The Supreme Court's $1 Billion Online Copyright Case

This podcast is brought to you by ReliaQuest. Cybercriminals are constantly attacking. They want your data. They want your identity. They want your innovation. RelyQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. RelyaQuest. Agentic Defense for the Enterprise. Learn more at ReliQuest.com. That's R-E-L-I-A-Q-U-E-S-T.com. From the opinion pages of the Wall Street Journal, this is Potomac Watch. The Supreme Court here is a billion-dollar case that could decide whether internet providers are liable for illegal activities by their subscribers. Plus, the justices also take up a dispute over whether New Jersey's Attorney General can demand donor information from pro-life pregnancy centers. Welcome, I'm Kyle Peterson with the Wall Street Journal. We're joined today by my colleagues on the editorial page, columnist Alicia Finley and Kim Strassel. On Monday at the High Court, it was the battle of the corporate heavyweights. On one side, Cox Communications, which provides internet, phone, TV, and connectivity to 6 million homes and businesses in a dozen and a half states. On the other side, a long list of music companies and record labels led by Sony Music Entertainment. This dispute is over if a billion-dollar jury verdict against Cox for allegedly failing to sufficiently police copyright infringement on its network can be upheld. Alicia, what's the story here? It's interesting. It's almost as if the two filings by each side in this case are telling different stories about what happened here. Well, they do. The facts of the case are in dispute. What has been happening is that people who are essentially using what are called a peer-to-peer file sharing networks to essentially share music without actually purchasing it. And this would violate the copyright of many of these artists who are represented by Sony Music Entertainment. That includes Beyonce, Bruce Springsteen, and many others. And as a result, they aren't getting paid for their, quote, intellectual property. Sony claims that Cox has an imperative to basically boot anyone from its service.

if they are found or believed to be engaging in copyright infringement. And this goes back to a 1998 law, Digital Millennium Act, that created this kind of safe harbor for internet providers that said basically, If you create this kind of terms of use or terms of service and you set out procedures to not necessarily patrol copyright infringement, actually take to respond it, warn users against it, and then cut off service, then you cannot be held liable for their infringement. Now, this was an issue at the time because there were concerns of just being a dumb tube, so to speak, or, you know, carrying or transmitting this content. the pirated material could make them liable for copyright infringement, which could be very costly in this case, as you pointed out, it was a $1 billion in damages. Here are a couple pieces from each of the filing. So the Sony filing basically paints Cox as cavalier about this. It says Cox initially gave identified infringers three strikes, but over time, that's well due 10, then 12, then ultimately 13, all while simultaneously watering down the consequences of striking out from mandatory termination to discretionary termination to literally just a stern warning. It also claims that at one point peer-to-peer sharing balloon to a whopping 21% of all traffic on Cox's network. So suggesting that Cox as an internet service provider was not taking these kinds of copyrights claims seriously. The Cox filing, on the other hand, presents itself as taking a good faith effort to do its best. So a few points it makes, it says that during the relevant period, Cox received over a million allegations of information. It says that its first step was sending warnings to customers. Nearly half of customers who received such an email were never again accused. Kim, I imagine that includes people who maybe did not know what maybe their teenagers were doing in the basement on these beer-to-peer file sharing networks. And if you get that kind of an email as an internet subscriber, many people figured out what was going on. Who in their house was sharing this kind of music over these networks illegally? in violation of copyright and took care of that problem. Then it goes on to say that there were 0.02% of all customers who throughout this process did not fix their copyright issues. Cox considered termination of those, but it included multifamily houses, military housing, university housing. And so, Kim, the question now, I guess Cox's question is, what are we supposed to do in that case? cut off the dorm of this entire university based on these kinds of claims that are coming in. Yeah, look, if you were Sony, and I understand why it's going after this case, and we should point out, by the way, while this is a very big and important copyright case, is probably one of the biggest ones the U.S. has seen in a long time, because the law is so unsettled, and it's such a vital and basic question about copyright procedure.

