Death Blow: Texas Court Strips ISP Grande Communications Of DMCA Safe Harbor Defense
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.
March 15, 2019 – In an order ruling on multiple motions for summary judgment, the U.S. District Court for the Western District of Texas has stripped Internet service provider Grande Communications Networks, LLC of its ability to use a Digital Millennium Copyright Act (“DMCA”) safe harbor defense against a copyright infringement lawsuit filed by some of the largest recording companies in the U.S.[1] The recording company plaintiffs are seeking to hold Grande secondarily liable for over one million instances of direct copyright infringement by Grande broadband subscribers.
The court determined Grande had adopted a DMCA repeat infringer policy during the time period in which the infringements (allegedly) occurred, but concluded Grande failed to implement that policy because Grande never actually terminated any broadband subscribers suspected of repeated copyright infringement. The court found “the evidence is clear that from at least 2011 until 2016 Grande had no internal policy or procedures whatsoever to enforce their forward facing statement that they would terminate customers for repeat infringements.”[2] The case is now set to move to trial (or perhaps a settlement). Deja vu? This case is following the same path as BMG v. Cox Communications.
The court’s decision to strip Grande of its DMCA safe harbor is likely a death blow to Grande and should send shockwaves throughout the entire U.S. ISP industry. If this can happen to Grande, it can happen to any ISP. In fact, the recording industry and its hitman, Rightscorp, warned us that this would happen after the recording industry won its copyright infringement lawsuit against Cox Communications. Remember Rightscorp’s statement following the win over Cox – “we have amassed a vast amount of data documenting infringements that have occurred over the past five years on the networks of essentially every ISP in the country.”
The decision also bears out the significance of the Fourth Circuit Court of Appeals’ opinion in Cox, a decision with a factual scenario nearly identical to the one at issue in UMG v. Grande.[3] When considering nearly every important issue in the summary judgement opinion, Senior U.S. District Judge David Alan Ezra cites to BMG v. Cox Communications, and rules against Grande just as the Fourth Circuit ruled against Cox.
After reading this summary judgment order, record companies, movie studios, and all other owners of copyrighted material are probably licking their lips. And this is not the end. Brace yourselves, there will be more of these copyright infringement lawsuits against ISPs. A group of major recording companies (i.e., Universal, Warner, Sony) recently filed a copyright infringement lawsuit against ISP Charter Communications, Inc. in U.S. District Court in Colorado. They also sued ISP Bright House Networks, LLC – Charter’s wholly-owned subsidiary – in U.S. District Court for the Middle District of Florida. Like I said, this is not the end. As long as the DMCA is the law of the land, ISP will unfortunately continue to pay the price for the illegal acts of their broadband subscribers.
What follows is a general summary of the court’s summary judgment order that deals specifically with the DMCA safe harbor issue.
Quick Background – Procedural History Of The Lawsuit
In April 2017, a group of record companies that produce and distribute commercial sound recordings in the U.S. (UMG, Capitol Records, Warner Bros. Records, Sony Music, Roc-A-Fella Records, and numerous others – basically the largest record companies in the U.S.) filed a copyright lawsuit against Grande Communications Networks, LLC, a telecom company that, among other things, offers high-speed broadband Internet access in Austin, Dallas, San Antonio and other parts of Texas.[4] The record company plaintiffs allege Grande is secondarily liable for copyright infringement for allowing its broadband subscribers to repeatedly infringe the record companies’ copyrighted material using BitTorrent and other peer-to-peer file sharing applications.
Grande answered the recording industry’s complaint by pleading, among other affirmative defenses, that the safe harbor provision of the DMCA protects it from liability for the copyright infringement of its customers. In August 2018, the record company plaintiffs filed a motion for summary judgment, seeking to strip Grande of its DMCA safe harbor defense, arguing Grande is not entitled to a DMCA safe harbor defense because Grande has not “reasonably implemented” a repeat infringer policy because Grande does not terminate broadband subscribers who it knows are repeat copyright infringers.[5]
In December 2018, a Magistrate Judge issued a report recommending the recording industry plaintiffs’ motion be granted as to the safe harbor issue. More specifically, the Magistrate recommended stripping Grande of a DMCA safe harbor defense because the undisputed evidence shows that though Grande may have adopted a policy permitting it to terminate a customer’s internet access for repeat infringement, Grande affirmatively decided in 2010 that it would not enforce the policy at all, and that it would not terminate any customer’s account regardless of how many notices of infringement that customer accumulated, regardless of the source of the notices, and regardless of the content of a notice.[6] In January 2019, Grande objected to the Magistrate’s report and recommendation.[7]
DMCA Safe Harbor For ISPs – What Is It And How Do You Get It
Enacted in 1998 to, among other things, combat online copyright infringement, the DMCA establishes a safe harbor that allows qualifying ISPs to limit their liability for claims of copyright infringement. To qualify for this safe harbor defense, an ISP must adopt and reasonably implement a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the ISP’s system or network who are “repeat infringers.”[8] While the phrase “reasonably implement” is not defined in the statute, courts have interpreted the phrase to have two separate elements: (1) whether a service provider implemented its policy; and (2) whether that implementation was reasonable.[9] Most recently, the Fourth Circuit has explained that “an ISP has not ‘reasonably implemented’ a repeat infringer policy if the ISP fails to enforce the terms of its policy in any meaningful fashion.”[10]
The Summary Judgment Order
Grande objected to the Magistrate’s recommendation by arguing the summary judgment standard has not been met here – that there are material issues of fact for trial regarding whether it “reasonably implemented” its repeat infringer policy and whether “appropriate circumstances” warranting termination existed. The court, of course, disagreed. The court’s analysis of whether Grande met the requirements of the DMCA safe harbor focused on: (1) Grande’s repeat infringer policy and actions prior to October 2010; (2) Grande’s repeat infringer policy from October 2010 until May 2017; and (3) internal communications among Grande employees relating to DMCA notices.
