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ISPs Looking Over Our Shoulders

Your internet service provider may soon take a greater interest in what you do online – for good reason.

A federal court jury in Virginia found Cox Communications liable for $25 million in damages to a major music publisher, largely for being too lax in responding to allegations that some of its users were exchanging copyrighted songs using the popular file-sharing platform BitTorrent. U.S. District Court Judge Liam O’Grady, who has overseen the case, recently denied Cox’s petition for a review of the jury’s decision.

In contrast to earlier cases, such as the high-profile lawsuit that led to bankruptcy for Napster, Cox was not hosting the pirated content. Nor was it providing the software to share it via peer-to-peer networks, such as Grokster and Kazaa, which arose after Napster was shut down. Cox was not in a position to profit directly from its users’ activity at all, in fact.

But Cox was in no hurry to terminate broadband customers who paid monthly for their high speed internet and many of whom, no doubt, also purchased television and telephone services. In fact, the jury found that Cox adopted what amounted to a 13-strike policy before it would cut off an offending user’s service for copyright violations.

Many customers could expect more than 13 strikes, too, due to unpublicized features of Cox’s policy. These allegedly included ignoring any infringement notice that arrived after the first 200 such notices of the day; resetting customers’ “strikes” every six months; and consolidating multiple strikes if the customer incurred them within a single day. In cases where users did reach 13 strikes, Cox would in some cases reconnect those very same offenders the next day and give them another 13 strikes going forward.

It is not clear from this case whether Cox’s system would have satisfied the requirements of the Digital Millennium Copyright Act had it been applied in its stricter form as written, rather than with all the undocumented exceptions and second chances inherent in the way it was actually applied. That is because BMG Rights Management, the plaintiff in the case, identified a larger problem in its assertion that Cox was ignoring its infringement notices altogether.

Cox had, in fact, blacklisted incoming messages from the piracy-monitoring service Rightscorp, which BMG hired to monitor illegal torrenting of its copyrighted works. Cox objected to Rightscorp on the grounds that its initial cease and desist notices also aggressively demanded settlement money from the violator. Cox found a demand for settlement payments premature, since a notification cannot actually establish infringement; the company did not want to seem to endorse Rightscorp’s demands by passing the notices to its users.

Cox reportedly never considered notifying users that an infringement notice had been sent, even omitting the settlement language. Rightscorp never complied with Cox’s multiple request to send notices without such language. Eventually, Cox stopped accepting emails from Rightscorp in the fall of 2011 – months before BMG hired Rightscorp. This meant Cox received none of the millions of notices Rightscorp sent on BMG’s behalf before BMG filed suit.

Despite this self-imposed embargo, the jury found that Cox was in a position both to know and to do something about users who substantially and repeatedly engaged in piracy, and that it was therefore responsible for “contributory” copyright infringement.

Even after O’Grady upheld the jury’s verdict and its $25 million penalty, the matter is hardly settled. Cox has said it will appeal, and a major element of its appeal will be that unlike Grokster, whose case reached the Supreme Court, Cox did nothing to induce users to violate music publishers’ copyrights. Under Cox’s reading of the Supreme Court’s precedent, this distinction shields the company from liability – and O’Grady acknowledged as much. He read the Supreme Court decision more narrowly, however, and found that Cox could still be responsible for its own willful indifference to BMG’s copyright complaints.

There is a certain irony to a cable provider’s willingness to give users a baker’s dozen chances – at least – before cutting off service when they infringe someone else’s intellectual property rights. Cox probably feels differently in cases of piracy involving its own service. But as the old saying goes, where you stand usually depends upon where you sit.

Full disclosure: Since our firm works with singer-songwriters and other musicians, we have a more than casual interest in these ongoing copyright fights. Our interest cuts both ways. We want our clients’ copyrights to be respected, and we also want reasonable provisions to allow them to do their work while respecting the copyrights of others.

The major music publishers don’t always make this easy. Virtually every YouTube cover video is technically illegal because the performers did not obtain a synchronization, or “sync,” license to use someone else’s music and lyrics in their video. The videos remain available on YouTube because, rather than take down the work, YouTube simply plays advertisements before such videos and shares the ad revenues with the publishers. Publishers go along with the arrangement, because it benefits them to do so.

But if the same artist tries to host the same video on her own website, or that of her cinematographer, she would be violating the publisher’s copyright unless she obtained a sync license first. And getting permission to legally use the song can range from cumbersome to impossible, especially for small and independent artists.

Intellectual property law often requires courts and the parties that go before them to balance competing interests. The Virginia court seems to have struck a reasonable balance in the particulars of the Cox case. If the decision stands up, and if you actively share a lot of files, you can expect a little more attention from your own ISP in the future.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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