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BMG Rights Management (US) LLC v. Cox Enterprises, Inc.

United States District Court, E.D. Virginia, Alexandria Division

August 8, 2016

BMG RIGHTS MANAGEMENT (US) LLC, Plaintiff,
v.
COX COMMUNICATIONS, INC., and COXCOM, LLC, Defendants.

          MEMORANDUM OPINION

          Liam O'Grady United States District Judge

         This case presents the question of whether a conduit internet service provider may be held liable for the infringing activity of its subscribers based on the uploading and downloading of copyrighted musical works using BitTorrent, a peer-to-peer file sharing network. The plaintiff in this action, BMG Rights Management (US) LLC ("BMG"), seeks to hold Cox Communications, Inc. and CoxCom, LLC (collectively, "Cox") secondarily liable for the reproduction and distribution of 1, 397 musical composition copyrights by users of Cox's highspeed internet service between February 2, 2012 and November 26, 2014. After a two-week trial, a jury found Cox not liable for vicarious infringement, but liable for willful contributory infringement. The jury awarded BMG $25 million in statutory damages.

         Pending before the Court are the parties' post-trial motions. Cox moves for judgment as a matter of law or, alternatively, for a new trial. (Dkt. No. 760). BMG seeks judgment as a matter of law on its claim of vicarious infringement as well as permanent injunctive relief. (Dkt. Nos. 759, 765). For the reasons that follow, the Court will deny all of the motions and enter final judgment in accordance with the verdict.

         I. BACKGROUND

         This lawsuit is the latest in a years-long initiative by copyright holders to enlist the courts in the effort to curb the rampant infringement made possible by peer-to-peer file sharing on the internet. Peer-to-peer file sharing emerged in the late 1990s, most famously with Napster. In 2001, the music industry successfully enjoined Napster, see A&MRecords, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001); A&M Records, Inc. v. Napster, Inc., 284 F.3d 1091 (9th Cir. 2002), but technology continued to evolve and in its place came programs like KaZaA, Morpheus, Grokster, eDonkey, and iMesh. See In re Charter Commc'ns, Subpoena Enforcement Matter, 393 F.3d 771, 773 (8th Cir. 2005); Recording Indus, of Am., Inc. v. Verizon Internet Servs., Inc., 351 F.3d 1229, 1231-32 (D.C. Cir. 2003). A suit against Grokster and StreamCast, two peer-to-peer software distributors, reached the Supreme Court in 2005, see Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), and resulted in Grokster closing its doors and StreamCast being permanently enjoined.

         Despite nominal successes over the years, online piracy continues to grow. Today, the most popular vehicle is BitTorrent, a protocol that allows individual computers, called "peers, " to communicate and transfer information directly using an internet connection. At a high level, the process of acquiring a file-in this case, a musical work-using BitTorrent goes something like this. An individual can visit a website (The Pirate Bay or Kickass Torrents, for example) and search a directory of .torrent files. The .torrent file does not contain the work. It contains information about what is available to be distributed, including the name of the file(s) in the torrent payload, the SHA-1 hash of the torrent, and a tracker address.[1] If a .torrent file appears to represent the desired work, the user downloads the file and opens it while running the BitTorrent client. The client connects to the tracker, which provides a list of peers trading in that torrent-called a "swarm." The user is then connected to the peers and begins requesting pieces of the file.

         BitTorrent allows users to download different pieces of a single file from multiple users, called "seeds, " simultaneously rather than from a single source. This is an innovation that reduces bandwidth costs and increases efficiency. Once the user has downloaded all of the individual pieces, the client reassembles them into one complete file. An additional innovation of BitTorrent is that it allows users to begin uploading to other peers as soon as any piece of the file has been downloaded. In other words, a peer can be downloading and uploading a file simultaneously.

         Although this case only involves the use of BitTorrent to acquire musical works, BitTorrent can be used to acquire nearly any type of file. While it can be and is used for legal purposes, see Grokster, Ltd., 545 U.S. at 920, it also fosters a staggering amount of infringement. See, e.g., NetNames, Sizing the Piracy Universe 18 (Sept. 2013) ("Of all unique visitors to bittorrent portals in January 2013, it is estimated that 96.28% sought infringing content during the month, a total of 204.9m users."); id. at 30 ("Thus out of all non-pornographic files located, 99.97% of content was infringing."); Envisional Ltd., Technical Report: An Estimate of Infringing Use of the Internet 4-5 (Jan. 2011) ("An in-depth analysis of the most popular 10, 000 pieces of content managed by PublicBT found:... 2.9% was music content-all of which was copyrighted and shared illegitimately").

