In February 2024, the Fourth Circuit addressed a jury’s 2020 damages award of $1 billion finding Cox secondarily liable for its subscribers’ copyright infringement through illegal copying of copyrighted songs. Sony Music Ent. v. Cox Commc'ns, Inc., 93 F.4th 222 (4th Cir. 2024). The Fourth Circuit affirmed the jury’s finding that Cox was willfully contributorily liable for infringement, but reversed the jury’s finding of vicarious liability, vacating the damages award and remanding the case for a new trial on damages.

Both Cox and Sony filed petitions for certiorari in August 2024—Cox asking the Supreme Court to review the Fourth Circuit’s holdings on willfulness and contributory liability, and Sony asking for review on vicarious liability. Key industry players filed amici supporting the respective petitions. In October 2024, both Sony and Cox filed briefs in opposition to the others’ petition.

Sony’s Petition

In Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., the Supreme Court held that to establish vicarious liability, plaintiffs must show that a defendant (1) “profits directly from the infringement,” and (2) “has a right and ability to supervise the direct infringer.” 545 U.S. 913, 930 n.9 (2005). The Fourth Circuit in Sony did not reach the issue of supervision. It reversed the district court on the first prong, holding that Cox did not profit directly from its subscribers’ infringement because (1) it charged a flat monthly fee whether subscribers infringed copyright or not, and (2) subscribers were not drawn to Cox’s premium subscription offerings specifically for the purpose of infringing copyright. 93 F.4th at 230-33.

In its petition, Sony argues that profiting “from the larger operation in which the infringement occurred” constitutes direct profit. Petition for a Writ of Certiorari at 14-15, Sony Music Ent. v. Cox Commc'ns, Inc., No. 24-181 (Aug. 16, 2024). Sony says the Fourth Circuit’s decision is at odds with other circuits that adhere to the long line of “dance hall cases” following Dreamland Ball Room v. Shapiro, Bernstein & Co., 36 F.2d 354, 355 (7th Cir. 1929). Sony Pet. 13. In Dreamland, the operator of a dance hall was found vicariously liable for infringement where its hired orchestra played copyrighted music. Sony cites cases from the First, Second, Third, Seventh and Ninth Circuits following Dreamland. Id. 14-16.

As one example, Sony focuses on the Ninth Circuit case Fonovisa v. Cherry Auction, Inc., where the court held the defendants liable because some of their rental stall vendors sold counterfeit music recordings. 76 F.3d 259 (9th Cir. 1996). The Ninth Circuit explained that while the defendants received the same rental payment from all vendors, they “reap substantial financial benefits from admission fees, concession stand sales and parking fees…from customers who want to buy the counterfeit recordings.” Id. at 263. Sony argues that Fonovisa demonstrates that vicarious liability does not “require a strict causal link…between the defendant’s profit and the act of infringement.” Sony Pet. 17.

Sony also cites a line of cases following Herbert v. Shanley Co., 242 U.S. 591 (1917), which held that a hotel restaurant profited from an orchestra that played infringing music because the music was “part of a total for which the public pays.” Sony Pet. 26. Sony also relies on the legislative history of Congress’ rejection of an amendment to the Copyright Act, and points to the “most efficient risk bearer” principle in tort law as further support. Id. 29-30.

In its opposition brief, Cox interprets the dance hall cases as requiring defendants to receive direct benefit from orchestras that played copyrighted works, even if difficult to quantify. Brief in Opposition at 15-18, Sony Music Ent. v. Cox Commc'ns, Inc., No. 24-181 (Oct. 21, 2024). Cox highlights Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004), which directly addressed the issue of “whether an online service provider should be held vicariously liable for copyright infringement.” Cox Opp. 11. In Ellison, the Ninth Circuit held that AOL was not vicariously liable for its subscribers sharing copyrighted books on its forum because AOL did not receive “a direct financial benefit from providing access to the infringing material.” 357 F.3d at 1079.

Cox also stresses courts’ reluctance to expand vicarious liability too far beyond its original roots in agency law, and counters Sony’s invocation of legislative history as out of context and just one line in a House report. Cox Opp. 22-25, 27-28.

Cox’s Petition

Contributory Liability

In Grokster, the Supreme Court explained that “[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement,” but “mere…failure to take affirmative steps to prevent infringement” is not contributory infringement. 545 U.S. at 914, 939 n.12.

