• by Wendy Davis  @wendyndavis, February 20, 2024

A federal appellate court has set aside a ruling requiring Cox Communications to pay $1 billion to music companies for copyright infringement by broadband subscribers who downloaded music without the owners' permission.

In an opinion issued Tuesday, a three-judge panel of the 4th Circuit Court of Appeals partially upheld a finding that Cox was responsible for users' piracy, but said the company was entitled to a new jury trial on the amount of damages it must pay. While the ruling allows Cox to make a case for a smaller penalty, the decision doesn't require a jury to slash damages.

The ruling comes in a lawsuit brought against Cox in July 2018 by Sony Music Entertainment and dozens of other music companies. Among other allegations, the music companies said they sent “hundreds of thousands” of notifications about piracy to Cox, and that the company failed to terminate repeat offenders.

The music companies claimed Cox was responsible for users' piracy on two grounds. One was that Cox “vicariously” infringed (meaning in practical terms that Cox profited from infringement.) The other was that Cox "contributed" to infringement (meaning Cox knew its users infringed copyright and failed to take “reasonable measures” to prevent that activity).

Cox was found liable for infringement on both theories and, in December 2019, a jury awarded the music companies $1 billion in damages -- or nearly $100,000 per work for around 10,000 pieces of downloaded or shared music. The maximum statutory damages for copyright infringement is $150,000 per work infringed.

Cox appealed to the 4th Circuit, arguing that it didn't cause users to infringe or profit from infringement. 

Outside groups including the digital rights organization Electronic Frontier Foundation backed Cox, arguing in a friend-of-the-court brief filed with the 4th Circuit that a ruling against the company could lead other providers to more aggressively cancel people's broadband subscriptions. 

“Terminating that service means withdrawing an essential tool for participation in daily life,” the Electronic Frontier Foundation and others wrote.

“Moreover, terminating an ... account doesn’t just cut off an allegedly infringing subscriber. It potentially cuts off every household member or -- in the case of a school, library, or business -- every student, faculty member, patron, and employee who shares the internet connection.”

The appellate court sided with Cox regarding vicarious infringement, writing that the company didn't profit from music-sharing by users. The appellate judges specifically rejected the idea that Cox profited by collecting subscription fees from repeat infringers, holding that those fees weren't “a financial benefit flowing directly from the copyright infringement itself.”

“As Cox points out, subscribers paid a flat monthly fee for their internet access no matter what they did online,” Judge Allison Jones Rushing wrote in an opinion joined by Henry Floyd and Pamela Harris.

But the judges ruled against Cox regarding contributory infringement, writing that there was enough evidence to support the conclusion “that Cox knew of specific instances of repeat copyright infringement occurring on its network, that Cox traced those instances to specific users, and that Cox chose to continue providing monthly internet access to those users despite believing the online infringement would continue because it wanted to avoid losing revenue.”

The judges also said Cox is entitled to a new hearing on damages for contributory infringement alone, as opposed to both contributory and vicarious infringement.

But that ruling won't necessarily leave Cox in a better position in the long run. Santa Clara University law professor Eric Goldman notes that a jury could award the maximum amount of damages based on either theory of infringement. He adds that whether Cox ends up benefitting from Tuesday's ruling could come down to the answer to this question: “If you ask a jury to award damages only for contributory infringement, and not vicarious infringement, will they reach a different outcome?”

Cox previously settled a similar lawsuit by the record label BMG. But settling that matter, Cox argued it was protected by the federal copyright law's so-called "safe harbor" provisions, which protect internet service providers from liability for users' infringement -- but only if the ISPs have policies for handling repeat offenders.

A trial judge and the 4th Circuit Court of Appeals ruled in that earlier case that Cox wasn't entitled to rely on those safe harbors because it didn't implement its repeat-offender policy.

In an opinion issued in February 2018, a three-judge panel of the 4th Circuit wrote that Cox didn't enforce its “13-strike” repeat offender policy, which would have required the company to consider terminating subscribers after they received 13 notices of copyright infringement.