On February 1 2018 the US Court of Appeals for the Fourth Circuit in BMG Rights Management (US) LLC v Cox Communications, Incorporated (16-1972) held that Cox, an internet service provider (ISP), was not entitled to the safe harbour of 17 USC Section 512(a) of the Digital Millennium Copyright Act. In so holding, the Fourth Circuit rejected Cox's argument that the Section 512(a) safe harbour requires that an ISP take action only against subscribers who are adjudged in court to be 'repeat infringers'. The Fourth Circuit also clarified that contributory copyright infringement liability requires more than just negligence on the part of the ISP, and that the district court below erred in instructing a jury otherwise. Accordingly, the Fourth Circuit remanded the case for a new trial.
The Section 512(a) safe harbour protects an ISP from copyright infringement liability where the ISP has "adopted and reasonably implemented… a policy that provides for the termination in appropriate circumstances of subscribers… who are repeat infringers".(1) In this case, Cox implemented a '13-strike' policy, under which, if Cox received from a copyright owner repeated notices of infringement against a particular Cox subscriber, Cox would send escalating warnings to the subscriber and then limit or suspend the subscriber's internet access. However, under this policy, Cox:
- never automatically terminated a subscriber;
- did not count more than one notice per day toward a subscriber's 13-strike limit; and
- reset its subscribers' 13-strike counter every six months.
In December 2011 the music publishing company BMG hired Rightscorp, Inc to monitor infringing file-sharing activity on BitTorrent, and to send copyright infringement notices on BMG's behalf to alleged infringers' ISPs, including Cox. However, earlier in 2011 Cox had 'blacklisted' Rightscorp, such that Cox would categorically disregard all of Rightscorp's notices.
In November 2014 BMG sued Cox in the Eastern District of Virginia, alleging that Cox was vicariously and contributorily liable for copyright infringement due to Cox's subscribers sharing BMG music files via BitTorrent over Cox's service. At the end of discovery, the district court granted BMG's motion for summary judgment that Cox was not entitled to the Section 512(a) safe harbour because BMG had adduced evidence to show that Cox knew that certain subscribers had engaged repeatedly in infringing activity, yet had failed to terminate their accounts, and because Cox had no contrary evidence. Subsequently, at trial, a jury found Cox liable for wilful contributory infringement and awarded BMG $25 million in statutory damages. Cox appealed.
In a decision by Judge Diana Gribbon Motz the Fourth Circuit affirmed the district court's judgment that Cox was not entitled to the Section 512(a) safe harbour.
In affirming the district court's safe harbour judgment, the Fourth Circuit rejected Cox's argument that the term 'repeat infringers' in Section 512(i)(1)(A) refers to 'adjudicated' repeat infringers (ie, people who have been held liable by a court for multiple instances of copyright infringement). The Fourth Circuit observed that other provisions of the Copyright Act use 'infringer' to refer to "all who engage in infringing activity, not just the narrow subset of those who have been so adjudicated by a court". The Fourth Circuit also noted that Section 512(g)(1) of the Digital Millennium Copyright Act itself distinguishes between "infringing activity" and activity "ultimately determined to be infringing", thus illustrating that "Congress knew how to expressly refer to adjudicated infringement, but did not do so in the repeat infringer provision". The Fourth Circuit further noted that the legislative history explained that "those who repeatedly or flagrantly abuse their access to the Internet through disrespect for the intellectual property rights of others should know that there is a realistic threat of losing that access".
According to the Fourth Circuit, "the risk of losing one's Internet access would hardly constitute a 'realistic threat' capable of deterring infringement if that punishment applied only to those already subject to civil penalties and legal fees as adjudicated infringers".
Next, the Fourth Circuit determined that Cox had not reasonably implemented a policy that "provides for the termination in appropriate circumstances" of repeat infringers. The Fourth Circuit observed that, in internal emails, Cox's employees had indicated that a subscriber's services should be reactivated notwithstanding Digital Millennium Copyright Act violations, and that until September 2012, "Cox never terminated a subscriber for infringement without reactivating them". The Fourth Circuit also noted that from September 2012 until the end of October 2014, Cox issued only 21 terminations – 17 of which were for failure to pay bills or use of excessive bandwidth. The Fourth Circuit moreover noted that "Cox's decision to categorically disregard all notices from Rightscorp provides further evidence that Cox did not reasonably implement a repeat infringer policy".
The Fourth Circuit rejected Cox's argument that BMG had not provided sufficient proof of Cox's actual knowledge of repeat infringement:
"Cox bears the burden of proof on the DMCA safe harbor defense; thus, Cox had to point to evidence showing that it reasonably implemented a repeat infringer policy. The emails show that Cox internally concluded that a subscriber should be terminated after the next strike, but then declined to do so because it did not want to lose revenue. In other words, Cox failed to follow through on its own policy."
The Fourth Circuit then turned to Cox's challenges to the district court's jury instructions on contributory copyright infringement. The Fourth Circuit first explained that, under the Supreme Court's ruling in Metro-Goldwyn-Mayer Studios Inc v Grokster, Ltd (545 US 913 (2005)), while an intent to infringe will not be presumed from the sale of an item with a substantial non-infringing use, the fact that a product is capable of substantial lawful use does not mean that the producer of the item can never be contributorily liable:
"Thus, contrary to Cox's argument, the fact that its technology can be substantially employed for a noninfringing use does not immunize it from liability for contributory copyright infringement. The district court did not err in refusing to instruct the jury to the contrary."
However, the Fourth Circuit agreed with Cox that the district court had erred in instructing the jury that it could impose contributory infringement liability if it found that Cox "knew or should have known of such infringing activity". The Fourth Circuit reasoned that, while actual knowledge and wilful blindness "can establish the requisite intent for contributory copyright infringement", negligence – wherein the defendant "should have known" of infringement – does not suffice to prove contributory copyright infringement. The Fourth Circuit based that conclusion on the Supreme Court's Grokster ruling and on other Supreme Court decisions, such as Global-Tech Appliances, Inc v SEB SA (563 US 754 (2011)), requiring, in the patent context, a state of mind greater than negligence for contributory infringement. In addition, "to ensure the correctness of the contributory instructions on remand", the Fourth Circuit explained that "generalized knowledge" by Cox of its subscribers' infringement (ie, "that infringement was occurring somewhere on its network") did not suffice to demonstrate contributory infringement, and that, on remand, "the contributory infringement instruction should require that Cox knew of specific instances of infringement or was willfully blind to such instances".
Last, the Fourth Circuit rejected Cox's sundry assertions that certain evidentiary rulings and jury instructions on wilfulness, innocent infringer status and the Digital Millennium Copyright Act were in error.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
For further information on this topic please contact Christopher Loh at Fitzpatrick, Cella, Harper & Scinto by telephone (+1 212 218 2100) or email (firstname.lastname@example.org). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.