No Surprise: Judge Says US Government Can Take The Proceeds From Snowden's Book

from the contracts,-man dept

Back in the fall, we noted that, even if we thought it was silly, under existing law, it seemed highly likely that the DOJ would win its lawsuit against the publisher for Ed Snowden's memoir, Permanent Record. As I noted at the time, the government and the intelligence community in particular take the issue of "pre-publication review" incredibly seriously. Basically, if you take a job in the intel community, you sign a lifelong contract that says if you ever publish a book about anything regarding the intelligence community, you have to submit it for pre-publication review. Officially, this is to avoid classified information showing up in a book. Unofficially, it also gives the US government a sneak peek at all these books, and sometimes (it appears) allows them to hide stuff they'd rather not be public.

As I noted when the lawsuit was filed, there is another ongoing lawsuit challenging pre-publication review requirements on 1st Amendment grounds -- but given the state of the law today, it seemed pretty clear that Snowden would lose this case. And, that's exactly what's happened. Judge Liam O'Grady (who seems to end up with all sorts of high profile cases) easily ruled in favor of the government last week. In short, the court says: an unambiguous contract is an unambiguous contract.

The plain meaning of the contracts set forth above require prepublication review of a signatory's public disclosure which refer to, mention, or are based upon, classified information or intelligence activities or materials. The contractual language here is clear, and this Court is therefore legally barred from accepting extrinsic evidence of course of performance, course of dealing, and common trade practices.

That was in response to Snowden's legal team from the ACLU trying to seek discovery to get more evidence to support his case before it went up for dismissal. No go. In the end, a contract is a contract:

The terms of these Secrecy Agreements are clear, and provide that he is in breach of his contracts and the fiduciary duties identified therein if his public disclosures include the type of information and materials the contracts required to be submitted for prepublication review. Specifically, the CIA Secrecy Agreement requires prepublication review of "any writing... which contains any mention of intelligence data or activities, or contains any other information or material that might be based on" certain information, which was "received or obtained in the course of [CIA] employment... that is marked as classified or [known to be classified or known to be in the process of classification determination]."... Similarly, the NSA Secrecy Agreement require prepublication review of "all information or materials... prepared for public disclosure which contain or purport to contain, refer to, or are based upon protected information," which is "[i]nformation obtained as a result of [a] relationship with NSA which is classified or in the process of a classification determination," including but "not limited to, intelligence and intelligence-related information."... Because there is no genuine dispute of material fact that Snowden publicly disclosed the type of information and materials described above in Permanent Record and his speeches, the Government is entitled to summery judgment on both Counts.

As Snowden pointed out when this happened, all this has really done is to draw more public attention to his book, of course. But, I can see from the DOJ's viewpoint that it may have felt that if it didn't go after Snowden and Macmillan for this, then others might question why they had to go through pre-publication review as well.

Filed Under: cia, doj, ed snowden, liam o'grady, nsa, permanent record, prepublication review
Companies: macmillan

Recognizing It Had No Chance, Cox Settles BMG Copyright Trolling Case

from the and-onward dept

The long saga of the BMG v. Cox case is now over. If you don't recall, BMG had hired the copyright trolling outfit Rightscorp to bombard ISPs with shakedown letters, based on accusations of copyright infringement. Rightscorp really wanted ISPs to pass those letters on to ISP subscribers, including the part where they demand money to leave you alone. As was revealed during the case, Rightscorp would blatantly lie to those subscribers, telling them that if they were innocent they needed to first hand their computers over the police for a forensic search. Cox, after being bombarded with these shakedown letters, started ignoring the Rightscorp letters, leading BMG to sue.

Cox pointed to the DMCA safe harbors to protect itself, but the judge, Liam O'Grady, made it pretty clear that he didn't care much for the internet at all, and didn't seem to mind Righscorp and BMG shaking down people for money with the threat of losing their entire internet access. Of course, it did not help at all that Cox itself had some damning emails about how they treated subscribers accused of infringement. While plenty of attention has been placed on Cox's apparent "thirteen strikes" policy for those accused (not convicted) of copyright infringement, the real problem came down to the fact that Cox didn't follow its own repeat infringer policy. So, in the end, Cox lost to BMG in the lower court and it was mostly upheld on appeal.

However, the case was sent back down to the lower court because O'Grady messed up with his jury instructions, providing them with the wrong standard for contributory infringement (O'Grady's jury instructions about contributory infringement presented it as a much broader standard than it actually was). And thus, the case was supposed to go back for another trial... but that's now over as the two sides have settled and Judge O'Grady immediately signed off on the settlement.

This isn't all that surprising. Cox was basically in a no-win situation, since its own failure to abide by its own repeat infringer policy had already sunk it, and spending a few hundred thousand dollars more on lawyers to argue over contributory infringement in hopes of lowering the damages award probably wasn't worth it if they could just settle the case and move on.

Oh, and of course, Cox now also has a brand new fight with all the major labels that was launched a few weeks ago in response to the results of the BMG case. And Cox is right back in Judge O'Grady's unwelcome court room for that case. I wouldn't be surprised if Cox tries to settle its way out of that case as well.

