Sony Music Entertainment v. Cox Communications, Incorporated
Published Opinion, February 20, 2024 (2024)
Rule of Law:
An internet service provider (ISP) is not vicariously liable for its subscribers' copyright infringement if the provider does not directly profit from the infringing activity itself, even if it benefits from retaining paying subscribers who infringe. However, an ISP can be contributorily liable if, with knowledge that infringement is substantially certain to recur, it continues providing indispensable internet access, thereby materially contributing to the infringement. To limit statutory damages for derivative works or compilations, the defendant must present evidence to the jury at trial.
Facts:
- Cox Communications (Cox) sells internet, telephone, and cable television service to millions of homes and businesses across the United States.
- Users of Cox’s internet service infringed copyrights owned by Sony Music Entertainment and other record companies and music publishers (Plaintiffs) by downloading or distributing musical works without permission.
- The Recording Industry Association of America (RIAA), through its anti-piracy company MarkMonitor, sent Cox 163,148 infringement notices from 2013-2014, detailing specific instances of copyright infringement by Cox subscribers using peer-to-peer networks.
- Cox implemented an automated 'thirteen-strike' policy, which involved sending notices to infringing subscribers, ranging from email warnings to temporary account suspensions, in response to MarkMonitor's alerts.
- Cox capped the number of infringement notices it would accept from RIAA daily (eventually at 600), limited the number of account suspensions per day, and restarted the strike count for subscribers once they were terminated and reinstated.
- Cox's internal communications showed that its decisions to not terminate certain repeat infringing subscribers were influenced by their monthly payment amounts (e.g., considering a customer's high monthly bill before termination).
- Approximately 13% of Cox’s network traffic was attributable to peer-to-peer activity, and over 99% of that peer-to-peer usage was infringing.
- Cox had a tiered pricing structure where customers paid higher monthly fees for increased data allowances and faster internet speeds, which could facilitate data-intensive activities like peer-to-peer file sharing.
Procedural Posture:
- In a prior case, BMG Rts. Mgmt. (US) LLC v. Cox Commc’ns, Inc., the United States Court of Appeals for the Fourth Circuit held that Cox Communications failed to reasonably implement an anti-piracy program and was therefore ineligible for the Digital Millennium Copyright Act (DMCA) safe harbor defense.
- Sony Music Entertainment and other copyright owners (Plaintiffs) sued Cox Communications, Inc. and CoxCom, LLC (Defendants) in the United States District Court for the Eastern District of Virginia, alleging vicarious and contributory copyright infringement by Cox's subscribers during a period when Cox was ineligible for the DMCA safe harbor.
- After discovery, the parties cross-moved for summary judgment; the district court ruled that infringement notices sent to Cox proved Cox's knowledge of infringement as a matter of law for contributory liability and denied Cox's motion to reduce the number of copyrighted works.
- The case proceeded to a twelve-day jury trial where Plaintiffs limited their case to Cox subscribers who received three or more infringement notices.
- The jury found Cox liable for both willful contributory and vicarious infringement of 10,017 copyrighted works and awarded $1 billion in statutory damages.
- After the verdict, Cox renewed its motion for judgment as a matter of law, which the district court ultimately denied in full, rejecting Cox’s arguments regarding insufficient evidence for vicarious or contributory infringement and its attempt to reduce the number of copyrighted works for damages.
- Cox Communications (Defendants – Appellants) appealed the district court's judgment to the United States Court of Appeals for the Fourth Circuit, challenging the scope of secondary liability for copyright infringement and what constitutes a compilation or derivative work for statutory damages, with Sony Music Entertainment et al. as Plaintiffs – Appellees.
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Issue:
1. Is an internet service provider (ISP) vicariously liable for its subscribers' copyright infringement solely because it retains infringing subscribers to continue collecting flat monthly internet access fees, without demonstrating a direct financial benefit causally linked to the infringement itself? 2. Is an internet service provider (ISP) contributorily liable for its subscribers' copyright infringement when it continues to provide indispensable internet service to specific customers it knows are substantially certain to engage in repeat infringement, thereby materially contributing to that infringement? 3. To limit statutory damages under 17 U.S.C. § 504(c)(1) by arguing that some copyrighted works are derivative works or parts of a compilation, must the defendant present evidence of such relationships to the jury at trial?
Opinions:
Majority - Rushing, Circuit Judge
No, an internet service provider (ISP) is not vicariously liable for its subscribers' copyright infringement solely because it retains infringing subscribers to continue collecting flat monthly internet access fees, without demonstrating a direct financial benefit causally linked to the infringement itself. The court reversed the vicarious liability verdict, finding that Sony Music failed to prove Cox directly profited from its subscribers’ infringing acts. Vicarious liability requires a causal relationship where the infringement itself draws customers or incentivizes higher payments. Cox’s flat monthly fees for internet access were not directly tied to whether subscribers infringed; Cox would receive the same fees even if all infringement ceased. Retaining paying customers, even repeat infringers, for internet access does not establish a direct financial interest in the infringement. There was no evidence customers subscribed to Cox's service or paid more for faster speeds specifically because it enabled copyright infringement, unlike cases where infringing content directly enhances venue attractiveness or increases user base (e.g., Napster, Fonovisa). Yes, an internet service provider (ISP) is contributorily liable for its subscribers' copyright infringement when it continues to provide indispensable internet service to specific customers it knows are substantially certain to engage in repeat infringement, thereby materially contributing to that infringement. The court affirmed the jury's finding of willful contributory infringement. The district court's summary judgment ruling that MarkMonitor notices established Cox's knowledge of past infringement was upheld, as Cox forfeited its argument regarding 'substantially certain future infringement' by not raising it below. For material contribution, the court reiterated that providing a product (internet service) capable of lawful use can still constitute material contribution if supplied with intent to cause infringement. The jury had sufficient evidence, including Cox's knowledge of specific repeat infringers, its decision to continue service despite believing infringement would persist (to avoid revenue loss), and increasingly lenient anti-infringement policies that could be seen as ensuring recurrence. Supplying the means to infringe with knowledge of its use for infringement constitutes culpable conduct. Yes, to limit statutory damages under 17 U.S.C. § 504(c)(1) by arguing that some copyrighted works are derivative works or parts of a compilation, the defendant must present evidence of such relationships to the jury at trial. The court affirmed the district court’s denial of Cox’s post-trial motion to reduce the number of compensable works. While acknowledging the legal principle that derivative works or parts of a compilation count as 'one work' for statutory damages, Cox failed to present evidence to the jury that identified which of the 10,017 infringed works fell into these categories. Post-trial submissions containing new analysis were deemed inappropriate for a Rule 50 motion, which must rely on evidence presented to the jury at trial. Thus, the jury's verdict, based on the evidence presented, was upheld for this element. Given the reversal of the vicarious liability verdict and the general damages award that did not apportion damages between claims, the court vacated the $1 billion statutory damages award and remanded the case for a new trial solely on the amount of statutory damages consistent with the affirmed contributory infringement liability.
Analysis:
This case significantly clarifies the standards for secondary copyright infringement liability for internet service providers (ISPs). It raises the bar for proving 'direct financial benefit' for vicarious liability, emphasizing that the profit must stem directly from the infringing acts, not merely from general subscription fees. Conversely, it reinforces that ISPs face contributory liability if they knowingly enable repeat infringement by providing indispensable services. The ruling also underscores the critical importance for defendants to proactively present evidence to the jury at trial if they wish to argue for reductions in statutory damages based on legal definitions of 'one work' for compilations or derivative works.
