Court Denies UMG’s Feeble Attempt To Amend Copyright Infringement Complaint Against Grande Communications
UPDATE: ISP Grande Communications Found Secondarily Liable For Copyright Infringement, Must Pay $46.7 Million In Statutory Damages
November 3, 2022 – A jury has determined that Grande Communications, LLC is contributorily liable for copyright infringement of 1,403 copyrighted works owned by a group of record labels. It also concluded Grande’s contributory infringement was willful. The jury awarded the record labels a total of $46,766,200.00 in statutory damages.
A Magistrate Judge for the U.S. District Court for the Western District of Texas, Austin Division, has issued a report and recommendation denying UMG’s motion for leave to file an amended complaint in UMG Recordings, Inc., et al., v. Grande Communications Networks, LLC, and Patriot Media Consulting, LLC.[1] It was the same Magistrate Judge who ruled on two motions to dismiss in the same case back in February 2018. Here’s what happened in this most recent report and recommendation, starting with a quick review of the entire case.
In April of 2017, a vast group of record companies initiated a copyright infringement lawsuit against Grande Communications, an Internet service provider (ISP) located in Texas. The record companies are referred to collectively as UMG because that is the entity listed first in the caption for the proceeding. Patriot Media, a company that performs management consulting services for Grande, was named as a co-defendant.
The lawsuit concerns many of the same Digital Millennium Copyright Act (DMCA) issues addressed in the Fourth Circuit’s 2018 decision in BMG v. Cox Communications.[2] In particular, UMG claims Grande ignored over one million DMCA infringement notices and refused to take action against Internet access customers who are repeat infringers. This failure to act, UMG argues, bars Grande from claiming a safe harbor under the DMCA, therefore potentially making Grande secondarily liable for the direct copyright infringement perpetrated by its broadband subscribers. UMG is seeking statutory damages and injunctive relief.
After receiving UMG’s complaint, Grande and Patriot moved to dismiss the suit. The Magistrate Judge issued a report and recommendation, granting in part and denying in part, the motions to dismiss in February 2018.[3] To make a long story short, the Magistrate dismissed all claims against Patriot, concluding that UMG failed to show that Patriot, as an entity, was involved in the decisions or actions on which UMG bases its infringement claims. The Magistrate also dismissed UMG’s vicarious copyright infringement claim, finding “UMG...failed to plead facts showing that Grande receives a direct financial benefit from its subscribers’ infringing conduct.”
The Magistrate’s report and recommendation was adopted by the Judge presiding over the case on March 27, 2018. This brings us to the Magistrates recent decision.
After conducting discovery, UMG moved “to amend its complaint to add back into the case the vicarious copyright infringement claim against Grande and all of their claims against Patriot.” Yes, you read that correctly. UMG claimed that “based on discovery received since the dismissal, [it] can now state plausible claims for the causes of action previously dismissed.” In other words, UMG is asking for “a Motion for Reconsideration of the dismissal order.”
The Vicarious Liability Claim – Still Dismissed
Vicarious infringement occurs when a defendant (1) profits directly from the infringement and (2) has a right and ability to supervise the direct infringer, even if the defendant initially lacks knowledge of the infringement. UMG’s vicarious liability claim was dismissed by the Magistrate in February 2018 because UMG failed to establish the “direct financial interest” element. UMG was unable to show that “the infringing activity constitutes a draw for subscribers, not just an added benefit.” The Magistrate explained that to state a claim for vicarious infringement, UMG “would have had to plead facts showing customers signed up with Grande because Grande did not police infringing conduct by its subscribers.”
The second time around, UMG presented four new pieces of evidence obtained through discovery: (1) Grande tracks its infringing customers; (2) these customers are “a la carte” internet customers; (3) Grande’s profit margins on a la carte customers are its highest of any business lines; and (4) Grande never terminated any user regardless of how many notices of infringement it received. Once again, the Magistrate isn’t buying it. The Magistrate determined (1) the original complaint alleged essentially the same or similar facts, and (2) the new allegations still fail to say anything about the motivations of Grande’s subscribers when they sign up with Grande. The vicarious liability claim is dead again because UMG has failed “to plead facts showing Grande gained or lost customers because of its failure to terminate infringers.” The Magistrate noted that UMG claims the means by which infringement has occurred is use of the Internet and BitTorrent, which people can obtain from any Internet service provider. The Magistrate concluded by explaining that “the draw must be something more than this to state a vicarious infringement claim.”
The Claims Against Patriot – Still Won’t Stick
UMG tried to have Patriot added back as a co-defendant in the lawsuit based on “evidence acquired in discovery showing that Patriot has an ownership interest in Grande and that Patriot employees advise Grande or ‘make policy’ on Grande’s DMCA and other infringement policies.” Once again, the Magistrate isn’t buying it. According to the Magistrate, UMG’s description of Patriot in the amended complaint contains more details, but “the[] allegations are ‘more of the same’ when compared to the original complaint.” In other words, there is nothing new supporting a different outcome.
In the final paragraph concluding the report and recommendation, the Magistrate calls UMG’s motion an attempt “to re-litigate issues already decided by this Court.” UMG’s new evidence, the Magistrate said, “do[es] not make any material changes to the pleadings already found to be insufficient.” Translation – you are wasting the Court’s time.
For more on UMG Recordings, Inc., et al., v. Grande Communications Networks, LLC, go here:
Death Blow: Texas Court Strips ISP Grande Communications Of DMCA Safe Harbor Defense
Another Broadband Provider Battles DMCA Lawsuit
Court Denies UMG’s Attempt To Amend Copyright Infringement Complaint Against Grande Communications
UMG v. Grande Communications Update: Grande’s Motion For Summary Judgment
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[1] UMG Recordings, Inc., et al., v. Grande Communications Networks, LLC, and Patriot Media Consulting, LLC, 2018 WL 4501535 (W.D. Tex. Sep. 20, 2018).
[2] BMG Rights Mgmt. (US) LLC v. Cox Commc'ns, Inc., 881 F.3d 293 (4th Cir. 2018).
[3] UMG Recordings, Inc. v. Grande Communications Networks, LLC, 2018 WL 1096871 (W.D. Tex. Feb. 28, 2018).