         The widespread use of BitTorrent and the ease with which copyrighted works are duplicated makes the prospect of going after individual users for direct infringement an unappealing option for rights holders.[2] See Grokster, Ltd., 545 U.S. at 930 ("When a widely shared service or product is used to commit infringement, it may be impossible to enforce rights in the protected works effectively against all direct infringers, the only practical alternative being to go against the distributor of the copying device for secondary liability on a theory of contributory or vicarious infringement."); Mark A. Lemley & R. Anthony Reese, Reducing Digital Copyright Infringement Without Restricting Innovation, 56 Stan. L. Rev. 1345, 1377-78 (2004). As peer-to-peer file sharing has evolved and removed the need for distribution intermediaries-a Napster, for example-rights holders have shifted their focus to a new type of defendant. As evidenced by this lawsuit, rights holders are attempting to expand the universe of culpable characters to include intermediaries that provide the means to infringe and may promise a more global solution to the problem. See Jane C. Ginsburg, User-Generated Content Sites and Section 512 of the Copyright Act, in Copyright Enforcement and the Internet 183, 183-84 (2010) ("This does not mean that dissemination intermediaries have vanished from the copyright landscape, but rather that we have new kinds of intermediaries who do not themselves distribute copyrighted content but give their customers the means to make works available to the public."); Alfred C. Yen, Torts and the Construction of Inducement and Contributory Liability in Amazon and Visa, 32 Colum. J.L. & Arts 513, 517 (2009) ("These suits have included claims against file sharing services, Internet auction sites, age verification services, search engines and credit card companies." (footnotes omitted)).

         The role of internet service providers ("ISPs") in the piracy problem and their potential liability for it is by no means a new topic. As early as the mid-1990s, it became apparent that the day-to-day operations of ISPs may render them liable for user infringement under existing copyright doctrine. In a seminal case, a California district court held that Netcom On-line Communication Services, Inc., then "one of the largest providers of Internet access in the United States, " could face secondary liability for its subscribers' infringement. Religious Tech. Ctr. v. Netcom On-line Commc'n Servs., Inc., 907 F.Supp. 1361, 1366, 1373-76 (N.D. Cal. 1995). Following that decision, Congress enacted the Digital Millennium Copyright Act ("DMCA"), which sought to strike a balance "between the interests of ISPs in avoiding liability for infringing use of their services and the interest of copyright owners in protecting their intellectual property and minimizing online piracy."[3] Charter Commc 'ns, Inc., 393 F.3d at 773. In return for a certain amount of cooperation, ISPs would enjoy the protection of four liability-limiting safe harbors. To be eligible, an ISP must, for example, "adopt[] and reasonably implement!], and inform[] subscribers and account holders of the service provider's system or network of, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers." 17 U.S.C. §512(i)(1)(A).

         Cox is a conduit service provider. It provides approximately 4.5 million customers in the United States with a connection (or a "pipeline") to the internet. Cox's relationship with its subscribers is governed by its Acceptable Use Policy ("AUP"). The AUP reserves the right to suspend or terminate customers who "use the Service to post, copy, transmit, or disseminate any content that infringes the patents, copyrights, trade secrets, trademark, moral rights, or proprietary rights of any party." PX-1343.0002. With respect to infringement, Cox is the gatekeeper of the network over which data is transferred.[4]

         Cox has a group of employees, aptly named the Abuse Group, dedicated to eradicating abuse on its network and addressing violations of its AUP.[5] In order to claim the protection of the DMCA, Cox provides an email address, <abuse@cox.net>, to copyright holders and their authorized agents for the receipt of notifications of alleged infringement.[6] Cox requires that the notifications contain certain pieces of information-identification of the copyrighted work and a statement that the complaining party has a good faith belief that the use of the material is unauthorized, for example. Upon receiving such notification, Cox states that it will either "[r]emove or disable access to the material that is alleged to be infringing" or "[t]ake reasonable steps to promptly notify the subscriber that it has removed or disabled access to the material." PX-1343.0021. To assist in this task, Cox created an automated system-CATS (Cox Abuse Tracking System)-that processes the notifications received. Notifications are transformed into "tickets" and from there, they enter Cox's graduated response system.

