DMCA Lawsuit Update: District Court Allows Vicarious Copyright Infringement Claims Against Charter To Go Forward

April 19, 2020 – The U.S. District Court for the District of Colorado has issued an Order in Warner Records Inc. et al. v. Charter Communications, Inc., rejecting Charter’s motion to dismiss the plaintiff’s vicarious copyright infringement claim.[1] The District Court’s Order adopts wholesale the recommendations from the Magistrate’s October 2019 order.[2]

Background: Record Companies’ Copyright Infringement Lawsuit Against Charter

The plaintiffs – a group of the largest recording companies (i.e., Universal, Warner, Sony) – filed a copyright infringement lawsuit against Charter in March 2019. They allege Charter, through the provision of high-speed broadband service, “has knowingly contributed to, and reaped substantial profits from, massive copyright infringement committed by thousands of its subscribers, causing great harm to plaintiffs, their recording artists and songwriters, and others whose livelihoods depend upon the lawful acquisition of music.”[3] The plaintiffs allege Charter is liable as (1) “a contributory copyright infringer,” and (2) “a vicarious copyright infringer” for the direct infringements of its subscribers. In response, Charter filed a motion to dismiss the Plaintiff’s claims for vicarious liability, likely expecting an easy “win,” based on precedent from the UMG v. Grande case.[4]

Vicarious Liability & Charter’s Motion To Dismiss

The legal elements of vicarious liability for copyright infringement are different than those of contributory infringement. Like other claims for secondary liability, there must first be direct infringement of a copyrighted work. For vicarious liability to apply, however, a defendant must have the right and ability to supervise the infringing activity, and have a direct financial interest in the infringing activity.

Charter, in its motion to dismiss, argued the recording company plaintiffs failed to allege (1) a causal connection between the alleged infringement and its profits and, thus, failed to show a direct financial interest in any infringing activities; and (2) that Charter maintained the right and ability to control infringement by its subscribers. Charter’s motion was sent to a U.S. Magistrate Judge for recommendation.

Magistrate’s Recommendations

In short, the Magistrate concluded that the record company plaintiffs plausibly alleged the infringement of their musical compositions and sound recordings is a “draw” to Charter’s broadband subscribers – satisfying the direct financial interest prong. The first prong – ability to supervise the infringing activity – was satisfied because, according to the Magistrate, Charter has the ability to terminate the broadband service of its customers that are (alleged) repeat infringers. Charter objected to both findings, arguing the Magistrate “misapplied the direct financial benefit standard and implausibly presumed that Charter had the practical ability to control infringement.”[5]

District Court’s Order Adopting The Magistrate’s Recommendations

With respect to the direct financial benefit element, Charter challenged the Magistrate’s “conclusion that ability to engage in infringing conduct need not be the primary draw of defendant’s services, but only a draw.” Charter argued that the ability to infringe on plaintiffs’ content must constitute “the attracting factor” for subscribers. In other words, it must be the draw that makes customers sign up for broadband service.

Since the Tenth Circuit, which includes the District Court for Colorado, has limited vicarious copyright liability precedent, the Magistrate looked to and applied cases from the Ninth Circuit, primarily Perfect 10 v. Giganews.[6] The District Court approved this course of action.

Overall, the District Court sided with the Magistrate, and his reading of Perfect 10 – a financial benefit exists where the availability of infringing material acts as a draw for customers and the size of the “draw” relative to a defendant’s overall business is immaterial. The District Court concluded “[t]his language does not suggest that plaintiffs must show that the draw of infringing activity was ‘the attracting factor’ as Charter argues, but rather an attracting factor.”[7]

I get that the parties and the District Court are making a legal analysis of whether an element of vicarious liability has been satisfied at this point in the proceeding. But, the discussion of what draws a consumer to subscribe to broadband service seems...murky. Or rather, it seems maybe outdated that a court would need to engage in this analysis to determine whether a claim can go forward. Aren’t people past the point where they have to weigh factors to determine whether to subscribe to broadband Internet access? It’s so essential today. The only factor that people weigh nowadays is whether they can afford. That’s really it. And of course, there are places in the U.S. that don’t have broadband. Basically what I’m saying is a disagree with this entire premise of how to show a financial benefit or I disagree with being able to apply vicarious liability in this context.

