Appeals Court: ISPs Don't Get Copyright Shield Without Enforcement of Meaningful Repeat Infringer Policy

The 4th Circuit issues a huge piracy ruling and wipes out a $25 million verdict against Cox Communications because of erroneous jury instruction.

In a key decision in a landmark piracy case, the 4th Circuit Court of Appeals on Thursday issued a mixed ruling when examining a $25 million verdict in favor of BMG Rights Management against Cox Communications over piracy by the ISP's users. The entertainment industry got a huge victory when the appeals court upheld a federal judge's conclusion that the safe harbor provision of the Digital Millennium Copyright Act requires meaningful implementation of a policy that terminates the service of repeat copyright infringers. On the other hand, the appeals court reversed the $25 million verdict and ordered up a new trial because of an error in instructions to the jury.

The dispute emanates from a lawsuit brought by BMG, which administers the rights to works by David Bowie, Bruno Mars, Frank Ocean and many other artists. BMG had hired Rightscorp to flag piracy and send Cox notices. Rightscorp detected 1.847 million instances of infringement, but Cox had what a judge characterized as essentially a 13-strike policy that was found insufficient. It was alleged that Cox really maintained an "under the table policy purporting to terminate repeat infringers while actually retaining them as high-speed internet customers." 

The case went to trial in 2015, and the music publisher scored a $25 million win, later upheld by U.S. District Judge Liam O'Grady in a decision that would gather the intense interest of those in copyright circles.

On Thursday, 4th Circuit judge Diana Motz writes the opinion that will be closely examined by those looking to figure out an ISP's responsibilities for the copyright infringing actions of its users.

The DMCA provides some armor for tech companies that respond expeditiously to takedown requests. One of the requirements, though, is that the ISP has to have "adopted and reasonably implemented … a policy that provides for the termination in appropriate circumstances of subscribers … who are repeat infringers."

Cox urged a reading that would be generous to ISPs. Specifically, the company argued that "repeat infringers" means adjudicated repeat infringers, or people who have been held liable in court for multiple instances of direct copyright infringement.

Motz notes that the statute doesn't define "repeat infringers" but nods to the use of "alleged infringer" elsewhere in the law plus legislative history to come to the conclusion that Cox's interpretation is wrong.

"Indeed, 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," she writes.

Then, turning to Cox's conduct, Motz determines that the federal judge was right to flag this ISP's repeat infringer policy as lacking.

At a minimum, she writes, an "ISP has not 'reasonably implemented' a repeat infringer policy if the ISP fails to enforce the terms of its policy in any meaningful fashion. Here, Cox formally adopted a repeat infringer 'policy,' but, both before and after September 2012, made every effort to avoid reasonably implementing that policy. Indeed, in carrying out its thirteen-strike process, Cox very clearly determined not to terminate subscribers who in fact repeatedly violated the policy."

Motz adds that failure to implement a consistent and meaningful repeat infringer policy essentially means it has no policy and can't be entitled to a safe harbor defense.

Nevertheless, Cox does score a consequential decision in its own right when it comes to jury instructions, although not on the issue of whether its technology was capable of a "substantial noninfringing use," something the ISP believed relevant thanks to the famous Supreme Court case over Sony's Betamax.

Instead, Motz accepts Cox's challenge to the specific instruction that liability could be imposed upon a finding that "Cox knew or should have known of such infringing activity."

The words "should have known" amounts to a standard of negligence, and Motz writes it does not suffice. 

"We are persuaded that the Global-Tech rule developed in the patent law context, which held that contributory liability can be based on willful blindness but not on recklessness or negligence, is a sensible one in the copyright context. It appropriately targets culpable conduct without unduly burdening technological development," states the decision.

In other words, when it comes to piracy, ISPs can't ignore red flags that make piracy obvious. But it's got to be more than a should-have-known situation. Surely, the lines are gray and will be fought over in years to come. That includes at a new trial between BMG and Cox, a coming event that the appeals court believes is appropriate given the erroneous jury instruction.

There's more in the decision, which can be read in full here.