Welcome back to the High Court Report.

Today we dive into a billion dollar broadband battle, Cox Communications versus Sony Music Entertainment.

A case that could reshape how we think about Internet service providers and copyright liability.

If you're keeping score, this is the first copyright case the Supreme Court will hear this term.

The court scheduled oral arguments for December 1, the first business day after Thanksgiving.

This case intrigues me for a couple reasons.

One, because this case sits right at the intersection of two things Americans care deeply.

Protecting artists, creative work and keeping universal Internet access affordable and available.

Exactly.

And another intriguing point is that the fourth Circuit essentially told Cox Communications, terminate customers accused of copyright infringement or face billion dollar liability.

You heard it right.

A $1 billion jury verdict here.

A billion dollars.

To put that in perspective, that's more than 1,400 times the actual losses Sony proved at trial, which were only $692,000.

And here's a third area of interest.

It's not often that industry titans face off at the Supreme Court like this.

Here we have Sony with a market cap of around $175 billion, 2000 facing off against Cox Communications, which is part of the $21 billion Cox Enterprises conglomerate.

Those are massive companies with enormous stakes in this outcome.

Sony represents the global entertainment industry's fight to protect intellectual property, while Cox represents the infrastructure that keeps America connected to the Internet.

This case generated massive interest.

We're talking about a whopping 31amicus briefs filed on the merits of, from tech giants like Google and X Corp. To the aclu, the Motion Picture association, industry groups, legal scholars, and even former members of Congress.

31.

Most Supreme Court cases might get a handful of amicus briefs.

When you see that level of participation, you know this case touches fundamental questions about how the Internet operates.

So let's break down what's really at stake.

If the Supreme Court upholds this decision, it could fundamentally change the how Internet service providers operate.

But if they reverse it, copyright holders worry that online piracy will explode.

The central tension here is whether providing Internet service to someone you know will probably infringe copyright makes you liable as an accomplice to that infringement.

And this matters for every single American who uses the Internet because this case determines when your ISP will might cut off your connection based on accusations, not proof of copyright infringement.

Let me read the two questions the Supreme Court granted certiorari to resolve.

First, did the Fourth Circuit err in holding that a service provider can be held liable for materially contributing to copyright infringement merely because it knew that people were using certain accounts to infringe and did not terminate access without proof that the service provider affirmatively fostered infringement or otherwise intended to promote it.

And second, did the Fourth Circuit err in holding that mere knowledge of another's direct infringement suffices to find willfulness under 17 USC section 504c?

Now, the key statutory text comes from the Copyright Act.

The willfulness Provision in Section 504 says that statutory damages can increase to $150,000 per work if the infringement was committed willfully.

But here's what's fascinating.

There's no single statutory definition of contributory infringement.

Courts created this doctrine using judge made law, drawing from Supreme Court cases like Sony versus Universal Studios from 1984 and MGM versus Grokster from 2005.

Right.

And Sony established that you can't hold someone liable for contributory infringement just because they sell a device capable of both legal and illegal uses, like a Betamax recorder that can record both copyrighted movies and family home videos.

But Grokster added that if you actively encourage people to use your technology for infringement, like Grokster did by promoting its file sharing software specifically for downloading copyrighted music, then you can face liability even if the technology contains legal uses.

So here's the story of how we got to the Supreme Court.

Cox Communications operates as an Internet service provider.

Basically, they sell Internet connections to homes and businesses across multiple states.

Like all major ISPs, Cox receives massive numbers of automated notices from record labels claiming that specific IP addresses on Cox's network downloaded copyrighted songs illegally.

We're Talking about roughly 5.8 million infringement notices during just the two year period at issue in this case.

Now, Cox didn't ignore these notices.

They actually developed what they called a 13 strike policy.

Customers who received multiple infringement notices would get warnings and theoretically repeat offenders would eventually lose their Internet service.

But here's where it gets interesting.

Sony Music and other record labels argued that Cox deliberately sabotaged its own policy.

The trial evidence showed that Cox employees regularly reset customers strike counts, reactivated terminated accounts, and even mocked the Digital Millennium Copyright act with one employee literally writing f the DMCA in internal communications.

And the numbers are pretty stark.

Cox terminated only a few dozen customers over the relevant period, even though they received millions of infringement notices.

The trial court found that Cox deliberately avoided terminating customers because, as Cox employees put it in emails, we want to hold on to every subscriber we can.

This brings us to a crucial background legal the DMCA safe harbor.

Congress created this protection in 1998 to shield Internet companies from copyright liability, but only if they follow specific rules, including terminating repeat infringers.

The 4th Circuit already ruled in an earlier case that Cox lost its safe harbor protection because it didn't actually terminate repeat infringers.

So when Sony sued Cox in this case, Cox couldn't use the DMCA as a defense.

At trial, the jury found Cox liable for contributory copyright infringement and awarded damages on 10,017 copyrighted works.

They also found that Cox acted willfully, which increased the potential damages to $150,000 per work.

Instead of the normal maximum of $30,000, the jury awarded exactly $1 billion.

That's about $99,830 per copyrighted work.

Remember, Sony proved actual losses of only about $692,000 total.

Cox appealed to the 4th Circuit, which reversed the vicarious infringement verdict but upheld the contributory infringement finding.

The Fourth Circuit said that Cox materially contributed to infringement simply by continuing to provide Internet service to customers it knew would likely keep infringing.

The Supreme Court granted certiorari to resolve this question, which split the circuits and created uncertainty for Internet service providers nationwide.