         The graduated response system is essentially a thirteen-strike policy. No action is taken on receipt of a subscriber's first notice. The second, third, fourth, fifth, sixth, and seventh notices generate an email to the subscriber warning that if Cox "continues to receive infringement claims such as this one concerning your use of our service, we will suspend your account and disable your connection until you confirm you have removed the infringing material." On the eighth and ninth notices, Cox limits a subscriber's internet access to a single webpage containing a warning. The customer can self-reactivate by clicking an acknowledgement. On the tenth and eleventh notices, Cox suspends service and requires the subscriber to call a support technician. The technician explains the reason for the suspension, advises removal of the allegedly infringing file, and then reactivates service. On the twelfth notice, the subscriber is suspended and directed to specialized technicians. On the thirteenth notice, the subscriber is again suspended and this time considered for termination.

         On the basis of this policy, Cox asserted a safe harbor as an affirmative defense to its possible liability in this case. As noted, however, Congress reserved its safe harbors for ISPs who hold up their end of the bargain. Unfortunately for Cox, the record was replete with evidence that foreclosed any assertion by Cox that it had reasonably implemented a repeat-infringer policy. For instance, there were several features of Cox's policy that remained unwritten. Cox limits the number of notices it will process in a day. The default is 200 per copyright holder or agent. Any notice received beyond the limit is closed, and it is not counted in the graduated response escalation. Additionally, Cox counts only one notice per subscriber per day. In other words, if a subscriber generates ten notices in a day, they are "rolled up" into a single ticket. Cox also implemented its graduated response system on a rolling six-month basis, which meant that if a customer did not hit termination review within six months, the count would start over. There was also evidence that when Cox took the step to terminate a customer, they would be reactivated the very next day or shortly thereafter. A reactivated customer would then begin anew in the graduated response system, starting from zero. See PX-1378.0001 ("This is to be an unwritten semi-policy We do not talk about it or give the subscriber any indication that reactivating them is normal... This only pertains to DMCA violations. It does not pertain to spammers, hackers, etc."). Even when Cox began terminating customers "for real, " see PX-1329, repeat infringers were routinely spared termination. Jason Zabek, the former head of Cox's Abuse Group, summed up Cox's general sentiment toward its obligations best in an email exclaiming: "f the dmca!!!" PX-1340.0002. Without a safe harbor, the Court and the parties were left to apply the nebulous doctrines of secondary copyright liability to the digital world.

         BMG is a music publishing company that owns, co-owns, and administers musical composition copyrights with the aim of maximizing profits from their commercial exploitation. BMG and its artists depend on the royalty payments made each time a work is purchased, downloaded, streamed, played on the radio, or incorporated in a television show or movie. For obvious reasons, BitTorrent poses a significant threat to BMG and the music industry as a whole.[7] In an effort to protect its rights and its revenue stream, BMG enlisted the help of Rightscorp, Inc. (formerly known as Digital Rights Corp.).

         Rightscorp monitors BitTorrent for peers offering its clients' copyrighted works. As will be described in more detail below, Rightscorp records the peers' Internet Protocol ("IP") addresses and then generates notices to the ISPs providing internet access to the respective IP addresses. Rightscorp asks the ISP to forward the notice to the subscriber associated with the IP address.[8] The notices contain the name of the copyright owner, the name of the copyrighted work, the subscriber's IP address and port, the hash value, a time stamp, and a statement under penalty of perjury that Rightscorp is an authorized agent and that the information in the notice is true and accurate. What makes Rightscorp controversial is that its notices also contain a settlement offer. The notice advises that its client-here, BMG-is entitled to monetary damages for copyright infringement, but that Rightscorp is authorized to "offer a settlement solution that... is reasonable for everyone." DTX-69. The subscriber can access the settlement offer by clicking on an embedded link and can then pay $20 or $30 (the amount has increased over time) in return for a release from potential legal liability for the single instance of observed activity recorded in the notice.

         This was an attractive proposal to BMG on multiple levels. The notices served the purpose of notifying ISPs of infringing activity on their networks. The settlement language educated individuals that real consequences may follow copyright infringement. And the revenue generated by the notices would both subsidize the high cost of monitoring the internet for infringement and provide an additional source of income for BMG's artists whose work was being duplicated indiscriminately on the internet.

         What BMG found innovative, Cox found extortionate. In Cox's view, a settlement demand was premature at best because a notification alone cannot establish infringement. As a policy, Cox will not forward or process notices that contain settlement language, for fear of giving the demand its imprimatur. When Cox began receiving notices from Rightscorp in the spring of 2011, Cox notified Rightscorp that the notices would be processed if and when the settlement language was removed. Cox never considered removing the settlement language or using an alternative vehicle to alert subscribers to the activity observed. Rightscorp likewise never considered complying with Cox's multiple requests to remove the settlement language.