Filed Under: copyright, copyright trolling, dmca, liam o'grady, repeat infringer, settlement
Companies: bmg, cox, rightscorp

Sensing Blood In The Water, All Major Labels Sue Cox For 'Ignoring' Their DMCA Notices

from the copyright-trolling-showdown dept

For years, we've noted that the major record labels have been drooling over the idea that the DMCA might allow them to force ISPs to kick people entirely off the internet based on mere accusations of piracy. This is problematic for all sorts of reasons (as you might imagine). However, the record labels feared testing this idea in court, because it might not turn out the way they wanted it to. However, as we covered on Techdirt, a few years back, music publisher BMG, with the assistance of copyright trolling operation Rights Corp. went after ISP Cox, claiming that it had failed to kick people off under the DMCA.

That case was an utter mess, not helped at all by the fact that it was handled by Judge Liam O'Grady, who flat out mocked the idea that the internet was important, and made it clear he didn't see any issue at all with banning people from the internet. Here's how he responded to an attempt by the EFF to file an amicus brief pointing out the problems with kicking people off the internet:

I read the brief. It adds absolutely nothing helpful at all. It is a combination of describing the horrors that one endures from losing the Internet for any length of time. Frankly, it sounded like my son complaining when I took his electronics away when he watched YouTube videos instead of doing homework. And it's completely hysterical.

The whole case was a complete mess -- and it was made worse by some bad choices by Cox, including not really following its own stated DMCA repeat infringer policy. O'Grady's ruling was bad, and unfortunately the appeals court upheld it. However, at least the Appeals Court made it more or less clear that they weren't saying every ISP had to kick people off the internet -- but rather that Cox lost its DMCA safe harbors by not following its own DMCA policy. While much attention was paid to the claim that Cox's policy amounted to a "13 strike" policy before you might lose access, the appeals court notes it's not the number of strikes that matters, so much as whether or not the company follows its own policy -- and Cox did not.

Of course, another part that came out during the trial is that Cox was getting so completely bombarded by Rights Corp takedown notices (which doubled as demands for money), that Cox felt it needed to put in place systems to deal with the spam, which included limiting how many notices it would accept each day. Between the ruling in the original BMG case, and the revelations about Cox's own practices, the RIAA clearly sensed blood in the water, and a chance to prove its point. And, thus, it has a massive lawsuit against Cox. It's basically all of the major labels using the earlier case as evidence of some grand conspiracy to profit off of piracy.

Cox is one of the largest Internet service providers (“ISPs”) in the country. It markets and sells high-speed Internet services to consumers nationwide. Through the provision of those services, however, Cox also has knowingly contributed to, and reaped substantial profits from, massive copyright infringement committed by thousands of its subscribers, causing great harm to Plaintiffs, their recording artists and songwriters, and others whose livelihoods depend upon the lawful acquisition of music. Cox’s contribution to its subscribers’ infringement is both willful and extensive, and renders Cox equally liable. Indeed, for years, Cox deliberately refused to take reasonable measures to curb its customers from using its Internet services to infringe on others’ copyrights—even once Cox became aware of particular customers engaging in specific, repeated acts of infringement. Plaintiffs’ representatives (as well as others) sent hundreds of thousands of statutory infringement notices to Cox, under penalty of perjury, advising Cox of its subscribers’ blatant and systematic use of Cox’s Internet service to illegally download, copy, and distribute Plaintiffs’ copyrighted music through BitTorrent and other online file-sharing services. 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.”

Cox also claimed to have implemented a “thirteen-strike policy” before terminating service of repeat infringers but, in actuality, Cox never permanently terminated any subscribers. Instead, it lobbed “soft terminations” with virtually automatic reinstatement, or it simply did nothing at all. The reason for this is simple: rather than stop its subscribers’ unlawful activity, Cox prioritized its own profits over its legal obligations. Cox’s profits increased dramatically as a result of the massive infringement that it facilitated, yet Cox publicly told copyright holders that it needed to reduce the number of staff it had dedicated to anti-piracy for budget reasons.

Given the mess of how Cox handled DMCA notices and its repeat infringer policy, this case is going to be a tough one for it to fight off. But the actual stakes are huge. The RIAA wants to be able to kick people entirely off the internet based purely on accusations -- even if they're bullshit. We should be very concerned about it.

And to increase the level of concern: this new case has been assigned to... Judge Liam O'Grady. Needless to say we'll be watching it closely.

Filed Under: copyright, dmca, isps, kicking people off the internet, liam o'grady, repeat infringer policy
Companies: cox, emi, sony music, universal music, warner music

Dangerous: Judge Says It Was 'Objectively Unreasonable' For Cox To Claim DMCA Safe Harbors

from the this-is-bad dept

We've been covering the BMG v. Cox case since the beginning, and a bad decision just got made even worse -- and more dangerous. If you've been following the case, you know that it's on appeal right now (and a whole bunch of amici have weighed in), but in the meantime, the judge in the district court, Judge Liam O'Grady, has doubled down on his opportunity to chop up and mock the DMCA's safe harbors by telling Cox it must pay $8 million to BMG in legal fees because its using the DMCA safe harbors as a defense was found to be "objectively unreasonable."

