While internet provider Cox came off poorly in its recent case against BMG, Mike Masnick of Techdirt believes that the circumstances of that case were unique, and that is why labels trying to win similar cases by expanding the definition of 'vicarious' infringement are having less success.
Op-ed by Mike Masnick of Techdirt
While there has been plenty of attention paid to the BMG v. Cox case, in which Cox was found not to be protected by the DMCA's safe harbors in dealing with repeat infringers, it's increasingly looking like the ruling in that case (which eventually led to a "substantial" settlement) was fairly unique to Cox's situation. Specifically, while much was made of Cox's "13 strikes" repeat infringer policy, in the end the nature of the policy wasn't what sunk Cox: it was the fact that Cox didn't follow its own policy. In other cases, courts seem willing to grant much more latitude to the ISPs to make their own calls. We wrote about the 9th Circuit and its ruling in the Motherless case, which made it clear that a platform gets to set its own policy, and that policy need not be perfect.
Meanwhile, down in Texas, there's the UMG v. Grande Communications case, which many had seen as a parallel case to the BMG v. Cox case. This was another case that involved an ISP being bombarded with shakedown (not takedown) notices from Rightscorp, in which Righscorp and its clients felt that ISP was not willing to pass on those notices (thus denying Rightscorp and its clients the ability to collect money in exchange for a promise not to sue). As we noted back in April, while still in the district court, the Grande case wasn't going nearly as smoothly as the Cox case for those wishing to copyright troll. The magistrate judge was quite skeptical, and had tossed out entirely the claims of vicarious infringement (while somewhat skeptically allowing the claims of contributory infringement to move forward).
Vicarious and contributory infringement are often lumped together, but they are different. For there to be vicarious infringement, you have to show that the party being sued both had the right and ability to supervise the activity, and that it would directly financially benefit from the infringement. The court rejected that in the case of Grande, noting that just because Grande makes money from its subscribers, that's not enough to show that it was profiting from the infringement.
Universal Music tried to amend the complaint to show that it had "more evidence" that Grande and its management company, Patriot, were still vicariously liable -- but the magistrate judge says it's just trying to re-litigate what it lost last time. The recommendation makes fairly quick work of UMG's arguments:
The new evidence Plaintiffs rely on is: (1) Grande tracks its infringing customers; (2) these customers are “a la carte” internet customers; (3) Grande’s profit margins on a la carte customers are its highest of any business lines; and (4) Grande never terminated any user regardless of how many notices of infringement it received... Plaintiffs contend that these facts make a difference, and are enough to suggest that Grande’s failure to terminate infringers is a draw.... The Court disagrees. First, the original Complaint alleged essentially the same or similar facts. Second, the new allegations still fail to say anything about the motivations of Grande’s subscribers when they sign up with Grande. That is, Plaintiffs still fail to plead facts showing Grande gained or lost customers because of its failure to terminate infringers. Instead, the proposed amended complaint states that, “the evidence demonstrates that Plaintiffs’ Copyrighted Sound Recordings were a draw to Grande’s infringing customers, including customers Grande had identified as repeat infringers.” ... But as has been noted in prior orders, the means by which Plaintiffs contend the infringing subscribers infringed the Copyrighted Sound Recordings by use of the internet and the BitTorrent protocol, which one can access through any ISP. Again, the draw must be something more than this to state a vicarious infringement claim. The allegedly “new” facts are insufficient to overcome the deficiencies of the original Complaint.
This is important. For years, the legacy copyright players have continually tried to expand what third parties could be liable for when it came to infringement. It's always been a stretch to use both vicarious and contributory infringement claims in these ways, and it's good to see courts pushing back (though, in this case, the contributory infringement claims still have a chance...). The court directly pointing out that just because a company makes money from a client, that doesn't mean the money is from infringement is an important point that many among the copyright legacy world would like to ignore.