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IP/Entertainment Case Law Updates

Sony Music Entertainment v. Cox Communications, Inc.

In copyright infringement action arising from internet service provider’s alleged tolerance of repeated infringement via its services, Fourth Circuit reverses and vacates finding of liability on vicarious infringement, affirms finding of liability on contributory infringement and orders new trial on damages.

Plaintiffs, a group of record companies and music publishers, brought an action for vicarious and contributory copyright infringement against Cox Communications, an internet service provider. Plaintiffs alleged that Cox subscribers repeatedly illegally distributed 10,017 of plaintiffs’ copyrighted works via peer-to-peer networking software, and that Cox both knew of and enabled its subscribers’ illegal distribution. Prior to trial, and in response to the parties’ cross-motions for summary judgment, the district court (1) held that infringement notices Cox received from a software known as MarkMonitor established Cox’s knowledge of infringement as a matter of law and (2) denied Cox’s motion to limit the number of copyrighted works at issue based on Cox’s argument that, for purposes of statutory damages, all songs included on a single album should constitute a single work, and likewise for a musical composition and the sound recording embodying it. The action then proceeded to a 12-day jury trial, following which the jury found Cox liable for willful vicarious and contributory infringement of all 10,017 copyrighted works alleged, and awarded a total of $1 billion in statutory damages. Following the verdict, Cox filed a renewed motion for judgment as a matter of law, arguing that there was insufficient evidence to prove vicarious or contributory infringement, and that the number of copyrighted works at issue should be reduced. The district court denied the motion in full, and Cox appealed both that denial and the district court’s rulings on the parties’ summary judgment motions. (Read our summaries of the court’s decisions here and here.)

Turning first to the issue of vicarious infringement, the Fourth Circuit agreed with Cox that there was insufficient evidence to support the jury’s finding of liability. Specifically, the Fourth Circuit held that Sony had failed, as a matter of law, to prove that Cox profited directly from its subscribers’ copyright infringement, as required for a claim of vicarious infringement. Indeed, the evidence presented at trial merely showed that Cox subscribers paid the same flat monthly fee for internet services regardless of whether they used their internet access for infringing or non-infringing purposes. Whereas the district court found it dispositive that Cox repeatedly declined to terminate infringing subscribers’ accounts in order to continue collecting the subscribers’ monthly fees, the Fourth Circuit disagreed. The Fourth Circuit explained that “the continued payment of monthly fees for internet service, even by repeat infringers, was not a financial benefit flowing directly from the copyright infringement itself” because “Cox would receive the same monthly fees even if all of its subscribers stopped infringing.” The Fourth Circuit also found unpersuasive plaintiffs’ arguments that there was sufficient evidence for the jury to infer either that subscribers chose to use Cox because of Cox’s lenient approach to infringement or that subscribers paid more for the ability to infringe. Based on plaintiffs’ failure to show “that Cox, in any sense, had a financial interest in its subscribers committing infringement,” the Fourth Circuit found that Cox was not vicariously liable for its subscribers’ infringement, and it reversed the district court’s ruling on that issue.

The Fourth Circuit next addressed Cox’s appeal regarding the contributory infringement claim. Cox challenged both the district court’s finding as to the intent element of the claim and the jury’s finding as to the material contribution element of the claim. As to intent, Fourth Circuit precedent provides that intent can be shown by knowledge that infringement was substantially certain to result from an internet provider’s provision of services to a subscriber. Cox argued that its receipt of notices of past infringement from MarkMonitor was insufficient to show its knowledge that subscribers who infringed were substantially certain to infringe again. However, the Fourth Circuit disregarded this argument on the basis that Cox did not raise it before the district court and therefore failed to preserve it for appeal. 

Regarding material contribution, Cox argued first that it could not have materially contributed to copyright infringement because its internet service was not designed to promote infringement. But the Fourth Circuit explained that distributing a product with substantial non-infringing uses can still constitute a material contribution when, as the district court found, there is intent coupled with distribution. Thus, it was irrelevant that Cox’s internet services were capable of, or even primarily designed for, non-infringing purposes. Cox also argued that its contribution could be material only if it was equivalent to “aiding and abetting” the infringement, as opposed to merely failing to prevent the infringement. But as the Fourth Circuit noted, there was ample evidence before the jury that “Cox knew of specific instances of repeat copyright infringement occurring on its network, that Cox traced those instances to specific users, and that Cox chose to continue providing monthly internet access to those users despite believing the online infringement would continue because it wanted to avoid losing revenue.” Accordingly, there was no basis for disturbing the jury’s finding that Cox had materially contributed to its subscribers’ infringement, and the Fourth Circuit affirmed the district court’s rulings on the contributory infringement claim.

Having reversed on the vicarious infringement claim and affirmed on the contributory infringement claim, the Fourth Circuit concluded by disposing of three related issues. First, because the Fourth Circuit was unsure to what extent the jury’s finding as to vicarious liability affected the statutory damages award it made, the Fourth Circuit deemed it necessary to vacate the damages award and order a new trial solely as to damages. Second, the Fourth Circuit denied Cox’s request to vacate the contributory infringement verdict on the ground that, “in [Cox’s] view, the two types of secondary liability [were] intertwined.” And finally, the Fourth Circuit rejected Cox’s effort to reduce the number of copyrighted works at issue due to the purported overlap between some of the works. The Fourth Circuit noted that whether any of the works were derivative of one another or part of a compilation was a mixed question of law and fact, and that Cox had utterly failed to present evidence to the jury on this issue. As a result, the Fourth Circuit had no choice but to affirm the district court’s refusal to overturn the jury’s verdict by limiting the number of copyrighted works at issue.

Summary prepared by Melanie Howard and Edward Delman 

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