27 March, 2020

Significant Damage - US Courts Order Immense Damages for Music Copyright Infringement

The following article was written by Assaad Lyn, who is a US attorney specializing in Intellectual Property, seeking to help artists, entrepreneurs, and creatives by helping them through the legal issues they may encounter so they can keep working on their craft. You can find Assaad's LinkedIn profile here and his website at www.assaadlynlaw.com.

Remember when Napster first came out? It was a peer-to-peer (P2P) file-sharing service that allowed people to download music. While Napster was eventually shut down (and later brought back), the issues of downloading music on P2P networks persist, and was the reason for a court case in the US where the jury gave an unprecedented damages reward.

The case of Sony Music Entertainment v Cox Communications Inc is a class action lawsuit where Sony and other music companies alleged that Cox Communications did not stop ongoing copyright infringement after receiving notice of the alleged behavior. Sony and the others are music companies that make, license, manage, and sell music. As a primer, copyright law separately protects the musical composition (the sheet music and lyrics) and the sound recording (what we hear on radio or streaming services), so Sony had to prove that it owned, controlled, or otherwise managed the works in question.

Once a work of art (such as a book, a movie, or music) is created, ownership in the copyrighted work automatically exists in it. The author of the work can then transfer all or some of these rights to any other party. In order to prove that you are the rightful owner of a copyrighted work, a copyright owner usually registers the copyrighted work with the United States Copyright Office. Luckily, registration is not the only way to prove ownership, and transfer agreements and documents such as licenses can show a chain of title and may suffice to prove ownership. Sony asserts that they protect their copyrights through registration with the United States Copyright Office and through written agreements where they own or control the copyrighted works. Sony was able to prove they own various songs through the online Copyright Catalog, works registered as works made for hire, declarations, and more.

Cox Communications is a broadband communications network, and acts as an internet service provider, or ISP, to customers throughout the United States. Cox Communications has a department with the purpose of monitoring internet security issues, such as copyright infringement (through illegal downloads for example), and has adopted a policy in order to respond to alleged abuse of its network and systems.

The Recording Industry Association of America (RIAA), acting as the agent for Sony, hired MarkMonitor, an anti-piracy company, to scan the internet for infringing file sharing on P2P networks. MarkMonitor participated in the P2P networks in order to gather data from the potentially infringing users, and create infringement notices. MarkMonitor’s reports contained information such as the timestamp of the infringement detection, the date the notice was sent, the Cox user (identified by IP address and port), and more. They then sent the infringement notices to Cox Communications on the behalf of Sony. Cox Communications received and processed those notices through their in house system. The question therefore is, did Cox Communications have enough information to be viewed as contributorily liable for the infringement occurring on its network?

Contributory infringement can be found when one “(1) has knowledge of another’s infringement and (2) either (a) materially contributes to or (b) induces that infringement.” Generally, knowing that infringing activity is occurring on an ISP’s network is not enough to prove contributory infringement. The question is if Cox Communications had enough information in order to do something about the infringing activity. The detailed MarkMonitor reports show that Cox Communications could have acted in various ways, such as, evaluating a subscriber’s activity, or even terminating said subscriber. Since Cox Communications did not take appropriate action after being notified of the infringing activity, the jury found Cox Communications liable for contributory infringement and vicarious liability of over 10,000 works.

Then came the question of damages. Statutory damages in a copyright case in the US can range from a minimum of $750 or more than $30,000. In a case where the infringement was committed willfully, the award of statutory damages can go up to $150,000. The damage amounts are per work infringed, and not simply a total. Cox Communications was fined $99,830.29 per work, resulting in damages for a total of about $1 billion.

It is shocking to see such high damages being awarded in this case, and that an ISP was not protected by the Digital Millennium Copyright Act (DMCA) safe harbor provision. Just because Cox Communications did not do anything about the infringement, does not mean that the infringement was willful. Whether or not this case will affect ISP’s in the future, remains to be seen. As of January 31, 2020, Cox Communications has filed an appeal asking for either 1. a remittitur (lowering of damages), or 2. a new trial.