That's crazy, for a variety of reasons, but we'll get there. From the very beginning, this case was a joke, and it's unfortunate that the court didn't realize that early on. The case was filed back in 2014, and we pointed out that it was really BMG (and another publisher, Round Hill Music) acting as a proxy for copyright trolling operation Rightscorp, testing out the wacky legal theory that the DMCA requires that ISPs kick repeat infringers entirely off the internet. No one has ever interpreted the DMCA in this manner. Yes, 512(i) requires a repeat infringer policy, but it had always been widely recognized that that referred to services that hosted content, not network providers (e.g., YouTube is required to have a repeat infringer policy that kicks users off YouTube if they keep posting infringing works, but your ISP shouldn't kick you off the internet for the same thing.)

If that interpretation of the law was legit, you'd think that someone would have tried it in court before -- especially with all the whining from the MPAA and RIAA about how ISPs weren't doing enough to stop piracy. So this was a real stretch as a legal theory.

But, somewhat amazingly -- even after the legal proceedings demonstrated that the lawsuit was really about copyright trolling and exposed some heinously bad behavior by copyright troll Rightscorp -- the case went against Cox and in favor of BMG (Round Hill Music was kicked out of the case early on).

O'Grady made it pretty clear in the case that he's not a big fan of this internet thing, and doesn't see why it's a big deal if someone were to get kicked off the internet. At one point in the proceedings, Public Knowledge and EFF sought to file an amicus brief. Admittedly, many district court judges aren't fans of amicus briefs (they're more usually seen at appellate courts), but O'Grady was so dismissive of this one that it was fairly incredible:

I read the brief. It adds absolutely nothing helpful at all. It is a combination of describing the horrors that one endures from losing the Internet for any length of time. Frankly, it sounded like my son complaining when I took his electronics away when he watched YouTube videos instead of doing homework. And it's completely hysterical.

So, yeah. Judge O'Grady then said that Cox wasn't protected by the DMCA at all, which made it easy for the jury to find in favor of BMG and award it $25 million from Cox. Part of the problem was that there was some sketchy behavior by Cox (including some really dumb emails by staff who don't understand the law, but look damning), but none of it should have directly impacted the legal issues, but that behavior clearly influenced O'Grady.

And, now, because of that, O'Grady has awarded legal fees, by arguing that Cox relying on the very same DMCA safe harbors that everyone else relies on and where Cox was the only major ISP that would kick off any user for infringement, was somehow "objectively unreasonable." Think about that for a second. Let's repeat it: Cox's policy was the only one at a major ISP that kicked people off the network for repeat infringement. And every network provider regularly relies on the DMCA safe harbor to protect them from liability. And yet, Judge Liam O'Grady's opinion says that it was "objectively unreasonable." Oddly, O'Grady's opinion here is again entirely focused on the bad behavior by some Cox employees, and not the overall question of whether or not the safe harbor actually works the way O'Grady (and Rightscorp and basically no one else) seems to think it works. Rather than explaining why it's "objectively unreasonable" for Cox to rely on the DMCA's safe harbors, O'Grady basically says that the reliance was unreasonable... because of the bad behavior. That's conflating two separate things. Sanction them for bad behavior if you must, but don't let that cloud the actual legal issue.

The objective reasonableness of a party's position is an important factor in deciding whether to award fees.... In a hard-fought litigation battle such as this one, discovery disputes and fierce briefing are to be expected, and they should not be held too harshly against either party. Nonetheless, there are a few instances in which Cox's advocacy crossed the line of objective reasonableness. In particular, both Cox's attempts to obscure its practice of reinstating infringing customers, and its subsequent assertions of a deeply flawed DMCA defense evince a meritless litigation position that Cox vigorously defended.

[....]

.... Although Cox's DMCA defense cannot be categorized as frivolous or in bad faith, the Court 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 requirements."... The evidence supporting this conclusion was overwhelming, and it included "smoking gun" email conversations.... The most memorable of these contained Cox's own abuse manager stating: "F . . . the dmca!!!"... Therefore, although Cox's defensive arguments may have been reasonable as an abstract legal theory, when viewed in light of the actual facts of the case, they evince an objectively unreasonable litigation position that was nonetheless vigorously defended.

It's clear that O'Grady is hung up on the bad behavior and statements by Cox employees. And, again, what they were saying was really bad. But the real question is whether or not it actually violated the DMCA. And Cox argued, quite reasonably, that it did not. The DMCA doesn't actually require what O'Grady and BMG insist it does, and no other ISP even goes as far as Cox did (bad behavior or not). So because you have some clueless Cox employees, who were spouting off internally about how much they hate the DMCA (an opinion shared by many) and because they implemented their repeat infringer policy in a way that O'Grady felt wasn't reasonable, suddenly arguing that the safe harbors still should apply (because they should!) is "objectively unreasonable"? That's dangerous.

Again, the earlier parts of the case are already on appeal, so hopefully this will all get wiped out and this order won't matter in the long run either. But if it does stand, it's yet another serious problem that's come out of this particular case.

