IP Law Daily, COPYRIGHT—E.D. Tex.: Another music industry case against an ISP goes forward, (May 17, 2023)

By Matthew Hersh, J.D.

Service provider Altice fails to convince a court to dismiss the complaint alleging that it was liable for users’ file-sharing activities.

Record labels and music publishers sufficiently alleged that a major Internet service provider could be held liable for its users’ widespread infringement through a prominent file-sharing service, the U.S. District Court for the Eastern District of Texas has decided. The court, in refusing to dismiss the music industry’s complaint against the service provider, will presumably allow the case to proceed forward with discovery and an eventual ruling on the service provider’s Digital Millennium Copyright Act (DMCA) safe harbor defense (BMG Rights Management (US) LLC v. Altice USA, Inc., May 12, 2023, Gilstrap, R.).

The lawsuit is one of many that rightsholders of musical works and sound recordings have brought against internet service providers. The lawsuit at issue in this opinion targets Altice, the New York-based cable television and Internet provider that is perhaps better known by the name of its predecessor, Cablevision. The copyright owners, led by BMG Rights Management and UMG Recordings, claimed that the service provider has been engaging in “blatant and systemic use” of the service by allowing its users to unlawfully distribute their works through notorious file-sharing technology BitTorrent. As a result, the copyright owners allege, the service provider is responsible both vicariously and contributory liable for those acts of infringement.

The service provider moved to dismiss the complaint, leading to this opinion.

Vicarious liability. The court rejected the motion to dismiss, allowing the complaint to go forward to discovery. In doing so, the court grappled with a complex and potentially contradictory amount of doctrine. In order to adequately plead that an Internet provider is vicariously liable for its users’ infringement, a copyright owner must allege that the ISP had a direct financial interest in that infringement and that it has a right and ability to supervise its users. Although there was some authority pointing the other way, the court noted, the complaint met the threshold under the better read of the caselaw.

The complaint adequately alleged that the ISP obtained a direct financial benefit from infringement, the court found, because it alleged that the ability to use the network to infringe—in addition to other factors such the high speed of its services—acted as a draw for users. Here was the first doctrinal question. All parties agreed that to the extent some users were specifically drawn to the service because of its allegedly lax enforcement policy, that could potentially be enough to constitute a direct financial benefit to the service. But did the allegedly lax policy have to constitute only some sort of draw for users, or did it have to be the “main” draw? Here the caselaw was arguably mixed—but the better authority, the court noted, held that there needed only to be some sort of causal relationship between the allegedly lax enforcement policy and the growth of the user base. Thus, the court reasoned, the fact that the copyright owners alleged only that lax infringement was a draw for users—even though they did not allege that it was the main draw—was enough to sustain a claim.

The complaint also adequately alleged that the service provider had the right and ability to supervise its users, the court found, because it contended that the ISP had the contractual right to deny service to users who infringed. The service provider argued that the complaint fell short because it did not allege that the service provider had the ability to stop its users’ infringement before that infringement took place. But that was not required under the caselaw, the court found. To be sure, the court noted, cases held that an ability to stop infringement before it happened was enough to constitute a right and ability to control. But that was only the high water mark of right and ability to supervise, the court found—not the prerequisite. To the contrary, the court noted, it was “not persuaded” by the service provider’s argument that “the contractual right to condition the availability of the internet is never enough to plausibly allege supervision or control over infringing conduct.” To the contrary, the court observed, considerable caselaw pointed the other way. Thus, the complaint adequately alleged vicarious liability.

Contributory liability. The complaint also adequately alleged that the service provider was liable for knowingly contributing to its users’ infringement, the court noted—another way in which the service provider could be secondarily liable for copyright infringement. This again required the unpacking of a complicated legal doctrine. There was little question that the complaint alleged that the service provider contributed to its users’ alleged infringement—those users could not have done so without the service. But did it allege that the service provider did so knowingly? The court found that it did.

The music industry adequately alleged knowledge, the court found, because it alleged that the service provider turned a blind eye to millions of notices that its users were infringing. The service provider argued that this didn’t matter because it was not accused of actually inducing its users to infringe, as opposed to merely tolerating that infringement. But while inducement of infringement was enough to constitute knowing contribution of infringement, the court noted, it was merely a sufficient but not a necessary condition. Here, the court noted, the service provider was accused of receiving millions of notices about its users’ past copyright infringement, but doing nothing to prevent those users from continuing to infringe. That allegation of willful blindness, the court noted, was enough to meet the knowledge threshold—and therefore to allow the claim to go forward.

The case is No. 2:22-CV-00471-JRG.

Attorneys: Michael Jarrett Allan (Steptoe & Johnson LLP) for BMG Rights Management [US] LLC, UMG Recordings, Inc. and Capitol Records, LLC. Michael S. Elkin (Winston & Strawn) for Altice USA, Inc. and CSC Holdings, LLC.

Companies: BMG Rights Management (US) LLC; UMG Recordings, Inc.; Capitol Records, LLC; Altice USA, Inc.; CSC Holdings, LLC

Cases: Copyright TechnologyInternet TexasNews GCNNews