Insanity (AKA Copyright Statutory Damages) Rules: Cox Hit With $1 Billion (With A B) Jury Verdict For Failing To Magically Stop Piracy

from the oh-come-on dept

We've highlighted the many problems with the various lawsuits against Cox Communications arguing that the company should be held liable for failing to wave a magic wand and stop all piracy from occurring on its service. The internet access provider was originally sued by music publisher BMG, and they got a judge who made it clear that he was not a fan of the internet, and didn't see why it should be a problem for anyone to be kicked off the internet at all. Cox lost the case mostly because the company didn't really follow its own internal repeat infringer policy. That ruling was upheld on appeal, leading the company to settle the case for $25 million.

Sensing an opportunity to cash in, all of the RIAA major record labels jumped in to sue Cox as well -- and got the same exact judge, Liam O'Grady. After a trial earlier this month, a jury has now awarded an absolutely astounding $1 billion damages verdict. The verdict is so preposterous and so disconnected from reality, that the math is wrong. The jury verdict document said that each infringed work should lead to statutory damages to the tune of $99,830.29. And there were 10,017 works infringed. And thus, the total was $1 billion on the dot:

Except that if you multiply those two numbers, the total would actually be $1,000,000,014.93. The jury's bad math saved Cox just about $15. Small favors.

Anyway, Cox has already made it clear that it will appeal, and I'd be stunned of such an amount held up. Everything about this is (1) crazy and (2) demonstrative of just how messed up and broken the "statutory damages" set up is for copyright. We've long wondered why statutory damages are even a thing in copyright, because they really don't make any sense. But the fact that statutory damages can go as high as $150k per work infringed -- even if there were literally no actual damages, raises significant 5th Amendment issues about due process (specifically, the wholly arbitrary nature of the jury award) and whether or not the award is "obviously unreasonable."

In a Supreme Court ruling almost exactly 100 years ago (St. Louis v. Williams), the Supreme Court ruled about obviously unreasonable awards, noting that there's a problem when "the penalty is 'arbitrary and unreasonable, and not proportionate to the actual damages sustained.'" That certainly seems to be the case here. After all, a basic recounting of the facts seems important here. Yes, Cox did not adequately follow its own repeat infringer policy, which may have lost it its DMCA safe harbors, but a jury verdict of over $30,000 per work infringed requires the jury to say that each and every infringement was willful by Cox. And that's crazy. Fucking up your own policies doesn't mean that you willfully infringed on every single work that someone shared via your network. Indeed, Cox was actually one of the more aggressive internet access providers in kicking people off for infringing.

Just to put this in perspective, the entire RIAA made just under $10 billion in 2018 in the US. IFPI reported that the total globally was $19.1 billion. And they want to now say that piracy of 10,000 songs on one ISP should grant them $1 billion? Honestly, the award is so insane, and so out of touch with reality, I actually wonder if the RIAA might come to regret it, as it makes the strongest case I've seen yet for the sheer unconstitutional nature of statutory damages, without any evidence of actual damages, for copyright infringement.

Filed Under: contributory liability, copyright, internet access provider, jury verdict, statutory damages, vicarious liability, willful infringement
Companies: cox, cox communications, riaa, sony music, universal music, warner music

Court Shoots Down Record Label's Attempt To Expand The Definition Of 'Vicarious' Infringement

from the that's-not-how-it-works dept

While there has been plenty of attention paid to the BMG v. Cox case, in which Cox was found not to be protected by the DMCA's safe harbors in dealing with repeat infringers, it's increasingly looking like the ruling in that case (which eventually led to a "substantial" settlement) was fairly unique to Cox's situation. Specifically, while much was made of Cox's "13 strikes" repeat infringer policy, in the end the nature of the policy wasn't what sunk Cox: it was the fact that Cox didn't follow its own policy. In other cases, courts seem willing to grant much more latitude to the ISPs to make their own calls. We wrote about the 9th Circuit and its ruling in the Motherless case, which made it clear that a platform gets to set its own policy, and that policy need not be perfect.

Meanwhile, down in Texas, there's the UMG v. Grande Communications case, which many had seen as a parallel case to the BMG v. Cox case. This was another case that involved an ISP being bombarded with shakedown (not takedown) notices from Rightscorp, in which Righscorp and its clients felt that ISP was not willing to pass on those notices (thus denying Rightscorp and its clients the ability to collect money in exchange for a promise not to sue). As we noted back in April, while still in the district court, the Grande case wasn't going nearly as smoothly as the Cox case for those wishing to copyright troll. The magistrate judge was quite skeptical, and had tossed out entirely the claims of vicarious infringement (while somewhat skeptically allowing the claims of contributory infringement to move forward).

Vicarious and contributory infringement are often lumped together, but they are different. For there to be vicarious infringement, you have to show that the party being sued both had the right and ability to supervise the activity, and that it would directly financially benefit from the infringement. The court rejected that in the case of Grande, noting that just because Grande makes money from its subscribers, that's not enough to show that it was profiting from the infringement.

