MEMORANDUM OPINION
In this copyright action, the putative owners of more than 1,400 musical composition • copyrights seek to hold Cox Communications, Inc. and Cox Com, LLC (collectively, “Cox”) eontributorily and vicariously liable for alleged copyright infringement taking place over its high-speed internet service. At the close of extensive discovery, the parties cross-moved for summary judgment. Following oral argument, the Court issued an Order (Dkt. No. 675) granting in 'part and denying in part Plaintiffs’ Motion for Partial Sum; mary Judgment (Dkt. No. 310) and denying Cox’s Motion for Summary Judgment (Dkt. No. 305) for the reasons stated in this memorandum opinion.
I. Background
Cox provides high-speed internet service to customers nationwide. Plaintiffs BMG Rights Management (US), LLC (“BMG”) and Round Hill Music LP aré the. putative owners or administrators of approximately 1,400 musical composition copyrights. Plaintiffs allege users of Cox internet service employ BitTorrent, a type of peer-to-peer (“P2P”) file sharing, to Illegally upload and download music files, thereby violating Plaintiffs’ exclusive rights.
A. BitTorrent
The innovation of P2P file sharing is that it allows “user’s computers [to] communicate directly with each other,” rather than through-a central- server. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.,
The BitTorrent protocol is unique in “how it facilitates file transfers.” Id. at 1026. BitTorrent breaks files into pieces, which “permits users to download, lots of different pieces at the same time from different peers.” Id. It also allows users to begin sharing before the complete file has downloaded, meaning “at any given time, each user is both downloading and uploading several different, pieces of a file from and to multiple other users.” Id. at 1027.
B. Rightscorp, Inc.
Plaintiffs enlisted Rightscorp, Inc. (“Rightscorp”) as their agent to identify infringing uses of their copyrighted works. Rightscorp’s software searches websites that index torrent files and identifies files that appear to contain one or more of the Plaintiffs’ copyrighted, works. Defs.’ SUMF ¶ 19. A torrent file does not actual
C. Cox’s Copyright Policy and Graduated Response Procedure
Cox’s Acceptable Use Policy (“AUP”) provides that account holders may not use Cox’s internet service “to 'post, copy, transmit, or disseminate any content that infringes the patents, copyrights, trade secrets, trademark, moral rights, or propriety rights of any party.” Theodore Decl. Ex. 10; Trickey Deck ¶ 11. The AUP further provides that “[v]iolation of any terms of this AUP may result in the immediate suspension or ■ termination of either ... access to the Service and/or [the] Cox account.” Theodore Deck Ex. 10; Trickey Deck ¶ 11. Cox informs account holders of the policy in subscriber agreements. Trick-ey Deck ¶ 12. The terms on Cox’s website also incorporate the AUP’s policy by reference. Id. ¶ 13.
Cox’s abuse department handles misconduct on Cox’s network. Abuse ranges from copyright infringement to hacking to excessive bandwidth usage. Pis.’ SUMF ¶ 17. Cox offers copyright owners an email address, abuse@cox.net, to which they can send notices of infringement. Beck Deck ¶ 3. Cox processes the notices it receives using a largely automated system called CATS — Cox Abuse Tracking System. Pis.’ SUMF ¶ 19. CATS scans the messages' in the inbox and culls certain information, such as the date of the alleged abuse, the IP address, and so on. Beck Deck ¶ 7. That information is then used to create a “ticket.” Id. ¶ 3.
Three features of the CATS system are worth mentioning. First,, when Cox receives multiple complaints in one day for a single account, the tickets are “rolled up,” meaning Cox counts only the first ticket. Id. ¶ 8 & n.4; Zabek Deck' ¶ 9; Theodore Deck Ex. 1 at'155-56. Second, Cox imposes a “hard limit” on the number of complaints a complainant can submit that will receive customer-facing action.' Beck Deck ¶ 8. If a
Cox handles tickets generated by CATS according to its graduated response procedure. Beck Deck ¶ 12; Theodore Deck Ex. 39 at 10; id. Ex. 17. This process, which Cox does not publicize to customers, progresses from warnings to suspensions and ultimately, the possibility of termination. Theodore Deck Ex. 17 at 11-12. Cox takes no action on an account’s first ticket because a “substantial percentage” of accounts never receive a second complaint within one abuse cycle. Zabek Deck ¶ 9; Theodore Deck Ex. 17 at 11; id. Ex. 39 at 13. When a second complaint arrives-, CATS generates an email to the account holder that includes a letter from Cox explaining the alleged infringement as well as the complete text of the infringement notice Cox received from the copyright owner.
When Cox receives an eighth notice, it suspends the account and places the account holder in what Cox calls a “soft-walled garden.” Beck Deck ¶9. That means the account holder’s internet access is temporarily limited to a single webpage that displays a warning message. Id.; Za-beck Deck ¶ 9. The account holder can exit the soft-walled garden and self-reactivate service by clicking a link on the webpage. Beck Deck Ex. 3 (“After deleting the files and disabling file sharing, you may click here to reactivate your service.” (emphasis omitted)); Theodore Deck Ex. 17 at 11; id. Ex. 2 at 178-79. On the ninth complaint, the account holder is again sent to the soft-walled garden) Beck Deck ¶ 9; Theodore Deck Ex. 17 at 11.
The tenth complaint results in what Cox calls a “hard-walled garden.” Beck Deck ¶ 9. The account holder is now directed to a webpage with instructions to call Cox customer service. Theodore Deck Ex. 17 at 11. When the account holder' calls Cox, he or she can request reactivation. Id.; id. Ex. 1 at 73. The eleventh complaint is the same. Id. Ex. 17 at 11. The twelfth and thirteenth complaints also place account holders in the hard-walled garden, but now they must speak' to higher-level Cox customer service representatives to request reactivation. Id.; id. Ex. 1 at 79-80. When Cox receives the fourteenth complaint in an abuse cycle, it will review the full account history and consider termination. Id. Ex. 17 at 12. Termination is never automatic, however, and is left to the discretion of Cox employees. Beck Deck ¶ 13. In the “vast majority” of cases, Cox says it is able
D. Cox’s Rejection of Rightscorp’s Notices
Rightscorp includes within its standard infringement notice an offer.of settlement. Specifically, the notices say, “This notice is an offer of settlement. If you click on the link below and .login to the Rightscorp, Inc. automated settlement system, for $10.00 [or $20.00] per infringement, you will receive a legal release from the copyright owner.” Beck Deck Ex. 6. As a policy, Cox does not accept or process infringement notices that contain settlement .offers. Beck Deck ¶ 17-18; Zabek Deck ¶ 31. Cox’s in-house privacy counsel set the policy after concluding that such notices are improper and fall outside the “spirit” of the DMCA. Theodore Deck Ex. 5 at 77-78; Zabek Deck ¶ 31.
.When Cox receives a. complaint with, a settlement offer, it asks the complainant to conform, the notice, and explains that the notice will not be forwarded unless and until it is, amended. Beck Deck ¶ 17; Zabeck Deck ¶ 34. Until a complainant complies, Cox. “blacklists” all complaints received from that complainant by configuring CATS to .auto-delete messages received from that complainant’s email address. Beck Deck ¶ 17.
On March 9, 2011, Cox received its first notice of infringement from Rightscorp. Id. ¶ 19. Cox asked Rightscorp to remove its settlement offers, but Rightscorp declined to do so and continued to send Cox notices. Zabek Deck ¶¶32, 35; id. Ex. 13. On March 14, Cox blacklisted Rightscorp, meaning from that point on, Cox auto-deleted Rightscorp’s emails and never retrieved--the information from the body of those notices. Beck Deck ¶ 20; Theodore Deck Ex. 41 at 10, 12-13. The following October, Cox claims Rightscorp “started inundating” its inbox, sending as many as 24,000 notices in one day. Beck Deck ¶ 21; Zabek Deck ¶ 33. In response, Cox blocked Rightscorp. Blocking messages goes one step beyond blacklisting: now Rightscorp’s notices never even entered Cox’s inbox. Theodore Deck Ex. 2 at 339-40; id. Ex. 41 at 10, 13; Beck Deck ¶21. When a complainant is blacklisted, Cox still has a record of the emails received and deleted. When a complainant is blocked at the server level, there is no record of any message received. Theodore Deck Ex. 41 at 10.
E. Procedural Background
In November 2014, Plaintiffs filed suit against Cox alleging contributory and vicarious copyright infringement for diréet infringements occurring between February 2012 and November 2014. As relief, Plaintiffs seek statutory damages, injunctive relief, fees, and costs.
II, Analysis
Plaintiffs seek to hold Cox’ liable for the direct infringing activities of in
After setting out . the applicable standard of review, the Court addresses each motion for summary judgment separately, as it must. See Desmond v. PNGI Charles Town Gaming, L.L.C.,
A. Standard of Review
Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A genuine issue of material fact exists where, after reviewing the record as a whole, a court finds that a reasonable jury could return a verdict for the nonmov-ing party.” McAirlaids, Inc. v. Kimberly Clark Corp., 756 F.3d 307, 310 (4th Cir.2010). “It is an axiom that in ruling on a motion for summary judgment, the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” Id. (alteration omitted) (quoting Tolan v. Cotton, — U.S. —,
B. Plaintiffs’ Motion for Partial Summary Judgment
Plaintiffs • move for partial summary judgment on two issues. First, Plaintiffs seek a ruling that they own the copyrights at issue. Second, Plaintiffs ask . the Court to find as a matter of law that Cox is not entitled to protection under the. DMCA’s safe harbor provisions. Cox opposes the motion and, asks the Court .to deny the motion -or alternatively enter summary judgment in its favor on both issues.
