With Section 512 of the DMCA, Congress sought to “preserve strong incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements that take place in the digital networked environment.”
Given the symbiotic relationship between copyright owners and service providers, Congress meant to establish an online ecosystem where both would take on the benefits and burdens of policing copyright infringement. This shared-responsibility approach was codified in the Section 512 safe harbors.
But rather than service providers and copyright owners working together to prevent online piracy, Section 512 has turned into a notice-and-takedown regime where copyright owners do most of the work. This is not what Congress intended, and the main culprit is how the courts have misinterpreted Section 512’s red flag knowledge standards.
In a major victory for the rule of law and a total vindication for Rightscorp, Magistrate Judge Andrew Austin ruling in the labels’ contributory copyright infringement case against Grande Communications, a Texas-based ISP, has recommended that Grande be denied the DMCA safe harbor defense in a copyright infringement case for failing to implement a repeat infringer policy. (UMG Recordings, Inc. v. Grande Communications Networks, LLC and Patriot Media Consulting, LLC, case number 1:17-cv-00365-DAE-AWA for those reading along at home.)
Recall that the DMCA safe harbor, as poorly drafted as it is, does include conditions to the ability of an online service provider to assert the safe harbor defense. These include the “knowledge predicate” (essentially denying the safe harbor to those who had knowledge of the infringement waiving like a red flag). Another predicate is the Congress’s attempt to address the safe harbor’s moral hazard that Congress created by requiring the online service provider to take infringement seriously and to adopt–and actually implement–a repeat infringer policy. Absent these predicates, the Congress has created what is essentially a back door royalty-free compulsory, the detestable “DMCA license,” which of course is no license at all.
While no one can predict the future, it is my hunch that these cases will demonstrate again and again that online service providers do not take these predicates seriously. My bet is that they knowingly allow massive infringement to occur on their networks with no real effort to implement a repeat infringer policy. Therefore, they bring trouble on themselves all by themselves.
That is certainly what happened in BMG’s groundbreaking case against Cox Communications, a precedent that figures largely in the Grande case and in the label and publisher tag-along case in Virginia against Cox. Thankfully, BMG led the way and hung in there as the lone copyright owner enforcing their rights until they achieved a successful result and settlement. (BMG Rights Mgmt. (US) LLC v. Cox Commc’ns, Inc., 149 F. Supp. 3d 634, 657 (E.D. Va. 2015), aff’d in part, rev’d in part, 881 F.3d 293 (4th Cir. 2018).)
This is certainly the view of the magistrate in his recommendation to the trial judge on Grande’s contributory infringement. Here’s a few relevant excerpts:
In this case, Grande had nothing even approximating the system Cox used, as for the six years before this lawsuit was filed, it never warned a customer they might be terminated, regardless of how many infringement notices Grande received about that customer….During the six year period, the only policy that addressed repeat infringement was Grande’s general Acceptable Use Policy, which among many other things, stated that repeat copyright infringers could have their service terminated….
More than six months after posting the DMCA policy, and two months after this case was filed, Grande terminated its first customer for infringement in nearly seven years. Through the date of the filing of the instant motion, Grande has terminated a total of 12 users—eleven in 2017, and one in 2018….This amounts to absolutely no implementation of the policy Grande had allegedly adopted. And, as in BMG, the policy that was actually in effect for this time was that Grande was determined never to terminate a subscriber, no matter what information Grande received about that customer allegedly infringing a copyright. It is hard to imagine a case in which it is more clear that the DMCA safe harbor is not available….The fact is, Grande had no policy in effect for the vast majority of the relevant time period, and its last minute conversion is too little too late.
And when a judge says “its last minute conversion is too little too late,” that’s roughly the equivalent of a phrase that echoed through my childhood–“that’s bullshit for starters.” So don’t go there.
There’s a long way to go before this case is concluded, but it’s starting to look like a pattern is emerging here–ISPs, and probably all ISPs, got some bad, bad advice and have simply failed to address one of the few parts of the DMCA safe harbor that actually makes sense.
