DocketNumber: No. 1:17-CV-365-DAE
Citation Numbers: 384 F. Supp. 3d 743
Judges: Ezra
Filed Date: 3/15/2019
Status: Precedential
Modified Date: 7/25/2022
Before the Court are two Report and Recommendations, both filed by Magistrate Judge Andrew W. Austin on December 12, 2018. (Dkts. ## 240, 241.) Pursuant to Local Rule CV-7(h), the Court finds this matter suitable for disposition without a hearing. After careful consideration and review, the Court-for the reasons that follow-(1) ADOPTS the Report and Recommendations (Dkts. ## 240, 241); (2) GRANTS Plaintiffs' Motion for Partial Summary Judgment as to Grande's DMCA safe harbor defense (Dkt. # 127); (3) GRANTS IN PART AND DENIES IN PART Grande's Motion for Summary Judgment (Dkt. # 140); (4) DENIES Grande's Motion for Sanctions (Dkt. # 156); and DENIES Plaintiff's Motion for Summary Judgment as to Liability (Dkt. # 172).
BACKGROUND
Plaintiffs in this case are record companies that produce commercial sound recordings and distribute them throughout the United States. (Dkt. # 1 at 2.) Remaining Defendant Grande Communications Networks, LLC ("Grande") is an internet service provider ("ISP"), providing internet access to customers in Texas. (Id.) Former Defendant Patriot Media Consulting, LLC ("Patriot") provided and continues to provide various management services to Grande. (Id. at 6.) Plaintiffs originally filed suit against both Grande and Patriot. (Id. at 1.) Plaintiffs asserted that Defendants received over one million notices of direct copyright infringement allegedly committed by Grande's customers. (Id. at 2, 11-12.) Plaintiffs allege that these customers directly infringed on Plaintiffs' copyrights through the use of various of file sharing applications, including BitTorrent. (Id. at 2, 8-12.) Plaintiffs' complaint asserted claims for secondary copyright infringement under
On April 19, 2017, Defendants filed separate motions to dismiss under Federal Rule of Civil Procedure 12(b)(6). (Dkts. ## 28, 29.) On March 26, 2018, the Court adopted a Report and Recommendation from Magistrate Judge Austin recommending Patriot's motion be granted in its entirety and Grande's motion be granted as to Plaintiffs' claims for vicarious secondary infringement.
On April 9, 2018, Grande filed their answer to the complaint. (Dkt. # 80.) Among other affirmative defense, Grande pled the safe harbor provision of the Digital Millennium Copyright Act ("DMCA"),
On August 8, 2018, Plaintiffs filed a motion for summary judgment as to Grande's affirmative defense of the DMCA safe harbor provision. (Dkt. # 127.) On December 18, 2018, Judge Austin issued a Report and Recommendation (the "Safe Harbor Report") recommending Plaintiffs' motion be granted as to the safe harbor issue.
Additionally, on August 18, 2018, Grande filed a motion for summary judgment as to the issues of liability and damages. (Dkt. # 140.) On September 11, 2018, in their response in opposition to Grande's motion for summary judgment, Plaintiffs cross moved for summary judgment as to liability. (Dkt. # 172.) On December 18, 2018, Judge Austin issued a Report and Recommendation (the "Liability Report") recommending Grande's motion for summary judgment be granted as to Grande's alleged liability for infringing Plaintiffs' reproduction rights under
The Safe Harbor Report and the Liability Report and the parties' objections thereto are currently before the Court.
LEGAL STANDARD
I. Review of the Magistrate Judge's Report and Recommendations
Any party who desires to object to a Magistrate Judge's findings and recommendations must serve and file written objections within 14 days after being served with a copy of the findings and recommendation. Fed. R. Civ. P. 72(b)(2). The Court conducts a de novo review of any of the Magistrate Judge's conclusions to which a party has specifically objected. See
II. Summary Judgment
Summary judgment is proper if "there is no genuine dispute as to any material fact" and the moving party "is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Meadaa v. K.A.P. Enters., L.L.C.,
The moving party bears the initial burden of demonstrating the absence of any genuine issue of material fact. Celotex Corp. v. Catrett,
In deciding whether a fact issue has been created, the court must draw all reasonable inferences in favor of the nonmoving party, and it "may not make credibility determinations or weigh the evidence." Tiblier v. Dlabal,
*754(quoting Brown v. City of Hous.,
Finally, when, as here, "parties file cross-motions for summary judgment, [the court] review[s] each party's motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party." Green v. Life Ins. Co. of N. Am.,
DISCUSSION
I. Report and Recommendation Regarding Plaintiff 's Motion for Partial Summary Judgment as to Grande's Statutory Safe Harbor Defense
In order to be entitled to the DMCA's safe harbor protections, an ISP must "adopt[ ] and reasonably implement[ ] ... a policy that provides for the termination in appropriate circumstances of subscribers and account holders ... who are repeat infringers[.]"