1. Ownership
To establish a claim of infringement, Plaintiffs must establish their ownership of the 1,421 musical composition copyrights allegedly infringed.
a. Copyrights That List BMG as the Claimant on the Certificate of Registration
For this first category of copyrights, Plaintiffs have produced certificates of registration that list BMG as the claimant. See Briggs Deck Apps. A1-A7, A13 (composition titles and copyright registration numbers); id. Exs. B1-B137, B391, B934 (certificates). The Copyright Act provides that “[i]n any judicial proceedings the certificate of a registration made before or within five years after the first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate.” 17 U.S.C. § 410(c). Included in the facts entitled to the presumption of validity is ownership. Univ. Furniture Int’l, Inc., 618 F.3d at 428. Because Plaintiffs produced the certificates they have met their initial burden, and the burden shifts to Cox to “prove-that the claimed copyrights are invalid” Id. (citing M. Kramer Mfg. Co. v. Andrews,
Cox agrees that the copyright registrations create a rebuttable presumption of ownership, see Defs.’ Opp’n at 25, but it contends that the evidence needed to rébut the presumption and shift the burden back »to Plaintiffs to conclusively establish ownership is not heavy. Indeed, the Fourth Circuit has cautioned that “the Copyright Office’s practice of summarily issuing registrations ... counsels against placing too much weight on registrations as proof of a valid copyright,” and has instructed “reviewing court[s to] assess other relevant indicia of ownership, such as the parties’ intent and the terms of transfer agreements and other documents establishing a chain of title.” Univ. Furniture Int’l, Inc.,
The question, then, is whether Cox has come forward with sufficient evidence to rebut Plaintiffs’ prima facie case of ownership or create a genuine issue of material fact as to ownership. Cox argues that testimony by BMG’s Vice President of Copyright Administration, Robert Briggs, about BMG’s registration process undermines the presumption of validity. Specifically, Cox claims the testimony establishes that BMG does not check to see if it owns copyrights before it registers them. In response, Plaintiffs argue that Cox greatly mischaracterizes Briggs’s testimony and that the testimony is insufficient to rebut the presumption.
During his deposition, Briggs was asked whether and how' BMG verifies its ownership of a copyright prior to filing a registration application. When asked whether BMG checks to see ’if there is a valid assignment' agreement before filing the registration, Briggs responded, “I can’t say specifically,” and “[generally, this is speculation on my part but I think that they are not checking each song.” Bridges Deck Ex. 19 at 23. He also testified that he did not know whether BMG has or checks its files for complete documentation of ownership following registration. But Briggs also explained that when a “song is delivered to our department, it’s delivered by departments who are working on an understanding that there is an active agreement with that winter or client.” Id.
When Briggs’s testimony is read in full, it is not enough to cast doubt on BMG’s ownership. Although “a defendant sued for infringement ‘must simply offer some evidence or proof to dispute or deny the plaintiffs prima facie case of infringement,’” Palladium Music, Inc. v. EatSleepMusic, Inc.,
b. Copyrights That List a Predecessor of BMG as the Claimant on the Certifícate of Registration
The next group of copyrights lists a BMG predecessor entity as the claimant on the certificates of registration. See Briggs Decl. Apps. A8-A12, A14-A19, A20-A33, A36 (composition titles and registration numbers); id. Exs. B138-B390, B392-B700, B704, B932-B933 (certificates). Because BMG is not-listed as the claimant, Plaintiffs must produce additional evidence of the chain of title from the claimant listed on the registration to BMG.
To meet their burden, Plaintiffs have produced both the certificates of registration and the merger and acquisition agreements between BMG and the entity (or a d/b/a of the entity)'listed as the claimant on the certificates. See Briggs Decl. Exs. 1-12. Cox makes two general challenges to the chain of title evidence. First, Cox contends that the Court should require the chain‘of title'to éxtend beyond the claimant listed on the certificate to the original author of the work. Second, Cox argues that the merger "and acquisition agreements produced by Plaintiffs are insufficient'to .establish chain of title because they do not specify the - individual works acquired. See Defs.’ Opp’n at 28 (“Without conclusive evidence of which songs it acquired through mergers, BMG cannot prove that it owns the ... works.”). Neither argument is persuasive.
There is no basis for Cox’s argument that the chain of. title must relate back to the author instead of the original claimant. The weight of authority supports finding the latter sufficient. See 4-13 Nimmer on Copyright § 13.01 (“The only evidence required of the plaintiff, in addition to the registration certificate, is evidence of plaintiffs chain of title from the original copyright registrant.” (emphasis added)); see also Montgomery Cty. Ass’n of Realtors, Inc. v. Realty Photo Master Corp.,
Cox’s second argument is that- Plaintiffs cannot establish ownership because the merger agreements do not list the specific copyrights, acquired. Cox cites no authority for the proposition that the writing used to transfer copyrights must list the specific assets acquired. Moreover, there is an exception to the Copyright Act’s general requirement that the transfer of exclusive rights be made in writing where such a transfer occurs by “operation of law.” 17 U.S.C. § 204(a). In Universal Furniture International, Inc. v. Collezione Europa USA, the Fourth Circuit recognized that “although the Copyright Act generally requires a writing to transfer copyright ownership, it makes exceptions for transfers that occur by ‘operation of law.’ ”
Finally, Cox disputes five individual copyrights in this category. In response, Plaintiffs withdrew their claim of ownership as to one copyright, see Pis.’ Reply at 5 n.3 (withdrawing Exhibit B403), but argue that the remaining challenges are baseless. The Court agrees. Cox first disputes the copyright for “Call of the, Zombie,” see Briggs Decl. Ex. B468, because “Bug Music” (a BMG predecessor) is handwritten under “claimant” on the certificate of registration. Plaintiffs respond that the handwritten name is immaterial. Neither party "cites any authority on this point. The Court need not decide whether a handwritten notation would be" sufficient to undermine a claim of ownership because the unofficial copyright registration available on the public catalog, of which thé Court may take- judicial notice,
There is no genuine issue of material fact as to the ownership.of these copyrights. Accordingly, the, Court grants Plaintiffs’ motion with respect to this category of copyrights, with the exception of the withdrawn claim of ownership as to Exhibit B403.
c. Copyrights That BMG Purchased or Otherwise Acquired from Third Parties
The third category consists of copyrights that BMG (or a BMG predecessor) purchased or otherwise acquired from third parties. Plaintiffs have produced the certificates of registration for these works, see Briggs Deck Apps. A35, A37~l()2; id. Exs. B702-B703, B705-B931, and the underlying purchase agreements, see id. Exs. 8-9, 13-105.
Cox,first argues that “BMG relies on incomplete co-publication or administration agreements.” Id. at 29. These agreements, Cox argues, “grant BMG various rights to songs in attachments that do not exist” arid thus “do not establish chain of title because they do not identify the objects of a transfer.” Id. As examples, Cox cites two agreements that assign exclusive rights to copyrights to be listed in an attachment but that fail to include the named attachment. Relatedly, ■ Cox argues that BMG “relies on vague agreements that also fail to’ identify the works.” Id. As examples, Cox cites agreements -that give BMG rights “to any and all compositions,” to works acquired after the agreement, and to “all musical compositions, including but not limited to” works listed in a non-existent schedule. Id. These agreements, Cox contends/fail to establish a chain of title
Plaintiffs respond that each agreement meets the Copyright Act’s requirement that transfers of ownership by assignment or exclusive license be signed and in writing. See IT U.S.C. § 204(a). There is no requirement, they argue, that each work be identified, and they note that Cox does not cite to a single case or other authority supporting such a proposition. Indeed, courts often say that “a qualifying writing under Section 204(a) need not contain- an elaborate explanation nor any particular ‘magic words,’ but must simply show an agreement to transfer copyright.” Metro. Reg’l Info. Sys., Inc. v. Am. Home Realty Network, Inc.,
Even assuming that to satisfy the chain-of-title requirement Plaintiffs must submit evidence of the specific copyrights covered by each agreement, they have done so via declaration testimony. For instance, Cox cites Exhibit 29, a Music Publishing Administration Agreement between John Legend Music, Inc. and BMG, as an example of an incomplete agreement. The agreement gives BMG exclusive rights to administer the musical compositions listed in Annex 1, but Annex 1 is left blank. In his declaration, Briggs testified that the agreement relates to the twenty-five works listed in Appendix A25. See Briggs Deck ¶¶ 60-61. There is similar testimony relating to each transaction. Cf. Arista Records LLC v. Lime Grp. LLC, No. 06 CV 5936,
Finally, Cox argues that “BMG relies on a few agreements that allegedly transferred to rights from others [sic] to BMG but'those other parties appear'nowhere in the agreements.” Defs.’ Opp’n at 30 (citing Briggs Deck Exs. A76, A77, A89, A95, A101). It is not entirely clear what Cox is arguing here, but Plaintiffs address each challenged agreement in their reply and identify the parties to the- transfers. Pis.’ Reply at 6-7.