Filed Under: attorney's fees, copyright, dmca, liam o'grady, objectively reasonable, repeat infringer, safe harbors
Companies: bmg, cox, rightscorp

As Expected Judge Upholds His Own Problematic Ruling Concerning Cox's Repeat Infringer Policy & The DMCA

from the moving-on-up-to-the-appeals-court dept

For nearly two years now, we've been following an important DMCA-related case between music publisher BMG and the ISP Cox Communications. While the issues are a bit down in the weeds, what it really comes down to is a question of whether or not internet access providers are required to have a "repeat infringer" policy that removes customers who are seen to have been engaged in too much copyright infringement. Most people had assumed that the DMCA's requirements for a repeat infringer policy only applied to hosting providers -- i.e., those who help people host content -- as opposed to transit providers, who are merely providing the connectivity. In this case, though, that important nuance seemed to have gotten lost in the shuffle, mainly because of some stupid behavior on the part of Cox. Amazingly, Cox is basically the only major ISP out there that has a history of actually kicking people off its service for infringement. Most others have historically refused to do so. But Cox's policy is ridiculously complex, and involves something around 13 steps... and, on top of that, Cox admitted that once it's kicked people off they can just sign up for new service. Seeing all that, the court basically decided that Cox was acting in bad faith, and thus jumped right over the question of whether or not the repeat infringer policy even applied to Cox.

The judge in the case, Judge Liam O'Grady (who is also handling the Kim Dotcom case...) is not exactly known for his love of the internet. Earlier in the case, he had mocked the idea that there was any harm in kicking people off the internet. Responding to an attempt by Public Knowledge and the EFF to file an amicus brief, the judge mocked both organizations and the proposed brief itself:

It is a combination of describing the horrors that one endures from losing the Internet for any length of time. Frankly, it sounded like my son complaining when I took his electronics away when he watched YouTube videos instead of doing homework. And it's completely hysterical.

Up against that, it's no surprise that Cox found itself on the losing side. We explained why this ruling was so problematic and it goes way beyond the $25 million Cox was told to pay BMG.

As part of the process of moving on to appeal, Cox asked Judge O'Grady to reconsider his original ruling as a matter of law, and he's now rejected that plea with a fairly long and detailed opinion. Cox raised three specific concerns about the original ruling, saying that BMG failed to show actual direct infringement, that it failed to provide evidence of Cox's liability and that it also failed to show evidence of willfulness. O'Grady is not impressed.

On the question of direct infringement, Cox pointed out all of the problems with Rightscorp's system (which is what BMG was using) in identifying infringement -- and also argued that Rightscorp's own downloads aren't evidence of infringement. BMG responded that they tested Rightscorp's system and it seemed accurate to them. O'Grady says that Rightscorp's downloads are perfectly good evidence and doesn't go much deeper than that.

On the question of Cox's liability is where things really go off the rails. Cox points to the famous (and important) ruling in the Sony Betamax case that said that VCR devices are legal thanks to "substantial non-infringing uses." BMG then tried to use the Grokster ruling on inducement to undermine what the Supreme Court said in Sony. Here, O'Grady decides that the Sony ruling was a narrow one. That's a problem. O'Grady says that because Cox has an ongoing relationship with potential infringers, rather than ending that relationship at the point of sale, the Sony standard doesn't apply.

Such a claim is possible here because, unlike in Sony, Cox maintains an ongoing relationship with users of its service. Sony's last point of contact with users of the VTR was at the point of sale.... An ongoing relationship between a defendant and direct infringers presents a potential for culpability quite beyond distribution or design....

The judge also rejects the "in the alternative" argument presented by Cox that even if Sony doesn't apply, under Grokster the only way to apply liability is if Cox was found to have induced infringement (remember, the Supreme Court in the Grokster case made up -- out of thin air -- an "inducement" standard to explain why Grokster's file sharing system wasn't protected by the Sony ruling). Here, however, O'Grady takes the Grokster ruling to mean not just that there's an inducement standard, but rather as open season to come up with reasons why the Sony standard doesn't apply. Yikes.

Cox also argues that if Sony does not provide immunity, the Grokster Court made clear that BMG's only path to liability was through an inducement claim. The Court again disagrees. It bears noting that adopting Cox's reading of Sony and Grokster would greatly simplify this area of law. Sony would be a complete bar to contributory infringement whenever a defendant's product or service is capable of commercially significant noninfringing uses, and that safe harbor would be removed for only a distinct subset--those that actively induce infringement.

Well... yeah. That's what the courts have said. What's so terrible about that reading of the law? It makes perfect sense. Instead, O'Grady wants the law to be something different -- allowing courts to shut down services with substantial non-infringing uses by pinning liability based on... vague other claims. That's problematic on a number of levels as it almost writes the Sony ruling out of existence. (As an aside, in a footnote, O'Grady notes that if the appeals court disagrees with him on this point, the case is effectively over, as BMG didn't claim that Cox engaged in inducement until after the case was over, which he notes, correctly, "is far too little and far too late."