[t]he undisputed evidence shows that though Grande may have adopted a policy permitting it to terminate a customer's internet access for repeat infringement, Grande affirmatively decided in 2010 that it would not enforce the policy at all, and that it would not terminate any customer's account regardless of how many notices of infringement that customer accumulated, regardless of the source of the notices, and regardless of the content of a notice.
(Dkt. # 241 at 12.) Grande objects to this conclusion, asserting that "[t]here are fact issues for trial regarding whether Grande 'reasonably implemented' its repeat infringer termination policies" and "[t]here are triable issues of material fact regarding the existence of 'appropriate circumstances' warranting termination." (Dkt. # 251 at 3, 7.) Because of Grande's objections, the Court reviews this issue de novo.
As a party asserting the affirmative defense of the DMCA's safe harbor, Grande "bears the burden of raising entitlement to the safe harbor and of demonstrating that it has ... taken the steps necessary for eligibility." Capitol Records, LLC v. Vimeo, LLC,
Grande argues that it has adopted an appropriate policy because since 2012 it has had a public-facing policy providing for the termination of infringing subscribers. (Dkt. # 251 at 4.) The evidence in the record indicates the opposite. Although Grande apparently stated publicly that its policy was to terminate infringing customers, Grande's corporate representative testified that from 2010 through 2016, Grande did not have any specific policies or procedures providing for how it would actually go about terminating any such infringing customers. (Dkt. # 127-21, Ex. B at 8-9.) In internal emails, one Grande employee even stated that "we have users who are racking up DMCA take down requests and no process for remedy in place." (Dkt. # 127-22, Ex. D.)
*755Moreover, to be eligible for the DMCA safe harbor, an ISP must "reasonably implement" a termination policy, not just adopt one.
Prior to 2010, Grande enforced "a policy of turning off all subscribers upon copyright violation notice, requiring the customer to then contact Grande to discuss the issue, understand what happened, inform the customer of why they'd been shut off, and take appropriate action from there." (Dkt. # 127-3, Ex. C at 12.) However, beginning in October 2010, Grande's practice of terminating customers ceased (id. at 12-13.), and Grande did not terminate a single infringing customer from October 2010 until May 2017 (Dkt. # 127-7, Ex. G at 6). Yet during that period Grande received over a million copyright infringement notices, it was tracking over 9,000 customers on its DMCA "Excessive Violations Report" by late 2016, and it specifically tracked users by the number of notices it received about them. (Dkts. ## 127-9, Ex. I at 5; 127-3, Ex. C at 9.)
In internal emails, Grande employees recognized that "we have some customers that are up to their 54th notice[,]" yet "there is no 'three strikes' law or anything that we follow like some ISPs." (Dkt. # 127-22, Ex D.) Grande's corporate representative further admitted that until 2017 it would not terminate a user for infringement "regardless of the source of any notice," regardless of the content of any notice," and "regardless of the volume of notices ... for a given customer." (Dkt. # 127-7, Ex. G at 6-7.) It was not until June 2017, two months after the commencement of this litigation, that Grande terminated any customers, and even then, it only terminated eleven customers in all of 2017. (Dkt. # 127-24, Ex. H at 1-3.)
Such an utter failure to terminate any customers at all over a six-and-a-half-year period despite receiving over a million infringement notices and tracking thousands of customers as repeat infringers demonstrates that Grande "made every effort to avoid reasonably implementing [its] policy" and "very clearly determined not to terminate subscribers who in fact repeatedly violated the policy." BMG,
In BMG, the defendant Cox Communications, Inc. ("Cox") actually had formal procedures in place that would lead to a customer's termination. The first copyright notice would result in no action.
Grande argues that BMG is inapposite in this case because in BMG Cox "failed to follow through on its own policy" because Cox internally concluded that a subscriber should be terminated, but then declined to do so to preserve a revenue stream. (Dkt. # 251 at 6 (quoting BMG,
But in BMG, Cox at least had internal procedures that in theory could lead to the termination of a customer, even if they were laxly enforced and often circumvented. In this case, the evidence is clear that from at least 2011 until 2016 Grande had no internal policy or procedures whatsoever to enforce their forward-facing statement that they would terminate customers for repeat infringements. (Dkt. # 127-21, Ex. B at 8-9.) Grande admitted that until 2017 it would not terminate a user for infringement "regardless of the source of any notice," regardless of the content of any notice," and "regardless of the volume of notices ... for a given customer." (Dkt. # 127-7 at 6-7.) And in fact Grande did not terminate a single infringing customer from October 2010 until May 2017 (Dkt. # 127-7 at 6.) Unlike Cox, Grande did not even have a policy or procedures in the first place for them to laxly enforce or frequently circumvent.