Accordingly, the Court grants summary judgment to Plaintiffs oh the ownership of the copyrights in this category.
d. Copyrights That List Round Hill Music, LLC as the Claimant and Copyrights That Round Hill Music, LLC Purchased or Otherwise Acquired from Third Parties '
The final category, consists of (1) copyrights that list Round Hill Music, LLC as the claimant on the copyright registrations and (2) copyrights that Round Hill Music, LLC purchased or otherwise acquired from third parties. Gillis Deck Apps. Al-A5 (composition titles and registration numbers); id. Exs. C1-C22 (certificates);
■ Section 501(b) of the Copyright Act provides that only “[t]he legal or beneficial owner of an exclusive right under a copyright is entitled ... to institute an action for any infringement of that particular right committed; while he or she is the owner of it.” 17 U.S.C. § 501(b); see also X-It Prods., L.L.C. v. Walter Kidde Portable Equip., Inc.,
Plaintiffs do not contend that Round Hill Music LP was assigned legal title to any of the copyrights at issue. They claim Round Hill Music LP was given an exclusive license to use each of the copyrights at issue for any and all of the exclusive rights listed in § 106. Thus, it must be the case that Round Hill Music LP not. only “received one or more divisible rights,” but also that its interest in those rights, is exclusive — that is, Round Hill
Three agreements are relevant here. The first is the Asset Purchase Agreement that assigned the copyrights from Round Hill Music, LLC, the entity listed on the copyright registrations, to Round Hill Music Royalty Fund LP (the “Fund”). See Gillis Deck Ex. RH1. It is undisputed that the Fund owns legal title to the copyrights.
The second is the Third Amended and Restated Agreement of Limited Partnership of Round Hill Music Royalty Fund LP (the “Fund Agreement”). See id. Ex. RH2. The Fund Agreement created a limited partnership consisting of a general partner — Round Hill Music Royalty Fund GP LP (the “General Partner”) — and. a sole limited partner — Joshua Gruss. The Fund Agreement states that “management of the Partnership shall be vested exclusively in the General Partner ... and the General Partner shall have full control over the business, assets, conduct and affairs of the Partnership.” I'd. at 32. The agreement also contemplates the appointment of a Management Company “to manage the affairs of the. Partnership,” id. at 29, and a Copyright Administrator, defined as “any Person- (including an Affiliate of the General Partner) employed or retained by the Partnership and at the Partnership’s expense, to provide services in connection with -the administration; preparation and processing or any similar service of any copyrights owned. by, or assigned to, the Partnership.” Id. at 6. With respect to the role of Copyright Administrator, the Fund Agreement also states:,
The Partnership will retain the Copyright Administrator, which'may be an Affiliate of the General Partner, to provide the services of administrator of the copyrights owned by or assigned to the Partnership. The Copyright Administrator will be responsible for day-to-day administrative services relating to the Partnership’s portfolio and will be reimbursed for its services.
Id. at 3Í.
The third relevant agreement, executed the same day as the Fund Agreement, is the Management Agreement. See Gillis Deck Ex. RH3. The Management Agreement. was entered into by the Fund, the General Partner, and Plaintiff Round Hill Music LP. Id. at 1. It appointed Round Hill Music LP as the Management Company, and within that role, the Copyright Administrator. See id. (appointing Round Hill Music LP to “provide management or other services, including acting as a Copy
Plaintiffs rely on the combined effect of the Fund Agreement’s grant to the General Partner of “full control over the ... assets” and the Management Agreement’s statement that Round Hill Music LP “shall have the same rights, duties and obligations” as the General Partner. Putting the two together, Plaintiffs claim the Fund gave Round Hill Music LP “the exclusive ownership rights to administer and éxploit the copyrights,” Grass Deel. ¶ 3, including “all of the exclusive rights described in ... § 106.” Pis.’ Supp. Memo. in .Supp. at 4.
The Court disagrees. The plain language of the agreements only gives Round Hill Music LP the “same rights” as the General - Partner — including “full control over the ... assets” — when it is “providing the services performed by the Manager.” Thus, -the language begs the question of what “services” the' Manager, and within that role, the Copyright Administrator, performs with respect to the copyrights. There is little, if any, indication that these “services” performed contemplated the transfer any legally cognizable right in any of the copyrights, much less that such permission was exclusive. The Fund Agreement explains the role of Copyright Administrator as “providing] the services of administrator of copyrights.” Gillis Decl. Ex. RH2 at 31. But the responsibilities listed are “day-to-day administrative services” for which the Copyright Administrator will be reimbursed. Id. Similarly, the agreement defines Copyright Administrator as an entity “providing] services in connection with the administration, preparation and process or any similar service of any copyrights” owned by the Partnership. Id. at 6. While Plaintiffs are correct.that administration agreements can transfer a sufficient ownership interest, there is no other indication aside from the word “administration” that suggests the agreement transferred any interest at all. There is no reference, for example, to any of the actions contemplated by § 106 — for example, the right to reproduce or. distribute. Instead, the word “administration” is surrounded by language that paints Round Hill Music LP’s role as administrative and acting directly on behalf of the Partnership.
The language in the agreements aligns much more closely with Cox’s contention that the Fund merely hired Round Hill Music LP “to provide services related to copyrights it did not own” and that “[t]his employment did not result in any assignment of rights to” Plaintiff. Defs.’ Opp’n at 25. As the Southern District of New York recently noted, “Considering the preeminence of exclusive rights in copyright cases, it is axiomatic that if the ... Agree? ment did not specify that exclusive rights were being transferred, no such rights were in fact transferred.” John Wiley & Sons, Inc. v. DRK Photo,
.Even assuming that the agreements did convey a license to use the copyrights, there is no indication that the license was exclusive. An exclusive license is transferred'when an “individual or entity is given the right to use a copyright” and “the owner promises not to convey that right to anyone outside of- those persons or entities who have an interest in the license.” Warner/Chappell Music, Inc.,
Plaintiffs also rely on the declaration of Joshua Grass, the managing member of the Round Hill entities, in which he testified that “[s]ince the Management Agreement was executed, Round Hill LP has acted as the exclusive worldwide administrator of the copyrights and other properties owned by the Partnership. No other individual or entity, including the Partnership, has acted or has the right to act as the administrator of its copyrights, 'including those at issue in this case.” Grass Decl. ¶ 5. As noted above, the Court looks to the substance of the agreements to determine whether standing exists and not the post hoc label placed on the agreements by Plaintiffs. The plain language of the agreements does not support finding a transfer of any exclusive license. Nor is Grass’s declaration particularly helpful, as it does not shed any light on what the role of “exclusive worldwide administrator” entails.
Rather- than attempting to explain what language in the agreements conveyed an exclusive license, Plaintiffs devoted most of them initial briefing to challenging Cox’s ability to make its standing challenge. Plaintiffs cite a line of cases that say an alleged third-party infringer cannot attempt to avoid liability by arguing that an underlying assignment of copyright failed to comply with the Copyright Act’s writing requirement. See 17 U.S.C. § 204(a) (“A transfer of copyright ownership ... is not valid unless an instrument of conveyance ... is in writing and signed by the owner of the rights conveyed----”). The principle arose out of cases where there had been an oral transfer of rights and the question was whether a later' written me-morialization of the transfer was sufficient to comply with the writing requirement. Because the purpose § 204 is to resolve disputes between transferors and transferees, those courts concluded that “it would be anomalous to permit a third party in-fringer to invoke this [writing] provision against the licensee.” Eden Toys, Inc. v. Florelee Undergarment Co., Inc.,
Plaintiffs ask the Court to apply this principle broadly and hold that Cox, as an alleged third-party infringer, cannot challenge the assignment between the Fund and Round Hill Music LP because there is no dispute between them regarding what was transferred. The Court does not believe the principle extends as far as Plaintiffs urge. Cox is not invoking § 204’s wilting requirement or relying on the informality of the transfer to avoid liability. Rather, it is pointing to the language within the written agreements and asking if that language conveyed the type of right necessary to support standing to bring an infringement claim. See Marya v. Warner/Chappell Music, Inc., No. CV13-4460,
Because Round Hill-Music LP does not co-own the copyrights or have an exclusive license for any use of the copyrights, it is without standing to bring this infringement action. Accordingly, the Court finds Round Hill Music LP cannot proceed in this action and its claims for infringement against Cox are dismissed.
