Appeals court overturns BMG’s safe harbour win, despite strengthening its case

[Len]

A US appeals court has overturned BMG’s big $25 million legal win over American internet service provider Cox Communications. Though the same judgement will strengthen BMG’s case when the whole matter goes to court for a second time.

BMG v Cox is one of the big safe harbour cases in the US. The safe harbour means that an internet service provider cannot be held financially liable when its users distribute copyright material without licence. Though that protection is conditional on the ISP having systems in place to remove infringing material and deal with repeat infringers, if and when it is made aware of infringing activity by a copyright owner.

In this case, Cox was basically accused of paying only lip service to its own repeat infringer policies. BMG argued that that meant the ISP should not be granted safe harbour protection, and should therefore be liable for the infringement of music it controls by Cox customers. In 2015, a jury sided with BMG, resulting in the $25 million damages bill.

Cox subsequently appealed and various legal wrangling has been going on ever since. In its ruling this week, the Court Of Appeals For The Fourth Circuit agreed with one key argument presented by Cox, to the effect that the jury in the original case had been incorrectly briefed by the judge.

The key instruction Cox took issue with was that it could be found liable for so called contributory infringement if it “knew or should have known” of infringing activity on its networks. Cox argued that the “should have known” bit of that instruction was incorrect, and this week the appeals judges basically agreed.

The appeals court said that an internet company could be found liable for contributory infringement if it was shown to be wilfully blind to infringing activity – ie there were factors that suggested piracy was occurring on its networks that the company should have responded to. However, that an ISP merely “should have known” about infringement on its networks is not sufficient to make it liable.

As a result of that bad instruction, the whole case will now have to be heard in court anew. Though BMG will enter that second round hearing with one of Cox’s key arguments already dismissed by the higher court.

The dismissed argument relates to the definition of ‘repeat infringer’, something the US Digital Millennium Copyright Act is a little vague on. Cox tried to argue that ‘repeat infringer’ referred to someone who had been found liable for copyright infringement multiple times in court, rather than just someone who had been on the receiving end of multiple takedown notices from copyright owners.

That seemed like an optimistic argument on Cox’s side, and the appeals court confirmed that the law uses the latter definition of repeat infringer. Therefore, there were plenty of repeat infringers within Cox’s customer base. Given the conclusion that Cox only paid lip service to its repeat infringer policy, that means the ISP did not fulfil its obligations to qualify for safe harbour protection.

All of which seems to suggest that BMG’s case against Cox is stronger than ever, even though it now has to go through the rigmarole of another bloody court battle. Unless it can use that stronger case to force the net firm into some sort of settlement.