piracy

The big three record labels notched another court victory against a broadband provider last month, but the music publishing firms aren’t happy that an appeals court only awarded per-album damages instead of damages for each song.

Universal, Warner, and Sony are seeking an en banc rehearing of the copyright infringement case, claiming that Internet service provider Grande Communications should have to pay per-song damages over its failure to terminate the accounts of Internet users accused of piracy. The decision to make Grande pay for each album instead of each song “threatens copyright owners’ ability to obtain fair damages,” said the record labels’ petition filed last week.

The case is in the conservative-leaning US Court of Appeals for the 5th Circuit. A three-judge panel unanimously ruled last month that Grande, a subsidiary of Astound Broadband, violated the law by failing to terminate subscribers accused of being repeat infringers. Subscribers were flagged for infringement based on their IP addresses being connected to torrent downloads monitored by Rightscorp, a copyright-enforcement company used by the music labels.

The one good part of the ruling for Grande is that the 5th Circuit ordered a new trial on damages because it said a $46.8 million award was too high. Appeals court judges found that the district court “erred in granting JMOL [judgment as a matter of law] that each of the 1,403 songs in suit was eligible for a separate award of statutory damages.” The damages were $33,333 per song.

Record labels want the per-album portion of the ruling reversed while leaving the rest of it intact.

All parts of album “constitute one work”

The Copyright Act says that “all the parts of a compilation or derivative work constitute one work,” the 5th Circuit panel noted. The panel concluded that “the statute unambiguously instructs that a compilation is eligible for only one statutory damage award, whether or not its constituent works are separately copyrightable.”

When there is a choice “between policy arguments and the statutory text—no matter how sympathetic the plight of the copyright owners—the text must prevail,” the ruling said. “So, the strong policy arguments made by Plaintiffs and their amicus are best directed at Congress.”

Record labels say the panel got it wrong, arguing that the “one work” portion of the law “serves to prevent a plaintiff from alleging and proving infringement of the original authorship in a compilation (e.g., the particular selection, coordination, or arrangement of preexisting materials) and later arguing that it should be entitled to collect separate statutory damages awards for each of the compilation’s constituent parts. That rule should have no bearing on this case, where Plaintiffs alleged and proved the infringement of individual sound recordings, not compilations.”

Record labels say that six other US appeals courts “held that Section 504(c)(1) authorizes a separate statutory damages award for each infringed copyrightable unit of expression that was individually commercialized by its copyright owner,” though several of those cases involved non-musical works such as clip-art images, photos, and TV episodes.

Music companies say the per-album decision prevents them from receiving “fair damages” because “sound recordings are primarily commercialized (and generate revenue for copyright owners) as individual tracks, not as parts of albums.” The labels also complained of what they call “a certain irony to the panel’s decision,” because “the kind of rampant peer-to-peer infringement at issue in this case was a primary reason that record companies had to shift their business models from selling physical copies of compilations (albums) to making digital copies of recordings available on an individual basis (streaming/downloading).”

Record labels claim the panel “inverted the meaning” of the statutory text “and turned a rule designed to ensure that compilation copyright owners do not obtain statutory damages windfalls into a rule that prevents copyright owners of individual works from obtaining just compensation.” The petition continued:

The practical implications of the panel’s rule are stark. For example, if an infringer separately downloads the recordings of four individual songs that so happened at any point in time to have been separately selected for and included among the ten tracks on a particular album, the panel’s decision would permit the copyright owner to collect only one award of statutory damages for the four recordings collectively. That would be so even if there were unrebutted trial evidence that the four recordings were commercialized individually by the copyright owner. This outcome is wholly unsupported by the text of the Copyright Act.

ISP wants to overturn underlying ruling

Grande also filed a petition for rehearing because it wants to escape liability, whether for each song or each album. A rehearing would be in front of all the court’s judges.

“Providing Internet service is not actionable conduct,” Grande argued. “The Panel’s decision erroneously permits contributory liability to be based on passive, equivocal commercial activity: the provision of Internet access.”