2. DMCA Safe-Harbor Defense
BMG also moves for summary judgment on Cox’s entitlement to its DMCA safe-harbor defense.
a. Statutory Framework
Title II of the DMCA, titled the Online Copyright Infringement Liability Limitation Act, was Congress’s answer to the potentially enormous liability, that ISPs faced for the materials being transmitted over their networks. See Viacom Int’l, Inc. v. YouTube, Inc.,
To benefit from any one of the safe harbors, Congress imposed certain threshold requirements on all ISPs, As is relevant here, a service .provider mpst demonstrate that it has “adopted and reasonably implemented, and informed subscribers and account holders of the service provider’s system or network of,--a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers.” 17 U.S.C. § 512(i)(l)(A). The requirement that service providers implement a repeat-infringer policy is a “fundamental safeguard for copyright owners” and “essential to maintain[ing] the strong incentives for service providers to prevent their services from becoming safe havens or conduits for known repeat copyright infringers.” Capitol Records, Inc. v. MP3tunes, LLC,
The dispute in this case centers on what it means for a service provider to “reasonably implement ]” its policy. The phrase is not defined in the statute. In deciphering its meaning, courts have split the phrase into two separate requirements: (1) whether a service provider implemented its policy; and (2) whether that implementation was reasonable. See, e.g., Perfect 10, Inc. v. CCBill LLC,
A service provider’s implementation is reasonable if it terminates a repeat in-fringer’s access in appropriate circumstances. See CCBill LLC,
Even if a service provider has knowledge of infringement, howéver, the Act requires termination only in “appropriate circumstances.” The inclusion of this phrase implies that' there are some circumstances under which termination of a repeat infringer may not be appropriate. For example, courts have noted that there , are different degrees of online copyright infringement, from the inadvertent and noncommercial, to the willful and commercial. See H.R. Rep. 105-551, pt..2 at 61 (1998). Another common benchmark, taken from the House and Senate Reports,, is that “those who repeatedly or flagrantly abuse their access to the-Internet'through disrespect for intellectual property rights of others should know that there is a realistic threat of losing that- access.” Id. Thus, appropriate circumstances clearly cover account holders who repeatedly or flagrantly infringe copyright, particularly infringement- of a willful and commercial nature. See Capitol Records, LLC v. Vimeo, LLC,
In sum, the Court finds § 512(i) covers, “at a minimum, instances where a
b. Application .
BMG identifies three reasons why Cox did not reasonably implement its repeat infringer policy. First, BMG says Cox cannot be said to be implementing its policy if it refuses to accept Rightscorp’s infringement notices merely because they contain settlement offers. And even beyond Cox’s blanket refusal to forward those notices to its account holders, BMG argues it is also unreasonable that Cox makes no effort to record the other information contained in the notices, such as the date and. time of the infringing activity and the account holder’s IP address. Second, BMG argues that with millions of subscribers, Cox’s use of a “hard limit” on the number of infringement notices it will receive in a twenty-four-hour period is additional evidence' of unreasonableness. Third, BMG argues that Cox does not terminate access of repeat infringers under appropriate circumstances.
The Court finds this last'ground sufficient, standing alone, to bar Cox from invoking the DMCA’s protection.
i. Cox Did Not Implement a ■Repeat Infringer Policy Before Fall 2012
■ The record conclusively establishes that before the fall of 2012 Cox did not implement its repeat infringer policy. Instead, Cox publicly purported to comply with its policy, while privately disparaging and intentionally circumventing the DMCA’s requirements. Cox employees followed an unwritten policy put in place by senior members of Cox’s abuse group by which accounts used to repeatedly infringe copyrights'would be nominally terminated, only to be reactivated upon request. Once these
Numerous emails in the record, portions of which are reproduced below, support these conclusions. Even viewed in the light most favorable to Cox, the Court finds the contents of the emails cannot be explained away. Cox’s attempts to recast the emails are unavailing. Nor can they be pinned on low level employees whose views had no real significance. The name that appears again and again on these emails is Jason Zabek, Cox’s Manager of Customer Abuse Operations.
In 2009, Zabek sent an email titled, “DMCA Terminations,” to the abuse group that said:
As we move forward in this challenging time we want to hold on to every subscriber we can. With this in mind if a customer is terminated for DMCA, you are able to reactivate them after you give them a stern warning about violating our AUP and the DMCA. We must still terminate in order for us to be in compliance with safe harbor but once termination is complete, we have fulfilled our obligation. After you reactivate them the DMCA ‘counter’ restarts; The procedure restarts with the sending of warning letters, just like a first offense. This is to be an unwritten semi-policy ... We do not talk about it or give, the subscriber any indication that reactivating them is normal. Use your best judgment and remember to do what is right for our company and subscribers. ... This only pertains tp DMCA violations. It does not pertain to spammers, hackers, etc.-
Theodore Deck Ex. 18.
In a January 2010 email exchange, Za-bek was asked by an employee what to do in the following scenario:
Customer had several -email warnings, followed by suspensions up to TOC [technical operations center] and was terminated December 8th. Voicemail call back on January 7th shows I explained to the account holder [redacted] they could request'review in 6 months for possible reactivation. ICOMS notes shows [redacted] called about the bill January 11 and got reinstated. We already have a DMCA complaint —
Id. Ex. 19.-In other words, this customer had progressed through Cox’s graduated response procedure and Cox had ultimately determined appropriate circumstances existed to terminate this customer for- six months. One month into the termination, the customer was reactivated and soon thereafter, Cox received another notice of infringement tied to the account.
This was Zabek’s response:
This is fine. If asked, I would'have allowed them back on. We have been turning customers back on who have been terminated for DMCA complaints. As long as our process of warnings, sus-pensión], then termination is followed, we can turn the customer back on and start the DMCA count over. During this time, as we try to keep customers and gain more RGU’s [revenue generating units] it is important to try and balance the needs of the company with the protection of the network. DMCA does not hurt the network like DOS attack, spam or hacking. It is not something we advertise however.
Id.
In a. series of emails in June of that year, a customer service representative asked whether she needed the abuse group’s “okay” to reactivate an account after “a customer is terminated for the
In August, a representative sent the abuse group an email to confirm that, after a customer is terminated and then reactivated, the next complaint Cox received “is to be treated as a brand new complaint” and the customer is to be “‘given a clean slate.” Id. Ex. 21. Zabek responded:
Internal info only. Do not forward. After termination of DMCA,- if you do suspend someone for another DMCA violation, you are not wrong. However, if the customer has a cox.net email we would like to start the warning cycle over,-hold for more, etc. A clean slate if you will. This way, we can collect a few extra weeks of payments for their account. ;-) Once the customer has been terminated for DMCA, we have fulfilled the obligation of the DMCA safe harbor and can start over. ... We have some leeway here. But know that once a termination happens, we have fulfilled “safe harbor.” These are not in our procedures as we do not make this information publicly known.
Id.-, see also id. Ex. 2 at 201, 222 (confirming that the process would begin anew following reactivation).
In March 2011, a customer service representative sent Zabek an email, saying: “Spoke to the customer this morning and he flat out is refusing to do anything on his side and insists nothing is coming from it despite multiple tickets. ... If possible, please give me some insight on where we should go from this point; ie suspension or something of the sort.” Id. Ex. 24. This was Zabek’s instruction:
You can of course suspend but I would suggest that you just forward any DMCA complaints to his email. ... He just has to realize that we must send 'these to him. If a copyright holder decfides] to sue, then we want to make sure the customer knows why .... And it is the law. Make sense? I am not concerned about DMCA and not ready to terminate a CB customer for it ... yet. It does not cause a big problem on the network. Not like spam, Dos attacks, hacking, etc. do ... The customer is doing this on purpose. I just know it (I can feel it) and is not owned IMO. They just want to steal stuff —
Id. (emphasis added).
In another March email, a representative emailed Zabek: “Here is another example of a customer that I consider a[] habitual abuser. In a year was terminated twice and turned back on. I suspended him again since no e-mail address and according to procedure he start over [sic] in the process.” Id. Ex. 45 (emphasis added). Za-bek responded, “It is fine. We need the customers.” Id. In an April exchange, a customer service representative sent this inquiry: “This is the customers [sic] third termination. He is waiting call [sic]. What do I tell him when I call him?” Id. Ex. 22. Zabek wrote, “DMCA = reactivate,” and then by separate email, “You can make him wait a day or so if you-want.;-)[.]” Id.
