The major record companies have asked the US Supreme Court to intervene in their legal battle with American internet service provider Cox Communications.
Facing the prospect of their billion dollar damages award being slashed because of an appeals court judgement, the majors have asked the Supreme Court to rule on what exactly is meant by the principle of ‘vicarious copyright infringement’.
Vicarious infringement applies when a company has profited from someone else’s direct copyright infringement, but there is - unsurprisingly, given the amounts of money at stake - a big disagreement between Cox and the majors over exactly what is meant by ‘profited’ in that context.
The majors argue that if an ISP sells an internet access package to a customer who it knows is pirating music, then it is profiting from that customer’s illegal conduct, and should therefore be liable for vicarious infringement. Cox counters that for vicarious infringement to apply, it would need to be directly profiting from the piracy itself, not from selling an otherwise legitimate service that is then used to commit piracy.
The Virginia district court originally found Cox liable for vicarious infringement, but when Cox took the case to the Fourth Circuit Appeals Court, the judges there opted for the narrower definition put forward by the ISP. If the majors’ plea to the Supreme Court is not successful, then this will force a recalculation of the damages due to the majors when the case returns to the district court.
In the new filing with the Supreme Court, the music companies say that the conclusion of the Fourth Circuit was “wrong on the merits” and “inconsistent with the Supreme Court’s precedent”.
The majors insist that rulings on vicarious infringement in other appeal courts in the US have opted for a wider definition of how a defendant profits from the direct infringement. In other cases, all that has been required, they write, is “evidence that the defendant expects commercial gain from the broader operation in which infringement occurs”.
“That tradition stretches as far back as the so called ‘dancehall cases’ from the first half of the Twentieth Century”, they add, “where nightclub owners and restaurateurs were held vicariously liable for copyright infringement by bands performing at the establishments even if their patrons did not pay a cover charge associated with the infringing music that they heard there”.
In other words, the clubs were profiting from food and drink bought by patrons lured in by the bands playing unlicensed music, not by charging entry to hear the music. However, profiting from hot dogs and beers was enough to put you on the hook for vicarious infringement.
“The Fourth Circuit’s requirement that the defendant profit directly from the act of infringement itself - as opposed to profiting from the operation in which infringement occurs - stands opposite to the rest of the field", the majors add. All the other appeal courts that “have considered the question have employed a different approach to the profit requirement, asking instead whether the defendant profits from the operation in which infringement occurs”.
So whether you’re an ISP selling internet access or a speakeasy selling martinis and sliders, if you’re a business making money somewhere that copyright infringement is taking place, you’re liable. That, at least, is the argument the majors are making.
Cox also wants the Supreme Court to review the case, because - while the Fourth Circuit concluded that the ISP wasn’t profiting from the infringement of its users - it nevertheless said that the company was contributing to it, and is therefore liable for contributory infringement.
The appeal court’s ruling on vicarious infringement should reduce Cox’s damages bill, but there will still be liability and damages to pay. Unless the Supreme Court overturns the contributory infringement claim.
In its filing with the Supreme Court, Cox ramped up the drama, insisting that the precedent set in this case will force ISPs to take extreme measures against any customer accused of infringing copyright, requiring them to cut off “entire households, coffee shops, hospitals, universities and even regional internet service providers” if just one person using an internet connection is accused of illegally accessing some music files.
There is less over-the-top drama in the major labels’ submission, although it does say that the ruling on vicarious infringement “eliminates an especially important tool” for copyright owners “in the digital age, where pursuing direct infringers - in this case, thousands of faceless individuals who cannot be identified except through an internet service provider - is impractical at best and impossible at worst”.
Cox was held liable for the copyright infringement of its users back in 2019, for failing to effectively deal with customers who had illegally accessed and shared music files, despite being made aware of those users’ infringing conduct by the record companies. Found liable for both contributory and vicarious infringement, a jury awarded the major record companies a billion dollars in damages.
When the Fourth Circuit decided that Cox was liable for contributory infringement but not vicarious infringement, the dispute was sent back to the district court where the case began for the damages to be reviewed. Generally liability for vicarious infringement increases damages in copyright cases, so the assumption is that the Fourth Circuit ruling will result in a lower damages bill for the ISP. Hence why the majors want the Supreme Court to intervene.
It remains to be seen if the Supreme Court decides to review this dispute. Both sides reckon that they are bringing important issues to the table where clarity is required, with the precedents set by the Fourth Circuit in this case having a wider impact beyond this dispute. That may or may not be sufficient to convince Supreme Court judges to give this legal battle consideration.