Grande thus did even less than Cox to "reasonably implement" the kind of policy required for the protections of DMCA's safe harbor. If lax enforcement and frequent circumvention of existent procedures disqualifies a defendant from the safe harbor's protections, the complete nonexistence of such procedures surely must do likewise. Such a complete abdication of their responsibilities to implement and enforce a policy terminating repeat copyright infringers requires the Court to conclude that Grande is not entitled, as a matter of law, to the safe harbor provisions of
Grande raises two additional arguments as to why summary judgment should not be granted on this issue, each relating to alleged infirmities in some of the infringement notices it received. Grande argues that because these notices were "incapable of identifying or giving notice of actual copyright infringement, there are questions of fact as to whether it reasonably implemented a termination policy in spite of never terminating any customers from 2010 to 2016." (Dkt. # 251 at 3-7.) Grande also argues, again because of the supposed flaws in these notices, that there are triable questions of fact whether appropriate *757circumstances existed warranting termination of any customers. (Id. at 7-8.)
However, these arguments are unpersuasive for several reasons. First, BMG also involved the same notices, generated by a company called Rightscorp, that Grande objects to in this case. Cox argued that these notices "do not necessarily prove actual knowledge of repeat infringement."
Second, Grande's argument that the Rightscorp notices failed to demonstrate appropriate circumstances justifying termination is similarly unpersuasive. This argument was also made by the defendant in BMG.
failed to provide evidence that a determination of "appropriate circumstances" played any role in its decisions to terminate (or not to terminate). [Grande] did not, for example, point to any criteria that its employees used to determine whether "appropriate circumstances" for termination existed. Instead, the evidence shows that [Grande's] decisions not to terminate had nothing to do with "appropriate circumstances" ....
Third, Grande's own documents in the record reflect, contrary to the arguments it now advances, that it took the Rightscorp and other notice as affirmative evidence of infringement. In one April 2013 email exchange, a senior Grande official stated that "we have some customers who are up to their 54th notice ... [yet] there is no 'three strikes' law or anything that we follow like some ISPs." (Dkt. # 127-22, Ex. D.) As a result, the same official then asked, in the same email: "Question - we have users who are racking up DMCA take down requests and no process for remedy in place. I don't know if I'm seeing a broken process or compliance with the letter of the law. Do you guys have insight or knowledge on this?" (Id.) In the ensuing conversation, another Grande manager reported the following:
Who is responsible for the DCMA notification process? Do we call customers?
Bartlett just answered my email, and, as you said, they contact the customer and let them know they will disconnect them if they continue to receive those notice.
*758If we do nothing more tha[n] emails (as I think you mentioned) we might lose our safe harbor status.
(Dkt. # 128-28, Ex. M at 2.) Other internal emails also demonstrate that Grande viewed the notices as evidence that a customer had infringed a copyright. (See Dkts. ## 127-17, Ex. Q; 127-30, Ex. R; 127-31, Ex. S.)
Finally, Grande's arguments related to the Rightscorp notices ignores the hundreds of thousands, out of roughly 1.2 million notices of infringement Grande received between 2011 and 2016 (Dkt. # 127-7, Ex. G at 10), came from entities other than Rightscorp. In 2015, for example, out of 365,569 infringement notices received, 119,247, roughly one third, were received from other sources. (Dkt. # 172-18, Ex. R at 2.) Grande has presented no summary judgment evidence that these other notices are in any way unreliable.
Even if the Court were to accept Grande's arguments related to the Rightscorp notices, the summary judgment evidence shows that Grande failed to terminate a single customer despite the receipt of several hundred thousand other copyright infringement notices. Therefore, summary judgment in favor of Plaintiffs' on this issue is still be appropriate because, as the DMCA safe harbor is an affirmative defense, Grande carries the burden of demonstrating it is entitled to raising it. See Capitol Records, LLC v. Vimeo, LLC,
For these reasons, the Court ADOPTS the Safe Harbor Report. (Dkt. # 241.) Plaintiffs' Motion for Partial Summary Judgment as to the issue of Grande's entitlement to the affirmative defense of the DMCA safe harbor provisions,
II. Report and Recommendation Regarding Parties' Cross Motions for Summary Judgment as to Liability
A. Grande's Motion for Summary Judgment
Grande moved for summary judgment as to liability based on six arguments: (1) Plaintiffs cannot prove direct infringement by Grande's customer of their distribution, reproduction, and public performance rights as copyright holders (Dkt. # 140 at 4); (2) Plaintiffs cannot prove contributory liability (id. at 11); (3) Plaintiffs cannot prove willful copyright infringement (id. at 18); (4) Plaintiffs cannot prove that the discovery rule expands the statutory damages period (id. at 18); (5) Plaintiffs cannot prove actual damages or Grande's profits from alleged infringement (id. at 19); and (6) Plaintiffs cannot prove they own many of the asserted copyrights (id.). In opposing Grande's motion, Plaintiffs also moved for summary judgment in their own favor on the issue of liability. (See Dkt. 172.)