Universal Music tried to amend the complaint to show that it had "more evidence" that Grande and its management company, Patriot, were still vicariously liable -- but the magistrate judge says it's just trying to re-litigate what it lost last time. The recommendation makes fairly quick work of UMG's arguments:

The new evidence Plaintiffs rely on is: (1) Grande tracks its infringing customers; (2) these customers are “a la carte” internet customers; (3) Grande’s profit margins on a la carte customers are its highest of any business lines; and (4) Grande never terminated any user regardless of how many notices of infringement it received... Plaintiffs contend that these facts make a difference, and are enough to suggest that Grande’s failure to terminate infringers is a draw.... The Court disagrees. First, the original Complaint alleged essentially the same or similar facts. Second, the new allegations still fail to say anything about the motivations of Grande’s subscribers when they sign up with Grande. That is, Plaintiffs still fail to plead facts showing Grande gained or lost customers because of its failure to terminate infringers. Instead, the proposed amended complaint states that, “the evidence demonstrates that Plaintiffs’ Copyrighted Sound Recordings were a draw to Grande’s infringing customers, including customers Grande had identified as repeat infringers.” ... But as has been noted in prior orders, the means by which Plaintiffs contend the infringing subscribers infringed the Copyrighted Sound Recordings by use of the internet and the BitTorrent protocol, which one can access through any ISP. Again, the draw must be something more than this to state a vicarious infringement claim. The allegedly “new” facts are insufficient to overcome the deficiencies of the original Complaint.

This is important. For years, the legacy copyright players have continually tried to expand what third parties could be liable for when it came to infringement. It's always been a stretch to use both vicarious and contributory infringement claims in these ways, and it's good to see courts pushing back (though, in this case, the contributory infringement claims still have a chance...). The court directly pointing out that just because a company makes money from a client, that doesn't mean the money is from infringement is an important point that many among the copyright legacy world would like to ignore.

Filed Under: contributory liability, copyright, copyright trolling, dmca, dmca 512, vicarious liability
Companies: grande communications, patriot, rightscorp, universal music

$25 Million Jury Verdict In Rightscorp Case Raises Serious Questions About Copyright Law

from the but-of-course dept

This wasn't a huge surprise after Judge Liam O'Grady's questionable reading of the DMCA a few weeks back (along with his general disdain for the internet), but a jury yesterday awarded BMG $25 million from Cox Communications, claiming that Cox was guilty of willful "contributory infringement" in not kicking accused file sharers off the internet. The jury found Cox not guilty of "vicarious liability," which is at least marginally surprising, as many people who don't spend their lives wrapped up in copyright law have difficulty distinguishing the difference between "contributory infringement" and "vicarious" (if you're confused too, Wikipedia's overview is a decent place to start). And based on that, the jury hit Cox with the $25 million award for BMG.

This will undoubtedly go to appeal, and it would seem that Cox has some pretty strong arguments. First up, the original decision that Cox is not subject to the DMCA's safe harbors is a highly questionable ruling, and would go against a number of previous rulings. As noted previously, some of Cox's actions did seem somewhat egregious, but this still involves a previously untested argument that the policy of requiring service providers to have a plan to terminate users applies to network service providers, rather than those who host content. That's a pretty big open question -- and how that issue is resolved will have a major impact on how the internet functions going forward. If Judge O'Grady's ruling stands, then the RIAA and MPAA just got a huge golden gift: it would effectively say that the US has a "three strikes"-like law where people can be kicked off the internet entirely, based solely on accusations of copyright infringement. That's a pretty scary result.

Even separate from that, the idea that Cox, an internet service provider, is guilty of "contributory liability" for infringement seems difficult to believe as well. The standard for contributory copyright infringement is basically one who "knowingly induces, causes or materially contributes" to copyright infringement done by someone else where that party "had knowledge, or reason to know, of infringement." So, in this case, the argument is that based on the notifications, Cox had the necessary knowledge of the infringement, and then "materially contributed" to that infringement by continuing to provide service. But, again, that's a huge stretch, and goes way beyond historical examples of contributory infringement, where you had things like Grokster, that actively advertised its software as being useful for infringement. In this case, all Cox did was not terminate users, and somehow that counts as "materially contributing" to infringement?

Again, if that stands, it has tremendously troubling implications for how the internet functions, and the ability of people to use copyright law to wreak havoc on the lives of others. We're talking about opening up the possibility of going way beyond the standard DMCA takedowns of content, to it becoming a weapon for killing internet access within households.

The $25 million verdict comes out to about $18,000 per each of the 1,397 copyrights listed in the case -- which is certainly less than the statutory maximum possibility of $150,000 per infringement. But, still... Either way, it's almost certain that Cox will appeal, and that's when the case will start to get a lot more interesting.

Filed Under: contributory infringement, copyright, copyright trolling, copyright trolls, dmca, safe harbors, secondary liability, vicarious liability
Companies: bmg, cox, cox communications, rightscorp