BMG v. Cox: Court of Appeals Denies DMCA Safe Harbor in Landmark Copyright Case

Copyright Reports

BMG Rights Mgmt. (US) LLC v. Cox Commc’n., Inc., Nos. 16-1972, 17-135 (4th Cir. Feb. 1, 2018), slip opinion, hosted by Justia.com.

On February 1, the Federal Court of Appeals for the Fourth Circuit issued a mixed ruling in a dispute about copyright enforcement online, a decision likely to have lasting effects for content owners and internet service providers alike. The case considered two essential questions in the ongoing battle over digital piracy: (1) what responsibility do providers have to police the infringing activities of their subscribers for DMCA safe harbor protection, and (2) is negligence alone sufficient to prove contributory copyright infringement?

BMG Rights Management (“BMG”), an international publishing house that administers copyright for 2.5 million songs, filed suit against Cox Communications (“Cox”) in 2015.  The complaint alleged that the internet service provider (“ISP”) was contributorily liable for infringement of BMG’s copyright catalog by Cox’s subscribers.

Cox provides high-speed internet to 4.5 million subscribers, some of whom used their connection to “torrent” protected content. The ISP offers an automated system for copyright owners like BMG to report alleged infringement. The system relies on a thirteen-strike policy that gauges the severity of response based on the number of past complaints received about a particular user. Copyright owners are able to log one complaint per subscriber per day, and Cox considers terminating a subscriber’s access after the thirteenth notice of alleged violation, subsequent to a series of escalating responses. Cox never automatically terminates a subscriber.

BMG contracts with Rightscorp Inc. to police copyright infringement and log complaints in Cox’s system. Rightscorp monitors torrent activity for possible violations and issues notices to be forwarded to individual infringers. The notices include settlement offers for legal release from the copyright owner in exchange for money. Objecting to Rightscorp’s money demands,  Cox “blacklisted” Rightscorp in 2011, auto-deleting the millions of complaints Rightscorp sent to the ISP on BMG’s behalf.

At trial, Cox argued that it was protected by the safe harbor provision of the Digital Millennium Copyright Act of 1998 (“DMCA”). The DMCA, a tool meant to protect copyright owners and consumers in the regulation of digital material, makes an exception in 17 U.S.C. § 512(i)(1) for ISPs that have “adopted and reasonably implemented…a policy that provides for the termination” of repeat infringers. Unconvinced that Cox’s approach would qualify for the safe harbor, the district court did not accept this defense. It further instructed the jury that to prove contributory infringement, BMG need only show that Cox “knew or should have known” of infringing activity by its subscribers (a negligence standard). The jury went on to award BMG $25 million dollars.

On appeal, Cox argued that the district court erred, both in refusing a §512(a) DMCA safe harbor defense and in its instructions to the jury. Fourth Circuit Judge Diana Motz affirmed the lower court’s denial of safe harbor protection. Still, she was persuaded that the jury instructions warranted a new trial. Judge Motz first addressed Cox’s argument that it had been wrongfully denied a safe harbor defense. Though it was clear that the ISP had implemented a system to process copyright complaints, Motz questioned whether Cox had any intention of implementing its repeat infringer policy. She found that the company had failed to implement its own policy “in any consistent or meaningful way.” Cox’s hesitance to terminate service to alleged infringers and repeated re-activation of their accounts suggested that the company was more concerned with retaining paying subscribers than policing infringement.

Cox further contested the district court’s reading of the safe harbor provision. The company argued that in addressing “repeat infringers,” the statute refers only to adjudicated repeat infringers – those previously held liable for infringement in a court of law. Judge Motz rejected this rationale as well. Looking at the legislative history and surrounding language, she concluded that “repeat infringers” means exactly that – subscribers infringing on a repeat basis. Motz noted that it would be irrational to imagine that the threat of terminated internet service would have any effect on those offenders already facing hefty civil penalties for past violations.

Turning to the district court’s instructions to the jury, Judge Motz took issue with the court’s use of a negligence standard in assessing contributory infringement. The jury instructions stated that “[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement” and that such intent could be found if Cox “knew or should have known of such infringing activity.” Looking to the Global-Tech rule employed in patent cases, Motz reasoned that negligence was not sufficient to create contributory liability. Rather, at least willful blindness (a lower standard than actual knowledgge) of ongoing infringement was needed to find the defendant liable. A willful blindness threshold, Motz noted, balances the need to “target[] culpable conduct without unduly burdening technological development.” She thus remanded the case for a new trial.

The new jury will have to consider whether Cox’s conduct meets this new standard. If the company is indeed found to have been willfully blind, other American ISPs will have to reconsider their treatment of DMCA claims. The new trial is sure to have extensive consequences for the future of copyright enforcement.

Oliver Brown is a 1L student at Harvard Law School.