Cox Communication’s DMCA Policy Based on Money, Not the Law, Rules Court of Appeals

Stephen Carlisle February 7, 2018

“[T]he evidence shows that Cox’s decisions not to terminate had nothing to do with ‘appropriate circumstances’ but instead were based on one goal: not losing revenue from paying subscribers.” ¹

Well, it doesn’t get much clearer than that, does it?

I have written about the Cox/ BMG lawsuit before. ² If you are unfamiliar with the facts of the case, you probably should start there, then meet me back here.

The District Court had ruled that because of a total lack of enforcement of Cox Communications’ overly generous DMCA termination policy (14 strikes and you’re out…maybe) that Cox had lost its “safe harbor” from copyright infringement suits. Subsequently, a jury came back with a $25 million dollar verdict against them. ³ This must have stung doubly, because Cox’s insurance company had filed suit against them to deny coverage for this, calling Cox’s policy an “intentional business decision” to block and ignore copyright infringement notices sent to it by the record company BMG. ⁴

The Fourth District Court of Appeals has largely affirmed this ruling. While Cox gets a retrial on certain issues, it will have no safe harbor to fall back on.

The dispute begins with BMG using the company Rightscorp to send the infringement notices.

“Rightscorp, Inc., which monitors BitTorrent activity to determine when infringers share its clients’ copyrighted works. When Rightscorp identifies such sharing, it emails an infringement notice to the alleged infringer’s ISP (here, Cox). The notice contains the name of the copyright owner (here, BMG), the title of the copyrighted work, the alleged infringer’s IP address, a time stamp, and a statement under penalty of perjury that Rightscorp is an authorized agent and the notice is accurate…

Rightscorp also asks the ISP to forward the notice to the allegedly infringing subscriber, since only the ISP can match the IP address to the subscriber’s identity. For that purpose, the notice contains a settlement offer, allowing the alleged infringer to pay twenty or thirty dollars for a release from liability for the instance of infringement alleged in the notice. Cox has determined to refuse to forward or process notices that contain such settlement language.

In the fall of 2011, Cox decided to ‘blacklist’ Rightscorp, meaning Cox would delete notices received from Rightscorp without acting on them or even viewing them. BMG hired Rightscorp in December 2011—after Cox blacklisted Rightscorp. Thus, Cox did not ever view a single one of the millions of notices that Rightscorp sent to Cox on BMG’s behalf.” ⁵

This last point is important, and goes to the issue of “willfull blindness.” Cox made a conscious decision to ignore all notices from Rightscorp.

On appeal, Cox contended that they still had safe harbor because they actually didn’t have to terminate any subscribers at all. Cox argued that this is because none of them had been found to be an infringer by a Court of law. And since the DMCA speaks in terms of “repeat infringer,” a Cox customer did not have to be terminated unless it had been found guilty of copyright infringement multiple times in multiple court cases. ⁶

Think about this for a second. Under this theory, no ISP could ever be held liable for contributory infringement, even if it knew that a subscriber was actively and massively using their service to infringe copyrights. Only if that person had been sued for copyright infringement multiple times and lost multiple times, would an ISP have to terminate them.

This theory is essentially a “get out of jail free” pass to all ISPs. No copyright holder would take the time to do this. Litigation is too time consuming and expensive. The result would be an open invitation to ISPs to sit back and do nothing, which is clearly not the intent of the DMCA.

The Court was not buying it.

“[T]he DMCA itself provides that ISPs who store copyrighted material are generally not liable for removing ‘material or activity claimed to be infringing or based on facts or circumstances from which infringing activity is apparent, regardless of whether the material or activity is ultimately determined to be infringing.’ Id. § 512(g)(1) (emphases added). This provision expressly distinguishes among three categories of activity: activity merely ‘claimed to be infringing,’ actual ‘infringing activity’ (as is apparent from ‘facts or circumstances’), and activity ‘ultimately determined to be infringing.’ The distinction between ‘infringing activity’ and activity ‘ultimately determined to be infringing’ in § 512(g) shelters ISPs from being liable for taking down material that is ‘infringing,’ even if no court ‘ultimately determine[s]’ that it is infringing—because, for example, the copyright holder simply does not file a lawsuit against the person who uploaded the infringing material. As this provision illustrates, Congress knew how to expressly refer to adjudicated infringement, but did not do so in the repeat infringer provision.” ⁷

Further the Court ruled:

