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UMG Recordings, Inc. v. RCN Telecom Services

In unpublished opinion on defendants’ motions to dismiss, district court finds plaintiffs sufficiently pled contributory and vicarious infringement against ISP by alleging it failed to terminate or suspend subscribers’ accounts after receiving millions of notices from plaintiffs of repeat instances of copyright infringement, but not against one of RCN’s owners.

Plaintiffs, a group of record labels and other companies that hold the vast majority of copyrights for recorded music in the United States, sued defendants — a group of regional internet service providers (ISPs) located across the country and the management consulting firm that allegedly has an ownership stake in the ISP and that allegedly makes its marketing and policy decisions — for contributory and vicarious copyright infringement, alleging that defendants’ customers used the file sharing protocol BitTorrent to download copyrighted music, infringing plaintiffs’ copyrights. Plaintiffs engaged Rightscorp, an independent copyright enforcement company, to track the transfer of copyrighted music files over BitTorrent. Rightscorp is able to track a number of relevant facts regarding any file transferred over BitTorrent, including not only the file name and contents, but also the IP address and ISP of the infringing individual. Rightscorp then sends a DMCA takedown notice to the ISP.

Plaintiffs allege that Rightscorp sent more than 5 million notices to RCN regarding its customers’ use of BitTorrent, identifying tens of thousands of RCN customers who were repeatedly downloading files in violation of plaintiffs’ copyrights. In addition, Rightscorp sent RCN weekly notices summarizing the individual notices for that week. Plaintiffs allege that despite being sent the information, RCN never took any meaningful action to discourage copyright infringement on its networks, and that any anti-piracy policies it had were a “sham,” because defendants did not terminate the infringing customers’ accounts. Plaintiffs further allege that Patriot, as the owner of RCN and responsible for setting the policy on copyright infringement, is liable as well.

Both defendants filed motions to dismiss. The district court denied RCN’s motion but granted Patriot’s motion, finding that plaintiffs’ allegations as to Patriot were conclusory statements unsupported by facts and holding that Patriot’s alleged ownership interest and role as management consultant did not make it liable for RCN’s actions. The court found that there were no allegations that Patriot received any DMCA takedown notices sent to RCN, that Patriot encouraged or contributed to any infringement, that Patriot could control the conduct of RCN’s subscribers, or that Patriot directly profited from the infringement, and as such, plaintiffs failed to state a claim against Patriot. 

As an initial matter, the court held that plaintiffs had adequately alleged direct infringement by RCN’s subscribers. As to the contributory copyright infringement claim against RCN, the court held that plaintiffs adequately pled both knowledge by RCN of the infringement and that RCN materially contributed to the infringement. The court relied on the complaint’s allegations that Rightscorp had informed RCN about the infringing acts, and reasoned that at minimum, the Rightscorp notices gave RCN sufficient notice that some of its customers were infringing plaintiffs’ copyrights. 

The court also found that RCN had materially contributed to its subscribers’ infringements. The court rejected RCN’s argument that pursuant to the Supreme Court decision in Sony Corp. of Am. v. Universal City Studios, Inc., because its service as an ISP has substantial non-infringing uses, it could not be held liable for contributory copyright infringement. The court distinguished Sony, noting that since it was decided, there have been several cases in which ISPs or computer networks were held liable for contributory copyright infringement because they knew of infringing material on their network and did not take action to remove it, and that other courts have found an ISP’s failure to take action against repeat infringers “tantamount to encouraging infringement.” In light of this authority, the court found that plaintiffs sufficiently pled that RCN materially contributed to the copyright infringement of its users by failing to terminate or suspend customers’ accounts after repeated instances of copyright infringement. 

Turning to the vicarious copyright infringement claim against RCN, the court found that the complaint adequately pled RCN had both the right and ability to supervise the conduct of the infringing activity, and “a direct financial interest in such activities.” While RCN claimed that it lacks the right or ability to supervise its users, the court found that the “right or ability to supervise” in this context is not limited to a traditional principal-agent relationship. Citing Metro–Goldwyn–Mayer Studios Inc. v. Grokster, Ltd. and Perfect 10, Inc. v., Inc., among other cases, the court noted that right or ability to supervise extends to circumstances in which an ISP has the legal duty to prevent infringing conduct and the ability to do so. RCN argued that it only has the ability to terminate the accounts of its users, and not to actually prevent the infringing actions from occurring, but the court found this argument unconvincing because RCN has the ability to prevent its users from infringing on plaintiffs’ copyrights by restricting their access to the internet, and because established precedent has found ISPs to be liable in similar circumstances. 

In terms of direct financial interest, the court noted that while the core question is whether there is a connection between the infringing activity and any financial benefit for the defendant, in the context of internet file sharing, this inquiry is whether the defendant’s tolerance for infringing activity is a draw for customers. Noting that recent precedent has split over whether the tolerance for infringing activity must be the main draw for customers, or whether it is simply one factor that would weigh in the defendant’s favor, the court concluded that under the deferential standard applied to a motion to dismiss, plaintiffs have met their pleading burden with regard to alleging a direct financial interest by RCN in allowing its users to infringe on plaintiffs’ copyrights without penalty.

Summary prepared by Linna Chen and Alex Inman