In August, Brent Beck, a software engineer, wrote, “I understand that recently the termination procedure has been relaxed a bit, so as to involve suspending the customer’s modem instead of removing the services (since most are reactivated, this was faster and easier).” Id. Ex. 46. In the same email chain, Zabek wrote, “Remember that we must terminate to receive protection under the save [sic] harbor
A January 2012 AOL instant messenger conversation between Sikes and Beck discussed the meaning of the term, “soft terminate.” Id. Ex. 13. When asked what a “soft term” was, Sikes explained: “basically, á suspension that is called a termination with the likelihood of reactivation.” Id. Then he said, “for DMCA — we don’t want to loose [sic] the revenue.” Id. And in response to further questions from Beck, Sikes said, “this is a relatively new process that we’ve -been doing for-the past year, again, to retain revenue.” Id. Sikes warned Beck that the “Hard/Soft verbiage stays amongst us only. ... It’s kind of an ‘under the table’ procedure, again, to preserve revenues, when we were loosing [sic] Subscribers, but it only happens about once per month.” Id. Finally, a February 2012 email from a Cox employee to the abuse group said, “I was chatting with Daryl and it seems no one has let them know- in SAN that DMCA Terms are not really Terminations any longer.” Id. Ex. 52 (emphasis added). ,
To implement the repeat infringer policy-contemplated by §' 512(i), the penalty irii-posed by service providers must be termination. Terminate means “[t]o put an end to; to bring to an end.” Black’s Law Dictionary (10th ed. 2014). Service providers cannot skirt the termination requirement by imposing something short of complete termination of a subscriber or account holder. The-District Court for the Southern District of New York recently examined the DMCA’s termination requirement and reasoned that the “definition suggests that Congress intended service providers to have a policy in place that would end or discontinue the accounts of repeat infring-ers, not something short of that such as limiting repeat infringers’ user privileges.” Capital Records, LLC,
The Fourth Circuit has said that the immunity granted by Congress to service providers “is not presumptive” and is to be “granted only to innocent service providers.” ALS Scan, Inc. v. RemarQ Cmtys., Inc.,
ii. Cox Did Not Reasonably Implement Its Repeat Infringer Policy After .the Fall of 2012
In October 2012, Cox added two additional suspension steps to its graduated response procedure. See Theodore Deck Ex. 39 at 10-13. BMG concedes that around the same time that Cox adopted
The numbers bear out BMG’s first argument. From January 2010 until August 2012, Cox terminated an average of 15,5 account holders a month. Theodore Decl. Ex. 39 at 25-27. Between September 2012 and November 2014 when this, suit was filed, Cox terminated an average of 0.8 accounts per month, with a total' of 22 terminations.
BMG has also presented evidence of specific instances in which Cox did not terminate account holders despite knowing that they were using Cox’s service to repeatedly infringe. For instance, in a March 2014. exchange, a customer service representative wrote, “Customer has been told multiple times that he needs to secure his open wireless router. He has also been warped that the next complaint can result in termination of service.” Roberts Decl. Ex. 6. Sikes responded, “Yep, this is their absolute last chance to either secure their wireless router and/or remove ALL P2P clients from their systems. Next complaint = 6 month termination.” Id. A few weeks later, the same service ' representative emailed to say, “Last ticket ... customer was warned that further complaints would result in termination. We have received an additional complaint.” Id. Ex. 5.
Sikes responded:
[I]t looks like the Customer suspected that their wireless network was the culprit. I assume you also' covered the likely possibility that it could also be a BitTorrent client running on one of their computers? If this was not covered thoroughly in the last call with them, please advise them that securing their wirelessnetwork obviously did not work. So, the BitTorrent client is running on one of their computers (their child’s, etc.) and they need to uninstall it. This customer pays us over $400/month and if we terminate their service, they will likely cancel the rest of their services. Every terminated Customer becomes lost revenue and a potential Detractor to our Net Promoter Score. We should make absolutely certain that we have covered each and every possibility with them (“to the bitter end”) before we terminate them. If all of this has been covered in detail, then please go ahead and terminate their internet service for this complaint.
Id. The rep responded, “Looks like PTP programs were discussed back on ticket 15711339 (Which was also a final suspension as well).” Id. Sikes responded,
That was back in October 2013 [approximately five months earlier]. We can’t expect our Customers to know and remember as much as we do about this stuff, especially if the account holder is not the one using BitTorrent. ... On this Customer’s last suspension ..., at the beginning of this month (March 5th), did you also explain that they should still check all of the computers in their household for BitTorrent clients and to speak with other members of their household ... about running/installing BitTorrent and downloading/sharing files? You only mentioned their wireless network in your work log notes. On final suspensions, we need to be as detailed as possible on the work log notes, show that we have covered EVERYTHING with the Customer. On 404 suspensions for DMCA, this is our last ditch effort to save the Customer. Obviously, if they don’t care and don’t want to help us help them, there’s not much more we can do, but this should also be noted in the work log notes.
Id.
In May, a representative sent an email to the abuse group that said, “Request for termination review — Cats Ticket 19991279. This is the 3rd time to the 404 number. Was warned on last call that next offense would result in termination review. Notes indicate that customer was advised to remove file sharing program on last call.” Theodore Deck Ex. 49. Sikes responded, “Since this Customer knows ‘it’s his fault’, [sic] please ask this Customer what he will do to prevent this from happening again and note it in the ticket work log. Then let him know that one more complaint will result in a 6 month Termination.” Id.
In June, a senior engineer in the abuse group said this about a customer who had been given a final suspension and advised to remove all P2P file-sharing programs: “This customer will likely fail again, but let’s give him one more change [sic]. [H]e pays 317.63 a month.” Id. Ex. 34. Also in June, a customer service representative emailed the abuse group about a different customer, saying, “This customer is well aware of his actions and is upset that ‘after years of doing this’ he is now getting caught. Customer was advised to shop sharing, check his wireless and remove his PTP programs.” Id. Ex. 47. Sikes responded, “Please advise this Customer that this is their final termination & reactivation. If we receive one more complaint, we will, regretfully, not be able to provide them with data service for 6 months.” Id.
■ Instead, Cox hangs its hat on the notion that an “infringer” is someone who has been adjudicated an infringer in court. Working from that baseline, Cox argues that “as a matter of choice and not obligation, Cox applies K,its process to mere accusations involving its accounts.” Defs.’ Opp’n at 15-16, In other words, Cox’s policy goes above and beyond what the DMCA requires, so its failure to act based on notices of infringement cannot render Cox ineligible for the safe harbor’s protection. Cox also argues that by not defining “appropriate circumstances” Congress left it to the service provider to make its own determination of when such circumstances exist.
. .Although Cox was under no duty to monitor for infringement, Cox did not have leeway to wait until an account holder was adjudicated as an infringer to find thdt circumstances were appropriate for termination. As explained above, the Court disagrees that a repeat infringer policy applies only to those who have been held liable in a copyright suit. Rather, an account holder must be considered an in-fringer, at minimum, when the service provider has actual knowledge that the account holder is using its services for infringing purposes. Nor do service providers have complete discretion to define “appropriate circumstances.” Appropriate circumstances arise when an account holder is repeatedly or -flagrantly infringing copyrights. Thus, when Cox had actual knowledge of particular account holders who blatantly or repeatedly infringed, the responsibility shifted to Cox to terminate their accounts.
Cox makes the additional argument that knowledge of infringement cannot be established by notices submitted by copyright holders.
Moreover,., the account, holders referenced in the | emails above had already been through Cox’s entire graduated response procedure. That means Cox had received, not one or two, but at least fourteen infringement notices tied to their accounts in a six-month period. And Cox customer service representatives worked with the customers on each of; their four “hard-walled garden” suspensions to identify the cause of the infringement notices—including the possibilities of mal-ware, an unsecured wireless, network, or a file-sharing program on another computer in the household. By the time an account holder reaches the end of Cox’s graduated response procedure, the chance that the account holder is not a willful infringer has substantially lessened.
Finally, and critically, the emails in the record reveal that Cox had knowledge that at least some of its account holders were intentionally and repeatedly infringing. See, e.g., Theodore Decl. Ex. 47 (“This customer is well aware of his actions and is upset that ‘after years of doing this’ he is now getting caught. Customer was advised to shop sharing, check his wireless and remove his PTP programs.” (emphases added)); id. Ex. 49 (“This Customer knows ‘it’s his fault’ ....” (emphasis added)). As one court' explained, “[although efforts to pin down exactly what amounts to knowledge of blatant copyright infringement may be difficult, it requires, at a minimum,- that a service provider who receives a notice of a copyright violation be able to tell merely from looking at the user’s activities, statements, or conduct that copyright infringement' is occurring.” Corbis Corp'.,
Implementation of a repeat-in-fringer policy is “unreasonable when service providers' fail[] to terminate users who ‘repeatedly or blatantly infringe copyright.’ ” Capitol Records, LLC v. Vimeo, LLC,
C. Defendants’ Motion for Summary Judgment
Cox moves for summary judgment on five grounds: (1) whether there is evidence of direct infringement by third parties; (2) whether there is evidence of Cox’s contributory infringement; (3) whether there is evidence of Cox’s vicarious liability; (4) whether BMG failed to mitigate its damages; and (5) whether BMG’s unclean hands bar its claims. After a careful review of the record in the light most favorable to BMG, the Court finds summary judgment on any of the first four grounds is inappropriate; Issues of material fact remain for the jury to decide at trial. The Court finds
1. Direct Copyright Infringement by Third Parties
BMG cannot hold Cox liable'for contributory or vicarious infringement absent evidence of underlying direct infringement. See Softech Worldwide, LLC v. Internet Tech. Broad. Corp.,
a. Level of Specificity Required
It is undisputed that BMG has not identified a specific individual Cox account holder who utilized a BitTorrent protocol on Cox’s internet service to upload or download music fries that infringed BMG’s copyrights. Cox believes this is a critical deficiency in BMG’s evidence. In Cox’s view, BMG should have brought John Doe lawsuits and used subpoenas to establish at least one account holder as a direct infringer. Cox argues Rightscorp’s identifications of IP addresses associated -with Cox accounts is insufficient to establish that any infringing act was committed by a Cox account holder -rather than some third party who tapped into the account holder’s network — for example, a neighbor accessing an unsecured wireless network or a babysitter on a -Friday night. •
The Court disagrees with Cox’s articulation of what is required of a copyright owner in a secondary liability suit. First, imposing a rule that would require copyright owners to litigate John Doe lawsuits before bringing claims of secondary liability would' undermine a key purpose of secondary liability claims. As the Supreme Court explained, “When a widely shared service or product is'used to commit in-fringément, it may be impossible to enforce rights in the protected work effectively against all direct infringers, the only practical alternative being to go against the distributor of the copying device for secondary liability on a theory of contributory or vicarious liability.” Grokster,
Second, Cox’s argument ignores the fact that BMG may establish direct infringement using circumstantial evidence that gives rise to an inference that Cox account holders or other authorized users accessed its service to directly infringe. See Capitol Records, Inc. v. Thomas,
Cox tries to counter this by arguing that BMG cannot rely solely on evi
Finally, Cox makes much of the distinction between infringement by the individual named on the account and infringement by other users with access to Cox service. Cox overstates the import of the distinction. Taking a scenario posed by Cox at oral argument, it is typical for each member of a multimember household to access the internet via an agreement between Cox and one individual in the household. Certainly, evidence that any one of those users infringed would be sufficient, notwithstanding the fact that the individual’s name does not appear on the bill.-While identity is a key issue in many individual infringement suits, it has little relevance in a large-scale secondary liability suit. On the other hand, Cox’s liability for infringement over its network is not boundless. Cox is free to present evidence at trial that might weaken any inference raised by BMG’s evidence of infringement. For instance, Cox can present evidence of the prevalence of stolen access to wireless networks or what it believes to be Right-scorp’s imprecise methods of identifying IP addresses.