Finally, on the question of whether or not Cox was "willfully" blind to infringement on its network, O'Grady again takes a very expansive and troubling view of what he believes the law says. While multiple courts have taken the quite reasonable view that "willful" blindness requires actual knowledge of infringing behavior, O'Grady goes with a broader definition, and takes jokey emails from Cox's abuse team as "proof" that it knew of infringement, and then combined that with the fact that Rightscorp bombarded Cox with notices (whose sole purpose was not to stop the infringement, but rather in hopes that Cox would pass them on to subscribers to get those subscribers to cough up money). But Judge O'Grady takes Cox's decision to treat Rightscorp notices more like spam as a sign of willful blindness:

There was a significant amount of evidence of Cox's general knowledge of infringement on its network. Cox received notices from other copyright holders complaining of infringement. Cox knew from its traffic analysis that subscribers were using BitTorrent.... There was evidence from industry reports that the overwhelming majority of traffic on BitTorrent was infringing, and emails among members of the Abuse Group indicated Cox's knowledge of that fact.... ("Bittorrent is used for one thing only... and I would know. ;-)")... ("99% of DMCA violations is from people using P2P on purpose and not Trojan activity.")

While generalized knowledge of infringement occurring on its network is not sufficient standing alone, it did provide the backdrop for Cox's decision to continuously ignore and take no action in response to the 1.8 million notices, weekly letters, and dashboard from Rightscorp. There was also evidence that Cox had configured its graduated response system in such a way as to reduce both the total number of notices that entered the system and the amount of customer-facing action that may be required. Moreover, internal Cox communications, which were admitted over Cox's objections, signaled that Cox's decision not to process Rightscorp's notices may have been due to more than just the presence of the settlement language and instead reflected a general disdain for any enforcement responsibilities.

Again, O'Grady reads this in the worst possible light. But an ISP should have disdain for copyright holders trying to lump all the liability on them. The whole idea that everyone thinks ISPs should be Hollywood's private police force is silly, and it's why the safe harbors of the DMCA are designed to keep most of the liability off of the ISPs.

Not surprisingly, O'Grady also rejects all of Cox's complaints about the jury instructions and the exclusion of certain evidence. This included O'Grady's decision to block evidence of Righscorp's seriously scammy behavior -- such as its phone script telling people who said they hadn't infringed that they needed to hand their computers over to the local police to search the hard drives. O'Grady says he was right to exclude that evidence because it might unfairly prejudice or confuse the jury.

Basically the only thing that goes Cox's way is O'Grady's decision to deny BMG's request for a permanent injunction

At the outset, the Court notes that BMG's brief in support of an injunction relied heavily on a statement of fact that was not true. Specifically, BMG alleged that, following the jury verdict, Cox had continued to ignore Rightscorp's detection of "massive infringement" on its network....

... In fact, Cox provided notice to BMG shortly after trial that Righscorp was no longer blacklisted.

The court goes on to note that BMG's request for an injunction is overly broad and extreme, and would basically allow Rightscorp to kick people off of Cox's service with little oversight. Hilariously, BMG also demands that Cox "hand over the identity, email address, mailing address, and telephone number of every subscriber that BMG identifies...." Which is basically "please let us let Rightscorp play its shakedown game." Thankfully, the court rejects that too and laughs off BMG's claim that this is necessary for "transparency."

Quite obviously, if that were the reason, there would be numerous ways to anonymize subscribers and still track Cox's actions. There certainly would never be a need for an email address, mailing address, and telephone numbers. When asked, counsel conceded that the infromation would be given to Rightscorp...

Anyway, all of this is just prelude anyway. It seems highly likely that Cox will appeal this decision (though, it's also possible that it will come to some sort of settlement agreement with BMG). It's the appeal where all of this will become especially interesting.

Filed Under: copyright trolling, dmca, intermediary liability, isps, liability, liam o'grady, willful blindness
Companies: bmg, cox, rightscorp

The Details Of Why Judge O'Grady Rejected Cox's DMCA Defense: Bad Decisions By Cox May Lead To Bad Law

from the ugh dept

As we noted a couple of weeks ago, Judge Liam O'Grady rejected Cox Communication's attempt to protect itself under the DMCA's safe harbor concerning a "repeat infringer policy." At the time, he only said he would explain his reasons later, and late yesterday he released his full opinion. It, unfortunately, brings to mind the phrase "hard cases make bad law."

As we explained when BMG and Round Hill Music (with the help of Rightscorp) first sued Cox Communications, the company seemed like a slightly odd choice. While it was the largest of the internet access providers not to sign onto the so-called "voluntary" six-strikes "Copyright Alert System" hammered out between the RIAA/MPAA and big ISPs, it already had a reputation for actually disconnecting those accused of repeat infringements. None of the other major ISPs do that. In fact, a key prong of the whole six strikes thing was that no one would be getting kicked off the internet.

However, the RIAA has long insisted that the DMCA's 512(i) required ISPs to kick people off the internet -- even as that theory had never really been tested until now. Many others had assumed 512(i)'s "repeat infringer" policy only really referred to service providers who actually had direct control over content -- i.e., a YouTube or SoundCloud style site. Kicking people entirely off the internet because one person who uses their account to infringe is quite draconian.