The Magistrate Judge's Liability Report recommends granting Grande summary judgment as to whether Grande's customers violated Plaintiffs reproduction or public performance rights, and thus whether Grande could be held contributorily liable for such infringement. (Dkt. # 240 at 4 n.1.) In all other respects, the Liability Report recommends denying both parties' motions. (Id. at 20-21.) Grande objects on all six issues to the Liability Report's recommendations denying the motions. (Dkt. # 252.) Plaintiffs object to the Liability Report's recommendations denying their *759cross motion on direct and contributory infringement. (Dkt. # 250.) Plaintiffs also object to the Liability Report's recommendation to grant Grande summary judgment on their claim for Grande's contributory liability for violating their reproduction rights. (Id.) The Court therefore reviews these issues de novo. See
1. Direct Infringement by Grande's Customers
It is axiomatic that there can be no contributory copyright infringement without there first being direct copyright infringement. See, e.g., A & M Records, Inc. v. Napster, Inc.,
To establish direct copyright infringement, a plaintiff must show that (1) he owns a valid copyright and (2) the defendant copied constituent elements of the plaintiff's work that are original. BWP Media USA, Inc. v. T & S Software Assocs., Inc.,
Grande moved for summary judgment on the issue of direct infringement, arguing that Plaintiffs cannot prove: (1) substantial similarity; (2) that any Grande subscriber violated the reproduction right using Grande's network; (3) that any Grande subscriber violated the distribution right through Grande's network; (4) direct infringement with respect to each asserted copyright; and (5) that a Grande subscriber violated the public performance right using Grande's network. (Dkt. # 140 at 8-14.)
i. Public Performance and Reproduction
As a threshold matter, the Liability Report recommends granting summary judgment to Grande as to direct infringements by their customers of Plaintiffs' reproduction and public performance rights as set forth in
Moreover, "to perform or display a work 'publicly' means ... to transmit or otherwise communicate a performance or display of the work to [a public place] or to the public ...."
However, Plaintiffs object to the Liability Report's recommendation to grant summary judgment to Grande as to violation of the right of reproduction. Plaintiffs argue that they stated in their combined opposition and cross motion for summary judgment that their claims involve both uploading and downloading of copyrighted music, the latter of which would constitute an infringement of the reproduction right. (Dkt. # 250 at 3.) However, a review of Plaintiffs' argument in which the referenced language is found makes it clear that their argument is directed solely towards Grande's argument related to violations of the right of distribution. (See Dkt. # 172 at 16-23.) The language in the motion Plaintiffs now attempt to rely on is merely their introductory statement of the law and is then followed only by argument related to distribution. Plaintiffs' motion does not reference or respond to Grande's argument related to reproduction.
Further, Plaintiffs' objections fail to respond to the substance of Grande's summary judgment argument. In this context, violation of a copyright holder's right to reproduction involves downloading copyrighted material. See, e.g., Maverick Recording Co. v. Harper,
ii. Substantial Similarity
Grande argues that proving a copyright infringement claim "requires a *761side-by-side comparison of the copyrighted work and the allegedly infringing work, so that the factfinder can assess whether they are 'substantially similar.' " (Dkt. # 140 at 8.) The necessary implication of this argument is that to prove its case Plaintiffs would have to play every song at issue for the jury, alongside the allegedly identical copy or copies found on Grande's customers' computers. Grande relies for this premise on language found in various decisions of the Fifth Circuit. For instance, in Bridgmon v. Array Systems Corp., the court stated "the law of this circuit prohibits finding copyright infringement without a side-by-side comparison of the works."
This Court believes Grande reads too much into this language and these decisions. First, the three cases relied on by Grande are factually distinct from the instant case. In Bridgmon and King, the only admitted evidence of substantial similarity asserted by the plaintiffs was their own oral testimony of similarity. See Bridgmon,
Creations Unlimited involved an allegation that the defendant sold t-shirts with images modelled off of a series of black and white drawings that the plaintiff held copyrights in.
