On June 2,2020, District Judge Liam O’Grady denied various motions by Cox Communications trying to wiggle out of the $1 Billion verdict handed down in December 2019. 1 These motions were Renewed Motion for Judgment as a Matter of Law and Motion for Remittitur (Reduction of Damages) or, in the Alternative, a New Trial. Cox won a partial victory in that the Judge ordered that the number of works at issue be recalculated. The bad news for Cox is that the Judge let stand the jury’s award of statutory damages: $99,830.29 for each work infringed. 2
At issue was Cox’s “repeat infringer policy,” a requirement for Cox to maintain “safe harbor” under the Digital Millennium Copyright Act (DMCA). This means, in theory, that an ISP must have a policy in place for terminating the account of people who routinely use the ISP service to infringe copyrights. Cox had such a policy. It simply refused to enforce it in any meaningful manner.
The team within Cox responsible for enforcing the policy was the “Cox Abuse Team” According to the Court:
“CATS implemented a graduated response to address the reported infringing activity; the graduated response involved a thirteen strike policy, or ‘13 plus’ given that the customer facing action generally began at the second notice.” 3
If this sounds familiar, it’s because this is the strategy that got Cox tagged for $25 million in a case brought by BMG Rights Management. Way back then, I summarized Cox’s DMCA policy as follows: 4
- If Cox receives a notice of infringement against a subscriber, it places a “strike” against the account, but does not send the notice to the subscriber.
- If Cox receives subsequent notices, strikes are placed on the account, and notice is sent to the subscriber.
- Cox takes no further action until the account has received 8 “strikes” against the account. Then the account holder is sent to a static “detention” page warning them against further infringement and instructing them to delete all infringing files and remove file sharing software. There is no real penalty and the subscriber can re-enable the account by simply clicking on the link on the web page.
- If the subscriber gets another warning notice, it is sent back to “detention,” but the subscriber account can again be re-enabled easily.
- On the tenth notice, the subscriber is sent to “jail,” i.e. a web page that they cannot exit. They must call Cox customer service to get their account re-enabled.
- On the eleventh notice, the subscriber is sent back to “jail,” and must call Cox customer service, again.
- On the twelfth and thirteenth notices, the subscriber is sent back to “jail,” and must talk to a higher level of Cox Customer service to get their service reinstated.
- On the fourteenth notice, Cox will review the account and “consider” termination, but termination is never the automatic remedy.
Tellingly enough, the “Cox Abuse Team” got renamed the “Customer Safety Team” 5 reflecting the shift from routing out bad actors as required by the DMCA, to protecting the bottom line of Cox Communications. One email read “This customer will likely fail again, but let’s give him one more change [sic]. He pays 317.16 a month.” Another stated “we want to hang on to every subscriber we can.” 6 But the most blunt was one email that stated “F*** the DMCA.” 7
This policy shift was also reflected in Cox limiting the number of notices any one party could send, and reducing the staffing of the CST from nine to four. 8 At trial, one team member admitted “we told each copyright owner to limit [the notices] or give us money to hire people.” 9
Never mind, of course, that enforcing the repeat infringer policy is YOUR responsibility under the DMCA, and a cost that YOU need to absorb.
In the order, the Judge finds that there was sufficient evidence to support the jury’s finding of direct infringement, vicarious liability and contributory liability. The only real question comes in what is the proper number of works “at issue” for the award of statutory damages.
Cox argues that the correct approach is to simply multiply the award times the number of discrete copyright registrations. 10 The Court notes that this is not correct under 4th Circuit and most all other circuits. 11 However, the Court notes that this issue ignores the impact of compilations and derivative works.
In the First, Seventh, Ninth, Eleventh and D.C. Circuits, the test for how many copyrights there are in a compilation for calculating statutory damages is whether the copyrights that make up a compilation have economic value standing apart from the compilation. This is the so-called “Independent Economic Value Test.” 12
Opposed to that is the Second Circuit, which treats the compilation as one copyright no matter how many individual parts are contained within it. 13 Indeed, with photographs, the individual components could number in the thousands, in one case 9,000. 14 However, if the components were issued individually, say as a musical single, as well as a compilation, a musical album, more than one damage award could be supported. 15
Here, the Court sides with the Second Circuit, but finds that since all the songs at issue were offered individually through various services, this does not reduce the number of songs at issue. 16
Derivative works are a different concern. The Plaintiffs include 16 record company plaintiffs, and 37 music publisher plaintiffs. 17 This question arises because the song is one copyright, the sound recording is a derivative work of that same copyright, yet it is entitled to its own separate copyright. 18 Are these two works? Or one? The Court seems to feel there should only be one award of statutory damages as the derivative work (the sound recording) wholly encompasses the underlying work (the song). 19 It cites to the language of Section 504(c) that “all parts of a compilation or derivative work constitute one work.”
The Court puts forth a hypothetical where an infringer infringes a song where the song copyright and sound recording copyright are owned by the same person. This results in one award. Suppose the same infringer infringes a song in which there are ten licensed samples of ten sound recording and ten musical compositions. (Believe me this is very possible). So now the infringer is facing 20 damage awards? The Court refuses to go this far. 20
So now the damage award itself is not going to be reduced, but the multiplier, the number of “works” at issue will be. The Court instructs the parties to offer their calculations on how many songs have been subsumed into the sound recordings. This does not appear to me to be a simple task. Consider that there might be multiple “covers” of a song. One song might have been subsumed by a sound recording also at issue. But that does not mean that another “cover” might exist that has not been sued on. This would invoke the ownership of the song itself, apart from the sound recording.
Stay tuned. Not only for the future order, but the inevitable appeal.
- Sony Music Entertainment et al V. Cox Communications, Inc., et al Case No. 1:18-cv-950-LO-JFA. No other citation is currently available. ↩
- Id. at 7 ↩
- Id. at 5 ↩
- 14 Strikes and You’re Out! (Maybe): How Cox Communications Lost its DMCA Safe Harbor ↩
- Sony Music Entertainment et al V. Cox Communications, Inc at 6 ↩
- Id. at 20 ↩
- Id. at 7 ↩
- Id. at footnote 7 ↩
- Id. at 6-7 ↩
- Id. at 23 footnote 15 ↩
- Id. ↩
- Id. at 25 ↩
- Id. at 27-28 ↩
- Id. at 30 ↩
- Id. at 28 citing EMI Christian Music Group v. MP3 Tunes 844 F.3d 79 (2d Cir. 2017) ↩
- Id. at 36 ↩
- Id. at 2 ↩
- 17 USC 101 ↩
- Sony Music Entertainment et al V. Cox Communications, Inc at 41 ↩
- Id. at 49 ↩