Supreme Court Rules for Cox, Weakens DMCA

Earlier today, the Supreme Court of the United States (SCOTUS) released its decision in the long-running battle between the record labels and the internet service provider (ISP) Cox Communications.

The decision was a resounding victory for Cox, with a unanimous court ruling that it was not liable for copyright infringement by its users. This not only brings an end to a case that has been ongoing for nearly a decade, but overturns a $1 billion judgment previously won by the record labels.

The ruling is also a major victory for other US-based ISPs like Cox. It makes it virtually impossible for them to be held liable for infringement by their users. That because the Supreme Court has ruled that it is only liable if it either induces the infringement through marketing or creates a “tailored service” for infringement. Neither describes your normal ISP.

However, there are bigger questions about how this decision will impact the Digital Millennium Copyright Act (DMCA) and the notice-and-takedown system relied on by web hosts, search engines and other online services.

The short answer is that, for right now, the answer is unclear. The ruling is deliberately vague on how such services are impacted. But the ruling does give such parties less reason to comply with the law and, in some cases, a potential path to safely ignore it altogether.

A Brief History of the Case

In July 2018, a group of record labels headed by Sony filed a copyright infringement lawsuit against Cox. According to the lawsuit, Cox was not taking adequate action to prevent copyright infringement on its network.

The group specifically targeted the lack of a policy to terminate repeat infringers, saying that it only terminated a few dozen accounts despite tens of thousands of notices being sent.

In December 2019, a jury ruled in favor of the record labels, awarding them $1 billion in damages. Cox appealed to the Fourth Circuit, which, in a split verdict, remanded the case back to the lower court for a new trial on damages alone.

The issue was that the jury had found Cox liable for both contributory and vicarious copyright infringement. Both are types of second liability in copyright cases. The court agreed that Cox was liable for contributory infringement, but disagreed on vicarious infringement.

To explain the difference, contributory copyright infringement, an alleged infringer did not commit the infringement directly but induced or enabled the infringement in some way. With vicarious liability, an alleged infringer had the “right, ability or duty to control” the infringement and benefited from the infringement in some way.

The Fourth Circuit found that Cox was not vicariously liable, saying that simply collecting a subscriber fee is not adequate to say they are benefiting from the infringement directly. The Supreme Court only addressed the remaining issue of contributory copyright infringement.

The appeals court further ruled that Cox’s lack of action against suspected infringers meant that they were not shielded from liability by the DMCA. The law requires services to have a policy to terminate repeat infringers in order to be protected by safe harbor.

The Supreme Court took the case, but only opted to examine the issue of contributory copyright infringement.

Though SCOTUS’ decision was unanimous, it was actually a 7-2 split on reasoning. Though all agreed Cox had not infringed, there was a disagreement on why that was the case.

The majority, headed by Justice Thomas, ruled that it was irrelevant whether Cox had complied with the DMCA. Since it had not induced the infringement via marketing and its service had significant legal uses, it was not liable for contributory copyright infringement.

The minority, lead by Justice Sotomayor, worried that the logic “consigns the safe harbor provision to obsolescence” and sought to narrow the scope of the decision.

But Justice Sotomayor’s concern does raise the question: Is this the end for the DMCA safe harbor provisions?

My Analysis

Disclosure: Through my consulting firm, CopyByte, I both file DMCA takedowns and serve as a DMCA agent for hundreds of sites and services. Also, this is very early analysis, and it is more than possibly my opinions will change with time.

When I first read the Supreme Court opinion, this did feel like a genuine “the sky is falling” moment when it comes to the DMCA safe harbor. I agreed with Justice Sotomayor that the ruling risked making safe harbor, and thus the notice and takedown systems, obsolete.

When it comes to an internet service provider like Cox, Verizon, AT&T, etc., that is likely very true. As it stands now, they can’t be held vicariously liable because taking a subscription fee is not the same as profiting directly from the infringement. However, since they don’t induce infringement through marketing or build a service primarily used for infringement, they can’t be held contributorily liable either.

The ruling basically means that they cannot be held liable regardless of whether they comply with the DMCA’s safe harbor rules. That’s what this ruling basically does, detach liability from safe harbor. Not complying with safe harbor rules doesn’t automatically make you liable, it’s a shield from existing liability.

How this applies to web hosts, search engines and other service providers is much less clear.

On one hand, the ruling makes it much more difficult to find that a site committed contributory copyright infringement. Unless they are actively promoting their service as a tool for infringement or the service is only usable for infringement, then their DMCA compliance doesn’t matter. Then again, if they were doing those things, they probably weren’t complying with the DMCA anyway.

That said, it is worth noting that the ruling did cite Cox’s response to notices and the fact it terminated some users as evidence that it was not inducing or intending their service to be used as infringement. As such, there is still some motivation for ISPs to take action on copyright notices, just nowhere nearly as much.

That said, the ruling doesn’t touch on vicarious copyright infringement. Hosts have a much greater “right, ability or duty to control” the infringement. The question is, do they also benefit from it directly.

Running ads against a suspected infringement, being paid per download or simply using infringement to grow your site or presence could be seen direct benefits from infringement. Whether they are is an open question.

The DMCA is protection against all secondary liability, both contributory and vicarious. Contributory may be, mostly, off the table, but vicarious is not. That said, different companies will be in different places.

For example, GoDaddy is different from YouTube, which is different from Amazon Web Services. GoDaddy, in theory, might not have any liability at all since it is a flat-rate subscription service. However, YouTube and might since it runs ads against uploaded content and Amazon might as well since it gets paid based on traffic used.

For most web hosts, it can likely be argued that they get some direct benefit from the infringement. Whether it’s increased traffic, ad revenue, growing a community or something else, most gain something beyond a subscription fee.

But, even if I didn’t feel that way, I would not be eager to test this. Litigation is expensive, and DMCA compliance is, for most providers, is a bargain. When it comes to litigation, you’d much rather be filing amicus briefs than sitting in the defendant’s chair.

That said, someone almost certainly will test these waters and, when that happens, we’ll likely get more clarity on the future of the DMCA.

Bottom Line

As with any big Supreme Court decision, right now there is a lot of uncertainty about what it means and how it will be applied down the road.

To be clear, this does weaken the DMCA some. It detaches DMCA safe harbor compliance from the infringement, and it largely eliminates contributory copyright infringement from the equation.

If I were an ISP like Cox, Xfinity, AT&T, Verizon, etc., I would be treating this as a tremendous win. There’s virtually no way that they can be held liable for copyright infringement by their users.

But for sites, apps, search engines and web hosts, things get a lot murkier. For most hosts, vicarious infringement was and is the bigger threat and this case deliberately avoids examining that issue.

So, while I don’t quite agree with Justice Sotomayor that this makes the DMCA obsolete, I can understand her concern. Though I believe that the majority really want the impact of this to be limited to ISPs like Cox, the way the decision is framed does open doors they might not have intended others to go through.

As with the recent Warhol ruling, the actual impact of this won’t be clear for years or even decades. But, by then, we’ll probably be onto the next big copyright ruling which will also have its own major impacts across the field.

The Decision