         During this early dialogue, Rightscorp also provided Cox a username and password that would give Cox access to its "dashboard"-a real-time compilation of every notice generated by Rightscorp corresponding to a Cox IP address. For instance, Cox would be able to see that Rightscorp sent Cox 13, 217 notices regarding a single Cox IP address over an 103-day period. In addition to the dashboard, Rightscorp sent Cox summary reports-termed "repeat infringer reports" or "repeat infringer notifications"-that identified the Cox IP addresses Rightscorp believed to be the worst offenders. The summaries would range from IP addresses with as few as two notices to as many as 20, 630.

         In the fall of 2011, Rightscorp was still sending Cox large volumes of notices containing settlement language. Cox took the step to blacklist Rightscorp. As explained by a Cox email, blacklisting went a step beyond its earlier decision to not process the notices. It meant that Cox's email client would "silently -delete- the email messages without any parsing/ticketing/etc. As soon as [the client] recognizes the From: address in the headers as blacklisted, [the client] delete[s] the message without retrieving it's [sic] msg body." PX-1427.0001. Rightscorp signed BMG as a client in December 2011-after the blacklisting was in effect. Thus, for the approximately 1.8 million notices Rightscorp sent to Cox on BMG's behalf during the period relevant to this lawsuit, Cox received exactly zero.[9]

         Despite the blacklisting, Rightscorp continued to generate the dashboard and provide Cox access instructions. Rightscorp also continued to send Cox summary letters both by mail and email on a weekly basis. A November 2013 letter, for example, informed Cox that Rightscorp had sent 1, 036, 902 notices to Cox over a four-month period and had identified 13, 145 "repeat infringers." PX-1677.0002. No one at Cox ever accessed the dashboard, and no action was taken in response to the letters. Randy Cadenhead, Cox's privacy counsel, testified that he reviewed one of the letters, but after spotting one anomaly in the data decided not to consider them further or direct anyone else to do so.[10]

         On November 26, 2014, BMG sued Cox alleging vicarious and contributory infringement of 1, 397 musical composition copyrights based on the reproduction and distribution of the works over Cox's network.[11] As relief, BMG sought injunctive relief and statutory damages under 17 U.S.C. § 504(c). At the close of discovery, the parties cross-moved for summary judgment. The Court granted both motions in part, but permitted BMG's claims of secondary infringement to proceed to trial. After a two-week trial, the jury found Cox liable for willful contributory infringement and awarded BMG $25 million in damages. The jury found Cox not liable for vicarious infringement.

         II. DISCUSSION

         A. Cox's Renewed Motion for Judgment as a Matter of Law

         Cox renews its motion for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b) on three grounds: (1) BMG failed to show direct infringement; (2) BMG failed to provide evidence of Cox's liability for contributory infringement; and (3) BMG failed to adduce evidence of willfulness.

         1. Standard of Review

         On a renewed motion for judgment as a matter of law, a court must affirm a verdict "[i]f, viewing the facts in the light most favorable to the non-moving party, there is sufficient evidence for a reasonable jury to have found in the non-moving party's favor." First Union Commercial Corp. v. GATX Capital Corp., 411 F.3d 551, 556 (4th Cir. 2005) (alteration omitted). If, by contrast, "the only conclusion a reasonable trier of fact could draw from the evidence is in favor of the moving party, " it must grant the motion. Figg v. Shroeder, 312 F.3d 625, 635 (4th Cir. 2002).

         2. Direct Infringement

         Secondary liability may only arise on proof of underlying infringement. "A direct infringer has ... been characterized as one who trespasses into the copyright owner's exclusive domain established in § 106 ...." CoStar Grp., Inc. v. LoopNet, Inc., 373 F.3d 544, 549 (4th Cir. 2004) (internal quotations and alterations omitted). BMG alleged users of Cox's internet service violated its exclusive rights to distribute and reproduce by uploading and downloading its works using BitTorrent. See 17 U.S.C. § 106(1) & (3). Cox challenges the evidence of both.

         a. Evidence of Rightscorp 's System at Trial

         At trial, both parties presented extensive evidence of how BitTorrent operates, and BMG presented evidence of the prevalence of infringement on BitTorrent. But all of BMG's evidence of infringement by Cox users came from Rightscorp. As a result, a large focus of the trial was on the operation of Rightscorp's software and what it can and cannot detect.

         Without delving into every detail, Rightscorp's software operates as follows. It searches torrent directories for .torrent files that appear to represent a client's work. When a possible match is identified, Rightscorp downloads the .torrent file and then, using the BitTorrent protocol, downloads the torrent from a swarm. It then listens to verify that the file downloaded is the copyrighted work. On confirmation, Rightscorp adds the torrent and its hash value to a database. Because the hash corresponds to the specific contents in the torrent, Rightscorp can assume that peers offering a torrent with the same hash value also have the copyrighted work.