But perhaps more importantly, these cases do not appear to stand for the proposition that a side-by-side comparison of the original and allegedly infringing works must be made in front of the jury, something that would prove beyond impractical in a case of this sort. Nothing in these cases state or imply a comparison must be made directly to a jury. Instead, there simply must be evidence, beyond mere oral testimony, resulting from such a comparison that would permit a layman to view the two works as substantially similar. See Bridgmon,
In this case, Plaintiffs' evidence of substantial similarity comes in the form of "audio fingerprinting" provided by a company called Audible Magic and a similar matching process performed by Rightscorp. Audible Magic:
scans the perceptual characteristics of a sound recording. The tool compares the characteristics of the sound recording to the content that has been registered in Audible Magic's database (what Audible Magic calls its "Global Content Registry"). If the tool returns a "match" condition, that indicates that the sound recording contains copyrighted content that has been registered with Audible Magic. When Audible Magic returns a "match" condition, it includes information about the sound recording contained in the file, including the track title and artist name for the sound recording and the copyright owner of the matched content (as contained in its registry).
(Dkt. # 172-12 at 3.) And Rightscorp's process:
receives a list of copyright works (including artist and title information) from its customers, obtains .torrent files matching those named works, forensically scrubs these torrent files to confirm a digital match (discarding any file that does not match), manually checks the digital match results, and only then monitors BitTorrent networks for infringement of these files.
(Dkt. # 173-79 at 3.)
The ability of the Audible Magic software in particular to identify and match files to copyrighted content has been widely recognized. See Capitol Records, LLC v. Escape Media Grp., Inc., No. 12-CV-6646(AJN),
Grande's argument that the Audible Magic evidence is inadmissible as hearsay is unpersuasive. Because Mr. Landis's "knowledge and analysis were derived from duties he [has] held at [the RIAA], his opinions [a]re admissible as testimony based upon personal knowledge and experience gained while employed by [the RIAA]." United States v. Valencia,
For these reasons, Plaintiffs' evidence-in particular the Audible Magic evidence-is sufficient to raise a genuine issue of material fact as to substantial similarity. Summary judgment in favor of Grande on this issue is therefore inappropriate.
Finally, Grande's argument that "Plaintiffs' cannot demonstrate that the [allegedly] disseminated material satisfies the 'substantially similar' requirement" because "BitTorrent operates by breaking a file into small pieces for transmission, and any Internet user who may download an allegedly copyrighted work would only take a small portion of any allegedly infringing work from a particular Grande subscriber" finds no support in the case law. "It makes no difference from a copyright perspective whether the infringing copy is created in a single wholesale file transfer using a peer-to-peer protocol; or in a swarm of fragmented transfers [using BitTorrent] that are eventually reassembled into the new infringing copy." Malibu Media, LLC v. Bui, No. 1:13-cv-162,
iii. Distribution
Grande argues that summary judgment on distribution is proper because a mere offer to share an infringing file is not actual distribution. Grande relies primarily on Atlantic Recording Corp. v. Howell for the proposition that "[i]f the owner of the shared folder simply provides a member of the public with access to the work and the means to make an unauthorized copy, the owner is not liable as a primary infringer of the distribution right, but rather is potentially liable as a secondary infringer of the reproduction right."
However, to the extent Grande relies on Atlantic Recording for the proposition that *764contributory infringement of the reproduction right is the only viable theory against a party who makes infringing material available to the public, that reliance is misplaced because Atlantic Recording appears to be contrary to the great weight of the case law, including decisions of other courts in this district. In Warner Bros. Records, Inc. v. Payne, the court held that:
the Supreme Court has equated the term with "publication," which is defined under the Act. "Publication" includes "[t]he offering to distribute copies or phonorecords to a group of persons for purposes of further distribution, public performance, or public display." Listing unauthorized copies of sound recordings using an online file-sharing system constitutes an offer to distribute those works, thereby violating a copyright owner's exclusive right of distribution.
No. W-06-CA-051,
Even the case most directly relied on by Grande, Atlantic Recording, recognized that multiple courts "have held that the terms publication and distribution are synonymous, so where a defendant's act fulfills the definition of 'publication' provided by the statute, it also constitutes a 'distribution' under § 106(3)."
Other courts have held that "[i]n order to establish 'distribution' of a copyrighted work, a party must show that an unlawful copy was disseminated 'to the public.' " Hotaling v. Church of Jesus Christ of Latter-Day Saints,
Regardless of whether or not violation of the distribution right requires actual dissemination instead of a mere offer to disseminate, Plaintiffs have come forward with sufficient evidence to survive summary judgment. Plaintiffs have presented evidence of hundreds of thousands of notices sent to Grande of infringing material being made available by Grande's customers *765for download and evidence that Rightscorp downloaded over 59,000 full infringing files shared by Grande customers.
