RightsCorp Has Some High Hurdles to Clear Before it Even Gets to Repeat Infringers

Typical. I read about a truly significant lawsuit, start blogging about what is obviously the main issue—an issue that has significance beyond the lawsuit—only to discover in analyzing the pleadings that the lawsuit isn’t all it’s cracked up to be.

RightsCorp: A Business Model in Trouble…

You’ve heard of the lawsuit against the major ISP, Cox Communications, for violating the repeat-infringer requirement of the DMCA? (Here’s the complaint.) If not, let me ’splain. No, there is too much. Let me sum up:
There is a company called RightsCorp that is in the business of enforcing copyrights for others. They make money by monitoring BitTorrent networks, finding files whose copyrights belong to its clients, identifying the IP address (and timestamp) and sending short little notices to the ISP that are supposed to be forwarded to the customer. The short little notice says the usual things that lawyers say in cease-and-desist letters that aren’t lies but don’t tell the whole copyright story, to wit: (a) you are a copyright infringer; (b) you “could be” liable for up to $150,000 per infringement46Strictly speaking, true, but you “could be” liable for $750, too.; (c) your ISP service “could be suspended”47Strictly speaking, true, in that your ISP “could” do lots of things.; and (d) the actual rights holder absolutely, 100% will come after you hammer and tongs if you ignore this. Here’s the twist: for a mere $20, we’ll make it all go away48Until this lawsuit, a bit of a stretch.. Just click on this link…
The business model prizes volume over price. For it to work, RightsCorp needs a modicum of cooperation from the ISPs because they’re much better positioned to know which customer was using IP address such-and-such as so-and-so time. So RightCorp sends the short little notice to the ISP that owns the IP address in question and asks that the ISP forward it to the customer. If the ISPs don’t cooperate, there won’t be enough volume of notices getting to alleged infringers to make the business model work.
And, guess what? Not all ISPs forward RightsCorp’s short little notices to the customer, at least not in an unedited form. Why not? Probably they don’t want to unnecessarily freak out their customers with a notice that’s scarier than it really is. They might also not want to give even indirect approval to a message that’s not totally honest. Take a look at that short little notice again: no outright lies, but lots of half-truths that a non-lawyer won’t pick up on. A company with copyright counsel might well be embarrassed to forward such a notice.
Not very coincidentally, RightsCorp isn’t doing very well these days. Most business models have some point of weakness49My favorite is: we don’t actually have exclusive rights to the intellectual property on which our whole enterprise relies, and there’s little natural barrier to entry. Other than that, it’s fool-proof., and RightsCorp’s is the willingness of ISPs to play ball.