The issue here, however, gets muddied, because Cox made such a mess of its "repeat infringer policy." Yes, it alone among the major ISPs will kick people off. But (and this is the important bit), its internal policy was apparently to kick people off... and then allow them to sign right back up for new service, at which point the count on "infringements" would be reset to 0. For obvious reasons, that feels pretty sketchy, and it's the key point that Judge O'Grady focuses on. Doing something that feels sketchy will often obscure the more important legal arguments. Judge O'Grady basically tosses aside all the other issues because of this "bad behavior" by Cox, as immortalized in some internal emails.

The 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.

Numerous emails in the record, portions of which are reproduced below, support these conclusions. Even viewed in the light most favorable to Cox, the Court finds the contents of the emails cannot be explained away. Cox’s attempts to recast the emails are unavailing. Nor can they be pinned on low level employees whose views had no real significance. The name that appears again and again on these emails is Jason Zabek, Cox’s Manager of Customer Abuse Operations.

In 2009, Zabek sent an email titled, “DMCA Terminations,” to the abuse group that said:

As we move forward in this challenging time we want to hold on to every subscriber we can. With this in mind if a customer is terminated for DMCA, you are able to reactivate them after you give them a stern warning about violating our AUP and the DMCA. We must still terminate in order for us to be in compliance with safe harbor but once termination is complete, we have fulfilled our obligation. After you reactivate them the DMCA ‘counter’ restarts; The procedure restarts with the sending of warning letters, just like a first offense. This is to be an unwritten semi-policy . . . We do not talk about it or give the subscriber any indication that reactivating them is normal. Use your best judgment and remember to do what is right for our company and subscribers. . . . This only pertains to DMCA violations. It does not pertain to spammers, hackers, etc.

And, based on that, the court decides that Cox does not have a "reasonably implemented" termination policy for repeat infringers. There are a bunch of other similar emails, indicating that this absolutely was Cox's policy. Of course, all of that obscures the question of whether or not 5129(i) is meant to apply to access providers, rather than online service providers.

Separately, the judge buys BMG's claim that in late 2012, Cox actually stopped terminating accounts almost entirely (leaving aside, again, that no other major access provider terminates anyone). Again, some questionable internal behavior by Cox comes back to bite them. The judge highlights a case where Cox internally kept discussing a user who was frequently accused of infringing, and who they threatened to cut off... but didn't -- even admitting it's at least partly because of the large amount of money the customer pays.

In June, a senior engineer in the abuse group said this about a customer who had been given a final suspension and advised to remove all P2P file-sharing programs: “This customer will likely fail again, but let’s give him one more change [sic]. [H]e pays 317.63 a month.”

The judge uses this and other examples to note that Cox knew of "repeat infringers" but didn't terminate them. Of course, the vague language of 512(i) doesn't say that you have to terminate someone as soon as you know they're repeat infringers -- just that you have a "reasonably implemented policy." However, Judge O'Grady uses these examples to suggest the policy implementation is not reasonable.

Cox's defense to that is it can't know for sure if people are infringing based solely on accusations. This is correct, but Judge O'Grady doesn't care.

Although Cox was under no duty to monitor for infringement, Cox did not have leeway to wait until an account holder was adjudicated as an infringer to find that circumstances were appropriate for termination. As explained above, the Court disagrees that a repeat infringer policy applies only to those who have been held liable in a copyright suit. Rather, an account holder must be considered an infringer, at minimum, when the service provider has actual knowledge that the account holder is using its services for infringing purposes. Nor do service providers have complete discretion to define “appropriate circumstances.” Appropriate circumstances arise when an account holder is repeatedly or flagrantly infringing copyrights. Thus, when Cox had actual knowledge of particular account holders who blatantly or repeatedly infringed, the responsibility shifted to Cox to terminate their accounts.

That, alone is quite troubling. Kicking people off the internet based merely on accusations of infringement is really dangerous, especially given the number of false infringement allegations that we see.

The one good thing is that the court rejects BMG's troubling definition of "making available." This has been a fight that's been going on for ages. Copyright law says that one of the exclusive rights given to a copyright holder is the "distribution" right. What is not settled law at all is whether or not "making available" violates this distribution right, or if copyright holders have to show actual distribution. The courts are somewhat split on this, with O'Grady recognizing that merely making available is not distribution.

At the threshold, the Court questions the evidence relied on by those courts that purportedly establishes that distribution is interchangeable with publication. Those courts build upon comments in legislative history as well as an excerpt from the Supreme Court’s decision in Harper & Row Publishers, Inc. v. Nation Enterprises.... Legislative history cannot override the plain meaning of “distribution” under § 106(3), however, and Harper & Row involved a narrow discussion of first publication and not the meaning of distribution and publication generally....

Nor does the definition of “publication” support a broader reading of the distribution right. The Act defines “publication” as

the distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership, or by rental, lease, or lending. The offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance, or public display, constitutes publication.

...The first sentence of the definition tracks the language in § 106(3), making it clear that all distributions are publications. It does not follow from that proposition that the inverse—all publications are distributions—is also true.... In short, § 101 provides no support for BMG’s “making available” theory.