b. The Distribution Right
Cox devotes most of its argument to the scope of § 106(3)’s distribution right, arguing that BMG’s evidence of Cox account holders making copyrighted works available for download is insufficient to show distribution, Cox asserts that BMG must show actual dissemination of the copyrighted works and that BMG has failed to
Section 106(3) grants “the owner of copyright ... the exclusive rights to ... distribute copies or phonorecords of the copyrighted work to the public by kale or other transfer of ownership, or by rental, lease,' or lending.” 17 U.S.C. § 106(3). The right was “largely dormant” before the emergence of file-shar- • ing technology. Peter S. Menell, In Search ■ of Copyright’s Lost Ark Interpreting the Right to Distribute in the Internet Age, 59 J. Copyright Soc’y 1, 6 (2011). As copyright owners have increasingly relied on the distribution right in the digital age, district courts and academia alike have split oh how to define distribution.
One source of disagreement among courts is the question of how to understand early cases that discussed the, distribution right in contexts far afield from online file sharing. The most commonly cited case in this debate comes from the Fourth Circuit. In Hotaling v. Church of Jesus Christ of Latter-Day Saints,
After stating the general principle that “[i]n order to éstablish ‘distribution’ of a copyrighted work, a party must show that an unlawful copy was disseminated ‘to the public,’ ” id. at 203 (citing Nat’l Car Rental v. Computer Assocs.,
When a public library adds a work to its collection, lists the work in its index or catalog system, and makes the work available to the borrowing or browsing public, it has completed all the steps necessary for distribution to the public. At that point, members of the public can visit the library and use the work. Were this not to be considered distribution within the meaning of § 106(3), a copyright holder would be prejudiced by a library that does not keep records of public use, and the library would unjustly profit by its own omission.
Id.
The Fourth Circuit has never returned to its holding in Hotaling and thus has not had the opportunity to consider whether evidence that sound recordings were made available for download without authorization via BitTorrent would be enough to show distribution. Cf. Menell, supra, at 8 (noting that Hotaling “arose in arcane circumstances far removed from the file-sharing context”). BMG contends that Ho-taling announced a broadly applicable “making available” definition of distribution that applies equally to file-sharing and that the Court is bound by that definition. While the Court is bound by Fourth Circuit precedent, the Court does not read Hotaling as broadly as BMG urges.
The Hotaling court announced the definition of distribution when it said, “In order to establish ‘distribution’ of a copyrighted work, a party must show that an unlawful copy was disseminated ‘to the
Hotaling can also be understood as only a more limited decision on what is required to prove distribution. Although the record on the summary judgment appeal revealed no instances in which the library in fact loaned the infringing copy to the public, the court observed that “members of the public can visit the library and use the work,” and further that “[i]f, as the [defendant] Church says, actual use by the public must be shown to establish distribution, no one can expect a copyright holder to prove particular instances of use by the public when the proof is impossible to produce because the infringing library has not kept records of public use.
Goldstein on Copyright § 7.5.1 (3d ed. 2012 Supp.) (footnotes omitted); see also Patry on Copyright § 13:9 (“[T]he majority’s decision can be saved only if it is read to rest on an evidentiary probability that there had been an actual loan of the copy.”).
To be sure, some courts have construed the holding in Hotaling broadly and held that making works available on file-sharing programs is distribution.
BMG argues in response that reading distribution to include a “making available” right is consistent with other provisions in the Copyright Act. As examples, BMG cites the definition of “publication” in § 101, which includes “offering to distribute copies,” and § 506(a)(1)(C), a criminal provision that-provides that “the distribution of a work” may be accomplished by “making it available ¡on a computer network accessible to members of the public.” Courts have debated whether the’ definition of “publication” in § 101 supports a broader reading of the distribution right. Some courts have concluded that “distribution” and “publication” are synonymous terms under the Copyright Act and, working from that baseline, use the definition of “publication” to define “distribution.” This logic is flawed for several reasons.
At the threshold, the Court questions the' evidence relied on by those courts that purportedly establishes that distribution is .interchangeable' with publication;- Those courts build upon comments iri legislative history as well as’ an excerpt from the Supreme Court’s decision in Harper & Row Publishers, Inc. v. Nation Enterprises,
’ Nor does the definition of “publication” support a broader reading of the distribution right. The Act defines “publication” as
the distribution of copies or phonorec-ords of a work to the public by sale or other transfer of ownership, or by rental, lease,* or lending. The offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance, or public display, constitutes publication.
17 U.S.C. § 101. The first sentence of the definition tracks the language in § 106(3), making it clear that all distributions are publications. It does not follow from that proposition that the inverse — all publications are distributions — is also true. See Patry on Copyright § 13:11.50 (noting that courts that assume the inverse is true fall within “the logical fallacy of affirming the consequent” (internal quotation marks omitted)). The “offering to'distribute” language forms an additional category of publications that are not distributions. See London-Sire,
Section 506(a)(1)(C), a criminal provision that imposes penalties for “the distribution of a work being prepared for commercial distribution, by making .it available on a computer network accessible to members of the public,” likewise convinces the Court that its reading of § 106(3) is correct. This provision. and § 101 establish that “when Congress intends distribution to;encompass making available or offering to transfer, it has demonstrated that it is quite capable of explicitly providing that in the statute.” Thomas,
BMG makes three additional arguments for a “making available” interpretation that the court finds equally unpersuasive. First, BMG says that “making available” is “the view of definitive treatises.” Pis.’ Opp’n at 12. That is not correct. There is a split in the academic debate, with Menell and Nimmer advocating for a “making available” right and Patry and Goldstein advocating for actual distribution.
BMG also argues that interpreting the right broadly is essential to comport with the United States’s obligations under the World Intellectual Property Organization (“WIPO”) Copyright Treaty. While the WIPO Treaty does recognize a “making available” right, the treaty is “not self-executing and [it] lack[s] any binding legal authority separate from [its] implementation through the Copyright Act.” Thomas,
Finally, BMG points to a letter written by Marybeth Peters, the former Register of Copyrights, that embraces a “making available” reading of the statute. See Letter from Marybeth Peters, Register of Copyrights,' to Rep. Howard L. Berman (Sept. 25, 2002). The opinions expressed in the letter have no controlling weight and the Court does not consider them. See Elektra Entm’t Grp., Ine.,
Although the Court agrees with Cox up to this point, Cox makes two additional arguments regarding the contours of the distribution right that the Court does hot accept. First, Cox contends “copies or pho-norecords” coyer only tangible, material objects and the distribution right is not infringed by electronic, rather than physical, transfers. Second, Cox argues that the transactional language in the statute — “by sale or other transfer of ownership, or by rental, lease, or lending” — requires that there be a consummated “transfer” of copy .or phonorecord and, that there is no evidence of such a transfer in this case, The Court believes, Cox is mistaken on both counts.
The distribution right extends only to “copies” and “phonorecords.” 17 U.S.C. § 106(3). Phonorecords are “material objects in which sounds ... are ... fixed by any method nowknown or later developed, and from which th‘e sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine hr device.”
Not only can electronic files be “material objects,” but transferring files using a Bit-Torrent protocol satisfies the transactional element of distribution. Section 106(3) requires a distribution “by. sale or other transfer of ownership, or by rental, lease, or lending.” While BitTorrent transfers do not fit within our ordinary conception of a “transfer of ownership” because the trans-feror retains Jus or her own copy of .the file, the Court finds the London-Sire court’s reasonjng on this issue persuasive. “[I]t is the newly minted owner ship, rights held by the transferee that concern it, not whether the transferor gives- up his own.”
