Why it matters: Following a two-week trial in the case of BMG Rights Management (US) LLC v. Cox Communications, Inc., on December 17, 2015, a federal jury found high-speed Internet service Cox Communications liable for willful contributory copyright infringement for "turning a blind eye" to the repeated illegal downloading and sharing of music files by its subscribers. The jury awarded damages in the amount of $25 million in the first case where an Internet service provider (ISP) has been held responsible for its subscribers' music piracy. Prior to the trial's start, the judge ruled that Cox Communications could not avail itself of a safe harbor defense afforded to ISPs under the Digital Millennium Copyright Act, which defense potentially could have shielded Cox Communication against any liability.

Detailed discussion: In the first time that an ISP has been held responsible for its subscribers' music piracy, on December 17, 2015, a federal jury in BMG Rights Management (US) LLC v. Cox Communications, Inc. found high-speed ISP Cox Communications, Inc. (Cox) liable for willful contributory copyright infringement and awarded damages in the amount of $25 million. The jury's verdict was based on evidence presented at the two-week trial that Cox had "turned a blind eye" to the illegal downloading and sharing of music by its subscribers, including not terminating—or "soft" terminating but then reactivating—the accounts of known "repeat infringers." Prior to the trial's start, the judge ruled that Cox did not qualify for one of the safe harbor defenses afforded to ISPs under the Digital Millennium Copyright Act (DMCA), which would have limited Cox's liability. More on that later.

First, a brief summary of the background of the case: BMG Rights Management (US), LLC (BMG) and Round Hill Music LP (collectively, Plaintiffs), the putative owners or administrators of approximately 1,400 musical composition copyrights, sued Cox in 2014 for, among other things, contributory copyright infringement, alleging that the ISP did nothing to stop its subscribers—many of them "repeat infringers"—from using peer-to-peer (P2P) file sharing to illegally upload and download music files. The evidence to back up these claims came through Plaintiffs' use of Rightscorp, Inc. (Rightscorp) as their agent to identify infringing uses of their copyrighted works. Rightscorp's process involved using software to search websites that index P2P files and, through a complicated process, identifying those P2P files that contained one or more of the Plaintiffs' copyrighted works. Once identified, Rightscorp was able to obtain the date, time and IP addresses of the peers between whom the P2P files were shared. In March 2011, Rightscorp began sending infringement notices (ultimately totaling over 2.5 million) to Cox, the ISP associated with the recorded IP addresses, using an email address specifically provided by Cox for the purpose. A large percentage of these infringement notices related to repeat infringer subscriber accounts. After much back and forth between the parties having to do with the settlement offers contained in Rightscorp's infringement notices (Cox asked for the offers to be removed; Rightscorp kept them in), Cox at first blacklisted, then outright blocked, email delivery of the notices by October 2011. The Plaintiffs subsequently filed their complaint against Cox in November 2014 in the Eastern District of Virginia. In its answer, Cox claimed as one of its defenses that, as an ISP, its liability for copyright infringement was limited because it was protected by one of the "safe harbors" for ISPs contained in the DMCA, namely that it was a "mere conduit" for "transitory digital networking communications," and that it did "nothing more than transmit, route, or provide connections for copyrighted material (Conduit Safe Harbor). "

Prior to the trial's start, District Court Judge Liam O'Grady heard oral arguments in connection with cross-summary judgment motions filed by the parties. As part of their summary judgment motion, the Plaintiffs requested that the judge find that Cox was not entitled to the Conduit Safe Harbor defense, which the judge granted on December 1, 2015. In his analysis, the judge noted that, in order to benefit from any one of the four safe harbors in the DMCA, ISPs such as Cox must meet certain "threshold requirements," the most relevant to this case being the requirement that the ISP demonstrate that it has "adopted and reasonably implemented, and informed subscribers and account holders of the service provider's system or network of, 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."

The fact that Cox had such a policy in place at the time of the events leading up to the lawsuit was not in dispute—Cox's Acceptable Use Policy (AUP) prohibited its subscribers from "post[ing], copy[ing], transmit[ting], or disseminat[ing] any content that infringes the patents, copyrights, trade secrets, trademark, moral rights, or proprietary rights of any party." The AUP further provided that "[v]iolation of any terms of this AUP may result in the immediate suspension or termination of either . . . access to the Service and/or [the] Cox account." Claims regarding subscriber copyright infringement were handled through Cox's abuse department using a written "graduated response procedure" for repeat infringers with delineated steps (warnings, etc.) to be taken leading up to an account being suspended or terminated.

Per Judge O'Grady, the issue turned on whether Cox had "reasonably implemented" its AUP policy toward repeat infringers. After reviewing the evidence, the judge determined that it had not. The judge pointed to internal Cox emails showing that Cox employees in actuality employed an "unwritten semi-policy" to delay the termination of and/or reactivate repeat infringers in order to maintain subscriber revenue. Tellingly, Judge O'Grady found that "[t]he record conclusively establishes that before the fall of 2012 Cox did not implement its repeat infringer policy. Instead, Cox publicly purported to comply with its policy, while privately disparaging and intentionally circumventing the DMCA's requirements. Cox employees followed an unwritten policy put in place by senior members of Cox's abuse group by which accounts used to repeatedly infringe copyrights would be nominally terminated, only to be reactivated upon request. Once these accounts were reactivated, customers were given clean slates, meaning the next notice of infringement Cox received linked to those accounts would be considered the first in Cox's graduate response procedure." The judge further found that Cox amended its AUP in October 2012 to add two additional suspension steps to its graduated response procedure, which resulted in fewer repeat infringers being terminated. Finally, the evidence showed that "Cox did not terminate account holders despite knowing that they were using Cox's service to repeatedly infringe."

Because he found Cox's implementation of its repeat infringer policy to be unreasonable, the judge granted summary judgment in favor of the Plaintiffs and ruled that Cox could not avail itself of the Conduit Safe Harbor defense, with the result that "[i]f Cox is determined [at trial] to be liable for contributory … copyright infringement, BMG will not be limited in the remedies it seeks." Two weeks later, on December 17, the jury returned the $25 million willful contributory copyright infringement verdict against Cox.

Click here and here to read the (1) 12/1/15 Memorandum of Opinion ruling on cross-summary judgment motions and (2) 12/17/15 Jury Verdict in BMG Rights Management (US) LLC v. Cox Communications, Inc.