BMG Rights Mgmt. (US) LLC v. Cox Commc'ns, Inc.

• Decision Date: 01 February 2018
• Docket Number: No. 17-1353,No. 16-1972, No. 17-1352,16-1972
• Citation: 881 F.3d 293
• Parties: BMG RIGHTS MANAGEMENT (US) LLC, Plaintiff–Appellee, and Round Hill Music LP, Plaintiff, v. COX COMMUNICATIONS, INCORPORATED; CoxCom, LLC, Defendants–Appellants, and Cox Enterprises, Inc.; CoxCom, Inc., d/b/a Cox Communications of Northern Virginia; John Doe 2, IP Subscriber 174.65.175.31, Defendants, Rightscorp, Inc., Party-in-Interest. American Council on Education; Association of American Universities; Educause; American Library Association; Association of Research Libraries; Association of College and Research Libraries; American Indian Higher Education Consortium; Appa: Leadership in Educational Facilities; National Association of College and University Business Officers; Thurgood Marshall College Fund; Association of Catholic Colleges and Universities; National Association of Independent Colleges and Universities; Public Knowledge; Electronic Frontier Foundation; Center for Democracy & Technology, Amici Curiae, and Consumer Technology Association ; Computer & Communications Industry Association; United States Telecom Association; American Cable Association; Internet Commerce Coalition, Amici Supporting Appellant, Recording Industry Association of America, Inc.; The Copyright Alliance ; National Music Publishers' Association; Nashville Songwriters Association International; Motion Picture Association of America, Inc., Amici Supporting Appellee. BMG Rights Management (US) LLC, Plaintiff–Appellant, and Round Hill Music LP, Plaintiff, v. Cox Communications, Incorporated; CoxCom, LLC, Defendants–Appellees, and Cox Enterprises, Incorporated; CoxCom, Inc., d/b/a Cox Communications of Northern Virginia; John Doe, IP Subscriber 174.65.175.31, Defendants, Rightscorp, Inc., Party-in-Interest. BMG Rights Management (US) LLC ; Round Hill Music LP, Plaintiffs–Appellees, v. Cox Communications, Incorporated; CoxCom, LLC, Defendants–Appellants, and Cox Enterprises, Incorporated; CoxCom, Inc., d/b/a Cox Communications of Northern Virginia; John Doe, IP Subscriber 174.65.175.31, Defendants, Rightscorp, Inc., Party-in-Interest.
• Court: U.S. Court of Appeals — Fourth Circuit

881 F.3d 293

BMG RIGHTS MANAGEMENT (US) LLC, Plaintiff–Appellee,

and

Round Hill Music LP, Plaintiff,

v.COX COMMUNICATIONS, INCORPORATED; CoxCom, LLC, Defendants–Appellants,andCox Enterprises, Inc.; CoxCom, Inc., d/b/a Cox Communications of Northern Virginia; John Doe 2, IP Subscriber 174.65.175.31, Defendants,

Rightscorp, Inc., Party-in-Interest.

American Council on Education; Association of American Universities; Educause; American Library Association; Association of Research Libraries; Association of College and Research Libraries; American Indian Higher Education Consortium; Appa: Leadership in Educational Facilities; National Association of College and University Business Officers; Thurgood Marshall College Fund; Association of Catholic Colleges and Universities; National Association of Independent Colleges and Universities; Public Knowledge; Electronic Frontier Foundation; Center for Democracy & Technology, Amici Curiae,

and

Consumer Technology Association ; Computer & Communications Industry Association; United States Telecom Association; American Cable Association; Internet Commerce Coalition, Amici Supporting Appellant,

Recording Industry Association of America, Inc.; The Copyright Alliance ; National Music Publishers' Association; Nashville Songwriters Association International; Motion Picture Association of America, Inc., Amici Supporting Appellee.

BMG Rights Management (US) LLC, Plaintiff–Appellant,

and

Round Hill Music LP, Plaintiff,

v.Cox Communications, Incorporated; CoxCom, LLC, Defendants–Appellees, andCox Enterprises, Incorporated; CoxCom, Inc., d/b/a Cox Communications of Northern Virginia; John Doe, IP Subscriber 174.65.175.31, Defendants,

Rightscorp, Inc., Party-in-Interest.