There's some more in the ruling, but it seems pretty clear that Cox's own internal emails and policies really sunk the company here, and out of that could come some potentially dangerous law. Some have been making a big deal over the fact that Cox's insurance company, Beazly, has filed for declaratory judgment that it's not responsible for any judgment in this case -- but again, that seems to focus on Cox's own actions, which may not apply more broadly to other providers.

Also, important is the fact that the trial still is about to go forward. Losing the safe harbor protections does not, necessarily, mean that Cox will lose the overall case, but it's an ominous start. Judge O'Grady's rulings and statements so far certainly do not bode well for the company. It's also a little bit ridiculous that O'Grady focuses so much on Cox's bad behavior, but leaves out Rightscorp's much worse behavior -- but I can see where he's coming from.

In the end, this is unfortunate and it's certain that this case will be appealed, no matter how it turns out. But the bad behavior by Cox poisons the well a bit in terms of focusing on the rather important question of what 512(i) actually means, and whether it really applies to internet access providers. As it stands right now, however, a potentially dangerous precedent could be set, whereby people could be forced to completely lose internet access based on mere accusations of copyright infringement. It's hard to believe that Congress intended such a result, but that's how Judge O'Grady is now reading the law.

Filed Under: 512i, copyright, dmca, liam o'grady, repeat infringer, safe harbors, termination policy, three strikes
Companies: bmg, cox, cox communications, rightscorp

Judge Mocks Public Interest Concerns About Kicking People Off Internet, Tells Cox It's Not Protected By The DMCA

from the that's-a-problem dept

Judge Liam O'Grady -- the same guy who helped the US government take all of Kim Dotcom's stuff, is the judge handling the wacky Rightscorp-by-proxy lawsuit against Cox Communications. The key issue: Rightscorp, on behalf of BMG and Round Hill Music flooded Cox Communications with infringement notices, trying to shake loose IP addresses as part of its shake down. Cox wasn't very happy about cooperating, and in response BMG and Round Hill sued Cox, claiming that 512(i) of the DMCA requires ISPs to kick people off the internet if they're found to be "repeat infringers." Historically, it has long been believed that 512(i) does not apply to internet access/broadband providers like Cox, but rather to online service providers who are providing a direct service on the internet (like YouTube or Medium or whatever). However, the RIAA and its friends have hinted for a while that they'd like a court to interpret 512(i) to apply to internet access providers, creating a defacto "three strikes and you lose all internet access" policy. Rightscorp (with help from BMG and Round Hill Music) have decided to put that to the test.

This is a big, big deal. If the case goes against Cox, then it would create a massive problem for the public on the internet. Accusations of infringement could potentially lead to you totally losing access to the internet, which could really destroy people's lives, given how important the internet is for work and life these days. The details of the case look like they should favor Cox pretty easily. After all, Cox pointed out that Rightscorp only had licenses from the publishes, meaning they had no copyright in the sound recording -- yet they admitted to downloading the sound recording, suggesting that, if anything, Rightscorp was a mass infringer. On top of that there was pretty strong evidence that Rightscorp does not act in good faith in how it runs its shakedown practice, telling people that they have to take their computers to the police to prove their innocence (really).

Unfortunately, as Eriq Gardner reports, Judge O'Grady has ruled against Cox on a very key point: does its current policy grant it safe harbor under the DMCA. The judge said no, though we're still waiting for the full ruling as to why.

The bigger story is O'Grady's determination that there is "no genuine issue of material fact as to whether defendants reasonably implemented a repeat-infringer policy as is required by §512(i) of the DMCA," granting a motion that Cox is not entitled to a safe harbor defense.

Now, just because you're not protected by the safe harbor it does not mean that you are automatically guilty of infringement. There are cases where sites have not qualified for the safe harbor and still prevailed. But it does make things more difficult and complicated and, much more importantly, opens the door to lots and lots of mischief by the RIAAs and MPAAs of the world to use this to kick people off the internet entirely based on accusations of copyright infringement. That's immensely worrisome.

O'Grady doesn't seem to think that kicking people off the internet is really a big deal. Earlier in the case, we've discovered, in the process of flat out rejecting an attempt by Public Knowledge and EFF to file an amicus brief, Judge O'Grady made his views clear:

I read the brief. It adds absolutely nothing helpful at all. It is a combination of describing the horrors that one endures from losing the Internet for any length of time. Frankly, it sounded like my son complaining when I took his electronics away when he watched YouTube videos instead of doing homework. And it's completely hysterical.

That's his response to two well known public interest groups explaining to him the "real world harmful effects" of Rightscorp's copyright shake-down trolling business. But he didn't want to hear any of it. Because protecting the ability of Americans to not be the subjects of extortion schemes and to enable them to communicate and work is "hysterical" and no different from kids not doing their homework because of too much YouTube.

The details here matter, but I would imagine that Cox is likely to appeal. One hopes that the appeals court is more open to listening to the concerns over copyright trolling and kicking people off the internet.

