The Fifth Circuit Appeals Court in the US has upheld the judgement against internet service provider Grande Communications that was secured by the major record companies, which accused the ISP of facilitating music piracy.
However, the court also says that the nearly $47 million in damages awarded to the majors should be recalculated, because the number of copyright infringements for which damages are due should be based on albums not tracks. Which will significantly cut the amount of money the labels receive.
Nevertheless, the appeals judgement is basically a win for the majors, not least because the court rejected an argument increasingly presented by ISPs that are accused of facilitating piracy, which is based on a US Supreme Court ruling from last year in a case involving Twitter.
That argument has been made to the Supreme Court itself as part of Cox Communications’ appeal of its music piracy legal battle with the major record companies.
However, that ruling - which considered the responsibilities of social media in relation to terrorist content posted to their platforms - doesn’t impact on legal precedents in copyright law, the Fifth Circuit insists. “To conclude otherwise”, it adds, “would require us to decide that the Supreme Court changed fundamental principles of copyright liability without saying so in a case that was not about copyrights”.
Both Grande and Cox - and other American ISPs - were accused of facilitating music piracy by failing to deal with customers that repeatedly accessed and shared copyright infringing music files, despite being told about those customers by the record companies.
Facilitating the direct copyright infringement undertaken by their users in that way, the labels successfully argued, meant the ISPs themselves were liable for contributory copyright infringement. And because the ISPs had slack policies for dealing with repeat infringers, they couldn’t rely on the copyright safe harbour to avoid that secondary liability.
The ISPs have presented various arguments as to why they shouldn’t be liable for contributory copyright infringement, including on appeal. More recently one of those arguments has been based on the Supreme Court ruling in the Twitter v Taamneh case.
Four other ISPs - Frontier, Lumen, Altice and Verizon - also recently brought up this argument in an amicus briefing filing in support of Cox in its appeal to the Supreme Court. They wrote that holding ISPs liable for the copyright infringement of their customers “flouts the traditional secondary liability principles this court recently recognised in Twitter v Taamneh”.
But the Fifth Circuit disagrees. In Twitter v Taamneh, social media companies were accused of aiding and abetting ISIS by permitting its members to use their platforms for “recruiting, fundraising and spreading their propaganda", which in turn contributed to an ISIS terrorist attack in Istanbul in 2017.
The Supreme Court ruling in favour of the social media companies, explains the Fifth Circuit, “underscores the general importance, in all cases of secondary liability, of demonstrating a direct nexus between the defendant’s conduct” and the harmful conduct of whoever has primary liability.
There was no ‘direct nexus’ in the Twitter case because “ISIS did not use the social media companies’ services to carry out its terrorist attack”.
However, in the majors v Grande case, the Grande users infringing the record companies’ copyrights “relied on and used Grande’s services” to illegally access and share music. Which is your direct nexus. Which is why the lower court was right to hold the ISP liable for contributory infringement, and Grande’s arguments on appeal relying on Twitter v Taamneh don’t change that fact.
It’s on the damages front that the majors won’t be happy with the Fifth Circuit ruling. The music companies won statutory damages, which is a principle under US law where a copyright owner is awarded a set sum of money - up to $150,000 - for each copyright infringed. It’s the statutory damages system that can result in mega-damages being awarded in US copyright cases.
In the Grande case, the lower court awarded the majors $33,333 for each of the 1403 tracks that the ISP’s users had illegally accessed and shared. Which came out at $46,766,200.
However, on appeal Grande pointed out that US copyright law clearly states that, for the purposes of calculating statutory damages, “the parts of a compilation or derivative work constitute one work”. And some of those tracks were downloaded as part of albums which, in copyright law terms, count as ‘compilations’.
The majors pushed back at that argument, citing precedents set in rulings in other appeal courts around the US. The Fifth Circuit conceded that the other appeals courts have been inconsistent on this and most have adopted an approach that would actually allow the labels to receive damages for every single track.
However, it added, nothing in US copyright law actually permits that approach, which means damages should now be recalculated with groups of tracks accessed or shared as an album treated as one work.