The infringement notices provide evidence of offering to share under a "making available" theory, and constitute circumstantial evidence of dissemination if actual dissemination is required. Further, the audio files Rightscorp downloaded from Grande subscribers are exactly the type of evidence that courts have used to establish direct infringement under an "actual dissemination" theory. See, e.g., BMG Rights Mgmt. (US) LLC v. Cox Commc'ns, Inc.,
Finally, relying again on Atlantic Recording's premise that making infringing files available only implicates contributory secondary liability against Grande's customers, Grande argues any theory of liability against it invokes tertiary liability, a premise which is not recognized in the law. (Dkt. # 140 at 12.) However, for the reasons previously stated, the Court concludes a theory of direct liability properly applies to Grande's customers, either through making infringing materials available, or through actual dissemination of infringing materials. Therefore, by providing the services permitting their customers' alleged direct infringement, Grande is potentially liable as a secondary infringer.
iv. Evidence of Direct Infringement with Respect to Each Asserted Copyright
Grande argues that Plaintiffs cannot show direct infringement with respect to each asserted copyright. (Dkt. # 140 at 13.) However, as previously discussed, the court concludes the Rightcorp notices and analysis and the Audible Magic analysis constitute sufficient evidence to raise a genuine issue of material fact to survive summary judgment. The Rightscorp system receives a list of copyrighted works, obtains infringing files allegedly matching those works, forensically scrubs these torrent files to confirm a digital match, discards any non-matching allegedly infringing files, manually checks the match results, and then monitors BitTorrent Networks for infringement of these files. (Dkts. ## 173-78 at 19-33; 173-79 at 3.) Further, the Audible Magic digital fingerprinting technology "scans the perceptual characteristics of a sound recording[, ...] compares the characteristics of the sound recording to the content that has been registered in Audible Magic's database[, and i]f the tool returns a 'match' condition, that indicates that the sound recording contains copyrighted content that has been registered with Audible Magic." (Dkt. # 172-12, Ex. L at 3.) Plaintiffs have also provided evidence that they "ran the mp3 audio files RIAA received from Rightscorp through Audible Magic[, *766and] Audible Magic returned a "match" condition for ... the works ... the Plaintiffs are suing over (the "works in suit"), attached as Exhibit A to Plaintiffs' Complaint." (Id. at 4 (attaching as an exhibit "a chart setting forth each work in suit listed in Exhibit A to the Complaint, along with the corresponding .mp3 audio files that Rightscorp downloaded and the "match" output files from Audible Magic.").)
For these reasons, Grande is entitled to summary judgment as to direct infringement by Grande's customers of Plaintiffs' rights to reproduction and public performance. But there remain genuine issues of material fact as to direct infringement by Grande's Customers of Plaintiffs' distribution right related to all of the asserted copyrights. Summary judgment on this issue is therefore inappropriate and denied.
2. Contributory Infringement
After the Supreme Court's decision is MGM Studios Inc. v. Grokster, Ltd., liability for contributory infringement requires "intentionally inducing or encouraging direct infringement."
Within the general rule of contributory liability announced by Grokster, the Supreme Court has identified two categories of contributory liability: "actively encouraging (or inducing) infringement through specific acts ... or ... distributing a product distributees use to infringe copyrights, if the product is not capable of 'substantial' or 'commercially significant' noninfringing uses."
In expositing these principles of contributory liability, the Grokster Court expressly relied on those "doctrines of secondary liability [that] emerged from common law principles and are well established at law."
Grande's assertion that a cause of action for "material contribution" to copyright infringement is not recognized in the law is thus misplaced. The Grokster Court was clear that liability for contributory infringement was still to be analyzed by reference to those "rules of fault-based liability derived from the common law."
Under this articulation, liability may "be imposed for intentionally encouraging infringement through specific acts." Perfect 10,
However, "mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a [product] distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves." Grokster,
Distilling these principles into a rule of liability, service providers like Grande "can be held contributorily liable if [they] ha[ve] actual knowledge
Turning to the summary judgment evidence, it is clear that Grande has at least one simple measure at its disposal-terminating the internet services of repeat infringers-to prevent further damages to copyrighted works. It is also clear that for the period in question, 2011 through 2016, Grande continued to provide access to the infringing works by continuing to provide internet service to such customers. (Dkt. # 127-7, Ex. G at 6.) The question therefore is whether Grande had actual knowledge of specific infringement on the part of specific customers.
The Court concludes that the summary judgment evidence is sufficient to raise a genuine issue of material fact on that question. Between 2011 and 2016, Grande received over a million copyright infringement notices, it was tracking over 9,000 customers on its DMCA "Excessive Violations Report" by late 2016, and it specifically tracked users by the number of notices it received about them. (Dkts. ## 127-9, Ex. I at 5; 127-3, Ex. C at 9.) Further, in internal emails, Grande employees recognized that "we have users who are racking up DMCA take down requests" and that "some customers ... are up to their 54th notice" (Dkt. # 127-22, Ex D). Grande is therefore not entitled to summary judgment on the issue of contributory liability.
