Key Takeaways from the Recent Fourth Circuit Decision on DMCA

[Len]

A recent decision by the U.S. Court of Appeals for the Fourth Circuit, BMG Rights Management (US) LLC et al. v. Cox Enterprises Inc. et al., case number 16-1972, provides significant direction on issues relating to the Digital Millennium Copyright Act (DMCA) and online piracy.

Three points are particularly noteworthy.

1.A “repeat infringer” policy, alone, is not sufficient

The DMCA provides a “safe harbor” that shields Internet Service Providers (ISPs) from potentially significant liability they would otherwise face over infringing behavior by their subscribers. However, the availability of the safe harbor depends on compliance with several rules, including, the ISP must “adopt and reasonably implement” a “repeat infringer policy” that provides for the termination of users' accounts “in appropriate circumstances.”

In the case decided by the Fourth Circuit, BMG Rights Management, a music publisher, sued Cox on the theory that the ISP had violated that rule, causing the company to lose the protection of the safe harbor. BMG said Cox had ignored millions of notices about users who repeatedly shared the publisher’s songs illegally. The Fourth Circuit agreed, holding that Cox “failed to implement its [‘repeat infringer’] policy in any consistent or meaningful way — leaving it essentially with no policy.”

The Court wrote extensively on the problems with Cox’s policy, including that Cox "made every effort” to avoid terminating subscribers, and, until 2012, never once terminated a subscriber without quickly reactivating them. The Court wrote, “An ISP cannot claim the protections of the DMCA safe harbor provisions merely by terminating customers as a symbolic gesture before indiscriminately reactivating them within a short timeframe.”

Although the Court’s decision provides much insight into the type of behavior that will cause ISPs to lose the protection of the DMCA’s “safe harbor,” it does not provide guidance as to what less egregious conduct might also cause problems.

2.A "repeat infringer" is not an "adjudicated infringer"

The Fourth Circuit’s ruling also provides an answer to what constitutes a “repeat infringer."

Cox argued that the only “repeat infringers” that an ISP must terminate under the DMCA are those who have been repeatedly “adjudicated” to have infringed, as opposed to merely repeatedly accused by a rights holder.

The Fourth Circuit disagreed, saying that both the language and legislative history of the DMCA foreclosed the idea that “repeat infringers” only means people who have been found liable. The Court pointed to a passage in the legislative history saying that people who “abuse their access to the internet through disrespect for the intellectual property rights of others” should face a “realistic threat of losing” Internet access. Per the Court, the passage “does not suggest that they should risk losing internet access only once they have been sued in court and found liable for multiple instances of infringement.”

Although the Court’s ruling answers the question of what constitutes a “repeat infringer,” it leaves open other questions about what ISPs must do to comply with the DMCA requirement. It is likely that, if credible evidence exists that a user has repeatedly infringed third-party copyrights, the ISP will need to have a policy in place to ensure such customers are denied internet access.

3.Contributory liability requires more than negligence

Without the protection of the DMCA’s safe harbor, an ISP would be subject to claims of contributory liability for the infringing conduct of its users. In Cox’s case, the jury found Cox liable for contributory infringement and awarding BMG $25 million in infringement damages.

The Fourth Circuit vacated that verdict and specified precisely what copyright owners need to prove to sustain similar secondary infringement claims. The Court rejected the idea of contributory liability based on negligence, i.e., that the ISP “should have known” its subscribers were infringing copyrights.

Referring to the Supreme Court’s decisions in MGM Studios v. Grokster and Global-Tech v. SEB (a patent case), the Court noted the Supreme Court’s holding that contributory infringement only occurs when one “intentionally” induces or encourages infringement. According to the Fourth Circuit, “We are persuaded that the Global-Tech rule developed in the patent law context, which held that contributory liability can be based on willful blindness but not on recklessness or negligence, is a sensible one in the copyright context.”

In light of the Fourth Circuit’s decision, contributory liability claims against ISPs could be more difficult to prove, factually.