Tomorrow (March 9), lawyers for Cox Communications will begin oral arguments in the appeal of a $1 billion copyright infringement award that it says is not only wrong on a legal basis, but could upend the entire broadband industry if it is allowed to stay.
A Virginia federal court awarded 53 music publishers, including Sony Entertainment, Universal Music Group, Warner Music and others, $1 billion in December 2019, agreeing with claims that despite complaints and warnings from the music publishers, Cox continued to allow its broadband subscribers to illegally download music. All in all the publishers found 10,017 instances of infringement by Cox customers, and a jury assigned a value of $99,830.29 to each one, for a total of $1 billion.
Cox immediately appealed the decision, but that was rejected by another federal court in Virginia in June 2021, which upheld the verdict. The latest appeal is before the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, with oral arguments set for March 9. A decision is expected sometime this spring.
Cox had originally hoped that it would be protected by the Digital Millennium Copyright Act, the federal law that protects internet-service providers from liability for content that its subscribers put on the web. An earlier court ruled that Cox wasn’t protected by the DMCA because it didn’t terminate enough customers who had been accused of the infringement. According to court filings, the DMCA requires ISPs to terminate subscribers that repeatedly infringe copyrights under appropriate circumstances.
The suit centered around about 58,000 of Cox’s estimated 6 million broadband customers who, according to the publishers, were suspected of downloading copyrighted material without permission. The plaintiffs claim they sent Cox about 163,000 notices concerning those subscribers (about 2.8 notices for each customer) regarding 10,017 individual sound recordings and compositions over Cox’s network. .
Other MSOs in Crosshairs
Cox isn’t the only cable ISP facing a potentially crippling lawsuit regarding illegal downloading of content. In August, Sony Entertainment, Universal Music Group, Warner Music and their subsidiaries sued Charter Communications in U.S. District Court in Colorado, claiming the cable company failed to terminate “tens of thousands” of subscribers who were allegedly downloading music illegally, and claimed the company profited from those downloads by selling higher speeds of service. Last June, the record labels sued Frontier Communications, claiming similar copyright violations.
While Cox doesn’t deny that some of its broadband subscribers illegally downloaded music during the period in question, it does take issue with the extent of the punishment — about $100,000 per song that typically retails for $1 each — and the idea that ISPs are supposed to immediately disconnect subscribers at the mere hint they are downloading something they aren’t supposed to.
The Recording Industry Association of America, the trade group that represents record labels and distributors in the music business and who in 2019 said the original verdict sent a message to ISPs concerning their obligations to stop piracy, declined to comment on the appeal.
But in a brief filed in June, attorneys for the plaintiff record companies said the court had already correctly determined that Cox repeatedly allowed copyright infringers to remain on the service, creating a “safe haven” for them as the company collected millions of dollars in fees for broadband service.
“During the time period at issue here, Cox terminated over 600,000 subscribers for not paying their bill,” the plaintiffs said in the filing. “It terminated 32 for copyright infringement.”
While Cox has argued that it has no financial incentive to allow its customers to illegally download copyrighted material — it charges the same amount no matter the usage — the record companies argued that music pirates tend to subscribe to higher-speed service, which does carry a higher retail price.
“By not terminating known repeat infringers, Cox received subscription revenues it would not have otherwise obtained, and avoided costs it would have otherwise incurred,” the plaintiffs wrote. They pointed to one Cox residential customer who was the subject of more than 100 infringement notices and was billed $8,594 between February 2013 through 2016, after Cox received at least 13 infringement notices for that subscriber. The plaintiffs also claimed that two Cox Business customers were billed $706,434 and $12,525, respectively, after receiving 13 infringement notices.
“Between February 2013 and December 2016, Cox received $208 million in revenue from subscribers caught infringing three or more times,” the plaintiffs wrote. “Cox thus demonstrably and consistently prioritized cash over copyright.”
According to Cox’s arguments, it had issued warnings to subscribers that they were illegally downloading music in three phases. In phase one, Cox sent subscribers automated email warnings concerning the complaint that they were illegally downloading music, demanding removal of any material that infringed on copyrights, and providing educational resources on infringement. Cox’s Abuse Tracking System (CATS) repeated the warnings after the cable operator received a second notice of infringement and repeated them again for the next five notices. Those warnings ended the infringement 78% of the time, Cox said in court filings.
If that wasn’t enough, Cox moved to the second phase, automatic suspension of internet service. According to the filings, Cox suspended thousands of subscribers during the period and refused to restore service until the subscriber promised to stop the infringement, either via an online form or, if the violations continued, in a conversation with Cox investigators who would determine how the infringement started, and how it could be stopped. According to Cox, phase 2 increased the success rate to 95%.
Phase three was termination, a measure that Cox said it rarely had to resort to. According to the filing, Cox determined a few dozen customers — out of about 6 million total broadband subscribers — were terminated in 2013 and 2014. “[U]ltimately, the only accounts that continued to rack up more and more notices were all business accounts or regional ISPs, termination of which would have carried especially devastating consequences,” Cox said in the filing.
Cox tried to have the $1 billion award reduced in 2021, but was rejected by the court in June. But the company, in its latest appeal, tells the court that upholding the verdict will have a devastating effect on the broadband industry as a whole.
ISPs Left Exposed
“It would effectively make ISPs strictly liable for every act of infringement on the internet, from downloads to social media posts,” Cox said in the filing. “And given the threat of crushing liability, ISPs would have no choice but to terminate subscribers the moment they are accused of a single infringement, stranding countless subscribers in an internet exile.”
Other ISPs believe so as well. At least four amicus briefs were filed with the court in favor of Cox’s position, by 17 distinguished university intellectual property law professors and industry organizations like the Electronic Frontier Foundation, and The Internet Association (which represents 40 leading tech companies). All said upholding the ruling would result in massive terminations of internet subscribers.
“Consumers, whether they personally engage in infringing conduct or not, could be subject to wholesale termination of their internet access based on unproven allegations of infringement occurring at the IP address through which they connect to the internet,” the law professors said in their brief. “And entities through which multiple users connect to the internet via a single IP address could lose internet access entirely due to alleged infringement by a single user.”
They argued that Cox did not receive any benefit from allowing the illegal downloads — it got paid a flat monthly for service either way — which is a key part of the law. According to the professors’ brief, in order for Cox to benefit from the illegal activity, the “infringing activity must constitute a draw for subscribers.“
“But no evidence on the record shows that customers purchased Cox’s internet service because of the ability to infringe,” the brief continued.
And terminating one individual because of a single act of infringement, or just the suspicion of such an act, could mean that every member of a household loses service.
“The harm of cutting off an entity, in this case, could greatly outweigh the harm of a single infringing act,” the brief said. “And because 40% of Americans have only one option for broadband internet service, being terminated by one provider is not just an inconvenience, but can mean the loss of internet access altogether.”
With broadband subscriber growth dwindling, and cable companies relying more and more on broadband service to survive, the outcome of the case could have a chilling effect on the industry. With the federal government pumping billions of dollars into programs to encourage expansion of broadband service to rural areas, the 4th Circuit may well hold the fate of high-speed internet connections for all in its hands. ■