Grande cited Supreme Court decisions in MGM Studios v. Grokster and Twitter v. Taamneh. “Nothing in Grokster permits inferring culpability from a defendant’s failure to stop infringement,” Grande wrote. “And Twitter makes clear that providing online platforms or services for the exchange of information, even if the provider knows of misuse, is not sufficiently culpable to support secondary liability. This is because supplying the ‘infrastructure’ for communication in a way that is ‘agnostic as to the nature of the content’ is not ‘active, substantial assistance’ for any unlawful use.”

This isn’t the only important case in the ongoing battle between copyright owners and broadband providers, which could have dramatic effects on Internet access for individuals accused of piracy.

ISPs, labels want Supreme Court to weigh in

ISPs don’t want to be held liable when their subscribers violate copyright law and argue that they shouldn’t have to conduct mass terminations of Internet users based on mere accusations of piracy. ISPs say that copyright-infringement notices sent on behalf of record labels aren’t accurate enough to justify such terminations.

Digital rights groups have supported ISPs in these cases, arguing that turning ISPs into copyright cops would be bad for society and disconnect people who were falsely accused or were just using the same Internet connection as an infringer.

The broadband and music publishing industries are waiting to learn whether the Supreme Court will take up a challenge by cable firm Cox Communications, which wants to overturn a ruling in a copyright infringement lawsuit brought by Sony. In that case, the US Court of Appeals for the 4th Circuit affirmed a jury’s finding that Cox was guilty of willful contributory infringement, but vacated a $1 billion damages award and ordered a new damages trial. Record labels also petitioned the Supreme Court because they want the $1 billion verdict reinstated.

Cox has said that the 4th Circuit ruling “would force ISPs to terminate Internet service to households or businesses based on unproven allegations of infringing activity, and put them in a position of having to police their networks… Terminating Internet service would not just impact the individual accused of unlawfully downloading content, it would kick an entire household off the Internet.”

Four other large ISPs told the Supreme Court that the legal question presented by the case “is exceptionally important to the future of the Internet.” They called the copyright-infringement notices “famously flawed” and said mass terminations of Internet users who are subject to those notices “would harm innocent people by depriving households, schools, hospitals, and businesses of Internet access.”

Music publishing companies notched another court victory against a broadband provider that refused to terminate the accounts of Internet users accused of piracy. In a ruling on Wednesday, the conservative-leaning US Court of Appeals for the 5th Circuit sided with the big three record labels against Grande Communications, a subsidiary of Astound Broadband.

The appeals court ordered a new trial on damages because it said the $46.8 million award was too high, but affirmed the lower court’s finding that Grande is liable for contributory copyright infringement.

“Here, Plaintiffs [Universal, Warner, and Sony] proved at trial that Grande knew (or was willfully blind to) the identities of its infringing subscribers based on Rightscorp’s notices, which informed Grande of specific IP addresses of subscribers engaging in infringing conduct. But Grande made the choice to continue providing services to them anyway, rather than taking simple measures to prevent infringement,” said the unanimous ruling by three judges.

Rightscorp is a copyright-enforcement company used by the music labels to detect copyright infringement. The company monitors torrent downloads to find users’ IP addresses and sends infringement notices to Internet providers that serve subscribers using those IP addresses.

“The evidence at trial demonstrated that Grande had a simple measure available to it to prevent further damages to copyrighted works (i.e., terminating repeat infringing subscribers), but that Grande never took it,” the 5th Circuit ruling said. “On appeal, Grande and its amici make a policy argument—that terminating Internet services is not a simple measure, but instead a ‘draconian overreaction’ that is a ‘drastic and overbroad remedy’—but a reasonable jury could, and did, find that Grande had basic measures, including termination, available to it. And because Grande does not dispute any of the evidence on which Plaintiffs relied to prove material contribution, there is no basis to conclude a reasonable jury lacked sufficient evidence to reach that conclusion.”

Grande’s pre-lawsuit policy: No terminations

The ruling described how Grande implemented a new policy on copyright infringement in 2010, a year after being purchased by a private equity firm:

Under Grande’s new policy, Grande no longer terminated subscribers for copyright infringement, no matter how many infringement notices Grande received. As Grande’s corporate representative at trial admitted, Grande “could have received a thousand notices about a customer, and it would not have terminated that customer for copyright infringement.”