Grande’s DMCA Policy Prior To October 2010
Prior to 2010, Grande enforced “a policy of turning off all subscribers upon copyright violation notice, requiring the customer to then contact Grande to discuss the issue, understand what happened, inform the customer of why they’d been shut off, and take appropriate action from there.”[11]
Grande’s DMCA Policy From October 2010 – May 2017
Grande claimed that since 2012 it has had a DMCA policy providing for the termination of broadband subscribers who are repeat infringers. The court disagreed. It found that beginning in October 2010, Grande’s practice of terminating customers ceased, and Grande did not terminate a single infringing customer from October 2010 until May 2017.[12] During that time period, Grande purportedly received over a million copyright infringement notices. In written testimony, a Grande corporate representative stated that from 2010 through 2016, Grande did not have any specific policies or procedures providing for how it would actually go about terminating any such infringing customers. Grande also was apparently aware that some of its broadband subscribers were allegedly infringing copyrights repeatedly using file sharing application. By late 2016, Grande was tracking over 9,000 customers on its DMCA “Excessive Violations Report,” and was specifically tracking users by the number of infringement notices they received.
“Smoking Gun” Emails From Grande Executives & Damaging Testimony
Just like what happened in the BMG/Cox case, the court cited internal emails of Grande executives as proof of two things: (1) Grande considered DMCA infringement notices “as affirmative evidence of infringement;” and (2) Grande did not terminate broadband subscribers who, due to their receipt of numerous DMCA notices, were suspected of repeat copyright infringement. These emails were extremely damaging to Grande’s argument:
In one April 2013 email exchange, a senior Grande official stated that “we have some customers who are up to their 54th notice, yet there is no three strikes law or anything that we follow like some ISPs.” As a result, the same official then asked, in the same email: “Question – we have users who are racking up DMCA take down requests and no process for remedy in place. I don’t know if I’m seeing a broken process or compliance with the letter of the law. Do you guys have insight or knowledge on this?”[13]
In the ensuing conversation, another Grande manager reported the following: “Who is responsible for the DCMA notification process? Do we call customers? Bartlett just answered my email, and, as you said, they contact the customer and let them know they will disconnect them if they continue to receive those notice. If we do nothing more than emails (as I think you mentioned) we might lose our safe harbor status.”[14]
Grande’s corporate representative testified that from 2010 through 2016, Grande did not have any specific policies or procedures providing for how it would actually go about terminating any such infringing customers.
Grande’s DMCA Policy June 2017
Grande’s corporate representative admitted that until 2017 it would not terminate a broadband customer for repeated copyright infringement “regardless of the source of any notice,” regardless of the content of any notice,” and “regardless of the volume of notices for a given customer.”[15] The court found that Grande did not terminate any broadband subscribers for repeated copyright infringement until June 2017, two months after it was sued by the recording companies. Grande terminated only eleven customers in all of 2017.
