United States: Greater Liability For ISP's

In a sure-to-be-appealed verdict last week, a federal court jury in the Eastern District of Virginia found Cox Communications liable to pay $25 million to music publisher BMG Rights Management for contributory copyright infringement. Does this case add anything new to the debate over whether the Digital Millennium Copyright Act strikes the right balance in protecting the rights of Internet service providers, their subscribers and rights holders?

BMG asserted that users of Cox's Internet service employed BitTorrent, a type of peer-to-peer file sharing, to illegally upload and download its copyrighted musical compositions. BMG hired Rightscorp, Inc., to locate infringing uses of BMG's works. Rightscorp located files allegedly being shared illegally and flooded Cox with 2.5 million DMCA notices. The notices contained a demand that the subscribers pay Rightscorp $10 or $20 per infringement, in addition to removing the content.

Rightscorp refused to remove the demand for payment from its notices, Cox refused to forward the notices to its subscribers, and BMG sued for contributory and vicarious copyright infringement. Cox invoked the DMCA safe harbor defense under Section 512(a) (providing safe harbor for a service provider that acts as a mere conduit for transmission of content). It was dealt a significant blow in the weeks prior to trial, however, when the court granted BMG's motion for summary judgment on that defense and precluded BMG from raising that argument at trial.

In order to invoke the safe harbor defense, Section 512(i) of the DMCA requires that a service provider demonstrate that it has "adopted and reasonably implemented, and informed subscribers and account holders of the service provider's system or network of, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers." In its opinion on summary judgment, the court noted several "threshold functions" that must be present in order for a service provider to implement any repeat infringer policy. These include (but are not limited to) a "working notification system" and "a procedure for dealing with DMCA-compliant notifications." Additionally, the court noted, the penalty imposed for repeat infringers when appropriate circumstances exist must be termination, and not some lesser consequence. The court held 512(i) covers "at a minimum instances where a service provider is given sufficient evidence to create actual knowledge of blatant, repeat infringement by particular users, particularly infringement of a willful and commercial nature."

The court determined as a matter of law that Cox failed to reasonably implement a repeat-infringer policy. In particular, the court noted that there was evidence of an unofficial policy of reinstating terminated accounts even where, the court concluded, Cox had determined appropriate circumstances existed to terminate the account.

The jury found that users of Cox's Internet service used it to infringe BMG-copyrighted works and that Cox was liable for willful contributory infringement. The jury awarded statutory damages of $25 million. Cox prevailed on the claim for vicarious liability, which requires evidence of profiting from direct infringement while at the same time declining to exercise a right to stop or limit it.

This case illustrates in part the struggle to address the demands of an aggressive (and some say overly aggressive) rights holder. The DMCA leaves the decision to terminate a user's account to the ISP's discretion and does little to inform how that discretion should be exercised. Industry organizations have sought to define the parameters of a reasonable system by implementing their own, such as the "Six Strikes" Copyright Alert System implemented by the Center for Copyright Information. However, that system has been criticized as ineffective. See http://variety.com/2015/biz/news/copyright-alert-system-piracy-expendables-3-1201493788/. Some stakeholders have pushed for laws requiring a judicial order before content is removed, in order to safeguard freedom of expression, and have unsuccessfully sought for this protection in treaties such as the Trans Pacific Partnership. See Electronic Frontier Foundation, "How the TPP perpetuates mistakes of the DMCA," available at https://www.eff.org/deeplinks/2015/12/how-tpp-perpetuates-mistakes-dmca.

The BMG v. Cox case, of course, does not include all the stakeholders. There are facts on both sides that paint the parties in a negative light, which can detract from measured debate. The bottom line is that the debate will continue, while the law struggles to keep up and the courts and ISPs struggle to find their appropriate boundaries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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