Further, under Grande’s new policy, Grande did not take other remedial action to address infringing subscribers, such as suspending their accounts or requiring them to contact Grande to maintain their services. Instead, Grande would notify subscribers of copyright infringement complaints through letters that described the nature of the complaint and possible causes and advised that any infringing conduct is unlawful and should cease. Grande maintained that policy for nearly seven years, until May 2017.

The record labels sued Grande in April 2017. “It was not until after Plaintiffs initiated this lawsuit that Grande resumed terminating subscribers for copyright infringement,” the ruling said.

In November 2022, the labels were awarded $46,766,200 in statutory damages by a jury in US District Court for the Western District of Texas. But the District Court will have to hold a new damages trial following this week’s appeals court ruling.

Back in 2020, we wrote about the voir dire questions that record labels intended to ask prospective jurors in their case against Grande. One of those questions was, “Have you ever read or visited Ars Technica or TorrentFreak?”

Damages to be reduced

Although the 5th Circuit agreed that Grande is liable for contributory copyright infringement, judges found that the lower court “erred in granting JMOL [judgment as a matter of law] that each of the 1,403 songs in suit was eligible for a separate award of statutory damages.” The damages were $33,333 per song.

The 5th Circuit remanded the case to the district court for a new trial on damages. Record labels can expect a lower payout because the appeals court said they can’t obtain separate damages awards for multiple songs on the same album.

“The district court determined that each of Plaintiffs’ 1,403 sound recordings that was infringed entitled Plaintiffs to an individual statutory damages award,” the 5th Circuit said. “Grande contends that the text of the Copyright Act requires a different result: Whenever more than one of those recordings appeared on the same album, Plaintiffs are entitled to only one statutory damages award for that album, regardless of how many individual recordings from the album were infringed. Grande has the better reading of the text of the statute.”

The Copyright Act says that “all the parts of a compilation or derivative work constitute one work,” the court said. In the Grande case, record labels sought damages for each song but conceded that “each album constitutes a compilation.”

“In sum, the record evidence indicates that many of the works in suit are compilations (albums) comprising individual works (songs),” the 5th Circuit court wrote. “The statute unambiguously instructs that a compilation is eligible for only one statutory damage award, whether or not its constituent works are separately copyrightable.”

Larger battle could head to Supreme Court

The Grande case is part of a larger battle between ISPs and copyright holders. The industries are waiting to learn whether the Supreme Court will take up a challenge by cable firm Cox Communications, which wants to overturn a ruling in a similar copyright infringement lawsuit brought by Sony.

The US Court of Appeals for the 4th Circuit affirmed a jury’s finding that Cox was guilty of willful contributory infringement, though it also vacated a $1 billion damages award because it found that “Cox did not profit from its subscribers’ acts of infringement.” Cox and other ISPs argue that copyright-infringement notices sent on behalf of record labels aren’t reliable and that forcing ISPs to disconnect users based on unproven piracy accusations will cause great harm.

A Supreme Court brief filed by Altice USA, Frontier Communications, Lumen (aka CenturyLink), and Verizon said the 4th Circuit ruling “imperils the future of the Internet” by “expos[ing] Internet service providers to massive liability if they do not carry out mass Internet evictions.” Cutting off a subscriber’s service would hurt other residents in a home “who did not infringe and may have no connection to the infringer,” they wrote.

Cox told the Supreme Court that ISPs “have no way of verifying whether a bot-generated notice is accurate. And no one can reliably identify the actual individual who used a particular Internet connection for an illegal download. The ISP could connect the IP address to a particular subscriber’s account, but the subscriber in question might be a university or a conference center with thousands of individual users on its network, or a grandmother who unwittingly left her Internet connection open to the public. Thus, the subscriber is often not the infringer and may not even know about the infringement.”

Cox asked the Supreme Court to decide whether the 4th Circuit “err[ed] in holding that a service provider can be held liable for ‘materially contributing’ to copyright infringement merely because it knew that people were using certain accounts to infringe and did not terminate access, without proof that the service provider affirmatively fostered infringement or otherwise intended to promote it.”

Record labels also petitioned the Supreme Court because they want the original $1 billion verdict reinstated. Digital rights groups such as the Electronic Frontier Foundation (EFF) have backed Cox, saying that forcing ISPs to terminate subscribers accused of piracy “would result in innocent and vulnerable users losing essential Internet access.”