In sum, to establish a direct infringement of its, distribution right, BMG must show an actual dissemination of a copyT righted work. BMG contends that even under this standard, it has produced more than enough evidence to show actual dissemination: First, Rightscorp ,,identified Cox subscribers sharing .torrents that Rightscorp had also found , on- torrent indexing websites. Because, ¡each torrent contains a unique “hash,” an identifying code that is only created _ once,- BMG argues these Cox users must have downloaded the torrents at some point. Second, Rightscorp downloaded over 700,000 copies of copyrighted works from Cox subscribers using Cox’s internet service and 100,000 of those copies were of the works at issue in this case.
The Court finds BMG has demonstrated that there is a genuine issue of material fact as to whether its ’ distribution right was directly infringed.
2. Contributory Infringement
A contributory infringer is one who, (1) “with knowledge of the infringing activity,” (2) “induces, causes or materially contributes to. the infringing conduct of another.” CoStar Grp., Inc.,
a. Effect of Grokster
The Court finds no support for Cox’s reading of Grokster. Grokster clarified the scope of inducement;- it did not explicitly or implicitly reject a material contribution theory of liability.
b. Knowledge
Cox argues that even if a “material contribution” theory survived Grokster, BMG cannot succeed because there is no evidence that Cox had knowledge of infringing activity.
BMG asserts that Cox had knowledge of its users’ infringing activity because Right-scorp sent Cox more than two million infringement notices pertaining to its copyrighted works. Despite Cox’s arguments to the contrary, DMCA-compliant notices are evidence of knowledge. See Capitol Records, LLC,
BMG argues that Cox’s unreasonable decision not to receive Rightscorp’s notices gave Cox reason to know of the infringing activity. In support, BMG draws a comparison to Ellison v. Robertson,
First, BMG claims that when Cox refused to-forward its notices, it gave Cox access ■ to a searchable and,, sortable “dashboard” that. contained all of the information pertaining to the alleged infringements occurring at each IP address. Although Cox received an email from Rightscorp with instructions on how- to access the dashboard, Cox maintains that it never in fact accéssed the dashboard and thus it could not have been a ■ source of knowledge. Second, BMG says after Cox blocked Rightscorp’s notices, Right-scorp sent emails to Zabék, the abuse group, and Cox’s in-house privacy counsel identifying IP addresses with a significant amount of infringing activity. See Allan Decl. Exs. 14, 61. Finally, BMG reprises the statements by members of Cox’s abuse group discussed above that describe specific -customers with phrases like “habitual abuser” or “well aware of his actions.”
Considering all of this together, the Court finds a reasonable jury could conclude that Cox’s refusal to accept Right-scorp’s notices was unreasonable and that additional notice provided to Cox gave it
c. Willful Blindness
BMG also argues that the record establishes Cox’s willful blindness to the direct infringement. As noted above, willful blindness is the equivalent of knowledge in copyright law. See Aimster, -
BMG argues that Cox’s failure to terminate repeat infringers from its service and its deliberate avoidance of Rightscorp’s notices establishes its willful blindness. In response, Cox points to the actions it does take when it receives what it considers proper infringement notices. Cox says that it forwards hundreds of thousands of infringement notices annually, that it works with account holders to identify and stop the activities causing the notices, and that it suspends and when necessary terminates account holders. But this generalized evidence that Cox does not always turn a blind eye to infringement, does not mean that it has never done so. Cf. Capitol Records, Inc. v. MP3tunes, LLC,
BMG paints a very different picture of a company unhappy with the burdens of complying with the DMCA and using the settlement offers in Rightscorp’s notices as a red herring to distract from its goal of reducing the number of infringement notices Cox receives. Given the evidence, this is also a justifiable inference. It will be the jury’s task, not the Court’s, to weigh the evidence and choose among the competing inferences. See Columbia Union Coll. v. Clarke,
3. Vicarious Infringement
BMG also alleges that Cox is liable for vicarious infringement. A variant on respondeat superior, vicarious liability holds a defendant accountable for third-party infringement if he “(1) possessed the right and ability to supervise the infringing activity; and (2) possessed an obvious and direct financial interest in the exploited copyrighted materials.” Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284
a. Right and Ability to Supervise
The first element requires that the defendant “declin[ed] a right to stop or limit” the direct -infringement. Grolcster,
In addition to its legal control, Cox also has the practical ability to stop or limit infringement. There cannot be any serious dispute that internet service is an essential component of the infringing activity alleged by BMG. File-sharing programs are completely dependent on the internet to facilitate the download and upload of files. It is therefore a reasonable inference that the result of an internet service provider exercising its ability to suspend or terminate account holders stops or limits- infringement..
Cox maintains that despite a legal right to stop or limit infringing activity by terminating accounts, there must also be evidence in the record that Cox’s current architecture would allow it to exercise physical control over the infringing activity. Cox reasons that the provision of general internet service is much different than the swap market in Fonovisa, Inc. v. Cherry Auction, Inc.,
In support, Cox relies on two more recent cases from the Ninth Circuit, Perfect 10, Inc. v. Amazon.com, Inc.,
By contrast, here Cox has the contractual right to control, which allows it to stop or limit individuals from infringing BMG’s copyrights. Moreover, unlike the scenario in which Google terminated a contract with an AdSense partner, when Cox terminates or suspends the relationship with an account holder, it takes away an essential component of direct infringement. When an'AdSense partner was terminated, the only result was that the áds were no longer sourced by Google. It would have no effect'on how the website worked. Without the internet, individuals' cannot upload or download illegal content.'
In Visa, the Ninth Circuit held that Visa could not be vicariously liable for processing credit card payments on websites hosting infringing conduct. The court’s holding was grounded in a concern that vicarious liability may be extended to entities whose ability to take steps against infringement would have only an “indirect effect of reducing infringing activity on the Internet at large.”
Nor does the Court agree with the Visa court’s attempt to distinguish cases "like Fonovisa and Napster where the defendant has physical control over the infringing activity. As Judge Kozinski explained in his dissent, “[pjhyfeical control over the infringing activity is one way to stop in-fringers, but it’s certainly not the only way. Withdrawing-crucial services, such as financial support, can be just as effective, and sometimes more effective, than technical measures that can often be circumvented.” Id. at- 821 (Kozinzki, J., -dissenting).
In sum, Cox has a contractual relationship with its users and that relationship gives Cox the legal-right to'withhold service in the face of infringing conduct. Cox also provides a crucial service to the infringements alleged in' this case, which gives Cox the practical ability to stop or limit infringement. That is enough to raise a genuine issue of material fact as to whether BMG can establish the first element of its vicarious liability claim.
h. Direct Financial Interest
The second element requires a “causal relationship between the infringing activity and any financial benefit a defendant reaps, regardless of how substantial the benefit is in proportion to a defendant’s overall profits.” Ellison,
Cox provides a content-neutral commercial service that makes a wide selection of services and activities available to its subscribers, including email, social networking, web surfing, gaming, P2P file sharing, and more. See Allan Decl. Ex. 37. Cox charges the same flat monthly fees to its users whether they use Cox’s service for infringing or non-infringing purposes. Those “flat periodic payments for service ... ordinarily would not constitute receiving a financial benefit directly attributable to the infringing activity,” unless “the value of the service lies in providing access to infringing material.” Ellison,
BMG offers evidence of the “draw” of infringing activity in the form of a survey conducted by its expert, Stephen Nowlis. The study of Cox internet subscribers concluded that 16% of subscribers “download or upload free digital music through sites such as ThePirateBay, KickAssTorrents, and Torrentz,” and of that 16%, ,70% characterized the ability to do .so as a reason they subscribe to Cox.
4. Mitigation of Damages
Cox also raises BMG’s alleged failure to mitigate its damages as a ground for summary judgment. Specifically, Cox argues BMG failed to mitigate by declining
To the extent failure to mitigate damages is applicable.to the award of statutory damages, a genuine issue of material fact remains as to whether BMG in fact failed to mitigate its damages.
5. Unclean Hands
Finally, Cox contends that BMG’s unclean hands bar its claims. Courts, including the Fourth Circuit, have “on occasion invoke[d] the equitable doctrine of unclean hands as a defense in a copyright infringement action.”
Cox argues BMG has unclean hands for two reasons. Cox first claims BMG “failed to supervise [its agent] Rightscorp and cast a blind eye towards its extortionate scheme to profit .from threats to cut off Internet service,” Defs.’ Memo, in Supp. at 27. The only conduct by Rightscorp with a direct nexus to this litigation is the inclusion of settlement offers in the notices sent
Cox next submits that BMG is not entitled to relief because Rightseorp downloaded thousands of sound recordings and there is no evidence that Rightseorp had authorization to do so from the owners of the sound recording copyrights (as opposed to authorization from BMG, which owns the musical composition copyrights). However, “use of ... undercover investigators and the like to ferret out infringement is routine, and provides no defense.” 4-13 Nimmer on Copyright § 13,09[B] (citing Sega Enters. v. MAPHIA,
III. CONCLUSION
For the reasons stated above, the Court DENIES Cox’s Motion for Summary Judgment. (Dkt. No. 305). The Court GRANTS in part and DENIES in part Plaintiffs’ Motion for Partial Summary Judgment. (Dkt. No. 310),
Notes
. This number is disputed. Rightscorp asserts that during the time period relevant to this litigation, an infringement notice issued only when Rightscorp's software confirmed that a peer was offering 100% of its payload. Right-scorp admits that beginning in December 2014, after the filing of this lawsuit, it began sending notices when a payload contained anywhere between 10% and 100%. Because a torrent payload may contain hundreds of files, establishing that a peer is offering 10% of a payload is not a guarantee that the work identified in a notice was in fact in the payload. Cox claims that over 500,000 of the 2.5 million notices were issued after the lawsuit was filed and therefore, for at least some of those notices, the peer did not actually have the allegedly infringing file. Cox also argues that Rightscorp cannot establish that it was utilizing a 100% bitfield threshold during the time period relevant to the suit.