Of course, it must be said that Rightscorp played a crucial role in making this contributory infringement case. If it were not for Rightscorp, who were also an integral part of the Cox case, it is unlikely that the copyright owners arguments would have been as compelling. Magistrate Judge Austin acknowledged their role:
Grande’s complaints about the Rightscorp notices also miss the mark, for a host of reasons. First, the very same sort of Rightscorp notices at issue here made up a large portion of the notices that BMG relied on in their suit against Cox. Cox made very similar attacks on those notices, and also argued that the evidence failed to “prove actual knowledge of repeat infringement.” [Citation omitted] As the Fourth Circuit explained, that argument was misplaced, because “Cox bears the burden of proof on the DMCA safe harbor defense; thus, Cox had to point to evidence showing that it reasonably implemented a repeat infringer policy.” Id. The court found Cox failed to show that it had ever actually followed through and implemented its policy as written, and without such evidence, there was not a triable issue. Id. The same is the case here. Grande has pointed to no evidence that it ever considered terminating a user during the relevant period, despite the fact that there is ample evidence, including internal emails, indicating that it believed many of its customers were repeat infringers. Without at least some evidence of this sort, it cannot create a fact dispute related to its defense.
Grande has admitted that it would not have terminated any subscribers, no matter what the circumstances were, prior to June 2017, as the policy in place from 2010 to mid- 2017 was that it would not terminate a user for infringement “regardless of the source of any notice,” “regardless of the content of any notice,” and “regardless of the volume of notices . . . for a given customer.” [Citation omitted.] Moreover, the evidence in the record from Grande’s own documents reflects the opposite of what it now argues—Grande took the Rightscorp (and other) notices as evidence of infringement.…The criticism of the Rightscorp system and the notices it generated was never made until Grande was sued, and its lawyers raised these issues. What the lawyers thought of the notices in 2017 is irrelevant to the question of what Grande thought of them between 2010 and 2017. It is Grande’s employees’ knowledge that matters, and the evidence is undisputed that those employees believed the notices reflected that many of Grande’s customers were repeatedly infringing on copyrights.
The magistrate judge clearly took seriously the evidentiary record that Rightscorp helped to develop, and focused on the key evidence that was presented–when Grande received the notices they knew exactly what they meant and they fell into the very moral hazard that, having created the problem, Congress tried to address with the repeat infringer predicate.
It should be apparent that Cox and Grande will become extraordinarily important cases in the DMCA jurisprudence as we fight in Europe to roll back the greatest income transfer of all time–the value gap which is created by legacy statutes that have lost their utility.
Safe harbors were a nice idea to give a little latitude to reasonable people acting reasonably. They were never intended to be an alibi. But–as usual–the Congress having created the problem, it is now up to the copyright owners to fix it.
Some of you may recall the resounding victory scored by BMG Rights against Cox Communications challenging the gaping holes in Cox’s alleged repeat infringer policy as documented by Rightscorp. (Read the hilarious transcript from BMG v. Cox case denying EFF’s amicus brief as quoted in the Supreme Court amicus brief filed by David Lowery, Blake Morgan, East Bay Ray and Guy Forsyth in the current cy pres case brought by Ted Frank.)
In a follow on from the BMG Rights case, a group of record companies are essentially drafting behind BMG on the sound recording side in their own lawsuit against Cox. This, of course, was to be expected since the evidence unearthed by BMG reflected such a cavalier disregard for the company’s repeat infringer policy and what infringes the song also infringes the sound recording.
Why is that repeat infringer policy so important? In an oversimplified (but accurate) interpretation, no repeat infringer policy, no safe harbor. That is enough to send the shredders humming all over the world and explains why the EFF was so interested in trying to influence the outcome of the case. It also explains why Rightsflow’s investigative services are so important to rights holders as they were instrumental in proving the basic case (although Cox did a very good job of measuring the rope and testing their own noose all by themselves).
It also must be said that Cox never participated in the Copyright Alert System (to my knowledge) which could have gone a long way to helping them getting their repeat infringer policy in line with something that existed in the known universe. They had a chance. One final point is that it is an odd thing that BMG is to date the only publisher to enforce their rights against an ISP that I know of, although I’m happy to be educated otherwise.
If you think lions are lying down with lambs, think again.