“The legislative history of the repeat infringer provision supports this conclusion. Both the House Commerce and Senate Judiciary Committee Reports explained that ‘those who repeatedly or flagrantly abuse their access to the Internet through disrespect for the intellectual property rights of others should know that there is a realistic threat of losing that access.’ H.R. Rep. No. 105-551, pt. 2, at 61 (1998); S. Rep. No. 105-190, at 52. This passage makes clear that if persons ‘abuse their access to the Internet through disrespect for the intellectual property rights of others’—that is, if they infringe copyrights—they should face a ‘realistic threat of losing’ their Internet access. The passage does not suggest that they should risk losing Internet access only once they have been sued in court and found liable for multiple instances of infringement. Indeed, the risk of losing one’s Internet access would hardly constitute a ‘realistic threat’ capable of deterring infringement if that punishment applied only to those already subject to civil penalties and legal fees as adjudicated infringers.” ⁸

Next, Cox contends that since it did not have “actual knowledge” that their subscribers were infringing, that they were under no obligation to terminate them. ⁹ This, of course, ignores the fact that as noted above, they had taken steps to completely ignore the notices of infringement in the first place.

Again, the Court was not buying it:

“That argument misses the mark. The evidence shows that Cox always reactivated subscribers after termination, regardless of its knowledge of the subscriber’s infringement. Cox did not, for example, advise employees not to reactivate a subscriber if the employees had reliable information regarding the subscriber’s repeat infringement. An ISP cannot claim the protections of the DMCA safe harbor provisions merely by terminating customers as a symbolic gesture before indiscriminately reactivating them within a short timeframe.” ¹⁰(emphasis added)

Further, Cox’s own conduct undercut their argument:

“Cox failed to provide evidence that a determination of ‘appropriate circumstances’ played any role in its decisions to terminate (or not to terminate). Cox did not, for example, point to any criteria that its employees used to determine whether ‘appropriate circumstances’ for termination existed. Instead, the evidence shows that Cox’s decisions not to terminate had nothing to do with ‘appropriate circumstances’ but instead were based on one goal: not losing revenue from paying subscribers.” ¹¹

Cox did win one point on appeal, which mandated a retrial. The District Court ruled, and instructed the jury, that Cox would be liable for contributory infringement if Cox “knew or should have known” of the infringing activity. ¹² The Court of Appeals held that this standard, which is equivalent to simple negligence, sets the bar too low. ¹³ Instead, the Court of Appeals ruled that in order to prove contributory infringement one must prove either actual knowledge or willful blindness to actual knowledge, because “the law recognizes willful blindness as equivalent to actual knowledge.” ¹⁴ (citation omitted)

I suspect on retrial, that this standard will not be too hard to overcome. Remember that Cox refused to even read all notices that came from Rightscorp after the spring of 2011. ¹⁵ BMG did not hire Rightscorp until the fall of 2011, so Cox never considered, or even read for that matter, any of BMG’s millions of notices sent to them. ¹⁶

Nothing shouts “willful blindness” than absolutely refusing to read a communication that has been sent to you, and millions of communications on top of that.

For its part, the Electronic Frontier Foundation criticizes this decision because the ISP should not have to become “the copyright police.” ¹⁷ Yet, in the very same post, it suggests the ISP should act aggressively against copyright owners who have the temerity to oppose the wholesale infringement of their work.

“But nothing in the decision forbids an ISP from standing up for its customers by demanding strong and accurate evidence of infringement, and reserving termination for the most egregious cases—even if that makes actual terminations extremely rare.” ¹⁸

“Standing up for its customers by demanding strong and accurate evidence?” How is this NOT becoming “the copyright police?” And reserving termination for the “most egregious cases” was not the intent of Congress. Let’s read this again:

“Both the House Commerce and Senate Judiciary Committee Reports explained that ‘those who repeatedly or flagrantly abuse their access to the Internet through disrespect for the intellectual property rights of others should know that there is a realistic threat of losing that access.’ H.R. Rep. No. 105-551, pt. 2, at 61 (1998); S. Rep. No. 105-190, at 52.” ¹⁹

Those who “repeatedly abuse their access” “should know that there is a realistic threat of losing that access.” Nowhere does it say only in the “most egregious cases.”

This is why the EFF takes the extreme position that internet access is a basic human right, a position mocked by the District Court.

““I read the (EFF) brief. It adds absolutely nothing helpful at all. It is a combination of describing the horrors that one endures from losing the Internet for any length of time. Frankly, it sounded like my son complaining when I took his electronics away when he watched YouTube videos instead of doing homework. And it’s completely hysterical.” ²⁰

The take home message here is that the DMCA is broken and needs fixing. The DMCA envisioned that there would be co-operation between the tech interests and the creative community in removing infringing material or preventing its dissemination.

Hardly has an assumption by Congress been shown to be so spectacularly wrong. Just as Google hides behind their incredible passive aggressive tactics for preventing a simple takedown notice, ²¹ so did Cox Communications in taking extreme, and ultimately meritless interpretations of the law, simply to protect their bottom line.

So… wouldn’t it be ironic if the second jury awards BMG more than $25 million? Stay tuned.