…Because it’s Based on an Unexamined Legal Assumption

There must have been an assumption somewhere that the ISPs were legally obligated to play ball. And that assumption must have rested on the “repeat infringer” requirement, which may be summarized as: to be eligible for the DMCA safe-harbor defense, you must have and “reasonably implement” a policy for terminating, “in appropriate circumstances,” “repeat infringers.” Remember those short little notices? They also double as DMCA takedown notifications.50For whatever reason, the DMCA calls these things “notifications,” not “notices.” The thinking must have been: if we keep sending these notices to the ISPs, and they don’t do anything about them, they’ll have violated the obligation to terminate repeat infringers.
So, on November 2651Happy Thanksgiving!, the other shoe dropped. Two of RightsCorp’s clients52Because RightsCorp doesn’t actually have an interest in the copyrights at issue, it can’t bring the lawsuit. Instead, two of its clients, BMG Rights Management and Round Hill Music, are the plaintiffs. But it’s pretty clear who is calling the shots and paying the bills. sued one of those recalcitrant ISPs, Cox Communications. The nub of the lawsuit is that RightsCorp has been sending huge numbers of DMCA takedown notifications to Cox, and Cox has not terminated a single soul. Therefore, Cox has violated the DMCA’s repeat-infringer requirement; and, therefore, Cox is contributorily and vicariously liable for infringement by its customers.
This was exciting news! I’ve long wondered why rights holders haven’t attacked internet service providers53In the context of the DMCA, a “service provider” is much broader than the traditional last-mile ISP, like Cox, but includes anyone who provides a service over the internet, so it would include Amazon, YouTube, etc. for failing to meet this requirement. The requirement is couched in very squishy language, and there is very little clarifying legal authority about it, yet failure to abide by it results in the completely removal of DMCA safe-harbor protections—very harsh! All these things favor the plaintiff. If you’re the defendant-ISP, you can’t be sure that you really have been complying with this critical requirement because nobody quite knows the contours of that requirement. Also, with two well-financed parties fighting it out, we might get some much-needed clarification about the contours of the repeat-infringer requirement, much as the Veoh and YouTube cases helped clarify other aspects of the DMCA safe harbors.
I’d love to tell you all I know about the repeat-infringer requirement54And I will. Later.. I even have a half-finished blog post to that effect. But, sadly, unless things go really horribly for Cox, the case won’t even get that far.
Here’s the thing that everyone’s overlooking. The DMCA safe-harbor is a defense to a claim of copyright infringement. For it to even matter, there has to be a viable claim of copyright infringement. And just because someone is intimately involved in the internet ecosystem doesn’t mean that it’s legally responsible for everything that runs through its wires. You still have to prove your case. And just because a legal defense doesn’t apply doesn’t mean liability is automatic.55*This is a Classic Legal Blunder. You still have to prove your case.
Put another way, just because Cox didn’t terminate any of its customers’ accounts in response to RightsCorp’s avalanche of short little notices doesn’t mean Cox is liable for copyright infringement. You still have to go through the boring, unsexy task of determining liability before you can get to the fun task of talking about the repeat-infringer requirement.
RightsCorp has asserted claims against Cox for contributory copyright infringement and vicarious copyright infringement. I’ve described these two types of indirect copyright infringement here. Both claims are stretches.

Contributory Infringement: Tangled Up in VCR Tape…

To win on contributory infringement, RightsCorp will have to prove (1) that Cox’s subscribers have committed direct copyright infringement, (2) that Cox was aware of that infringing activity, (3) Cox materially contributed to the infringement, and (4) Cox’s provision of last-mile ISP service doesn’t have substantial non-infringing uses.
RightsCorp is going to have at least some difficulty with all of these elements, but the fourth is the biggest stumbling block. It looks insurmountable to me. This element derives from the notorious and influential Sony/Betamax Supreme Court opinion, which held that the sale of video recorders did not constitute either contributory or vicarious infringement because they were capable of “substantial non-infringing uses.” Now, it’s true that this rule gets taken out of mothballs to support some pretty sketchy arguments, usually along the lines of: Well, while no one actually uses our service for non-infringing purposes, they theoretically could. That argument didn’t work very well for Napster and Grokster. But the service that Cox is providing is a perfect fit for Sony/Betamax. The vast majority of the traffic moving across Cox’s network is not infringing. It’s your emails, your photographs of your kids, your Facebook posts, your streaming Netflix, your buying songs on iTunes, etc.56The only argument against this I can think of is that Cox doesn’t sell goods but a service. Sony/Betamax’s holding was borrowed from patent law’s “staple article” doctrine, which excepts from contributory patent liability “staple article[s] … suitable for substantial noninfringing use.” 35 U.S.C. § 371(c). But this is a distinction without a difference. For one thing, patent law’s contributory infringement is limited to goods (so a provider of internet service could never be liable for contributory infringement). Since copyright law’s version of contributory infringement is broader, then this “staple article” exception is proportionally broader.

