Fourth Circuit Says 'Thirteen Strikes and You’re Out!': Cox’s Failure to Reasonably Implement a Repeat Infringer Policy Disqualified it for the DMCA’s Safe Harbor
Last week, the United States Court of Appeals for the Fourth Circuit issued a decision in a closely watched case, BMG Rights MGMT v. Cox Commc’ns, Inc. This decision adds to the ever evolving body of law interpreting the scope and requirements of the safe harbor provisions in the Digital Millennium Copyright Act of 1998.
The DMCA provisions known as its “safe harbors” are important safeguards that limit an internet service provider copyright infringement liability for infringement arising out of the conduct of its end-users. But these crucial safeguards are only available to an ISP if it complies with the DMCA’s requirements. Among those requirements, an ISP seeking safe harbor protection must show that it has adopted and reasonably implemented a policy that provides for the termination in appropriate circumstances of subscribers who are repeat infringers. 17 U.S.C. §512(i)(1)(A).
In BMG v. Cox, BMG Rights Management and Round Hill Music had sued Cox Communications, an ISP, on a secondary liability theory for the infringing file-sharing of certain Cox customers. In response, Cox attempted to invoke the DMCA safe harbor. The District Court for the Eastern District of Virginia granted partial summary judgment for the plaintiffs, holding that Cox was ineligible for the safe harbor because it had failed to reasonably implement a repeat infringer policy. In the subsequent jury trial, Cox was hit with a $25 million judgment for infringement, stemming from its customers’ infringing activity.
The Fourth Circuit’s decision last week largely upheld the district court’s rulings, including that Cox did not qualify for the protections of the DMCA’s safe harbors because it had not reasonably implemented a repeat infringer policy. The Fourth Circuit reversed the district court only on one narrow point of error, finding that the jury was improperly instructed on the intent necessary to find contributory infringement. The court held that mere negligence (ie, the defendant should have known of the third party’s infringement) is insufficient to prove the requisite intent necessary for contributory infringement liability and sent the case back to the district court for re-trial with a corrected jury instruction on this point.
On the issue of Cox’s eligibility for the DMCA safe harbors, the Fourth Circuit found, as the district court had, that while Cox formally adopted a repeat infringer policy on paper, it made every effort to avoid reasonably implementing that policy in practice. The court pointed to several facts supporting this holding, including that Cox had a thirteen-strike policy before users were terminated, and reset the counter on that policy every six months; that until September of 2012 Cox never terminated a subscriber for infringement without reactivating them; and that even when Cox abandoned its practice of routine reactivation, it did so simply by stopping terminating customers at all.
The court also noted that from September 2012 to October 2014, Cox only issued 21 terminations (most or all of which were unrelated to infringing conduct) – a very small number of terminations compared to 500,000 plus warnings and temporary suspensions Cox had issued to alleged infringers during the same period. And the Fourth Circuit pointed to many emails by Cox personnel indicating a disregard for the DMCA, including one in which a manager at Cox directed an employee not to terminate an admitted repeat infringer, noting that “this customer pays us over $400/month” and that “every terminated Customer becomes lost revenue.”
Cox had also made the conscious decision to categorically disregard all infringement notices from Rightscorp, BMG’s copyright agent.
Noting that the ISP – in this case Cox – bears the burden of proving eligibility for the DMCA’s safe harbor defense, the court stressed that Cox had not produced any evidence of instances in which it did actually terminate repeat infringers after giving them a final warning to stop infringing.
The Fourth Circuit also rejected Cox’s theory that “repeat infringers” means “adjudicated repeat infringers,” ie those who had been held liable by a court for multiple instances of copyright infringement, and that Cox’s failure to terminate infringers who were not formally adjudicated did not remove it from the safe harbor. In rejecting this theory, the court noted that other provisions of the Copyright Act use the term “infringer” to refer to all who engage in infringing content, not just those whose infringement is formally adjudicated by a court. The Fourth Circuit also noted language within the DMCA tending to show that Congress knew how to expressly refer to adjudicated infringement, and chose not to do so in drafting the safe harbor language. Noting the deterrent purpose of the repeat infringer requirement, the court pointed out that “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.”
On the one point in which it reversed the district court’s finding, the Fourth Circuit agreed with Cox that the court had charged the jury to consider the wrong level of intent necessary to prove contributory infringement. Specifically, the district court had instructed the jury that it could impose liability for contributory infringement if it found that Cox knew or should have known of the infringing activity. The Fourth Circuit held that the “should have known” standard reflected negligence – too low an intent for a finding of contributory liability. But the court noted that actual knowledge of the infringing activity was not the only grounds for finding contributory infringement: a finding of willful blindness could also establish the requisite intent, because the law recognizes willful blindness as equivalent to actual knowledge.
The Fourth Circuit remanded the case for a new trial with corrected jury instructions on the issue of contributory liability, giving Cox another chance to make its case. But given the other rulings in the Fourth Circuit’s decision, and the facts cited in that decision, Cox may face an uphill battle in seeking a different outcome in a new trial.
The immediate takeaway from the Fourth Circuit’s holding is that an ISP’s repeat infringer policy must be more than a symbolic piece of writing – the ISP must actually make it standard practice to terminate customers who are repeatedly accused of infringement, without hastily reactivating terminated accounts. While the Fourth Circuit did not provide a bright line for how many “strikes” a user should be allowed before termination, ISPs should consider allowing significantly fewer than Cox’s liberal “thirteen” strikes. And while businesses may be concerned with the loss of paying customers upon termination, this case provides a cautionary tale: terminating some paying customers is likely much cheaper than litigating a copyright infringement claim and running the risk of multi-million dollar infringement liability as well as negative press.
Arent Fox’s Intellectual Property practice will continue to monitor developments in this area. If you have any questions, please contact Paul Fakler, Margaret Wheeler-Frothingham, or the Arent Fox professional who usually handles your matters.