         Next, Rightscorp reaches out to individual peers trading in that torrent payload and gathers certain information from them. This interaction was termed the "handshake" at trial, and the Court adopts that term for ease of reference. During the handshake, Rightscorp records the hash value, the peer's port and IP address combination, the bitfield, and the date and time. The bitfield message indicates what percentage of the torrent payload the peer has. If a peer indicates that it has 100% bitfield, Rightscorp assumes the user has the complete copyrighted work.[12] At this point, Rightscorp does not download anything from the peer. It stops at recording the information obtained during the handshake interaction. Rightscorp then runs a program that generates a notice of infringement for every instance in which a peer was offering 100% of the payload. The system generates one notice per day per work observed at a particular IP address/port combination.[13]

         Although Rightscorp does not download a copy of a work every time it generates a notice (due to the tremendous amount of bandwidth and storage that would require), Rightscorp does have sampling software. Between February and August of 2014, Rightscorp downloaded approximately 150, 000 complete copies of the works at issue from individual peers using Cox IP addresses that had previously been identified as offering the works for download. Rightscorp then used music identification software to confirm that the files downloaded were copies of the copyrighted works.

         At trial, Cox probed multiple grounds on which to doubt Rightscorp's system. First, Rightscorp does not use version control software and, as a result, there is no complete historical version of Rightscorp's code for any period of time relevant to this suit. The only code that remains is a partial version of the 2013 code, which Rightscorp had produced to BMG's expert in anticipation of litigation. Beyond that, the evidence of Rightscorp's operation was the testimony of Rightscorp's code developer and other employees and the 2015 code, which post- dated the lawsuit. Moreover, many of the processes that are now automated were once performed manually, and there was no written record of how those manual processes were performed.

         Cox's expert also identified flaws in the data produced by Rightscorp's code. For example, he identified 800 instances in which Rightscorp purported to download a BMG work that was in fact something else entirely. In one instance, Rightscorp generated a notice for a Grateful Dead song that was in actuality an article about a Grateful Dead performance. He also identified 9, 000 redundant copies in the samples Rightscorp downloaded. There was also evidence that Rightscorp sent duplicative notices for a period of time, and there were seemingly random spikes in the volume of notices that Rightscorp sent Cox. For example, in late 2014, near the time the lawsuit was filed, Rightscorp sent Cox more than 100, 000 notices in a single day.

         Cox also questioned whether the threshold at which Rightscorp generated notices was a 100% bitfield threshold, as had been claimed, or was actually something much lower. It was undisputed that in December 2014, shortly after this lawsuit was filed, Rightscorp changed the threshold and began generating notices when a peer was detected to be offering anything above 10% of the torrent payload. The code underlying this function was dated December 2, 2014, but Cox elicited testimony that the date could have been altered and that the 10% functionality could have been run manually during the relevant time period. Using a lower threshold would not only result in more notices, but also decrease accuracy.

         Cox also stressed what Rightscorp's software cannot detect. It has no ability to detect what is being transmitted between other peers. Rightscorp itself is what is called a "leecher." It only downloads. It does not upload to other peers. Thus, Rightscorp did not generate any data showing Cox IP addresses downloading BMG's works. Cox also emphasized that Rightscorp cannot identify individuals, only IP addresses. That is, Rightscorp can only know with certainty that Cox provided the internet access to the computer engaged in the allegedly infringing activity, but it cannot know with certainty that the actor was a Cox subscriber. Each Cox subscriber is assigned a modem with an IP address, but commonly subscribers will use Wi-Fi routers to open that connection to others-a household or a coffee shop, for example. If Wi-Fi is not password-protected, it can be accessed by anyone in the vicinity.

         Finally, Cox's expert criticized what Rightscorp could, but does not, detect. Following the handshake between peers in a BitTorrent exchange, the requesting peer sends an "unchoke" message to the peer with the file to begin the uploading process. Under certain circumstances, a peer may remain "choked" and not send the requested pieces of the file. Rightscorp did not take the additional step of recording the choke/unchoke interaction to confirm that a peer was set to share the file.

         This evidence did not go unanswered by BMG. Greg Boswell, Rightscorp's sole code developer, testified that he did not use version control software because Rightscorp's code development was not a collaborative process. Rightscorp employees, including Mr. Boswell, also testified in detail as to the operation of the Rightscorp system and the timeline of how it was developed. BMG's expert testified that she compared the partial 2013 code with the 2015 code and found no significant differences in the code's core functionalities.

