Virginia Lawyers Weekly VA Lawyers Weekly
Although an ISP’s “13-strike policy” did not qualify for safe harbor in a music copyright infringement suit, the court of appeals remanded for a new trial due to a jury instruction that erroneously suggested contributory liability could be based on a “should have known” standard.
Defendant/Appellant Cox is a conduit internet service provider to approximately 4.5 million subscribers. Some of these subscribers have shared and received copyrighted files using BitTorrent – a particularly fast and efficient peer-to-peer file-sharing protocol.
Plaintiff/Appellee BMG Rights Management is a music-publishing company that owns copyrights in music composition. To protect its copyrights, BMG uses a third-party service called Rightscorp Inc., which monitors BitTorrent activity and emails violation notices to infringers’ ISP. The notice includes information about the copyright and the particular infringement. Rightscorp also asks the ISP to forward the notice to the infringing subscriber, because only the ISP can discover the subscriber’s identity. Thus, the notice also contains a settlement offer to the infringing subscriber.
Under the Digital Millennium Copyright Act, ISPs can be contributorily liable for copyright infringements, but they can qualify for the Act’s safe-harbor provision if they have “adopted and reasonably implemented … a policy that provides for the termination in appropriate circumstances of subscribers … who are repeat infringers.” 17 U.S.C. § 512(i)(1)(A).
Cox’s agreement with its subscribers reserves the right to suspend or terminate those who use its services “to post, copy, transmit, or disseminate any content that infringes the patents, copyrights … or proprietary rights of any party.” Cox’s enforcement of this policy is at issue in this action. Its enforcement system was an automated 13-strike policy:
The first strike does not produce any action by Cox.
The second through seventh notices result in warning emails from Cox to the subscriber.
After the eighth and ninth notices, Cox limits the subscriber’s internet access to a single webpage containing a warning, but the subscriber can reactivate complete service simply by clicking an acknowledgement.
After the 10th through 12th notices, Cox suspends services and requires the subscriber to call a technician, who reactivates service after advising the subscriber to remove infringing content.
After the 13th notice, the subscriber is again suspended and, for the first time, considered for termination. Cox never automatically terminates a subscriber.
Cox’s 13-strike policy has several additional limitations as an effective deterrent. It restricts the number of notices it will process from any copyright holder or agent in one day; any notice received after this daily limit has been met does not count toward its 13-strike policy. Cox also counts only one notice per subscriber per day. And Cox resets a subscriber’s 13-strike counter every six months.
In the case of BMG and Rightscorp, Cox also decided to refuse to forward or process notices that contain the settlement language that Rightscorp includes in its notices as a matter of course. Cox notified Rightscorp of this policy, but Rightscorp elected not to remove the language. Thus, Cox blacklisted Rightscorp by deleting all notices received from the company without viewing them. Because BMG hired Rightscorp after Cox blacklisted it, Cox never viewed a single one of the millions of notices that Rightscorp sent to Cox on BMG’s behalf.
BMG sued Cox for contributory copyright infringement under the Act. The district court found that Cox did not qualify for the Act’s safe-harbor provision and, at trial, instructed the jury that they could find liability if BMG proved Cox “knew or should have known of such infringing activity.” The jury ultimately found Cox liable for contributory infringement and awarded BMG $25 million. Cox appeals, arguing that it should have been entitled to safe harbor and that the jury instruction regarding knowledge was in error.
DMCA safe harbor
The court rejects Cox’s contention that, under the Act’s safe harbor provision, the term “repeat infringers” means only people who have been held liable by a court for multiple instances of copyright infringement. To interpret this language, the court first turns to its ordinary meaning. Black’s Law Dictionary defines an infringer as “[s]omeone who interferes with one of the exclusive rights of a … copyright” holder. A repeat infringer, then, is one who infringes a copyright more than once.
Cox contends that an “infringer” is an adjudicated infringer unless accompanied by qualifiers, such as “alleged” or “claimed,” which appear elsewhere in the Act. But these qualifiers indicate only that “infringer” means something different than “alleged infringer,” e.g. someone who actually infringes a copyright vs. someone who is accused of doing so. Moreover, other provisions of the Act use the term “infringer” to refer to all who engage in infringing activity, not just the narrow subset of those who have been so adjudicated by a court.
In fact, at 17 U.S.C. § 512(g)(1), the Act expressly distinguishes among three categories of infringement: (1) activity merely “claimed to be infringing,” (2) actual “infringing activity” apparent from circumstances, and (3) activity “ultimately determined to be infringing.” As this provision illustrates, Congress knew how to expressly refer to adjudicated infringement, but did not do so in the safe-harbor provision.
The legislative history of the repeat infringer provision supports this conclusion. House and Senate committee reports explained that “those who repeatedly or flagrantly abuse their access to the internet through disrespect for the intellectual property rights of others should know that there is a realistic threat of losing that access.” This passage does not suggest that they should risk losing internet access only once they have been sued in court and found liable for multiple infringements. Loss of internet access would hardly constitute a “realistic threat” if it applied only to those already subject to other civil penalties and legal fees as adjudicated infringers.