Anyway and more importantly, the Court’s conclusion seems like a stretch. Here is how copyright expert Professor Eric Goldman describes the Court’s determination that to satisfy the direct financial interest prong, the potential to infringe only needs to be a draw, possibly one of many:

This response may be supported by the precedent, but it’s tone-deaf. If the opportunity to infringe represents 0.1% of the motivation for 0.1% of Charter’s subscribers to subscribe, the court implies that’s enough to potentially hold Charter vicariously liable for 100% of the copyright infringements by 100% of its subscribers. FFS.[8]

I couldn’t agree more. One more thought on this part – the District Court references the record company plaintiffs claim that Charter’s subscribers are motivated to subscribe to Charter’s broadband service by “advertisement of features attractive to those who seek to infringe, such as fast download speeds for ‘just about anything.’”[9] This is complete nonsense. Here’s the relevant language from the Complaint:

Charter has engaged in substantial activities purposefully directed at Colorado from which Plaintiffs’ claims arise, including...advertising its high-speed Internet services in Colorado to serve as a draw for subscribers who sought faster download speeds to facilitate their direct and repeated infringements.[10]

As if an ISP advertises and provides higher download speeds because it will attract individuals that want to infringe. No, ISPs offer high-speed service because that is what consumers want and the best online applications and uses require it. It’s not to entice potential infringers. Every ISPs’ terms of service expressly prohibit using their services to violate the law, including copyright law.

Let’s move on the last part – the ability to supervise the infringing activity. Charter argued it lacks the ability to identify and police the infringement its users engage in. The District Court said Charter might not have “the ability to identify and terminate all users who infringe on plaintiffs’ copyrighted materials,” but “Charter does not argue that it lacked the ability to terminate some users, such as those identified in plaintiffs’ infringement notices, and that is enough.”[11]

Charter characterized itself as a “general-purpose” ISP “that lack[s] sufficient ability to curtail infringing conduct to be held liable.” The District Court said nope – Charter can terminate its users’ ability to access the internet through Charter.[12]

Charter also argued “that because it cannot stop subscribers from using other forms of internet access to infringe, it has no ability to supervise or control infringing activity.” This was shot down for the same reason. The District Court said “Charter can certainly limit its subscribers’ ability to infringe by blocking their access to the internet through Charter.”[13]

Conclusion: Charter Is Going Down

The District Court concluded that the record company plaintiffs have stated a claim for vicarious copyright infringement, and denied Charter’s motion to dismiss. The case now moves forward. Next we will probably see a motion for summary judgment filed by the record companies. Regardless of what happens next, Charter is going down, and Charter knows it – or should know it. There’s nothing in this case to make anyone think the outcome will be any different from the outcomes in the BMG v. Cox[14] and Sony v. Cox. In the latter case, a jury found Cox Communications secondarily liable to the tune of $1 billion in damages for willful copyright infringement.[15] The record companies are seeking statutory damages against Charter in this case, so the jury verdict could be astronomical when it’s all said and done. Unless that is, Charter settles.

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[1] Warner Bros. Records Inc., et al., v. Charter Communications, Inc., Order, C.A. No. 19-cv-00874-RBJ-MEH, U.S. District Court, District of Colorado, Document #157 (Apr. 15, 2020) (Order).

[2] Warner Bros. Records Inc., et al., v. Charter Communications, Inc., Recommendation Of United States Magistrate Judge, C.A. No. 19-cv-00874-RBJ-MEH, U.S. District Court, District of Colorado, Document #71 (Oct. 21, 2019) (Magistrate Decision).

[3] Warner Bros. Records Inc., et al., v. Charter Communications, Inc., Complaint And Jury Demand, C.A. No. 19-cv-00874-RBJ-MEH, U.S. District Court, District of Colorado, ¶ 2 (Mar. 22, 2019) (Complaint).

[4] UMG Recordings, Inc. v. Grande Communications Networks, LLC, 2018 WL 1096871 (W.D. Tex. Feb. 28, 2018) (Magistrate’s Report and Recommendation).

[5] Order at 4.

[6] Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657 (9th Cir. 2017).

[7] Order at 6.

[8] Eric Goldman, Another Terrible Copyright Ruling on IAPs’ Liability for Users’ File-Sharing–Warner v. Charter, April 17, 2020, https://blog.ericgoldman.org/archives/2020/04/another-terrible-copyright-ruling-on-iaps-liability-for-users-file-sharing-warner-v-charter.htm.

[9] Order at 10-11.

[10] Complaint at ¶9, p. 5-6.

[11] Order at 12.

[12] Order at 13.

[13] Id.

[14] BMG Rights Mgmt. (US) LLC v. Cox Commc’ns, Inc. and CoxCom, LLC, 149 F. Supp. 3d 634, 662 (E.D. Va. 2015), aff’d in relevant part, 881 F.3d 293 (4th Cir. 2018).

[15] Sony Music Entertainment, et al. v. Cox Communications, Civil Case No. l:18-cv-950, Verdict Form, U.S. District Court For The Eastern District Of Virginia (Dec. 19, 2019).