BMG Rights Management (US) LLC ; Round Hill Music LP, Plaintiffs–Appellees,

v.Cox Communications, Incorporated; CoxCom, LLC, Defendants–Appellants,andCox Enterprises, Incorporated; CoxCom, Inc., d/b/a Cox Communications of Northern Virginia; John Doe, IP Subscriber 174.65.175.31, Defendants,

Rightscorp, Inc., Party-in-Interest.

No. 16-1972

No. 17-1352

No. 17-1353

United States Court of Appeals, Fourth Circuit.

Argued: October 25, 2017

Decided: February 1, 2018

ARGUED: Michael S. Elkin, WINSTON & STRAWN LLP, New York, New York, for Appellants/Cross–Appellees. Michael J. Allan, STEPTOE & JOHNSON LLP, Washington, D.C., for Appellee/Cross–Appellant. ON BRIEF: Thomas P. Lane, New York, New York, Jennifer A. Golinveaux, Thomas J. Kearney, San Francisco, California, Steffen N. Johnson, Christopher E. Mills, WINSTON & STRAWN LLP, Washington, D.C.; Craig C. Reilly, Alexandria, Virginia, for Appellants/Cross–Appellees. William G. Pecau, John M. Caracappa, Jeffrey M. Theodore, STEPTOE & JOHNSON LLP, Washington, D.C.; Walter D. Kelly, Jr., HAUSFELD, LLP, Washington, D.C., for Appellee/Cross–Appellant. Seth D. Greenstein, CONSTANTINE CANNON LLP, Washington, D.C., for Amici Consumer Technology Association and Computer & Communications Industry Association. Jonathan Band, JONATHAN BAND PLLC, Washington, D.C., for Amici American Council on Education, Association of American Universities, Educause, American Library Association, Association of Research Libraries, Association of College and Research Libraries, American Indian Higher Education Consortium, APPA: Leadership in Educational Facilities, National Association of College and University Business Officers, Thurgood Marshall College Fund, Association of Catholic Colleges and Universities, and National Association of Independent Colleges and Universities. David E. Weslow, Brett A. Shumate, Ari S. Meltzer, WILEY REIN LLP, Washington, D.C., for Amicus United States Telecom Association. Ross J. Lieberman, AMERICAN CABLE ASSOCIATION, Washington, D.C.; John D. Seiver, Ronald G. London, William W. Hellmuth, DAVIS WRIGHT TREMAINE LLP, Washington, D.C., for Amicus American Cable Association. Andrew L. Deutsch, DLA PIPER LLP, New York, New York, for Amicus Internet Commerce Coalition. Mitchell L. Stoltz, ELECTRONIC FRONTIER FOUNDATION, San Francisco, California; Charles Duan, PUBLIC KNOWLEDGE, Washington, D.C., for Amici Public Knowledge, Electronic Frontier Foundation, and Center for Democracy & Technology. George M. Borkowski, RECORDING INDUSTRY ASSOCIATION OF AMERICA, INC., Washington, D.C.; Kannon K. Shanmugam, Thomas G. Hentoff, Connor S. Sullivan, WILLIAMS & CONNOLLY LLP, Washington, D.C., for Amicus Recording Industry Association of America, Inc. Linda M. Burrow, Eric S. Pettit, Albert Giang, Alison Mackenzie, CALDWELL LESLIE & PROCTOR, PC, Los Angeles, California, for Amicus The Copyright Alliance. Erich C. Carey, Vice President & Senior Counsel, Litigation, NATIONAL MUSIC PUBLISHERS' ASSOCIATION, Washington, D.C., for Amicus National Music Publishers' Association. Jacqueline C. Charlesworth, New York, New York, for Amici National Music Publishers' Association and Nashville Songwriters Association International. R. Reeves Anderson, Denver, Colorado, Elisabeth S. Theodore, Washington, D.C., John C. Ulin, ARNOLD & PORTER KAYE SCHOLER LLP, Los Angeles, California, for Amicus Motion Picture Association of America, Inc.

