SCOTUS boots $1B verdict against internet service provider

In the absence of evidence that an internet service provider induced its users’ infringement or provided a service “tailored” to infringement, it could not be liable for infringing the copyrights of major music copyright owners under a contributory liability theory, the U.S. Supreme Court has ruled.

The case addressed a copyright infringement action brought by Sony Music Entertainment joined by other major music copyright owners against Cox Communications. Sony initiated the action in federal court after a service that tracks copyright infringement across the internet reported that during a two-year period it had sent Cox 163,148 notices identifying IP addresses of Cox subscribers associated with infringement.

A federal jury in Virginia found Cox liable under two theories of secondary liability recognized under the Copyright Act: “contributory” liability and “vicarious” liability. Finding Cox’s infringement willful, the jury awarded Sony $1 billion.

The 4th U.S. Circuit Court reversed the lower court judgment as to vicarious liability.

However, the 4th Circuit affirmed the judgment with respect to Sony’s claim for contributory liability, holding that “supplying a product with knowledge that the recipient will use it to infringe copyrights is … sufficient for contributory infringement.”

The Supreme Court granted Cox’s petition for certiorari with respect to Sony’s contributory liability claim.

The Supreme Court reversed, with the majority concluding Cox was not contributorily liable for the infringement of Sony’s copyrights because the company neither induced its users’ infringement nor provided a service tailored to infringement.

Click here to read the full text of the U.S. Supreme Court’s March 25 decision in Cox Communications, Inc. v. Sony Music Entertainment, et al.

BULLET POINTS: “This Court has repeatedly made clear that mere knowledge that a service will be used to infringe is insufficient to establish the required intent to infringe. In [Kalem Co. v. Harper Brothers, 222 U. S. 55 (1911)], the Court explained that ‘mere indifferent supposition or knowledge on the part of the seller’ that the buyer will use the product unlawfully is ‘not enough’ to make the seller liable for the buyer’s conduct. In [Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417 (1984)], the Court explained that ‘[t]here is no precedent in the law of copyright’ for liability based only ‘on the fact that [the defendant] has sold equipment with constructive knowledge of the fact that its customers may use that equipment to make unauthorized copies of copyrighted material.’ And, in [Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U. S. 913 (2005)], the Court confirmed that ‘a court would be unable to find contributory infringement liability merely based on a failure to take affirmative steps to prevent infringement.’ …

“Thus, Cox is not contributorily liable for the infringement of Sony’s copyrights. Cox provided Internet service to its subscribers, but it did not intend for that service to be used to commit copyright infringement. Holding Cox liable merely for failing to terminate

Internet service to infringing accounts would expand secondary copyright liability beyond our precedents.

“Cox neither induced its users’ infringement nor provided a service tailored to infringement. As for inducement, Cox did not ‘induce’ or ‘encourage’ its subscribers to infringe in any manner. Sony provided no ‘evidence of express promotion, marketing, and intent to promote’ infringement. And, Cox repeatedly discouraged copyright infringement by sending warnings, suspending services, and terminating accounts. As for providing a service tailored to infringement, Cox’s Internet service was clearly ‘capable of “substantial” or “commercially significant” non-infringing uses.’ Cox did not tailor its service to make copyright infringement easier. Cox simply provided Internet access, which is used for many purposes other than copyright infringement.”

— Justice Clarence Thomas, joined by Chief Justice John G. Roberts Jr., and Justices Samuel L. Alito Jr., Elena Kagan, Neil M. Gorsuch, Brett M. Kavanaugh and Amy Coney Barrett, opinion of the court

“The majority holds that Cox is not liable solely because its conduct does not fit within the two theories of secondary liability previously applied by this Court. In so doing, the majority, without any meaningful explanation, unnecessarily limits secondary liability even though this Court’s precedents have left open the possibility that other common-law theories of such liability, like aiding and abetting, could apply in the copyright context. By ignoring those past decisions, the majority also upends the statutory incentive structure that Congress created.

“I nonetheless agree with the majority that Cox cannot be held liable here for a different reason. Plaintiffs cannot prove that Cox had the requisite intent to aid copyright infringement for Cox to be liable on a common-law aiding-and-abetting theory.”

— Justice Sonia Sotomayor, joined by Justice Ketanji Brown Jackson, concurring in judgment