3. Willfulness
A showing of willfulness under the Copyright Act tracks the common law construction of the term. See Graper v. Mid-Continent Cas. Co.,
4. Discovery Rule
Under
"[T]he discovery rule need not be specifically pleaded in federal court." TIG Ins. Co. v. Aon Re, Inc.,
The summary judgment evidence indicates that Grande received 1.2 million notices of infringement, including from Rightscorp, between 2011 and 2016 (Dkt. # 127-7, Ex. G at 10) and that Grande refused to terminate any subscribers between October 2010 and May 2017 (Dkt. # 127-7, Ex. G at 6). Since Grande was aware of when it received such a volume of notices, and over what time period it failed or refused to terminate any subscribers or take any action based on such notices, Plaintiffs' pleading of such facts are sufficient to put Grande on notice that Plaintiffs were asserting claims based on conduct dating back to 2010 and thus that Plaintiffs' might assert that the discovery rule applied. See TIG Ins. Co.,
Further, Plaintiffs' produced evidence that they did not learn of Grande's infringements until January 2016, when Rightscorp approached the RIAA with evidence of Grande's customers' infringements. (Dkt. # 136 at 16.) In response, Grande presented evidence that Rightscorp marketed its services to Plaintiff Sony in 2012 and that Plaintiff UMG had meetings related to Rightscorp in late 2011. (Dkts. ## 201-5, 201-4.) However, the witness testimony on this issue is vague and does not indicate conclusively that Plaintiffs' were made aware of infringement on Grande's network through these meetings. (See
5. Damages
In order to be entitled to disgorgement of profits under § 504(b), "a copyright holder must show more than an infringer's total gross revenue from all of its profit streams." MGE UPS Sys., Inc. v. GE Consumer & Indus., Inc.,
To prove disgorgement damages, Plaintiffs rely on two expert reports. (See Dkts. ## 173-74, 173-81.) The Bardwell report applies probability analysis to the infringement data collected by Rightscorp to determine the probability that sequential infringements-including of the copyrights asserted in this case-are attributable to individual Grande subscribers. (Dkt. # 173-81 at 6.) The Lehr report estimates Grande's average monthly gross margin per customer, for all services a customer purchases from Grande, which can include voice and television services, in addition to high-speed internet. (Dkt. # 173-74 at 13-15.) The Lehr report also estimates the average tenure for a Grande subscriber. (Id. at 15.) Taking these two numbers together, and after accounting for net present value, the Lehr report arrives at an estimated lifetime net present value to Grande per subscriber. (Id. at 16.) The report also derives an alternative net present value amount per customer based on the price paid by TPG Capital to acquire Grande in 2017, and what it implies about the expected value per customer TPG had formed in paying that price. (Id.) The Court concludes this evidence is sufficient to raise a genuine issue of material fact about Grande's revenues reasonably related to infringing customers to defeat summary judgment on this issue.
*7716. Copyright Ownership
In order to prove copyright infringement, one of the things a plaintiff must prove is ownership of the asserted copyright. BWP Media USA, Inc.,
Grande argued in its motion for summary judgment that of the 782 unique registered copyrights listed by Plaintiffs as at issue in this case, Plaintiffs' evidence only demonstrated that they are the owners of 421 of the copyrights. (Dkt. # 140 at 23.) Grande thus argued it was entitled to partial summary judgment as to the remaining 361 unique copyrights at issue. (Id.) Plaintiffs responded with declarations from executives employed by each Plaintiff, with voluminous attachments, that they claim proves their ownership of these 361 copyrights. (See, e.g., Dkts. ## 173-2 to 173-47; 173-48 to 173-73; 180-1 to 180-31.) Such sworn affidavits-when uncontroverted-are generally sufficient to prove ownership. See, e.g., Sony BMG Music Entertainment v. Cuellar, No. CC-07-58,
Grande did not challenge the validity of this evidence on the merits, but instead requested in a motion for sanctions that it should be excluded as untimely because it was produced after discovery. (See Dkt. # 156.) In the Liability Report, the Magistrate Judge denied Grande's motion for sanctions pursuant to his authority under
Under Federal Rule of Civil Procedure 37(c)(1), failure to timely disclose evidence allows exclusion of that evidence "unless the failure was substantially justified or is harmless." Plaintiffs' presented arguments that these disclosures were not in fact untimely. (Dkt. # 179 at *7726-7.) But in any event, even if they were, such untimeliness was harmless because: (1) the evidence is fundamental to Plaintiffs claim; (2) Grande will suffer no demonstrable prejudice from permitting it; (3) the trial date in this case has been vacated and a new trial date has not yet been set; and (4) there is no evidence of willful misconduct or bad faith. See Texas A & M Research Found. v. Magna Transp., Inc.,
For these reasons, the Court is not "left with the definite and firm conviction that a mistake has been committed" by the Magistrate Judge in denying Grande's motion for sanctions. The order was therefore not clearly erroneous and will not be modified or set aside.
