Judge Upholds $25 Million Judgment Against ISP Over User Piracy

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Computers Laptops iPads - H 2012

In a big win for copyright holders, a federal judge won't change the outcome of a $25 million verdict in favor of BMG Rights Management against Cox Communications.

As U.S. District Judge Liam O'Grady notes at the beginning of an opinion released on Tuesday, "This case presents the question of whether a conduit internet service provider may be held liable for the infringing activity of its subscribers based on the uploading and downloading of copyrighted musical works using BitTorrent, a peer-to-peer file sharing network."

BMG, the plaintiff, controls rights to works by David Bowie, Bruno Mars, Frank Ocean and other artists and convinced a Virginia jury last December that Cox should be punished for failing to reasonably implement a repeat-infringer policy.

In examining the trial record, O'Grady reviews what happened when Rightscorp, on behalf of BMG, alerted Cox to infringement on its network.

"The graduated response system is essentially a thirteen-strike policy," writes the judge. "No action is taken on receipt of a subscriber's first notice. The second, third, fourth, fifth, sixth, and seventh notices generate an email to the subscriber warning that if Cox 'continues to receive infringement claims such as this one concerning your use of our service, we will suspend your account and disable your connection until you confirm you have removed the infringing material.' On the eighth and ninth notices, Cox limits a subscriber's internet access to a single webpage containing a warning. The customer can self-reactivate by clicking an acknowledgement. On the tenth and eleventh notices, Cox suspends service and requires the subscriber to call a support technician. The technician explains the reason for the suspension, advises removal of the allegedly infringing file, and then reactivates service. On the twelfth notice, the subscriber is suspended and directed to specialized technicians. On the thirteenth notice, the subscriber is again suspended and this time considered for termination."

Even that doesn't fully characterize Cox's response to infringement alerts because the judge goes on to note that Cox limited the number of notices it would process to 200 per copyright holder per day — and only counts one notice per subscriber per day even if that subscriber generates more.

Cox wasn't particularly happy with Rightscorp, which specializes in hunting down copyright infringements and, controversially, sends out letters to accused pirates with demands to pay for their misdeeds or face litigation. This requires some cooperation on the part of the ISPs, however. Cox considered the activity to be extortionate and chose at a certain point to stop processing notices.

So BMG filed a lawsuit with vicarious and contributory infringement claims. At trial,1,397 copyrighted works were in contention and, ultimately, a jury decided to punish the ISP to the tune of about $18,000 for each song infringed.

After the trial, Cox brought a motion for a judgment as a matter of law on the basis that the plaintiff failed to show direct infringement, failed to provide evidence of its liability for contributory infringement and failed to aduce evidence of willfulness.

In weighing the first argument, O'Grady reviews evidence of Rightscorp's system and potential complicating factors like how swarms operate in the simultaneous uploading and downloading of works via BitTorrent. The judge raises a flag that evidence didn't show how Cox subscribers acquired their BMG works, but nevertheless views everything in a light most favorable to BMG and concludes "there was sufficient evidence from which a reasonable jury could find Cox users violated BMG's reproduction right."

Perhaps more importantly is O'Grady's discussion of contributory infringement, given that the topic will likely be the subject of an appeal. (Plus, this is the same judge who is presiding over criminal charges against Megaupload's Kim Dotcom if he's ever extradited.)

Cox brought up some famous past Supreme Court cases involving contributory liability — the one over the Sony Betamax VCR and the one over peer-to-peer software Grokster — for the proposition that its service was capable of substantial noninfringing uses and should be immunized, or that the jury should have at least been instructed to weigh whether Cox induced users to commit infringements.

"Cox and BMG disagree on the state of law post-Grokster," writes the judge. "Throughout this litigation, the Court has taken the position that Sony is not the broad bar to liability that Cox paints it to be. Rather, the Court reads Sony as precluding the imputation of fault based solely on 'the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement.' Had that been BMG's claim, it would have failed."

Keep in mind that what O'Grady is talking about is the internet.

The judge writes that "providing internet access that supplies the means to infringe would not, standing alone, be contributory infringement," but adds that BMG's focus in its claim pertains to "Cox's conduct in relation to the operation of its service." He adds that in the Sony case, the manufacturer of the VCR held no ongoing relationship with the buyer after the point of sale, but here, "an ongoing relationship between a defendant and direct infringers presents a potential for culpability quite beyond distribution or design."

O'Grady also concludes that there was sufficient evidence for the jury to find Cox was aware of the infringing activity on its network and acted recklessly or with deliberate disregard.  

He rejects a motion for a new trial, rolling past other arguments before getting to the issue of whether permanent injunctive relief is warranted. The judge concludes it is not, highlighting the thorny issue of how exactly Cox might be required to prevent or limit further infringement (requiring Cox to act on Rightscorp notices? Making Cox require a subscriber to remove BitTorrent from their computers in order to remain on the network?). O'Grady also dances past potential minefields like a proposed order mandating Cox hand over the identity and contact information of every subscriber identified by BMG.

"The burden on Cox outweighs the impact on BMG of denying the injunction," writes the judge, also factoring BMG's years-long wait in bringing the lawsuit. "As noted, Cox's burden of complying with the proposed injunction is substantial. ... While there is without a doubt a significant public benefit in reducing copyright infringement, BMG has not demonstrated to the Court's satisfaction that such a reduction here would not come at the expense of other nontrivial interests, including privacy and access to the internet."

Here's the full opinion.