCA can easily be—and often is—a user in a foreign country who has never seen a U.S. court, let alone been a named party in a U.S. copyright case.

The DMCA’s existence is based partly on an understanding that worldwide users would inevitably infringe—either willfully or unintentionally—but that the ISPs and rights holders would have a mechanism for removing infringing files or stopping infringing activity without anyone getting sued—as long as all parties met the conditions in the agreement.

Photo by SergeyF

Knowledge of Infringement

If you call someone on their cell 3-4 times and they don’t answer, there may be any number of reasonable explanations.  If you call them 50 times and they don’t answer, they’re ducking your calls—or in legal terms, they’re engaging in “willful blindness” by choosing not to hear what you have to say.  So, what about a few million calls?  At issue in the lower court decision was the fact that Cox simply ignored millions of notices sent by Righstcorp on behalf of BMG containing IP addresses and other corroborating information demonstrating repeat infringement by numerous subscribers.

Cox’s rejection of these notices was deemed “willful blindness,” which is the legal equivalent to taking affirmative action to infringe, hence the charge of contributory infringement.  On appeal, Cox contends that the notices, which they chose to ignore, would not constitute “knowledge of infringement” anyway, thus seeking a standard of “knowledge” so narrow that it would effectively excuse all ISPs from adopting any kind of anti-infringement policy as mandated by the DMCA. 

The Betamax Argument

Cox further argues that as a conduit provider, they can only be held liable if they “actively encourage or induce infringement through affirmative acts.”  In this regard, Cox relies on a very broad reading of Sony Corp v Universal Studios (1984), which held that Sony could not be liable for copyright infringements that may be committed by users of its VCRs.  There are several parts to the Sony ruling, including the Court’s holding that because the VCR could be used for “substantial non-infringing purposes,” Sony could not be liable for any infringing uses unless it actively induced or encouraged that infringement by its customers.

Cox now seeks to argue, by the same principle, that because internet access may be used for “substantial non-infringing” purposes, they should be held to the same standard as Sony because they also did not induce its users to infringe.  Once again, Cox’s argument seeks to bypass the terms of the DMCA with an argument that, if upheld, would unconditionally absolve all ISPs of liability unless they promoted infringement in their marketing.

The fact that the internet, writ large, is used for substantial non-infringing purposes is immaterial.  To stick with automotive analogies, just because cargo trucks are used for substantially legal purposes, this has no bearing on the liability of a trucking company, if it were to turn a blind eye to some of its drivers transporting contraband across state lines.

Nevertheless, Cox—with the hyperbolic assistance of EFF/PK—seeks to argue that if this hypothetical trucking company pays a penalty, loses it’s license, or fires the named truckers, that will lead to the end of trucking itself, and we all starve. If 100 Cox subscribers lose their access due to their infringing activity, it has no more bearing on the internet and its billions of users, than if a different 100 subscribers lost their access due to non-payment for the service.

As argued in the brief filed by the Copyright Alliance, “If Cox’s view was the law, then as long as it was not actively inducing or promoting infringement, Cox could throw each and every infringement notice it received straight into the trash, and the “Abuse Group” charged with addressing online piracy could knowingly permit active infringement without creating any risk of liability to Cox.”

To summarize, the Cox argument boils down to the following:  1) repeat infringers are not repeat infringers; 2) even if they were repeat infringers, we could not know they were repeat infringers from the evidence presented; 3) even if they were repeat infringers and we knew about them, we aren’t liable because we didn’t tell them to infringe.

Implications of this Case

This effort to treat the safe harbor as an unconditional liability shield is generally where large ISPs have tried to move the conversation, both in the courts and in the public dialogue. But the DMCA was never meant to provide a free ride for service providers, although it has inadvertently produced that result to a greater extent than anticipated by its authors.

As Copyright Alliance also observes in its brief, if a rights holder the size of BMG has no remedy in a case in which a service provider has been shown to have circumvented the provisions in the law, then independent rights holders truly have no hope of protection whatsoever in the evolving digital market.  Instead, independent rights holders need the DMCA to be made more effective than it is by revising some of the ambiguity in the statutes, which leads to the kind of bad-faith policies on the part of ISPs that are apparent in this case.