Grande's argument regarding ownership is dependent on the Court striking this supplemental evidence. (See Dkt. # 252 at 38-40.) If allowed-as the Court concludes it should be-such evidence is sufficient to prove ownership. See Sony BMG Music Entertainment,
Thus, the Court ADOPTS the Liability Report with respect to Grande's Motion for Summary Judgment (Dkt. # 140) and Motion for Sanctions (Dkt. # 156). Grande's Motion for Summary Judgment is GRANTED IN PART AND DENIED IN PART . It is GRANTED as to infringement of the rights of reproduction and public performance, and DENIED in all other respects. (Dkt. # 140.) Grande's Motion for Sanctions is DENIED . (Dkt. # 156.)
B. Plaintiffs' Motion for Summary Judgment
Plaintiffs also moved for summary judgment as to liability for contributory infringement on essentially the same evidence discussed in relation to Grande's motion for summary Judgment. (Dkt. # 172). The Liability Report recommended denying this motion for the same reasons it recommended Grande's motion be denied on that issue. Plaintiffs object to this recommendation. (Dkt. # 250 at 6.) Because the Court has concluded that genuine issues of material fact exist as to Grande's customers' direct liability, (See Discussion Section II.A, supra) and contributory liability cannot exist in the absence of direct liability, A & M Records, Inc.,
Therefore, the Court ADOPTS the Liability Report with respect to Plaintiffs' Motion for Summary Judgment. (Dkt. # 240.) Plaintiffs' motion is DENIED . (Dkt. # 172.)
CONCLUSION
For the reasons stated, the Court ADOPTS the Safe Harbor Report and the Liability Report. (Dkts. ## 240, 241.)
*773Plaintiffs' Motion for Partial Summary Judgment as to Grande's DMCA safe harbor defense is GRANTED . (Dkt. # 127.) Grande's Motion for Summary Judgment is GRANTED IN PART AND DENIED IN PART . (Dkt. # 140.) It is GRANTED as to infringement of the rights of reproduction and public performance and DENIED in all other respects. (Id.) Grande's Motion for Sanctions is DENIED . (Dkt. # 156.) Plaintiffs' Motion for Summary Judgment as to Liability is DENIED. (Dkt. # 172.)
IT IS SO ORDERED.
There are two recognized types of secondary infringement: contributory and vicarious. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.,
On September 17, 2018, by order of the Court, the case was referred to Magistrate Judge Austin. (Dkt. # 183.) And on October 30, 2018, the case was reassigned to this Court by the Honorable Lee Yeakel. (Dkt. # 212.)
Because there is thus also no evidence subscribers obtained the infringing music through Grande's network, there is no evidence sufficient to support contributory liability against Grande on the basis of infringement through reproduction.
Grande argues that the Rightscorp evidence is precluded by the best evidence rule because "Rightscorp destroyed all records of its manual verification process, including any records of the alleged "original" songs that were used for comparison." (Dkt. # 247 at 7; see also Dkt. # 252 at 29.) This argument is best suited for the trial context. All that is required at the summary judgment stage is that evidence be capable of presentation in an admissible form. See Fed. R. Civ. P. 56(c)(2). Moreover, even if the "original" evidence has been destroyed by the proponent, other evidence of content is admissible unless the destruction was the result of "the proponent acting in bad faith." Fed. R. Evid. 1004. First, the alleged destruction was done by Rightscorp, which is not a party to this action, not the Plaintiffs, who are the proponents of the evidence at summary judgment and would be the proponents at trial. Second, Grande has presented no evidence that Rightscorp destroyed these "originals" at the behest of Plaintiff. In fact, Grande's own motion for sanctions states that the RIAA, the trade group of Plaintiffs, "requires the BitTorrent monitoring company working on behalf of Plaintiffs to preserve all of this data as part of its copyright infringement evidence package." (Dkt. # 247 at 7.) Nor did Grande present any evidence or argument that the originals were destroyed in bad faith. (See
Grande again reiterates its best evidence rule argument related to Rightscorp song matching and downloading evidence. (See Dkt. # 252 at 34.) The Court has already addressed this argument and found it unpersuasive. See FN 4, supra.
In this way, Grande's reliance on Cobbler Nevada LLC v. Gonzales,
Willful blindness can also satisfy the requirement of actual knowledge. Global-Tech Appliances, Inc. v. SEB S.A.,
Grande's objections to the sufficiency of this evidence are not persuasive. (See Dkt. # 252 at 38.) "Gross revenue" under