I would just note that's not entirely the court's fault. Congress at any time could have stepped in here and actually clarified some of this, of course, as per usual, it's not done its job. But if you're Sony, there's a couple of ways you could go about doing this. You could try to go after each of the individual violators, but that's costly. It's a huge hassle. And the reality is it's much easier to just go after Cox. and make it have to chase after everyone individually or to be held liable if it doesn't. Another recourse of you or Sony is you could attempt to upgrade your technology with better protections and locks that make it harder to be pirated. But that's also tricky, sometimes technologically, and it can also be expensive. So Sony's argument, at least from a legal perspective, is that they have proven that Cox's subscribers are flagrant copyright infringers. And they have also proven that Cox nonetheless continued to sell access to those subscribers despite repeated notices, etc. The problem here is that Cox has got a very good argument as well. And in my mind, they have the better argument of this, too. They note that internet service providers like them receive millions upon millions of these notices every year and that many of them are, in fact, generated by bots. that just look at these networks and then say, oh, they're monitoring these file sharing networks, and they go, this looks like an infringement, and then they send off the notification. And Cox argues it can't reasonably be expected. to just be canceling service on the basis of those notifications. But they also basically point out that the absence of any affirmative act by Cox that supports or facilitates infringement is essentially a protection for them and that they shouldn't have to do it. And then they get to the point that you make too, Kyle, which is, again, just the logistics of this. which is not only are they saying we can't be expected to act on this on the basis of these sort of generated millions of things but who exactly are the users, the end users who have violated? Often they are selling internet subscriptions to hospitals, to military bases, to regional internet service providers, to universities, to whole apartment blocks. You know, does the Supreme Court really want a hospital to lose its internet access because a two-day patient at the hospital was a copyright infringer? And then, of course, the question two,

which I think is important, is Cox notes that it is not a court of law itself. It does not necessarily have the ability to go and look into each of these cases and see if the person really was engaged in copyright or not. They did, in fact, take some steps, you know, to go and look. It's not that they do nothing. They have sent alleged infringers warnings. They have on occasion suspended services. But asking them to just go out and automatically terminate anyone who was accused of this is obviously a huge. problem and this all rests in the fact as noted that we have some odd precedents on this that don't really are either too vague or just don't give enough information for any of these actors to know exactly who bears the responsibility hang tight we'll be right back in a moment This podcast is brought to you by ReliaQuest. Cybercriminals are constantly attacking. They want your data. They want your identity. They want your innovation. RelyQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. RelyaQuest. Agentic Defense for the Enterprise. Learn more at ReliQuest.com. That's R-E-L-I-A-Q-U-E-S-T.com. This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington-Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. Listen at Schwab.com slash Washington Wise. Welcome back. There's a problem, Alicia, in the Internet age, of kind of routing the liability for this kind of online conduct. Not the first time that the justices have been asked that question. In some context, I'm sure it will probably not be the last time. There was a 2023 case, for example, involving Section 230, that liability protection for Internet providers, a case at the Supreme Court about whether what was then called Twitter was liable for aiding and abetting terrorism. because of some of the activities of some of its users. And let's listen to a couple of clips of the oral argument in this case. Here first is Justice Sonia Sotomayor making another analogy to gun stores. If I'm a gun dealer and I'm selling to someone who says to me, I'm going to kill my wife with this gun, I think the common law would say, you knew what he was going to do with the gun. You joined in. why isn't you're continuing to provide internet service the same?