         BMG's experts also responded at length to the deficiencies in the Rightscorp data identified by Cox. Even taking into account the errors, one expert testified that "the accuracy rate is still well over 99 percent." Tr. at 356. The same expert also testified that she ran a live test of Rightscorp's ability to detect infringing activity in 2013. With BMG's permission, she used BitTorrent to download and upload BMG works. She then compared her data with Rightscorp's and confirmed that Rightscorp had accurately detected her activity and generated notices based on it. She also testified that, at least once, a Cox IP address uploaded portions of a file to her. A second expert analyzed Rightscorp's data and found a very high probability that Rightscorp's data captured repeated activity by the same Cox users or subscribers.

         With respect to Cox's 10% bitfield theory, Rightscorp employees testified that they used a 100% bitfield threshold for the entire relevant period, that the change was not implemented until December 2014, and that manually running the 10% functionality would not have been practicable. They also explained that the catalyst behind the change was the increasing use of "lazy bitfield" by clients-a tactic that allows peers to underreport bitfield so as to avoid detection. BMG's expert also testified that she had observed nothing that indicated the 10% functionality was in operation before December 2014.

         In response to Cox's open Wi-Fi theme, BMG pointed to portions of Cox's AUP that requires subscribers to secure their Wi-Fi networks and explicitly assigns responsibility to subscribers for all data transmitted from their IP address.[14] On cross-examination, Mr. Cadenhead testified that Cox would hold a subscriber responsible for the activity of a child returning home from college and accessing the household's Wi-Fi connection. There was also testimony that Cox provides subscribers with a router that has a password and requires customers who use their own router to enable password protection.

         b. Whether BMG Established Direct Infringement

         Cox argues that BMG's distribution claim fails from the outset because the only evidence of peers connected to Cox IP addresses distributing BMG's works was to Rightscorp. Because Rightscorp was acting as an authorized agent of BMG, Cox submits that evidence cannot be the basis of the distribution claim. The Court disagrees. "Courts have consistently relied upon evidence of downloads by a plaintiff's investigator to establish both unauthorized copying and distribution of a plaintiffs work." Arista Records LLC v. Lime Grp. LLC, No. 06-cv-5936, 2011 WL 1641978, at *8 (S.D.N.Y. Apr. 29, 2011) (collecting cases). The testimony at trial was that BMG authorized Rightscorp in an investigative capacity as part of BMG's effort to stop infringement of its copyrights. Thus, the evidence that Cox IP addresses uploaded over 100, 000 copies of BMG's works to Rightscorp can form the basis of a distribution claim.

         Predicting BMG's well-founded response that there was at the very least overwhelming indirect evidence of distribution by Cox users over its network, Cox asserts that the "evidence at trial negated even that." (Dkt. No. 763, at 10). In support, Cox directs the Court to a single piece of evidence: Rightscorp's failure to record the unchoke signal. On that basis, Cox concludes that Rightscorp's 1.8 million observations of peers connected through Cox IP addresses indicating they had a complete BMG work to share were not confirmed offers to upload. And if that is true, the observations are not even circumstantial evidence of distribution.

         Of course, Cox presented no additional testimony that choking is a common occurrence, and the evidence at trial indicated the opposite. There was extensive testimony about BitTorrent-both the vast scale on which it operates and its functionality. The jury heard multiple explanations of how swarms operate and the simultaneous uploading and downloading that BitTorrent facilitates. The jury also heard detailed descriptions of what the Rightscorp software detects during the handshake-including the bitfield and the torrent's unique hash value. While Cox's expert testified that Rightscorp could have gathered more information, his testimony did not deprive the 1.8 million observations of their significant evidentiary value. The jury also had proof of Cox IP addresses uploading more than 100, 000 copies of BMG's works against which to weigh the choking testimony. In sum, the single piece of testimony on which Cox relies does not require that judgment be directed in its favor.

         Cox also argues that BMG's evidence of reproduction failed because at most BMG established that Cox users possessed BMG works. There was no evidence as to how those works were acquired, much less that they were acquired by download over Cox's network. Cox is correct. Somewhat curiously, BMG did not attempt to gather this evidence from the list of Cox subscribers BMG received during discovery. Nonetheless, viewing the evidence at trial in the light most favorable to BMG, the Court finds there was sufficient evidence from which a reasonable jury could find Cox users violated BMG's reproduction right.

         Accordingly, the Court denies Cox's motion on this ground.