….and Tripped by File-Sharing Precedent

And, believe it or not, RightsCorp will have trouble with the other elements. It might seem obvious that, by providing access to the internet, Cox is materially contributing to its customers’ illegal uploading and downloading of copyrighted content. But Cox’s customers aren’t actually being accused of transmitting illegal content over Cox’s network. Read the complaint very carefully, especially ¶ 22. Notice that RightsCorp’s technology doesn’t actually detect BitTorrent transmissions, mostly because that’s impossible.57I think Cox itself would find such snooping very difficult, for a number of technological, ethical and business reasons. What RightsCorp does is pretend to be a BitTorrent user and find out what files are available for torrenting.
Yes, that’s right. We’re talking about the “making available” right. Again. Whatever Profs. Nimmer and Menell might wish, most courts believe there is no such thing.58And I continue to believe that’s the correct view. Even if you think there is such right, it’s a stretch to say that Cox’s last-mile internet service contributes materially to its violation. The nub of a “making available” right is placing an illegal copy of a copyrighted work someplace—such as a publicly-accessible file-share folder on a computer—where others may take it. By providing the link between the computer and the internet, Cox makes such access possible, but so do all common carriers with respect to counterfeit physical goods. The difference between Cox and, say, UPS, is that Cox is more efficient at transferring information and has more leverage over its customers. But that doesn’t make it RightsCorp’s errand-boy.

Vicarious Liability: Your ISP Isn’t Napster…

RightsCorp might have a bit more luck with vicarious liability. For one thing, it’s generally agreed that Sony/Betamax doesn’t apply to it.59On its face, Sony/Betamax appears to apply to vicarious liability, but the consensus view is that the Supreme Court was just really slopping with its labels. Think about that for a minute.
To make a case for vicarious copyright infringement, RightsCorp will need to prove that Cox (1) controlled the infringing activity, and (2) derived a direct financial benefit from it. We actually have persuasive caselaw applying both of these elements to computer networks, and it suggests that RightsCorp will lose on both counts.
First, “control” means more than merely being a gatekeeper. You have to have the right and ability to supervise the infringing activity. In Napster, the Ninth Circuit made it quite clear that the power to terminate its customers’ accounts wasn’t “control,” without more.60“Put differently, Napster’s reserved ‘right and ability’ to police is cabined by the system’s current architecture.” Napster had to have been able to monitor the traffic across its network and see that it was infringing. In Napster’s case, the court found that Napster had this ability because it indexed its users’ file names, which tended to give away their infringing nature.
But Cox doesn’t (and probably can’t) monitor the traffic moving across its traffic for infringing content—or any other type of content. The short little notices provided by RightsCorp aren’t the same thing. In this context, RightsCorp is just an interfering busybody. Also, remember that RightsCorp has no idea what files are actually being transmitted over Cox’s network: it just knows what files are resident on Cox’s customers’ computers. So those notices aren’t really a substitute for some ability to monitor content.

…or Dance Hall or Even a Flea Market

Second, collecting flat subscription fees isn’t a receiving a direct financial benefit from the infringing activity. Everybody pays the same fee regardless of the content. The worst you can say about Cox is that it likes infringers’ money as well as anyone else’s money. Cox is a lot more like an absentee landlord than a dance-hall proprietor. It’s thus different from the flea-market proprietor in Fonovisa, which was paid only a rental fee, but also concession stand sales and parking fees that could be tied to the “draw” of the counterfeit items for sale.
Only after RightsCorp has proved either contributory or vicarious infringement, only then does the repeat-infringer requirement become an issue. And, in my opinion, RightsCorp has a difficult road to get to that point.
And if RightCorp does? I’ll speculate about the nature of the very mysterious repeat-infringer DMCA requirement in a follow-up post.
Thanks for reading!

Rick Sanders

Rick is an intellectual-property litigator. He handles lawsuits, arbitrations, emergency injunctions and temporary restraining orders, opposition and cancellation proceedings, uniform dispute resolution proceedings (UDRPs), pre-litigation counseling, litigation avoidance, and other disputes, relating to copyrights, trademarks, trade secrets, domain names, technology and intellectual-property licenses, and various privacy rights. He has taught Copyright Law at Vanderbilt University Law School. He co-founded Aaron | Sanders with Tara Aaron-Stelluto in 2011.