Last week, the U.S. Court of Appeals for the Fourth Circuit issued a precedential decision in Sony Music Entertainment v. Cox Communications, Inc., No. 21-1168 (Feb. 20, 2024), affirming Cox’s liability for contributory copyright infringement but reversing a vicarious infringement verdict, vacating a $1 billion statutory damages award, and remanding for a new trial on damages.
The Fourth Circuit previously determined that Cox, an internet service provider, could be held liable for its subscribers’ infringement between 2013 and 2014 because it failed to implement a sufficient anti-piracy program as required under the Digital Millennium Copyright Act’s safe harbor provision. BMG Rts. Mgmt. (US) LLC v. Cox Commc’ns, Inc., 881 F.3d 293 (4th Cir. 2018). Cox received more than 160,000 infringement notices from Plaintiffs’ representative but terminated only 32 subscribers under its Acceptable Use Policy. Back in the trial court, a jury found Cox willfully liable for vicarious and contributory infringement of 10,017 copyrighted works and awarded statutory damages of roughly $100,000 per work, totaling $1 billion for both theories combined. Cox appealed.
The Fourth Circuit affirmed the contributory infringement verdict. The Court explained that substantial evidence supported a determination that Cox continued to provide the internet service necessary for online infringement to certain repeat infringers despite a substantial certainty that those subscribers would continue infringing Plaintiffs’ copyrights.
However, the Court reversed the jury’s finding of vicarious infringement because the evidence failed to show that Cox directly profited from its subscribers’ infringement. The Court explained that the price of Cox’s monthly fee depended on the amount of accessible data, not on the nature of the data use. Thus, while Cox benefitted by continuing to collect fees from repeat infringers, it did not have a direct financial interest in their infringement because the fee remained static regardless of subscribers’ online activities. The Court noted that the relatively data-intensive nature of the infringing conduct did not show that any infringer paid for more data specifically to infringe because many legitimate online activities are also data-intensive.
The Court vacated the combined statutory damages award and remanded for a new trial on damages. The jury calculated a single award considering the circumstances underlying both theories. The Court concluded that the erroneous finding that Cox directly benefitted from the infringement likely influenced the jury’s exercise of its wide discretion necessitating a new trial on damages limited to contributory infringement.
