The US Fourth Circuit Appeals Court has overturned the billion dollar damages ruling won by the major record companies against American internet service provider Cox Communications. This is as a result of the appeals judges rejecting part of a previous ruling that said the infringement the ISP was liable for was vicarious - which meant it had both control over the infringement and benefited from it financially.
"The jury found Cox liable for both willful contributory and vicarious infringement of 10,017 copyrighted works owned by plaintiffs and awarded $1 billion in statutory damages", the Fourth Circuit writes in its new judgement, summarising the original ruling in this case. “We affirm the jury’s finding of willful contributory infringement. But we reverse the vicarious liability verdict and remand for a new trial on damages because Cox did not profit from its subscribers’ acts of infringement, a legal prerequisite for vicarious liability".
Cox is one of many US ISPs to have been sued by the music industry. The record labels argued that Cox deliberately turned a blind eye to customers who were repeatedly infringing copyright via its networks. In doing so, the ISP lost the protection of the copyright safe harbour for internet companies and could be held liable for its customers’ infringement.
BMG initially sued Cox in a case that set the precedent that ISPs could indeed be held liable for copyright infringement in those scenarios. The majors then filed their own lawsuit and, in 2019, won that billion dollars in damages, confirming that this kind of infringement could be costly for the ISPs. Other internet companies have since been found liable for infringement too, though the damages awarded have never got anywhere near to what Cox was ordered to pay.
Cox unsurprisingly appealed, with mixed success, given that the Fourth Circuit agreed with the lower court that the ISP was liable for contributory copyright infringement, just not vicarious infringement.
"To prove vicarious liability [the labels] had to show that Cox profited from its subscribers’ infringing download and distribution of [their] copyrighted songs", the appeals judgement explains. "The district court thought it was enough that Cox repeatedly declined to terminate infringing subscribers’ internet service in order to continue collecting their monthly fees".
"Evidence showed that, when deciding whether to terminate a subscriber for repeat infringement, Cox considered the subscriber’s monthly payments", it continues. "To the district court, this demonstrated the requisite connection between the customers’ continued infringement and Cox’s financial gain. We disagree. The continued payment of monthly fees for internet service, even by repeat infringers, was not a financial benefit flowing directly from the copyright infringement itself".
And so, while Cox remains liable for copyright infringement, the damages it needs to pay will need to be reconsidered now it is only liable for contributory and not vicarious infringement. Needless to say, the ISP will be hoping that that clarification will result in a considerable cut in the total damages bill.