In late 2022, several of the world’s largest music companies including Warner Bros. and Sony Music prevailed in their lawsuit against Internet provider Grande Communications.
The record labels accused the Astound-owned ISP of not doing enough to stop pirating subscribers. Specifically, they alleged that the company failed to terminate repeat infringers.
The trial lasted more than two weeks and ended in a resounding victory for the labels. A Texas federal jury found Grande guilty of willful contributory copyright infringement, and the ISP was ordered to pay $47 million in damages to the record labels.
$47 Million Appeal
This September, Grande filed its opening brief in which it again argued that the lower court reached the wrong conclusion. Internet providers shouldn't be held liable for pirating customers based on third-party allegations, the company noted.
“This appeal presents important questions of first impression in this Circuit about whether, and in what circumstances, an internet service provider may be held secondarily liable for the conduct of users of its service,” the ISP wrote.
The ISP believes that it shouldn’t have to terminate Internet access this easily. This view is bolstered by a recent Supreme Court decision in favor of ___ and other social media platforms, which held that they’re not liable for terrorist messages.
Grande is not alone in this appeal. Several telecoms organizations agreed that terminations are a drastic and overbroad remedy, which can have severe consequences for non-infringers.
Record Labels Counter
The record labels countered Grande's appeal. They believe that the jury reached a sound verdict that should be upheld on appeal; the alternative would make it almost impossible to tackle the online piracy problem.
Grande could have avoided liability if it had adopted and reasonably implemented policies to terminate repeat infringing subscribers. However, the music companies argue that the ISP chose to increase its profits instead.
The rightsholders believe that Grande’s decision was financially motivated. The company reportedly terminated the accounts of many subscribers who failed to pay their bills but took no action against repeat infringers.
Appeals Court Affirms Jury Verdict
After hearing both sides, the Fifth Circuit Court of Appeals affirmed the jury verdict yesterday. Grande's arguments, suggesting that the district court mistakenly upheld the verdict earlier, were rejected.
“The district court did not err in upholding the jury’s unanimous liability verdict because Plaintiffs satisfied each element legally and factually,” the decision reads.
“The court correctly interpreted the law and instructed the jury on the relevant legal standards in light of the factual issues disputed by the parties, and Plaintiffs introduced ample evidence from which a reasonable jury could find in Plaintiffs’ favor.”
Material Contribution
To hold Grande accountable for copyright infringement, the music companies had to prove they owned the copyrights to the music in question, and demonstrate that Grande's subscribers shared that music illegally. After reviewing the evidence, the Court of Appeals found that both elements were sufficiently proven.
Next, the Court had to determine whether Grande is secondarily liable for its subscribers' infringements. This requires the ISP to ‘know' about the pirating subscribers. In addition, there should be evidence showing that Grande induced or materially contributed to the pirating activities.
Grande ‘knew' about the infringements through the piracy notices they received. The crux of the appeal lay in interpreting the ‘material contribution' part.
The ___ Precedent
Grande found support in a recent ___ vs. Taamneh ruling, where the Supreme Court rejected the claim that ___ aided-and-abetted terrorist activity because it didn’t “consciously and culpably” participate in the illegal activity. According to the ISP, the same logic should apply in this case.
The Court of Appeals, however, doesn't follow this reasoning. It points out that the ___ ruling never referenced copyright. As such, that ruling should not be used to change fundamental principles of copyright liability.
In addition, the Court stresses that there's a key difference with the ___ case. The social media company was accused of liability for a terrorist attack because its platform was used for fundraising. There was no direct link between the actual attack and ___, however.
In Grande's case, there is a direct nexus between the copyright infringements and the use of Grande's network, as Internet access was required to share the copyright infringing music.
“Grande provided those subscribers with the tools necessary to conduct those infringements and continued doing so after learning that those subscribers were repeatedly using those tools to infringe, in furtherance of a policy never to terminate subscribers for copyright infringement,” the Court writes.
Grande is Liable
In addition to the material contribution challenge, Grande and its supporters also pointed out that terminating Internet access isn't a “simple measure”, as the jury concluded. Instead, it is drastic and overbroad, which could also impact innocent subscribers.
The Court of Appeals rejects this reasoning. Instead, it states that the jury could and did conclude that terminations are a simple measure. There is no evidence to reach a different conclusion.
All in all, the Court sees no reason to reverse the jury’s verdict that Grande is liable for contributory infringement. This means that the jury verdict is affirmed.
$47m Damages Award Vacated
While the liability verdict stands, there was some positive news for the ISP as well. The Court overturned the lower court's decision on how damages should be calculated. A new trial will determine the appropriate amount.
At the heart of the damages dispute, is the question of how to calculate damages when multiple copyrighted songs from the same album are illegally downloaded. The original ruling awarded damages for each individual song. However, Grande argued that the law only allows for a single damage award per album, regardless of how many songs from that album were shared illegally.
The labels argued that it would be best to count all songs separately, as they all have value. This argument was supported by the Copyright Alliance, which informed the court that concluding otherwise would “threaten the livelihood of some copyright owners.”
The Court acknowledged these concerns, but countered that awarding statutory damages on a per-song basis “would make a total mockery” of Congress' mandate. If rightsholders would like this to change, they should ask Congress to change the law.
“In sum, the record evidence indicates that many of the works in suit are compilations (albums) comprising individual works (songs). The statute unambiguously instructs that a compilation is eligible for only one statutory damage award, whether or not its constituent works are separately copyrightable,” the Court notes.
“Accordingly, we vacate the statutory-damages award and remand for a new trial on damages with the proper jury instruction.”
The decision is a major win for the record labels, as the copyright infringement verdict stands. The Court's dismissal of the ‘___ defense' is also key, as these same arguments are used in many related lawsuits.
The conclusion
Whether Grande plans any future challenges is unknown. In any case, it can focus on the new damages trial, where it hopes to substantially lower the $47 million damages award.
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The Fifth Circuit Court of Appeals opinion, signed by Circuit Judges Higginbotham, Stewart, and Higginson, is available here (pdf)
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Written by David Minister
By David Minister
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