. If there is no email address on record for the customer, Cox skips the warning stage and moves directly to suspensions. Theodore Decl. Ex. 17 at 12; Beck Decl. ¶ 9 n,10.
. The First Amended Complaint elected both actual and statutory damages. Plaintiffs made clear in subsequent motions that they only seek statutory damages.
. Plaintiffs' memorandum in support of their motion’ for summary judgment states theré are 1,422 copyrights at issue, but Plaintiffs subsequéntly withdrew one copyright in their reply brief. See Pis.’ Reply at’S n.3. ■
. See Island Software & Comp. Serv., Inc. v. Microsoft Corp.,
. There are three types of agreements: (1) Asset Purchase Agreements (or • Songwriter and/or Copyright Purchase Agreements), which transfer ownership; (2) Publishing and Co-Publishing Agreements, which convey some percentage of the copyright; and (3) Exclusive Administration Agreements.
. Cox’s brief challenges ownership of works listed in Appendix A103 and A104, but the Court’s copy of the Briggs Declaration ends at Appendix A102.
.Specifically, summary judgment is granted as to ownership of the works listed in A35, A38, A39, A41, A43, A47, A53, A55, A61, A65, A67-A72, A75, A78, A80-A82, A90, A92-A94, and A99.
. Cox raises multiple evidentiary objections to Briggs’s declaration. See Defs.' Opp’n at 2-3. The Court has reviewed the declaration and overrules these objections. Briggs is a proper representative to testify to corporate documents regarding the ownership issues raised and the Court finds his declaration reliable.
. Cox also disputes Plaintiffs' assertion that the certificates of registration as to the first sub-category of Round Hill copyrights list "Round Hill Music, LLC" as the claimant. Because the Court agrees with Cox that Round Hill Music LP ■ is without standing, there is no need to reach this argument.
. Section 106 provides, in pertinent part:
Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;'
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies ór phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
17 U.S.C. § 106.
. After reviewing the parties’ initial arguments on this issue, the Court determined that additional briefing was necessary on the limited issue of standing. The Court issued an Order directing the parties to
(1) address what, if any, exclusive right(s) Round Hill Music, LP holds with respect to the copyrights at issue and the nature of the transfer of those rights from Round Hill Music Royalty Fund, LP (i.e., whether there was an assignment of title to an exclusive right(s) or an exclusive license granted); (2) identify the strongest case law in support of their respective readings of the rights, if any, conveyed by the agreements attached as Exhibits RH2 and RH3 to the Gillis Declaration; and (3) address the breadth of the principle barring challenges by alleged third-party infringers to transfers of exclusive rights (i.e., the Eden Toys principle) and its application to Defendants’ standing challenge in this case.
(Dkt. No. 501).
. Because Round Hill Music LP is without standing, the remainder of this opinion refers to BMG as the sole plaintiff.
. In Perfect 10, Inc. v. CCBill LLC, the Ninth Circuit imported the knowledge standard in § 512(c)’s safe harbor into its determination of whether the service provider was reasonably implementing its repeat infringer policy.
. Because Cox was not acting on or receiving Rightscoip’s notices, the Court’s analysis focuses on how Cdx treated notices of infringement received from third-party copyright owners. As the Ninth Circuit has noted, “Section 512(i)(l)(A) requires an assessment of the service provider’s ‘policy,’ not how the service provider treated a particular copyright holder.” CCBill LLC,
. The emails from this period evidence a shift to real terminations. In a 2012 email, Sikes wrote, "Now, when we terminate Customers, we REALLY terminate the Customer (for 6 months).” Theodore-Decl. Ex. 23. And in the same email chain, he wrote, "[Employee] may not have been aware that we now terminate, for real. He’s been out of the loop, for a while. We’ll get him on the same page.” Id.
. In thp three months after the suit was filed, Cox terminated an average of 11.6 customers per month. Theodore Decl. Ex. 39 at 27.
. “404” refers to the area code in Atlanta, Georgia. This means the customer had been through the final suspension steps where he or she was required to speak with Cox’s high-level customer service representatives. Theodore Deck Ex, 1 at 79-80.
. Section § 512(c)(3)(A) lists the elements that.copyright owners must include in a notification of claimed infringement. Section 512(a), the safe harbor on which Cox relies, is the only safe harbor that does not reference the notification provision in § 5.12(c). The absence of the notification provision “make senses where an ISP merely acts as a conduit for infringing material — rather than directly storing, caching, or linking to infringing material — because the ISP has no ability to remove the infringing material from its system or disable access to the infringing material.” In re Charter Commc'ns,
. The Tenth Circuit recently relied on Hotal-ing in a case involving ,a library’s distribution of a copyrighted work. See, Diversey v. Schmidly,
. Compare Menell, supra, at 67 (“[T]o prove a violation of copyright's distribution right, si copyright owner need merely show that a copyrighted work has been placed in a share folder that is accessible to the public.”), and Nimmer on Copyright § 8.11[B], with Paul Goldstein, Goldstein on Copyright § 7.5.1 (3d ed. 2005) ("[A]n actual transfer • must take place; a mere offer for sale will not infringe the right.”), and William F. Patry, Patry on Copyright. § 13:11.50 (2015) ("[T]he mere offering to distribute a copy work does not violate section 106(3).”). Earlier versions of Nimmer on Copyright endorsed an actual dissemination reading of the statute. See 2 David Nimmer & Melville B. Nimmer, Nimmer on Copyright § 8.11[A] (2007) ("Infringement ... requires an actual dissemination of either copies or phonorecords.”); see also Rick Sanders, Will Professor Nimmer's Change of Heart on File Sharing Matter?, 15 Vanderbilt 1. Ent. & L. 857, 865 (2013) (noting that the "copyright treatises were unanimous until recently”).
. The definition of "copies” is the same except that they are ' "material objects) other than phonorecords, in which a work is fixed.” § 101 (emphasis added); see also London-Sire,
. Cox’s, pxpert, concluded that “the samples - that Rightscorp collected revealed multiple errors in its software’s detection process.” Reply at 10 n.3. The reliability of the samples will be a factual issue for the jury to weigh.
. The Grokster Court said that “[o]ne infringes contributorily by intentionally inducing or encouraging direct infringement.”
. Cox did not raise BMG’s ability to establish the second "material contribution” element until its reply brief. Accordingly, the Court declines to reach the issue of whether there is sufficient evidence of Cox’s contribution to the alleged infringement.
.Some courts have abandoned constructive knowledge in the online context and instead required-plaintiffs to establish “actual knowledge of specific acts of infringement.” Luvdarts, LLC v. AT&T Mobility, LLC,
. Cox contends the notices are not evidence of knowledge because even had Cox received them, the notices were deficient. But Cox’s in-house counsel, who set Cox’s policy not to accept Rightscorp’s notices, testified that the notices were "generally consistent” with the DMCA in all other respects, see Allan Decl. Ex. 2, and Cox has repeatedly asserted in this litigation that if Rightscorp had only agreed to delete the settlement language from the notices, they would have been forwarded to Cox account holders. At this stage of the litigation, viewing the evidence in the light most favorable to BMG, the Court finds a reasonable trier of fact could conclude that had Cox received the notices, they would be evidence of infringing activity.
. Cox attempts to characterize-these emails as merely acknowledging the presence of widespread infringement on the internet. The .Court disagrees. These emails show Cox employees discussing specific interactions with individual Cox. account holders regarding what Cox employees believed was specific infringing activity. Even if these emails would not be sufficient standing alone to establish knowledge, they strengthen the inference that Cox’s knowledge of infringement went beyond the mere possibility that its service was being used for infringement.
. Cox raised multiple challenges to Nowlis’s survey in a Daubert motion. (Dkt. No. 477). The Court denied the motion on the ground that any deficiencies identified go to the weight of the survey and not its admissibility. (Dkt. No. 691).
. BMG’s only other evidence that subscribers chose Cox or retained their subscriptions to Cox because of the availability of infringing material is in the form of screenshots of message boards on the website Reddit. BMG presents no explanation as to how these hearsay statements would be admissible or authenticated, and the Court does not consider them.
. When statutory damages are penal in nature, the focus is "necessarily on the [defendant's] actions and not the [plaintiff’s].” Moothart v. Bell,
. Although it is an equitable defense, courts have applied the doctrine to preclude both equitable relief and damages at law. See Tempo Music, Inc. v. Myers,