Fourth Circuit Reverses $1 Billion Award For Vicarious Liability Claim For More Than 10,000 Works

• Published date: 02 April 2024
• Subject Matter: Intellectual Property, Media, Telecoms, IT, Entertainment, IT and Internet, Copyright, Music and the Arts
• Law Firm: Wilson Elser Moskowitz Edelman & Dicker LLP
• Author: Leia Leitner and Taylor F. Bialek

On January 12, 2021, the U.S. District Court for the Eastern District of Virginia awarded a group of music recording companies (the plaintiffs) a $1 billion verdict against Cox Communications (Cox). The Virginia court's ruling found that Cox, an internet service provider (ISP), was contributorily and vicariously liable for copyright infringement committed by certain subscribers on its networks. The plaintiffs alleged that the ISP allowed the unauthorized downloading and distribution of more than 10,000 copyrighted works by Cox subscribers who had already received three or more notices of infringement. The district court in Virginia established that the "takedown" notices sent by the plaintiffs provided Cox with the requisite knowledge of its subscribers' repeated infringement to substantiate their claim that Cox was contributorily liable, suggesting that Cox had sufficient specific knowledge of infringement to have done something about it.

The plaintiffs' notice to Cox identified the IP address of the subscriber, as well as the time of infringement and the identification of the infringed work, which the plaintiffs argued was sufficiently specific knowledge for Cox to be able to identify the subscriber and to exercise its policy by suspending or terminating the infringing subscriber. This case proceeded to trial on two theories of secondary liability - vicarious and contributory copyright infringement. The plaintiffs argued that Cox failed to act on these known repeat infringers, and the jury found Cox liable for willful contributory infringement and vicarious infringement, ordering Cox to pay more than $99,000 for each of the infringed-upon works. Cox appealed the jury verdict.

On appeal, before the U.S. Court of Appeals for the Fourth Circuit, Cox raised several questions of law concerning the secondary liability for copyright infringement, as well as what constitutes a derivative work in the Internet Age.

Vicarious Infringement

The Fourth Circuit's analysis first considered whether the district court erred in denying plaintiffs' vicarious infringement claim. "A defendant may be held vicariously liable for a third party's copyright infringement [if the defendant] (1) profits directly from the infringement and (2) has a right and ability to supervise the direct infringer." See Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 930 n.9 (2005) (internal citations omitted). The Fourth Circuit found that the plaintiffs failed to establish the...