Filed Under: 512i, copyright, dmca, liam o'grady, safe harbors, three strikes
Companies: bmg, cox communications, rightscorp, round hill music

How The US Government Legally Stole Millions From Kim Dotcom

from the the-fun-of-asset-forfeiture dept

About a month ago we covered the basics of the lawsuit by which the US government was seeking to keep pretty much all of Kim Dotcom's assets, despite the fact that Dotcom himself hasn't been tried -- and, in fact, it hasn't even been determined if he can be extradited to the United States (a country he's never visited). This week, that case took another step, with the judge, Liam O'Grady, who had already ruled that Kim Dotcom could be considered a "fugitive," more or less finalizing the theft of Dotcom's assets by declaring a default judgment in favor of the US. This isn't the end of the process (not by a longshot), but it highlights just how the US government can use some ridiculous procedures to steal millions in assets from someone who hasn't been shown to be guilty of anything.

As we discussed last time, the story of the raid on Kim Dotcom's rented home in New Zealand, the seizure of all of his cars, money, bank accounts, computers, servers, etc. is well known. That was part of a case for which Kim Dotcom was indicted (under what appears to be questionable legal reasoning -- but that's a separate issue). As has been widely reported, that case is still on hold while Dotcom fights extradition from New Zealand. The extradition fight will finally go to a New Zealand court later this summer. Once that's done, if Dotcom loses, he'll be sent to the US, where he'll face a criminal trial based on the indictment.

But this is actually separate from all of that. You see, when the US government grabbed or froze all of Dotcom's assets, they did so using an asset seizure procedure. Asset seizure is allowed in such cases, but the government then has to give that property back. What the government really wanted to do is keep all of Dotcom's tens of millions of dollars worth of assets -- and in order to do that it has to go through a separate process, known as civil asset forfeiture. It's technically a civil (not criminal) case, but (and here's the part that people find most confusing), it's not actually filed against Kim Dotcom at all, but rather against his stuff that the government already seized. Yes, it's technically an entirely separate lawsuit, that was only filed last summer (two and a half years after the government seized all of his stuff and shut down his company), entitled United States Of America v. All Assets Listed In Attachment A, And All Interest, Benefits, And Assets Traceable Thereto. And, as we noted last time, Attachment A is basically all of Kim Dotcom's stuff.

This whole process is known as an "in rem" proceeding -- meaning a lawsuit "against a thing" rather than against a person. And the "case" basically says all this stuff should be "forfeited" to the US government because it's the proceeds of some criminal activity. You would think that in order for such civil asset forfeiture to go forward, you'd then have to show something like a criminal conviction proving that the assets in question were, in fact, tied to criminal activity. You'd be wrong -- as is clear from what happened in this very case. Once the Justice Department effectively filed a lawsuit against "all of Kim Dotcom's money and stuff," Dotcom did what you're supposed to do in that situation and filed a challenge to such a ridiculous situation. And here the DOJ used the fact that Dotcom was fighting extradition to argue that he was a "fugitive." Judge O'Grady agreed with that last month, and that resulted in the decision earlier this week to then declare a "default judgment" in favor of the DOJ, and giving the US government all of Kim Dotcom's stuff.

A "default judgment?" As you know if you regularly read Techdirt, that's usually what happens when a defendant simply ignores a court case filed against him. As the court notes in this ruling, for that to happen in a civil asset forfeiture case, it means no one tried to block the claim:

Federal Rule of Civil Procedure 55 permits the court to grant a motion for default judgment when the well-pled allegations of the complaint establish plaintiff's entitlement to relief, and where a defendant has failed to plead or defend as provided by the rules.... In the civil forfeiture context, default judgment is permitted where no potential claimant has filed a response to the complaint...

A defendant in default, and a claimant who fails to assert a claim in rem, is deemed to have admitted all of the plaintiff's well-pled allegations of fact, which then form the basis for the judgment in the plaintiff's favor.

But, wait, you say: Kim Dotcom did file a complaint about the asset forfeiture, so how could a default judgment happen here? That's where the whole "fugitive" bit comes in. Because Dotcom won't come to the US, he's been deemed a fugitive, and thus the Judge simply hands over all of his stuff to the US government. And thus, without any sort of criminal conviction at all, the US gets to steal millions of dollars from Dotcom.

If that sounds insane, you're absolutely right. And, again, it is entirely possible that when all of this is over, Kim Dotcom will be found guilty of "criminal conspiracy." If that's the case, then at that point it's reasonable to discuss whether the government should get to keep all of his stuff. But it seems an absolute travesty of concepts like due process for the government to be able to take all of his money and stuff based on purely procedural reasons having to do with a separate criminal case that hasn't even been tried yet.

The process isn't over yet. Dotcom can still appeal this ruling, though the real problem is with the civil asset forfeiture process, rather than how it was applied in this particular case. Dotcom also has other options for the assets that are in New Zealand and Hong Kong, in using the local courts in those places to try to block the transfer of those assets to the US government. Not knowing enough about the law in either place, it's difficult to say what the chances of success of such a strategy would be. Either way, this seems like a classic case demonstrating how the civil asset forfeiture process appears to be little more than legalized theft by the US government.

Filed Under: asset forfeiture, civil asset forfeiture, copyright, criminal copyright, doj, justice department, kim dotcom, liam o'grady
Companies: megaupload