Texas Court Rejects ISP’s Attempt to Dismiss Copyright Infringement Lawsuit – Grande Communications is Latest Broadband Provider Entangled in DMCA Litigation
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 that rules on two motions to dismiss in UMG Recordings, Inc., et al., v. Grande Communications Networks, LLC, and Patriot Media Consulting, LLC.[1] The case concerns a copyright infringement lawsuit filed by a vast group of owners of copyrighted music (referred to here as UMG) against Grande Communications, an Internet service provider (ISP) located in Texas. Grande’s consultant is also named as a defendant in the suit. The pleadings and the Magistrate’s report address many of the same Digital Millennium Copyright Act (DMCA) issues involved in the Fourth Circuit’s recent decision in BMG v. Cox Communications.[2]
In its complaint initiating the lawsuit , UMG asserts that it notified Grande “of more than one million infringements” by Grande’s broadband subscribers.[3] UMG contends Grande ignored these notices and refused to take action against repeat infringers, which bars Grande from claiming a safe harbor under the DMCA. UMG claims Grande is therefore secondarily liable for the instances of direct copyright infringement perpetrated by its broadband subscribers. UMG is seeking statutory monetary damages and injunctive relief.
UMG employs Rightscorp, Inc. to police its copyrights online. Rightscorp’s software monitors BitTorrent, a Peer‐to‐Peer (P2P) file sharing protocol, to detect illegal downloading of copyrighted digital media. When Rightscorp’s software determines a BitTorrent user is sharing Rightscorp client content, it records information about the activity, such as the date and time, the user’s IP address, and the infringing content, and then sends a DMCA infringement notice, on behalf of the client, to the ISP providing Internet access to the user’s IP address, to be forwarded to the BitTorrent user.[4]
Does Making Copyrighted Content Available Qualify as Actual Infringement?
In its motion to dismiss, Grande primarily argues that: “(1) the Complaint fails to plead any instances of direct copyright infringement, which is a prerequisite to a claim of secondary infringement; and (2) providing a ‘staple article of commerce’ such as internet service cannot give rise to a claim of secondary copyright infringement.”[5]
First, Grande argues that Rightscorp, UMG’s copyright enforcement agent, is not able to record “instances of actual copyright infringement,” but instead can only detect when copyrighted material is simply “available for distribution.” Making something available, Grande maintains, does not show the material was ever downloaded, and thus copied. Grande argues that vague allegations “that infringement happens on the internet” do not “identify a particular instance of direct infringement of a particular copyrighted work.”
The Magistrate noted that “Grande frames the issue as a legal one – whether making a work available for copying qualifies as ‘actual infringement’,” while “UMG in turn frames the issue as a primarily factual one – whether the Rightscorp system detects “actual infringement,” and whether they have adequately pled facts showing actual infringement.”[6]
The threshold question considered by the Magistrate was whether UMG may establish direct infringement through circumstantial evidence.[7] After reviewing a handful of cases, the Magistrate determined “it is generally accepted that circumstantial evidence can be used to prove a copyright infringement claim.”[8] Since this point in the litigation concerns a 12(b)(6) motion to dismiss, the ultimate question for the Magistrate was whether UMG has pled enough facts to make a plausible claim that Grande’s subscribers are infringing on its copyrights and distributing copies of works to others through BitTorrent. The Magistrate’s answer was yes – the facts pled in UMG’s Complaint do that.[9] That’s all that’s needed at this point, so the motion to dismiss was rejected. The suit must go on to resolve UMG’s claim.
Another Failed Attempt At A Sony Doctrine Defense
Second, Grande argued that the case should be dismissed under a “staple article of commerce” doctrine theory. That doctrine was established by the Supreme Court in Sony Corp. of America v. Universal City Studios, Inc., a 1984 case involving VCRs that stands for the following:
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 non-infringing uses.[10]
Grande, more specifically, argued “that Sony, as applied and interpreted by the Supreme Court in Grokster, only allows the imposition of secondary liability when the defendant takes some sort of affirmative action.” Grande framed the issue before the Magistrate as “whether UMG has alleged that Grande took any affirmative acts to encourage or promote subscribers to use its internet services to infringe UMG’s copyrights.” Of course, Grande argued it did not take any such affirmative acts, and stated that UMG’s complaint “only alleges that Grande failed to act when UMG made it aware its subscribers were engaged in infringement on Grande’s network,” which is not enough to show liability under Grokster.[11]
UMG countered by first arguing “the [staple article of commerce] doctrine does not apply here, because unlike in Sony, Grande did not design a product and then place it in the stream of commerce, but instead it provides a service to its subscribers, and maintains an ongoing relationship with them.”[12] Then, UMG argued Grande’s position that it did not take active steps encouraging infringement addresses only a claim for inducement, and not “other theories of secondary liability, such as ‘causing or materially contributing’ to infringing conduct.”[13] Finally, UMG conceded that “even if it cannot make out an inducement claim, it still has stated a valid contributory infringement claim.” The key part of that is “valid claim” because the issue before the Magistrate is whether UMG has made a valid claim for relief.