Let's break down how each side frames this case, starting with Cox's argument.

Cox makes three main arguments.

First, they argue that contributory infringement requires purposeful culpable conduct with the intent to promote infringement.

Cox says they never encouraged anyone to infringe.

They provided standard Internet service on the same terms to everyone.

Cox points out that they didn't provide file sharing software, didn't host copyrighted content, and didn't give customers instructions on how to infringe.

Their terms of service actually prohibited infringement, and they invested in anti infringement programs that reduced infringement by 98% among participating customers.

Cox's second major argument draws on the Supreme Court's Sony and Grokster decisions.

They argue that Internet service is a paradigmatic multi use technology with massive legitimate uses, everything from work to education to entertainment to communications.

Under Sony, you can't impose liability on someone who provides general purpose technology just because some people misuse it.

And Cox argues that Grokster only allows liability when someone actively induces or encourages infringement.

Cox's third argument is about practical consequences.

They warn that the Fourth Circuit's rule would make ISPs liable for literally everything bad that happens on the Internet.

Bullying, harassment, libel, racketeering, unlawful gun sales.

Anyone could send an accusation to an ISP and create potential liability if the ISP doesn't immediately terminate service.

Now let's look at Sony Music's counter arguments.

Sony argues that Cox's reading of the law would essentially eliminate secondary liability for copyright infringement in most online contexts.

Sony emphasizes that contributory infringement entails two established inducement, which requires active encouragement, and material contribution, which applies when someone knowingly continues supplying tools to specific infringers.

Sony quotes a 1982 Supreme Court case in Woodlabs, which held that defendants face liability if they continue to supply their product to one whom they know is engaging in infringement.

Sony argues that's exactly what Cox did here.

Sony also points to the DMCA's structure as supporting their position.

They argue that if Cox's theory were correct that you need active inducement for liability, then Congress wouldn't have needed to create safe harbor protections for ISPs who terminate repeat infringers.

Sony emphasizes the egregious nature of Cox's conduct, the internal email's mocking copyright law, the deliberate failure to terminate known repeat infringers, and what Sony characterizes as Cox's profit motive in retaining paying customers regardless of their infringing activity.

The United States filed an amicus brief supporting Cox and will participate in oral arguments, which adds significant weight to Cox's position.

The government argues that contributory liability requires culpable intent to facilitate infringement, not just knowledge that infringement will occur.

The government draws parallels to recent Supreme Court cases on aiding and abetting, particularly Twitter versus Tomne, where the court held that providing communications services doesn't create liability just because, you know, some customers will misuse those services.

The government warns that affirming the 4th Circuit's decision would threaten universal Internet access because ISPs would face pressure to terminate service to avoid liability, potentially cutting off innocent family members, employees, or students who share Internet connections.

Looking ahead to oral arguments, I'll be watching for several key tensions.

For one, how do the justices react to the technology analogy debate?

Do they see Internet service as more like selling hammers in a hardware store or more like providing ongoing specialized services?

That hammer analogy actually comes from the government's brief, where they argue that holding Cox liable would be like making a hardware store owner responsible when someone uses a purchased hammer to commit a crime.

The analogy highlights whether Internet service is just a general purpose tool sold to the public, or whether Cox's ongoing relationship with known repeat infringers changes the legal calculus.

It's a perfect example of how the justices will try to make sense of digital age liability using familiar physical world comparisons.

I'll be interested in questions about the line between active inducement and passive provision of tools.

Justice Kavanaugh for instance, might ask whether there's a meaningful difference between Grokster's active promotion of infringement and Cox's deliberate refusal to stop known infringers.

The practical consequences could generate fascinating exchanges.

If Justice Barrett asks about implementation, we might hear competing visions of how ISPs would actually operate under each rule.

And given the Court's recent interest in administrative workability, I suspect we will hear questions about whether Cox's proposed rule or Sony's proposed rule creates more litigation and uncertainty.

The federalism angle might emerge, too.

Most federal appellate courts rejected the approach the 4th Circuit took here, so the Justices might explore whether this represents a genuine circuit split or just an outlier decision.

And we'll have three parties arguing Cox, Sony, and the United States government supporting Cox.

Their participation suggests this case holds implications well beyond just copyright law.

This case matters because it affects the basic infrastructure of how Americans access information and communicate online.

If ISPs face massive liability for their customers actions, it could fundamentally change Internet access and affordability.

But it also matters for creators and artists who depend on copyright protection to make a living.

If Internet companies can facilitate infringement without consequences, it undermines the economic foundation of creative industries.

Beyond copyright, this case could influence how courts think about platform liability more broadly, from social media companies to cloud storage providers to payment processors.

We'll host oral arguments, so make sure you subscribe.

This promises to be one of the most sneaky, interesting and important cases of the term.

Thanks for joining us for this preview into Cox Communications versus Sony Music Entertainment.

It's a perfect example of how technological change forces courts to re examine century old legal principles.

If you're a copyright lawyer, Internet industry professional or ISP executive, or anyone possibly affected by this case, we'd love to hear your thoughts on this case.

We have an open invitation to join the podcast to discuss this case.

In our next episode we discuss an immigration law case called Urias Orellana vs Bondi.

This case asks whether a Federal Court of Appeals must defer to the Board of Immigration Appeals judgment that certain undisputed facts do not demonstrate mistreatment severe enough to constitute persecution to establish refugee status.

We'll break it all down for you.

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