Before MOTZ and WYNN, Circuit Judges, and SHEDD, Senior Circuit Judge.

Affirmed in part, reversed in part, vacated in part, and remanded by published opinion. Judge Motz wrote the opinion, in which Judge Wynn and Senior Judge Shedd joined.

DIANA GRIBBON MOTZ, Circuit Judge:

BMG Rights Management (US) LLC ("BMG"), which owns copyrights in musical compositions, filed this suit alleging copyright infringement against Cox Communications, Inc. and CoxCom, LLC (collectively, "Cox"), providers of high-speed Internet access. BMG seeks to hold Cox contributorily liable for infringement of BMG's copyrights by subscribers to Cox's Internet service. Following extensive discovery, the district court held that Cox had not produced evidence that it had implemented a policy entitling it to a statutory safe harbor defense and so granted summary judgment on that issue to BMG. After a two-week trial, a jury found Cox liable for willful contributory infringement and awarded BMG $25 million in statutory damages. Cox appeals, asserting that the district court erred in denying it the safe harbor defense and incorrectly instructed the jury. We hold that Cox is not entitled to the safe harbor defense and affirm the district court's denial of it, but we reverse in part, vacate in part, and remand for a new trial because of certain errors in the jury instructions.

I.

A.

Cox is a conduit Internet service provider ("ISP"), providing approximately 4.5 million subscribers with high-speed Internet access for a monthly fee. Some of Cox's subscribers shared and received copyrighted files, including music files, using a technology known as BitTorrent. BitTorrent is not a software program, but rather describes a protocol—a set of rules governing the communication between computers—that allows individual computers on the Internet to transfer files directly to other computers. This method of file sharing is commonly known as "peer-to-peer" file sharing, and contrasts with the traditional method of downloading a file from a central server using a Web browser.

Although peer-to-peer file sharing is not new, what makes BitTorrent unique is that it allows a user to download a file from multiple peers at the same time—even peers who only have a piece of the file, rather than the complete file. In other words, as soon as a user has downloaded a piece of the file, he or she can begin sharing that piece with others (while continuing to download the rest of the file). This innovation makes sharing via BitTorrent particularly fast and efficient. Although BitTorrent can be used to share any type of digital file, many use it to share copyrighted music and video files without authorization.

As a conduit ISP, Cox only provides Internet access to its subscribers. Cox does not create or sell software that operates using the BitTorrent protocol, store copyright-infringing material on its own computer servers, or control what its subscribers store on their personal computers.

Cox's agreement with its subscribers reserves the right to suspend or terminate subscribers who use Cox's service "to post, copy, transmit, or disseminate any content that infringes the patents, copyrights ... or proprietary rights of any party." To enforce that agreement and protect itself from liability, however, Cox created only a very limited automated system to process notifications of alleged infringement received from copyright owners. Cox's automated system rests on a thirteen-strike policy that determines the action to be taken based on how many notices Cox has previously received regarding infringement by a particular subscriber. The first notice alleging a subscriber's infringement produces no action from Cox. The second through seventh notices result in warning emails from Cox to the subscriber. After the eighth and ninth notices, Cox limits the subscriber's Internet access to a single webpage that contains a warning, but the subscriber can reactivate complete service by clicking an acknowledgement. After the tenth and eleventh notices, Cox suspends services, requiring the subscriber to call a technician, who, after explaining the reason for suspension and advising removal of infringing content, reactivates service. After the twelfth notice, the subscriber is suspended and directed to a specialized technician, who, after another warning to cease infringing conduct, reactivates service. After the thirteenth notice, the subscriber is again suspended, and, for the first time, considered for termination. Cox never automatically terminates a subscriber.

The effectiveness of Cox's thirteen-strike policy as a deterrent to copyright infringement has several additional limitations. Cox restricts the number of notices it will process from any copyright holder or agent in one day; any notice received after this limit has been met does not count in Cox's graduated response...