The plaintiffs allege in their suit that Cox is not effectively policing their subscribers who are violating copyrights, even when those alleged violators are brought to their attention by rights holders.
Per the lawsuit:
“Cox deliberately refused to take reasonable measures to curb its customers from using its Internet services to infringe on others’ copyrights—even once Cox became aware of particular customers engaging in specific, repeated acts of infringement. Plaintiffs’ representatives (as well as others) sent hundreds of thousands of statutory infringement notices to Cox, under penalty of perjury, advising Cox of its subscribers’ blatant and systematic use of Cox’s Internet service to illegally download, copy, and distribute Plaintiffs’ copyrighted music through BitTorrent and other online file-sharing services.”
The lawsuit takes issue with a provision of the DMCA, a law passed in 1998 that creates a safe harbor for online service providers such as Cox against copyright infringement liability, provided that they have an effective plan in place to deal with infringers.
The lawsuit cites a previous suit brought against Cox by a group of labels led by BMG. In that case, BMG Rights Mgmt. LLC v. Cox Communications, Inc. and CoxCom, LLC, BMG made substantially similar accusations against Cox, claiming that the company did little to deter rampant copyright infringement taking place via its service.
In 2015, a jury agreed with BMG Et Al. and awarded them a $25 million dollar judgment in that case. The judgment was later overturned on appeal, but the appeals court largely sided with the label’s challenge to Cox’s implementation of the DCMA rules.
[Editor Charlie sez: Scott Cleland takes an excellent deep dive into the “leechonomics” of the safe harbors afforded to the special people who are members of the Internet Association and the Digital Media Association. This corporate welfare was most recently replicated in the punitive Music Modernization Act retroactive safe harbor bolstering profits from copyright infringement for the special people which passed the House Judiciary Committee on the same day that the Congress cut back the CDA 230 safe harbor for the same special companies and cut their profits from sex trafficking.]
This post introduces a new white paper here with a first-of-its-kind, cost-estimation model of the cumulative hidden public costs of U.S. Internet industrial policy* entitled: “Internet Platform Corporate Welfare and Leechonomics.” *U.S. Internet-first, industrial policy in the 1996 Telecom Act, effectively exempted only Internet companies from: all U.S. communications law, regulation, and public responsibilities; normal non-communications Federal/State regulation; and normal civil liability for what happens via their platforms and business models.
Nutshell Summary: Sweeping Government exemptions and immunities from risks and costs overwhelmingly favor zero-sum, parasitic policy arbitrage and corporate welfare, which perversely fosters unproductive “leechonomics.” U.S. Internet policy most incents platform business that maximizes arbitrage spreads, i.e. taking maximal societal risk that un-immunized competitors can’t take, where the benefits can be capitalized by platforms, and the costs socialized to the public (>$1.5T), because the government has only exempted and immunized platforms from normal accountability and responsibility for consumer welfare.
This is a guest post by Volker Rieck. Mr. Rieck has spent considerable time investigating Private Layer a web hosting company that seems to be favored by many copyright infringing sites. Unfortunately Rieck’s investigation has been stonewalled by the quasi governmental organization RIPE. According to Wikipedia: “RIPE or The Réseaux IP Européens Network Coordination Centre […]
The biggest story of 2017? To my mind, there is no contest — the broad emergence of an awareness that the irresponsibility masquerading as Internet freedom represented a threat to global societies and to cherished aspects of our humanity, and that a course correction was badly needed.
While recognition of the fact that rewarding lack of accountability would likely incentivize anti-social and illegal conduct took longer than it should have, such an awareness came to fruition throughout 2017. Whether motivated by concerns about sex trafficking or the prevalence of other internet-enabled crimes, fake news, foreign government interference in elections, monopoly or monopsony power, or the perceived political or cultural biases of platforms, the question at the end of 2017 wasn’t whether the current legal framework for platform responsibility should be amended, but how.
It became clear that the twin pillars upholding the current lack of accountability in the internet ecosystem — Section 230 of the Communications Decency Act and Section 512 of the DMCA, each of which was adopted at the dawn of the commercial internet, would need to be reexamined and a new framework established.