         3. Contributory Infringement

         Cox next argues that BMG did not establish Cox's secondary liability for the infringement on its network.

         a. The Framework

         Cox contends that there are two possible avenues to contributory liability and BMG did not establish either one. First, Cox submits the evidence at trial established that Cox's internet service is capable of substantial noninfringing uses, which should have generally immunized Cox from liability for contributory infringement under the Supreme Court's decision in Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417 (1987). Second, Cox submits that the only way BMG could have circumvented the Sony safe harbor would have been to establish inducement under the Supreme Court's more recent decision in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005). But BMG failed to allege, prove, or request the submission of an inducement instruction to the jury. In response, BMG argues that Cox reads Sony and Grokster too broadly, and that Cox was rightfully held liable based on evidence of its knowledge of specific infringing activity and continued material contribution to that infringement. The Court agrees.

         "Contributory copyright infringement is a form of secondary liability with roots in the tort-law concepts of enterprise liability and imputed intent." Perfect 10, Inc. v. Visa Int'l Serv. Ass 'n, 494 F.3d 788, 794-95 (9th Cir. 2007). "Under a theory of contributory infringement, 'one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another' is liable for the infringement, too." CoStar Grp., Inc., 373 F.3d at 550 (quoting Gershwin Publ 'g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)); see also Grokster, Ltd., 545 U.S. at 930 ("One infringes contributorily by intentionally inducing or encouraging direct infringement....." (citing Gerswhin, 443 F.2d at 1162)).

         The Supreme Court first reached the secondary liability of a technology provider in Sony. There, copyright holders sought to hold Sony liable for infringement committed by end users of its Betamax video tape recorders ("VTRs"). The Court distinguished prior contributory copyright infringement cases that had involved "an ongoing relationship between the direct infringer and the contributory infringer at the time the infringing conduct occurred." 464 U.S. at 437. By contrast, "[t]he only contact between Sony and the users of the Betamax [VTR]... occurred at the moment of sale, " and thus, "plainly d[id] not fall in that category." Id. at 438-39. There was likewise no evidence that any user of the VTR had been influenced or encouraged to make copies by Sony's advertisements. Thus, the only possible basis for liability was Sony's sale of "equipment with constructive knowledge of the fact that their customers may use that equipment to make unauthorized copies of copyrighted material." Id. at 439; see also Grokster, Ltd., 545 U.S. at 931 ("[T]he only conceivable basis for imposing liability was on a theory of contributory infringement arising from its sale of VCRs to consumers with knowledge that some would use them to infringe.").

         The Court found the closest analogy for such a theory in patent law's staple article of commerce doctrine, which precludes contributory patent infringement based on "the sale of a staple article or commodity of commerce suitable for noninfringing use." Sony, 464 U.S. at 440 (internal quotation marks omitted). "The doctrine was devised to identify instances in which it may be presumed from distribution of an article in commerce that the distributor intended the article to be used to infringe another's patent, and so may justly be held liable for that infringement." Grokster, Ltd., 545 U.S. at 932. "Conversely, the doctrine absolves the equivocal conduct of selling an item with substantial lawful as well as unlawful uses, and limits liability to instances of more acute fault than the mere understanding that some of one's products will be misused." Id. at 932-33. That balance protects the public's interest in access to dual-use products.

         Borrowing that scheme, the Sony Court held "the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial noninfringing uses." Sony, 464 U.S. at 442. Because the VTR was capable of such uses, "Sony's sale of such equipment to the general public d[id] not constitute contributory infringement." Id. at 456.

         The Supreme Court returned to the question of "under what circumstances the distributor of a product capable of both lawful and unlawful use is liable for acts of copyright infringement by third parties using the product" nearly two decades later in Grokster. 545 U.S. at 918-19. There, a group of copyright holders sued two distributors of peer-to-peer software. Below, the Ninth Circuit found the software was capable of substantial noninfringing uses and read Sony as protecting the distributors from liability absent evidence of knowledge of specific infringement and material contribution.[15] Finding insufficient evidence of knowledge in the record, the Ninth Circuit affirmed the district court's entry of summary judgment in the distributors' favor. The Supreme Court granted review.

         Because the decision below had turned on Sony, the Court began there. The Court explained that "the Court of Appeals misapplied Sony, which it read as limiting secondary liability quite beyond the circumstances to which the case applied." Id. at 933. The Court expounded:

Sony barred secondary liability based on presuming or imputing intent to cause infringement solely from the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement. The Ninth Circuit has read Sony's limitation to mean that whenever a product is capable of substantial lawful use, the producer can never be held contributorily liable for third parties' infringing use of it; it read the rule as being this broad, even when an actual purpose to cause infringing use is shown by evidence independent of design and distribution of the product, unless the distributors had "specific knowledge of infringement at a time at which they contributed to the infringement, and failed to act upon that information."
This view of Sony, however, was error, converting the case from one about liability resting on imputed intent to one about liability on any theory. Because Sony did not displace other theories of secondary liability, and because we find below that it was error to grant summary judgment to the companies on MGM's inducement claim, we do not revisit Sony further ... to add a more quantified description of the point of balance between protection and commerce when liability rests solely on distribution with knowledge that unlawful use will occur. It is enough to note that the Ninth Circuit's judgment rested on an erroneous understanding of Sony and to leave further consideration of the Sony rule for a day when that may be required.