Borrowing the Second Circuit’s formulation in Gershwin Pub. Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159 (2d Cir. 1971), the Fourth Circuit found that Cox “materially contributed” to the copyright infringement of its subscribers because it failed to terminate internet access for users that Cox knew had repeatedly infringed copyrights. Sony, 93 F.4th at 237. The court also noted Cox’s increasingly liberal policies on copyright infringement and internal emails displaying contempt for infringement laws. Id.

In its petition, Cox argues that a three-way circuit split demonstrates “widespread confusion” about Grokster’s standard for contributory liability. Petition for a Writ of Certiorari at 17, Cox Commc'ns, Inc. v. Sony Music Ent., No. 24-171 (Aug. 15, 2024). Cox explains that the Second and Tenth Circuits require “affirmative, culpable conduct” to establish contributory liability. Cox Pet. 3; EMI Christian Music Grp., Inc. v. MP3tunes, LLC, 844 F.3d 79 (2d Cir. 2016); Greer v. Moon, 83 F.4th 1283 (10th Cir. 2023). Cox counts the Ninth Circuit’s “simple measures” test as a “middle-ground” position that requires reasonable steps to prevent infringement. Cox Pet. 3; Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657 (9th Cir. 2017). Cox contends that the Fourth Circuit diverges entirely from its sister circuits, and submits that it would not have been liable under the other circuits’ standards. Cox Pet. 21.

As further evidence of widespread confusion, Cox points to copyright treatises, law journal articles and a Judge Posner decision that highlight pitfalls of the standard in Grokster. Cox Pet. 22-23.

Finally, Cox argues that the doctrine of contributory liability is borrowed from other contexts and highlights the Supreme Court case in Twitter, where the court absolved Twitter of contributory liability under the Justice Against Sponsors of Terrorism Act because it did not engage in “conscious, voluntary, and culpable participation in another’s wrongdoing.” Twitter, Inc. v. Taamneh, 598 U.S. 471, 493, 505 (2023).

In its opposition brief, Sony maintains that there is no circuit split, Cox would be liable under the standards in any circuit, and the Ninth Circuit’s “simple measures” test is inapplicable here, where Cox does not have the ability to remove the copyrighted work. Brief in Opposition at 9-20, Cox Commc'ns, Inc. v. Sony Music Ent., No. 24-171 (Oct. 16, 2024). As to Twitter, Sony contrasts Twitter’s passivity with Cox’s affirmative misconduct. Id. 20-23.

Willfulness

Under 17 U.S.C. § 504(c)(1)-(2), willful violations of copyright increase statutory damages from a maximum of $30,000 to $150,000. The Fourth Circuit held Cox’s violations were willful because Cox had specific knowledge of subscribers’ infringement and knew that such infringement was “substantially certain to result from…particular subscribers.” Sony, 93 F.4th at 234.

In its petition, Cox argues that there is a circuit split between the Fourth and Eighth Circuits. In BMG Rts. Mgmt. (US) LLC v. Cox Commc’ns, Inc., the Fourth Circuit endorsed the lower court’s instruction to the jury that if the defendant knew certain subscribers’ conduct was illegal, the jury should find the secondary infringement to be willful. 881 F.3d 293, 313 (4th Cir. 2018). In contrast, the Eighth Circuit held in RCA/Ariola International, Inc. v. Thomas & Grayston Co., that a service provider’s conduct is willful if the provider understands that its own conduct, rather than its subscribers’ conduct, is illegal. 845 F.2d 773, 779-80 (8th Cir. 1988).

Cox explains that willfulness “across the legal spectrum, from willful crimes to willful employment discrimination,” depends on the actor’s reasonable belief as to whether its own conduct was lawful. Cox Pet. 33. Cox also argues that Congress intended to create a tiered damages regime and if mere knowledge of subscribers’ infringement constitutes willfulness, all contributory infringement is willful. Id. 33-34.

In its opposition brief, Sony asserts that the Eighth and Fourth Circuits agree that a secondary infringer’s reckless disregard for direct infringement by another is sufficient to establish willfulness, that this reckless disregard standard is applied universally, and that the standard keeps Congress’ tiered damages regime intact. Sony Opp. 24-31.

Conclusion

Cox argues that the Fourth Circuit’s decision “threatens mass disruption across the internet.” Cox Pet. 1. While Sony characterizes Cox’s fears as “overblown,” Sony Opp. 32, the Supreme Court now has the opportunity to clarify issues of secondary liability for copyright infringement.