Well, so a couple of answers, Your Honor. When you know that that particular location is going to continue to infringe. And here is Justice Amy Coney Barrett making another analogy, and I believe the references to Twitter here are referring to that 2023 ruling. Would it be enough for contributory, vicarious liability aid in abetting, if Twitter knew that a particular account was being used for child trafficking? And didn't take it down, didn't cut the user off. They know it, but they're not doing anything to facilitate or encourage. Twitter off obviously has X, has lots of other purposes. So I think that's a hard case. I don't know how Twitter would come out on that, but everything Twitter said about affirmative conduct and malfeasance versus non-feasance, I would say would drive the conclusion the same way that Twitter ultimately drove it. Now, I can imagine this court someday. carving out an exception for life and limb or imminent danger, a physical harm. But your basic answer is that based on your understanding of Twitter, unless we carved out that kind of exception, your theory of aiding and abetting liability anyways, that there would not be liability? That's correct. Alicia, what was your read of the oral argument in this case, which way the justices seem to be leaning? Well, I think they seem to be leaning toward Cox's argument in part because of the practical consequences of what ruling for Sony would mean, and which would essentially mean that Cox to protect itself from essentially ruinous liabilities, billions and billions of dollars in potential damages from lawsuits that would have to cut off Internet service for a broad swing. of its customers, potentially hundreds of thousands of people, many of whom aren't actually engaged in copyright violations. What I read or interpreted from the oral arguments is that justices are also trying to rule somewhat narrowly and very cautiously because they also understand the implications, not just for copyright infringement in the web, which, you know, have all kinds of follow-on ramifications, especially as we enter an AI age, but also in other instances, as you heard from Justice Sotomay. or about liability for a gun store owner who knowingly sells a gun to someone who he has a good reason to suspect is going to go kill his wife. And they are trying to be cautious in how they...

frame a decision not to kind of open up a can of worms, both in terms of copyright and the law, aiding and abetting obviously goes well beyond the copyright context. And they don't want to also enable the plaintiff lawyers to go fishing everywhere and anywhere. On the point about opening cans of worms potentially, Kim, I would agree with your point a moment ago that this is the kind of thing that it seems to me that Congress is better at addressing and balancing how to route these kinds of liability protections, what an internet service provider has to do, what level of care of these kinds of copyright complaints is enough to qualify for a safe harbor. And it's tough. It puts the justices in a tough position. when they are asked to apply laws that don't quite really fit the circumstance anymore. There was another online case a few years ago where Justice Elena Kagan had a quip about how these are not the nine greatest experts on the Internet. And there is one thing that's at issue in this case between Cox and Sony is a line in the 1998 Digital Millennium Copyright Act that creates a safe harbor for Internet providers if they have, quote, a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider system or network who are repeat infringers, unquote. And, Kim, we're a long way from 1998 and the way the Internet functions from that America online age. Maybe it would be nice to have Congress weighed back in here and provide some further guidance and clarity about how this is supposed to work in the year 2025. We've been doing this for a very long time now, wandering around. ground in the dark. And it's really remarkable. I mean, I think that 98 law might have been one of the last real times that Congress actually turned on its brain power to address any question of something digital. Some of us are old enough to remember the advent of online music sharing. And we'll remember that, in fact, there was a very famous case in the early 2000s involving Napster, which was one of the first music sharing businesses. I mean, that alone might have been a little bit of a clue that Congress needed to start thinking hard about that because music was obviously the first area where we started having these sharing questions. And a lot of copyright issues have come up as a result of that and continue to, although the industry has been sorting itself out to a certain degree. But you now have it in all kinds of areas. And I would note that it isn't just the question of copyright. I mean, Congress, you know, how long have we... been having a discussion about section 230, all kinds of questions about big tech and censorship questions, crypto, which has come up. I mean, we're in a digital age, and Congress has not sat down and said, here's a roadmap for the digital world. Of course, that takes a bit of finesse. I think Congress, and I understand this. To the same extent, the Supreme Court is a little wary about putting out some massive rule about how the digital economy must work and get ahead of its skis and potentially retard innovation. But it's pretty clear now what some of these big disputes are and where clarity is required and it's still dragging its feet. Hang tight. We'll be right back after one more break.