Id. at 933-34 (citation omitted).

         The Court then turned to the copyright holders' inducement claim. Under an inducement theory, "one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties." Id. at 936-37. On that theory, "the culpable act is not merely the encouragement of infringement but also the distribution of the tool intended for infringing use." Id. at 941 n. 13. After Sony and Grokster, a defendant may be contributorily liable for the distribution of a product or service if it has no (or very little) legal use or if it was designed or distributed with the intent that it be used for infringing purposes.

         As noted, Cox and BMG disagree on the state of law post-Grower. Throughout this litigation, the Court has taken the position that Sony is not the broad bar to liability that Cox paints it to be. Rather, the Court reads Sony as precluding the imputation of fault based solely on "the design or distribution of a product capable of substantial lawful use, which the distributor knows is in fact used for infringement." Id. at 933. Had that been BMG's claim, it would have failed. There can be no dispute, and the evidence at trial established, that the internet has an untold number of legal uses far beyond what is at issue here. Thus, Cox's "equivocal conduct" of providing internet access that supplies the means to infringe would not, standing alone, be contributory infringement. Id. at 932; Alfred C. Yen, Internet Service Provider Liability for Subscriber Copyright Infringement, Enterprise Liability, and the First Amendment, 88 Geo. L.J. 1833, 1874 (2000) (noting that after Sony "the imposition of contributory liability for the simple provision of Internet services [was] highly unlikely").

         But that is not the claim BMG made. BMG's claim goes beyond design choice or the mere provision of a service and therefore it goes beyond Sony. See Visa Int'l Serv. Ass 'n, 494 F.3d at 795 n.3 (noting that Sony did not apply to a contributory infringement claim against Visa despite the fact that it was undisputed that "the 'product' of credit card services is []capable of substantial and commercially significant noninfringing uses"); Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1170 (9th Cir. 2007) (rejecting Google's claim that Sony barred contributory liability because the plaintiff "ha[d] not based its claim of infringement on the design of Google's search engine and the Sony rule does not immunize Google from other sources of contributory liability"); Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 518 F.Supp.2d 1197, 1232 (CD. Cal. 2007) ("Distributors of products capable of substantial noninfringing uses are often vulnerable to lawsuits for contributory infringement, and injunctions regulating how such products may be subsequently distributed (as opposed to a total ban) have been upheld."). Instead, BMG focused on Cox's conduct in relation to the operation of its service. Specifically, BMG claimed that Cox ignored specific notices of infringing activity and continued to provide material support to its users' infringement of BMG works despite its ability to suspend or terminate customers with the push of a button. Cf Ellison v. Robertson, 357 F.3d 1072, 1077-78 (9th Cir. 2004) (allowing contributory infringement claim against AOL to go forward); Religious Tech. Ctr., 907 F.Supp. at 1365 (N.D. Cal. 1995) (finding an ISP may be liable for contributory infringement for failing to act after receiving adequate notice of user infringement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such a claim is possible here because, unlike in Sony, Cox maintains an ongoing relationship with users of its service. Sony&#39;s last point of contact with users of the VTR was at the point of sale.[16]See Sony, 464 U.S. at 437 (distinguishing cases "involving an ongoing relationship between the direct infringer and the contributory infringer at the time the infringing conduct occurred"). An ongoing relationship between a defendant and direct infringers presents a potential for culpability quite beyond distribution or design.[17] Other courts have similarly relied on this distinction in rejecting Sony as a complete defense to contributory infringement. See, e.g., Capitol Records, Inc. v. MP3tunes, LLC,821 F.Supp.2d 627, 649 (S.D.N.Y. 2011) (rejecting defendants&#39; reliance on substantial noninfringing uses because "the defendants were aware of the specific infringement at issue and had a continuing relationship with users"); Arista Records LLC v. Usenet.com, Inc.,633 F.Supp.2d 124, 156 (S.D.N.Y. 2009) (rejecting defendants invocation of Sony as a complete defense and finding noninfringing uses "immaterial" where there was an ongoing relationship with users); CoStar Grp. Inc. ...


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