In a legal development that has caught the attention of broadband Internet service providers (ISPs), the U.S. District Court of the Eastern District of Virginia ruled last week in favor of music rights group BMG in upholding a $25 million penalty assessed against cable operator Cox Communications for its alleged failure to act on warnings that certain customers were downloading and sharing copyrighted music content illegally.

The decision by U.S. District Court Judge Liam O’Grady upholds a jury verdict and associated damages that were handed down last December.  BMG, which uses a third-party company known as Rightscorp to monitor file sharing activities on Internet networks, filed suit against Cox two years ago.  When evidence of illegal file sharing is detected on ISP networks, Rightscorp notifies affected ISPs and expects them, in turn, to inform their customers that they may be held liable for copyright infringement.  The case at hand stems from BMG’s accusation that Cox blocked or hindered millions of infringement notices filed by Rightscorp on BMG’s behalf and had failed to track or crack down on subscribers who downloaded music illegally through the Cox broadband network.  Although Cox and other ISPs would normally be protected against claims of copyright infringement under the “safe harbor” provisions of the Digital Millennium Copyright Act (DMCA), BMG convinced the jury that Cox should be held liable for the illegal downloads of its users because Cox had failed to comply with DMCA rules that otherwise shield ISPs.

Cox—which has had an anti-piracy system in place since 2008—appealed the verdict, countering that the evidence entered by BMG and the court’s instructions to the jury were handled improperly.  Cox also criticized Rightscorp’s practice of including a settlement offer (typically a proposed payment in the amount of $20 or $30) in infringement notices that Rightscorp expected Cox to pass on to affected customers.  Concluding, however, that Cox “has not identified any ground that would warrant a new trial,” O’Grady declined to throw out the $25 million damage award.  As he reiterated the jury’s pronouncement that Cox did not qualify for the DMCA safe harbor because Cox failed to act aggressively in punishing suspected copyright infringers, O’Grady took issue with Cox’s “thirteen-strike” policy of dealing with online piracy—a system that O’Grady labeled as “so convoluted and multi-stepped as to be useless.”   Though acknowledging Cox’s view that Rightscorp’s settlement demands were “premature at best because a notification alone cannot establish infringement,” O’Grady wrote that “what BMG found innovative, Cox found extortionate.” While AT&T, Verizon and other network ISPs declined press requests for comment, a spokesman for Cox emphasized, “we are disappointed in the ruling and plan to appeal.”