Why Cox’s $1 Billion Victory May Not Matter

Earlier this week, the Fourth Circuit Court of Appeals overturned a $1 billion judgment against internet service provider (ISP) Cox Communications.  

The original verdict was handed down in December 2019, following a trial that saw the major record labels accuse Cox of failing to take adequate action to prevent piracy on its network, namely by failing to terminate repeat infringers.  

As a result, the labels said that Cox was liable for infringement of roughly 10,000 different songs, to which the jury awarded nearly $10,000 in damages for each work, reaching the $1 billion total.  

However, the appeals court has now set aside that damages amount, ruling that the labels did not prove that Cox directly profited from the infringement, as such, Cox was not vicariously liable, only contributorily liable.  

But while that is a victory for Cox in that they will likely pay less damages, the appeals court ruling is also a strong rebuke of Cox’s practices and still sets up the ISP to be liable for a significant amount of liability following a retrial on damages alone. 

In short, Cox is still liable, will still have to change its practices and will still likely have to pay significant damages, barring a settlement. So, while Cox has reasons to celebrate the decision, so do the record labels in their push to hold ISPs accountable for piracy on their network. 

It’s a case where both sides have a legitimate case for declaring victory, especially considering what they both likely wanted from the case to begin with. 

Background of the Case 

The case was originally filed in July 2018 by the four major record labels, Sony Music, Universal Music Group, Warner Music Group and EMI as well as their publishing arms. They accused Cox of failing to take action against copyright infringement on its network, even after repeated notification. 

According to the music companies, Cox failed to terminate repeat infringers, as obligated under the law, and refused to take any reasonable action when notified of infringement.  

The jury, after hearing the evidence, found Cox liable for two different kinds of copyright infringement: Contributory copyright infringement and vicarious copyright infringement. 

Contributory copyright infringement is simply a secondary liability that means that there was a direct copyright infringement that Cox was aware of and whose action (or inaction) enabled or aided the infringement.  

Vicarious copyright infringement, on the other hand, requires a greater degree of control over the infringement and that they, in some way, benefited from the infringement. However, for vicarious infringement, there is no need for the alleged infringer to be directly aware of the infringement.  

It was the ruling of vicarious infringement that the court took issue with. The music companies argued that Cox had benefited from the infringement by collecting subscriber fees from infringing users. However, the court ruled that is not the same as benefiting directly from the infringement. 

However, the court affirmed the contributory infringement ruling and found that Cox had willfully engaged in it. This means that the court found that Cox had knowingly authorized its customers to infringe on the various songs. 

Nonetheless, with the vicarious infringement award vacated, the appeals court dismissed the damages award and sent the case back to the lower court for a new trial on damages alone. 

That, in turn, makes this a mixed bag for those who are watching the case, especially if they were hoping to limit ISP obligations when it comes to reducing piracy on their networks. 

A Repeat Performance 

What this means for now is that, barring an appeal to the Supreme Court or a settlement, the case is going back to the lower court for a new trial. However, that new trial will be on damages alone as the contributory infringement ruling was affirmed. 

Cox will be hoping that they will win a lower damages award. However, given that 10,000 works are at issue, any award will be high. Even if the jury awards the statutory minimum, $750 per work, it will still be $7.5 million in damages. That is significantly less than $1 billion, but still not a small amount. 

However, as we saw with the Jammie Thomas-Rasset case, which dealt with an individual accused of file sharing 24 songs, a retrial does not guarantee a lower damages award. After her $222,000 award was vacated on a technicality, the second jury awarded $1.9 million in damages. 

Still, that kind of an increase seems unlikely in this case but is still a possibility as the ceiling for statutory damages is $150,000 per work. Though such an amount is highly improbable, it shows that the jury verdict can be higher as well as lower. This is something both sides must consider. 

That said, the bigger issue is for those hoping that the case would limit ISP requirements when it comes to combatting copyright infringement. Though the appeals court overturned the judgment, it affirmed that Cox was willfully liable. That should be a sharp warning to Cox, or any other ISP, about what their obligations are when notified about alleged copyright infringement. 

In short, both Cox and the music companies have reasons to celebrate this decision. Though Cox won’t have to pay $1 billion, it will still likely face significant damages and the music industry gets their views on ISP responsibility affirmed. 

So, while the $1 billion verdict may be no more, the legacy it created will likely remain in effect. 

Bottom Line 

Like a lot of things in the legal field, this decision and what it means is complicated and nuanced. While Cox is rightfully happy to likely be getting a significant reduction in damages, the appeals court made it clear that its previous practices were not acceptable.  

Both sides can easily spin this as a victory. Cox gets reduced (likely) damages, and the music companies get even more legal weight to compel ISPs to cooperate.  

Because of that, there’s a solid chance that the two sides could reach a settlement. The case has been ongoing for nearly six years and, now that there is no likely path for Cox to outright avoid liability, a settlement becomes much more likely, especially with the prospect of a second trial. 

Still, if it does go to a jury for the second time, it will be interesting to see how the jury awards differ given the change in liability. We will see if and how the jury will weigh the lack of vicarious infringement. 

In the end though, both sides have a reason to celebrate but other ISPs watching the case will likely have more reason to worry about their potential for liability moving forward.