Finally, the court’s interpretation accords with the other circuits that had cause to apply the Act’s “repeat infringers” phrase, and Cox does not cite a single case adopting its contrary view. Therefore, the court concludes that the safe-harbor provision does not reference only adjudicated infringers.
As to Cox’s actual policy to address repeat infringers, it appears that Cox made every effort to avoid reasonably implementing that policy and instead very clearly determined not to terminate subscribers who in fact repeatedly violated the policy. This conclusion is supported by the words of Cox employees. The executive managing Cox’s “Abuse Group” – the team tasked with addressing subscriber violations – explained to a customer service representative: “Once the customer has been terminated for DMCA, we have fulfilled the obligation of the DMCA safe harbor and can start over.” He elaborated that this would allow Cox to “collect a few extra weeks of payments for their account. ;-).” Another email summarized Cox’s practice more succinctly: “DMCA = reactivate.”
The evidence shows that Cox always reactivated subscribers after termination, regardless of its knowledge of the subscriber’s infringement. Although Cox appeared to adopt a stricter termination policy in September 2012, the record supports BMG’s contention that, in practice, Cox simply stopped terminating subscriptions in the first place. Of the 21 subscriptions that were terminated after September 2012, 17 concerned subscribers who failed to pay their bills on time or used excessive bandwith – a practice that Cox subjected to a three-strike termination policy.
The record also shows that, even when Cox had actual knowledge of repeated infringing activity, it did not take serious steps to restrict access. In one case, Cox advised a customer that “further complaints will result in termination,” and it was the customer’s “absolute last chance to remove ALL” file-sharing software. When that customer’s activity still resulted in another complaint, a manager directed that the customer not be terminated, but rather should be suspended “one LAST time” because this “customer pays us over $400/month,” and “every terminated customer becomes lost revenue.” Cox’s decision to categorially disregard all notices from Rightscorp provides further evidence that Cox did not reasonably implement a repeat-infringer policy.
Cox failed to qualify for the Act’s safe harbor because it failed to implement its policy in any consistent or meaningful way – leaving it essentially with no policy. Accordingly, the district court did not err in holding that Cox was not entitled to the safe-harbor defense.
Knowledge instruction
The court agrees with Cox that the district court erred by instructing the jury that it could impose liability for contributory infringement if it found that “Cox knew or should have known of such infringing activity.”
It is well established that willful blindness – a mental state slightly less demanding than actual knowledge – can establish the requisite intent for contributory copyright infringement. This is so because the law recognizes willful blindness as equivalent to actual knowledge. Although the notion that contributory liability in this context could be based on a lesser standard like negligence is not entirely without support, the court believes for several reasons that negligence does not suffice to prove contributory infringement. At least willful blindness is required.
In MGM Studios Inc. v. Grokster Ltd., 545 U.S. 913 (2005), the Supreme Court wrote that one infringes contributorily by “intentionally inducing or encouraging direct infringement.” This articulation is, on its face, difficult to reconcile with a negligence standard. Patent law – which guided the Court in Grokster and other cases – also counsels against a negligence standard. The Court has long held that contributory patent infringement requires knowledge of direct infringement. In Global-Tech Appliances Inc. v. SEB S.A., 563 U.S. 754 (2011), the Court held that willful blindness satisfies this knowledge requirement, but recklessness and negligence do not.
This court is persuaded that the Global-Tech rule developed in the patent-law context is a sensible one in the copyright context. It appropriately targets culpable conduct without unduly burdening technological development. The court therefore holds that proving contributory infringement requires proof of at least willful blindness. Negligence is insufficient.
Therefore, the district court erred in charging the jury that Cox could be found liable if it “knew or should have known” of the infringing activity. The “should have known” formulation reflects negligence and is, therefore, too low a standard. Because the instructions did not adequately impose the burden of proving knowledge and are reasonably likely to have affected the jury’s verdict, the case is remanded for a new trial.
The court also agrees with Cox that the trial court erred in instructing the jury that Cox could be held liable on the basis of proof of “direct infringement of BMG’s copyrighted works by users of Cox’s internet services.” A seller who only generally knows of infringement is aware that some of its products will be misused, but – critically – not which products will be misused. The proper standard requires a defendant to have specific enough knowledge of infringement that the defendant could do something about it. On remand, therefore, the contributory infringement instruction should require that Cox knew of specific instances of infringement or was willfully blind to such instances.
Affirmed in part, reversed in part, vacated in part, and remanded.
BMG Rights Mgm’t LLC v. Cox Commc’ns Inc., Record No. 16-1972, Feb. 1, 2018; 4th Cir. (Motz); EDVA at Alexandria (O’Grady). Michael S. Elkin for Appellants/Cross-Appellees; Michael J. Allan for Appellee/Cross-Appellant. VLW No. 018-2-019, 37 pp.
