IP Law Daily, COPYRIGHT—W.D. Tex.: $46 million jury verdict against Grande Communications is upheld, (May 18, 2023)

By Matthew Hersh, J.D.

Record companies score another victory over an internet service provider

An internet service provider that was found by a Texas jury to have contributed to widespread infringement of copyright music over file-sharing networks was not entitled to a reversal of the verdict as a matter of law, the federal court in Austin has held. The court, in brushing back the service provider’s last-ditch effort to earn judgment in its favor, or at least a new trial, added to a long line of decisions holding service providers liable for the repeated infringing conduct of their subscribers (UMG Recordings, Inc. v. Grande Communications Networks, LLC, May 11, 2023, Ezra, D.).

The ruling is the latest step in a long dispute between record companies and Grande Communications, a subsidiary of Astound Broadband that provides cable television and internet services in Texas. The major record labels, along with a modest collection of independents, sued the service provider in an Austin court in 2017. The complaint alleged that the service provider turned a blind eye to more than one million copyrighted works over the BitTorrent file-sharing system, “including tens of thousands of blatant infringements by repeat infringers of Plaintiffs’ copyrighted works.”

After considerable discovery and several extensions of the trial date, the court eventually set a trial for the fall of 2022. In the interim, the court rejected as a matter of law the service provider’s claim to a safe harbor under the Digital Millennium Copyright Act, or DMCA. The court’s 2019 order agreed with the findings of a magistrate that the service provider was ineligible for the safe harbor because from 2010 through 2017 it failed to terminate the accounts of even a single subscriber who used their accounts for infringement. The court also rejected as a matter of law, in a separate order, the record companies’ allegation that the service provider was vicariously liable for the alleged infringement by its subscribers.

That cleared the way for a trial on the record companies’ contributory liability claim. After a nearly month-long trial, a jury returned a unanimous verdict finding the service provider contributorily liable for copyright infringement and assessing statutory damages at $46.7 million (or $33,333 for each of the 1,403 works for which statutory damages could be assessed).

The service provider moved for judgment notwithstanding the verdict, or alternatively for a new trial, on a number of grounds, leading to this decision.

Direct infringement. The court rejected the motion on all grounds. The first ground was direct infringement. In order to find the service provider liable for contributing to its users’ infringement, the jury first had to find that the users actually infringed. But the jury was never given a chance, the service provider argued, to listen to the actual sound recordings that were allegedly infringed in order to compare them to the originals. That made no difference, the court found. The jury was given a wealth of evidence with which they could find that the sound recordings matched, including evidence from a reliable audio fingerprinting company and testimony from an official at a recorded music trade group who compared a number of the songs himself. That was more than enough, the court found, to support the verdict.

The court also found that there was no error in its jury instructions on direct infringement. The jury was told that it could rely on evidence that copyrighted content was “offered or distributed to third parties. But there has been an extensive debate, among commentators and courts, over whether the mere offering to distribute the work, even if an act of distribution is eventually not consummated, is enough to constitute infringement. Nonetheless, the court noted, there was no error in the instruction. The “great weight” of the caselaw, the court noted, found that mere offering was enough on its own to constitute infringement. Equally important, the court noted, the jury was entitled to rely on the fact that copyrighted works were offered for upload as evidence that the works were in fact uploaded. A new trial was not warranted on this ground.

Knowledge and willfulness blindness. The court also found that a reasonable jury could have concluded that the service provider acted with knowledge of—or was at least willfully blind to—the infringing activity of its users. The court’s analysis of this issue was fairly straightforward. A company hired by the record labels regularly monitored activity on BitTorrent and sent notices to the service provider about infringing conduct happening through its service. The service provider argued that this was not enough to confer knowledge because it had “no way of knowing” whether these notices were correct. But the evidence showed that the service provider had many ways to verify the information in those notices, a court found. A reasonable jury could easily find knowledge.

Material contribution. The court also rejected the service provider’s argument about the material contribution doctrine. The service provider argued that in order to find material contribution, the jury needed to find that the provider took “affirmative” steps to help users engage in infringement. But that was not the law, the court found. The jury reasonably found, based on the evidence before it, that the service provider was aware that users repeatedly infringed and yet failed to disconnect those users from the network. That was enough, the court found, to sustain the verdict.

Statutory damages. The jury’s award of statutory damages, the court held, would also stand. The evidence showed, the court observed, that the service provider ignored notices of infringing activity on its system, failed to investigate those notices, and didn’t terminate a single user for infringement in over half a decade. That was more than enough, the court found, to support a finding that the service provider acted willfully—or at least recklessly, which was legally equivalent for the purposes of statutory damages.

Other issues. No other objection by the service provider merited judgment notwithstanding the verdict, the court found. To be sure, the court noted, the jury heard brief references to a prominent infringement case involving another ISP—but that was merely to show that the service provider was willfully blind about infringement, not to “insinuate that this case should come out the same way.” And the jury also heard a brief reference to the fact that the service provider had lost its safe harbor defense, but that was because the provider itself brought it up in testimony. The remainder of the service provider’s “laundry list,” in the court’s words, was meritless.

The Case is No. 1:17-cv-00365-DAE.

Attorneys: Andrew H. Bart (Jenner & Block LLP) for UMG Recordings, Inc. Abigail Twenter (Armstrong Teasdale LLP) for Grande Communications Networks LLC.

Companies: UMG Recordings, Inc.; Grande Communications Networks LLC

Cases: Copyright TexasNews