For help, the Magistrate looked to BMG v. Cox. The Magistrate noted that when presented with same issue – can liability be imposed on an ISP that is made aware of continuing, frequent infringement by specific subscribers and then fails or refuses to act on that knowledge to stop the subscribers’ use of the services for such infringement? – “the Fourth Circuit found that contributory liability for copyright infringement could be imposed based on willful blindness, holding that Cox’s failure to act, once in receipt of the Rightscorp notices, was sufficient to show the required intent identified in Grokster.”[14] The Magistrate concluded that UMG “has pled a plausible claim of secondary infringement based on Grande’s alleged failure to act when presented with evidence of ongoing, pervasive infringement by its subscribers.” Accordingly, Grande’s motion to dismiss based on its Sony doctrine argument failed.
UMG’s Vicarious Liability Claim Is Dismissed
In addition to contributory infringement, UMG’s complaint alleges Grande is vicariously liable for the infringing acts of its subscribers. To show vicarious infringement, a plaintiff must prove that the defendant: (1) has the right and ability to supervise the activity which causes the infringement; and (2) has a direct financial interest in the infringing activity.[15] The Magistrate found the first element satisfied because Grande can stop or limit its subscribers’ infringing conduct by terminating their internet access. A similar conclusion about an ISP’s decision to made at the district court level in BMG v. Cox provided support for the Magistrate’s decision. However, the Magistrate dismissed UMG’s vicarious copyright infringement claim because it found that “UMG...failed to plead facts showing that Grande receives a direct financial benefit from its subscribers’ infringing conduct.”
Patriot’s Motion to Dismiss is Granted
In a new twist to DMCA-related litigation against ISPs, UMG’s complaint also named as a defendant, Patriot Media Consulting, LLC, a consulting firm that provides various management services to Grande. UMG claimed Patriot’s management of Grande included performing executive, legal, and compliance responsibilities, all of which involved in the actions and inactions of Grande that gave rise to the copyright infringement at issue here. In other words, UMG said Grande’s failure to police repeat infringers was Patriot’s failure, and therefore liability also flows to Patriot. Patriot moved to dismiss UMG’s claim, arguing it was based on an impermissible “tertiary theory” of liability. The Magistrate agreed, concluding that UMG failed to show that Patriot, as an entity, was involved in the decisions or actions on which UMG bases its infringement claim. Rather, UMG was only able to allege employees of Patriot, who were also employees of Grande, may have assisted in formulating Grande’s DMCA policies. The Magistrate concluded the relationship between the alleged direct infringers and Patriot is too attenuated to support a claim against Patriot.
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
****************************
[1] UMG Recordings, Inc. v. Grande Communications Networks, LLC, 2018 WL 1096871 (W.D. Tex. Feb. 28, 2018) (Magistrate’s Report and Recommendation).
[2] BMG Rights Mgmt. (US) LLC v. Cox Commc'ns, Inc., 881 F.3d 293 (4th Cir. 2018).
[3] UMG Complaint at ¶ 49.
[4] See Magistrate’s Report and Recommendation at pp. 6-7 (citing UMG Complaint at ¶ 43).
[5] Magistrate’s Report and Recommendation at p. 4.
[6] Magistrate’s Report and Recommendation at p. 7.
[7] The Copyright Office has noted that “[a]...widespread area of disagreement is the question of whether a party can infringe the distribution right by offering a copyrighted work to the public for download, or whether evidence of an actual download is an essential element of such a violation.” U.S. Copyright Office, The Making Available Right In The United States at 22-23 (2016) https://www.copyright.gov/docs/making_available/making-available-right.pdf.
[8] Magistrate’s Report and Recommendation at p. 9.
[9] Magistrate’s Report and Recommendation at p. 10.
[10] Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984).
[11] Magistrate’s Report and Recommendation at p. 13.
[12] Magistrate’s Report and Recommendation at pp. 11-12.
[13] Magistrate’s Report and Recommendation at p. 14.
[14] Magistrate’s Report and Recommendation at p. 16. (citing BMG, 881 F.3d at 308).
[15] Magistrate’s Report and Recommendation at p. 14 (citing Grokster, 505 U.S. at 930). Intent or knowledge of the infringement is not an element of a claim for vicarious liability. Peer Int'l Corp. v. Luna Records, Inc., 887 F.Supp. 560, 565 (S.D.N.Y.1995).