The Court Says The Facts In Grande Are Like Those In BMG v. Cox, Only Worse
As mentioned earlier, the court found that Grande did not terminate a single broadband customer from October 2010 until May 2017, despite receiving over a million DMCA infringement notices and tracking thousands of broadband customers suspected to be repeat infringers. Such an utter failure to terminate any customers at all during this time, the court said, demonstrates that Grande made every effort to avoid reasonably implementing its DMCA policy and was determined not to terminate subscribers who in fact repeatedly violated the policy.[16]
After reviewing everything, the court said that comparing the facts to those in BMG v. Cox is instructive when determining whether Grande met the DMCA safe harbor requirements. Like Grande and every other ISP, Cox had a DMCA policy. Cox though would only “consider” termination after a broadband customer received 13 notices. Even then, Cox would not automatically terminate a customer’s service. Cox’s policy “was laxly enforced and often circumvented,” leading the Fourth Circuit to affirm the district court’s ruling that Cox failed to qualify for the DCMA safe harbor.[17]
Comparing Cox to Grande, the court said “Cox at least had internal procedures that in theory could lead to the termination of a customer, even if they were laxly enforced and often circumvented.” Grande, on the other hand, “had no internal policy or procedures whatsoever to enforce their forward facing statement that they would terminate customers for repeat infringements.” The court concluded that “Grande thus did even less than Cox to ‘reasonably implement’ the kind of policy required for the protections of DMCA’s safe harbor.”[18] Here’s the court’s full statement absolutely crushing Grande:
If lax enforcement and frequent circumvention of existent procedures disqualifies a defendant from the safe harbor’s protections, the complete nonexistence of such procedures surely must do likewise. Such a complete abdication of their responsibilities to implement and enforce a policy terminating repeat copyright infringers requires the Court to conclude that Grande is not entitled, as a matter of law, to the safe harbor provisions of 17 U.S.C. § 512(i).[19]
The court then went on to address Grande’s other arguments related to appropriate circumstances, Rightscorp’s technology, and actual knowledge. Grande’s arguments were shot down by the court using, among other things, the Fourth Circuit’s BMG v. Cox decision. Some of this might be worth a separate blog post later. The court’s summary judgment order also addressed a number of other issues related to the lawsuit, including certain liability and damages and whether Grande broadband subscribers infringed the right to distribution. Those too may be worth a separate blog post later.
For more on UMG Recordings, Inc., et al., v. Grande Communications Networks, LLC, go here:
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, Order: (1) Adopting report and recommendations; (2) Granting plaintiffs’ motion for partial summary judgment as to Grande’s DMCA safe harbor defense; (3) Granting in part and denying in part Grande’s motion for summary judgment; (4) Denying Grande’s motion for sanctions; and (5) Denying plaintiffs’ motion for summary judgment as to liability, Case No. 1:17-CV-365-DAE (W.D. Tex. Mar. 15, 2019) (Summary Judgment Order).
[2] Summary Judgment Order at 13.
[3] BMG Rights Mgmt. (US) LLC v. Cox Commc’ns, Inc., 881 F.3d 293 (4th Cir. 2018).
[4] UMG Recordings, Inc. et al. v. Grande Communications Networks, LLC and Patriot Media Consulting LLC, Complaint, Case No. 1:17-cv-365 (W.D. Tex. Apr. 21, 2017).
[5] Summary judgment is proper if “there is no genuine dispute as to any material fact” and the moving party “is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A dispute is genuine only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
[6] Summary Judgment Order at 8.
[7] Any party who desires to object to a Magistrate Judge’s findings and recommendations must serve and file written objections within 14 days after being served with a copy of the findings and recommendation. Fed. R. Civ. P. 72(b)(2).
[8] 17 U.S.C. § 512(i)(1)(A). In addition, a qualifying ISP must accommodate “standard technical measures” that are “used by copyright owners to identify or protect copyrighted works.” 17 U.S.C. § 512(i)(1)(B), (i)(2).
[9] BMG Rights Management (US) LLC v. Cox Communications, Inc., 149 F.Supp.3d 634, 653 (E.D. Va. 2015) (summary judgment opinion stripping Cox of DMCA safe harbor protection) (Summary Judgment Order). The district court explained that an ISP has implemented a repeat infringer policy if it has a working notification system and a procedure for dealing with DMCA-compliant notifications, and it does not actively prevent copyright owners from collecting information needed to issue such notifications. It further opined that a service provider’s implementation is reasonable if it terminates a repeat infringer’s access in appropriate circumstances. Id. at 653-4.
[10] BMG Rights Mgmt. (US) LLC v. Cox Commc’ns, Inc., 881 F.3d 293, 303 (4th Cir. 2018). Adopting a repeat infringer termination policy that is not “carried out is not an ‘implementation’ as required by § 512(i).” In re Aimster Copyright Litig., 252 F. Supp. 2d 634, 659 (N.D. Ill. 2002), aff’d, 334 F.3d 643 (7th Cir. 2003). “[T]he relevant question is whether [the ISP] actually terminates the uploading privileges of repeat infringers under appropriate circumstances.” Capitol Records, LLC v. Escape Media Grp., Inc., No. 12-CV-6646, 2015 WL 1402049, at *12 (S.D.N.Y. Mar. 25, 2015).
[11] Summary Judgment Order at 10-11.
[12] Id. at 11.
[13] Id. at 16-17.
[14] Id. at 17.
[15] Id. at 11.
[16] Id. at 12 (citing BMG, 881 F.3d at 303).
[17] Summary Judgment Order at 13.
[18] Id. at 14.
[19] Id.
