Cox v. Sony: Material Contribution and Contributory Copyright Infringement

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On December 1, the Supreme Court will hear arguments regarding whether an internet service provider may be held secondarily liable for copyright infringement committed by its customers. This case garnered substantial attention from Hollywood, tech and communications giants, and the copyright community, with 28 amicus briefs filed on the merits. Read on for an overview of the issues and what’s at stake.

Secondary infringement

The case involves a type of secondary copyright liability known as contributory infringement. Unlike direct infringement, where a party may be liable for its own acts in violation of a copyright holder’s exclusive rights, secondary infringement involves holding a party responsible for the infringing acts of others. Secondary infringement typically focuses on the defendant’s role in enabling, encouraging, or benefitting from infringement by third parties.

There are three types of secondary copyright infringement: contributory infringement occurs when a defendant knowingly causes or materially contributes to another's direct infringement. Vicarious infringement arises when a defendant has the right and ability to control the infringing activity and derives a financial benefit from it, even without knowledge of the infringement. Inducement liability applies when a defendant distributes a product or service with the intent to promote its use for copyright infringement.

The Supreme Court addressed secondary copyright infringement roughly forty years ago in Sony Corp v. Universal City Studios (“Sony Betamax”) and again a decade ago in MGM v. Grokster. In Sony Betamax, the Supreme Court held that VCR manufacturers were not secondarily responsible when customers recorded television shows at home using their devices. In Grokster, the Court found Grokster was secondarily liable for distributing peer-to-peer networking software with the intent to promote its for infringement.

Proceedings below

Sony, along with other record companies and music publishers, sought to hold Cox secondarily liable for infringement because Cox did not terminate customers despite notice from Sony of their infringement. A jury found Cox liable for both vicarious liability and contributory infringement and awarded $1 billion in statutory damages. On appeal, the 4th Circuit upheld the finding of willful contributory infringement but reversed the judgement on vicarious liability and remanded the case for a new trial on damages.

What is before the Supreme Court

The main issue before the Supreme Court is whether U.S. Court of Appeals for the 4th Circuit erred when it held that a service provider can be held liable for “materially contributing” to copyright infringement when it knew that people were using certain accounts to infringe and did not terminate access. (An additional issue concerns a jury instruction on willfulness.)

In its briefs, Cox argued that contributory infringement requires affirmative conduct and mere knowledge of the infringement does not suffice. Cox also argued that a finding of secondary liability conflicts with Sony Betamax and the Supreme Court’s recent decision in Twitter v. Taamneh that online platforms are not liable for bad acts based solely on providing the infrastructure. Cox also argued that it would be devasting to terminate internet access for entire households, businesses and institutions based on infringement by unidentified individual users.  In contrast, Sony asserted that the test for material contribution does not require intent, that continuing to provide internet service to customers Cox knows have infringed fits within established principles of secondary liability, and that if service providers cannot be found secondarily liable under these circumstances, copyright owners will be unable to effectively obtain relief.

Various perspectives

Many of Cox’s supporters argued that contributory infringement requires affirmative intent, not mere knowledge, and emphasized the risk that a finding of liability will stifle technological innovation, endanger free speech, and undermine universal Internet access. Many parties supporting Sony argued that the material contribution test requires only knowledge and assistance, not intent, emphasized the harm to copyright owners where enforcement against end users is impractical, and highlighted Cox’s inadequate repeat infringer policy and profit motive.

The American Intellectual Property Law Association (AIPLA) argued in a brief supporting neither party (authored by this firm) that the material contribution standard for contributory liability was properly applied by the Fourth Circuit and that continuing to provide services to repeat infringers may, in appropriate circumstances, constitute material contribution.

What about the DMCA?

The Digital Millenium Copyright Act features prominently, albeit indirectly, in this litigation. Enacted in 1988, the DMCA created safe harbors for service providers, protecting them from secondary liability if they adopt and reasonably implement a policy to terminate repeat infringers. In a separate litigation, Cox was found ineligible for the DMCA safe harbors, setting up the issues in this case. At the Supreme Court, Cox argued that the legislative history of the DMCA provided that the failure to qualify for the safe harbors “shall not” bear adversely on a defense of non-infringement. In response, Sony argued that the DMCA’s safe harbors are premised on the notion that once a service provider has knowledge of infringing conduct, it risks liability if it does nothing about it, and that adopting Cox’s view would render the safe harbor somewhere between a nullity and nonsensical.

Looking ahead

The Supreme Court’s decision in this case may have significant repercussions for copyright owners and service providers as they continue to battle over online infringement. According to a Legal Sidebar by the Congressional Research Service, this case might also lead Congress to consider codifying the doctrine of secondary liability and/or modifying the DMCA.

Feel free to contact us if you have questions or would like to discuss these issues.

Nancy J. Mertzel

Mertzel Law PLLC

1204 Broadway, 4th Floor, New York, NY, 10001

info@mertzel-law.com

(646) 965-6900