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I think that's exactly right. And that's going back to, you know, to the Supreme Court's decision and double ACP versus Alabama, the Supreme Court has protected the right to donor privacy under the First Amendment under the view that this could actually squash speech rights. People will not contribute to organizations if they feel like they're worried that their information will be leaked to the public domain and that they could then be targeted. I mean, this was also an issue. with regards to California, donor requirements and investigation by the AG there. Xavier Becerra, when he was the AG, the moment an AG or government begins an investigation that, by its nature, is kind of a form of harassment. And donors naturally may be much more reluctant to give to an organization because they don't want to be caught up in a potential civil or even criminal investigation. or action. They don't want their information, their personal details to be leaked or otherwise disclosed to the public because then they may actually suffer some political or personal reputational damage as a result. So the problem is that the state courts aren't always trustworthy and reliable in protecting these interests. In the case in a property rights case, going back several years, Knight's Township, the Supreme Court held that. Well, individuals whose property rights are being infringed by states can actually go to federal court before exhausting all their state court remedies. I think the same kind of principle should apply here. On the point about the donor information, so the New Jersey Attorney General's filing in this case says that First Choice has one website where there's a solicitation page with pretty clear language saying that it has a pro-life mission to protect the unborn. But the New Jersey Attorney General... says that it also has two other sites that omit these same references. Instead, one of the websites says the petitioner is a network of clinics providing the best care and most up-to-date information on your pregnancy and pregnancy options. There's apparently some language only at the bottom of the website does not appear on the donation page of these sites at all, saying that first choice does not provide abortions. So, Kim, one of the things apparently that the New Jersey Journal in general says he wants to do with with this donor information is to call up a random sample of people who gave money to first choice and ask them whether they felt deceived. And I mean, I understand why federal courts are reluctant to get involved in these kinds of cases. If there are still disputes about the breadth, for example, of the subpoena, the position of the federal court so far in this case has been get that stuff settled. And then you can come here. On the other hand, that can take years. And if a party that is receiving this kind of broad subpoena that it believes is unconstitutional doesn't have a route into federal court to assert its First Amendment rights, it could spend a long time under a threat of an attorney general. And given the lawfare that we have seen in recent years, I can only imagine the justices are going to take that seriously. Well, that's why this case is simply so important. I know that sometimes people's eyes glaze over when we get to process cases, and we're talking about the way in which the law works. But it's exactly why this case matters. Let's be incredibly clear. The New Jersey Attorney General's goal here is to harass the heck out of this organization. It wants to inflict that as a punishment, essentially, on and nonprofit whose activities it does not like. And so the question at issue here is, what do you do in a scenario in which the legal

process itself. The rules and the procedures are stacked against an ability for an outfit to get relief in a circumstance like that. And it's also important because of the questions at stake here. I mean, Alicia mentioned it. The right of association is fundamental to the First Amendment. The first big ruling on that was back in the 50s with NAACP versus Alabama, which was actually about memberless, not donorless, but it has been refined in other Supreme Court cases, 2021, Americans for Prosperity versus Rob Bonta out in California. And the problem here is really the process is a problem. I mean, we should note that initially when this outfit went to a U.S. district judge, he said it wasn't ripe because only a state court has the power to enforce a subpoena. And a state court hadn't done that yet. So they get sent away. Then the AG goes to a state court to enforce a subpoena. the court rejects First Choice ask that they quash a subpoena. So now, indeed, he's getting his request to enforce the subpoena. First Choice goes back. to the federal court again and is told, no, no, you can't be here yet because now we've got yet a new standard. Like, you have the ability to debate with them and negotiate over how much you have to get. And look, now you only have to do two names. How many years? How much money does this entity have to engage in protecting its First Amendment rights to association in the face of an AG who... Probably in the end, his goal isn't necessarily even to get a hold of these names, but to simply send the message, which he's doing, that these donors might be at risk of being exposed. That is the threat and that is the injustice. And right now, our precedents are set up in such a way that attorney generals and other prosecutors have a great deal of latitude to abuse that system in those rules in a way that deny their targets from getting any justice. Thank you, Kim and Alicia. Thank you all for listening. You can email us at PW Podcast at WSJ.com. If you like the show, please hit that subscribe button, and we'll be back tomorrow with another edition of Potomac Watch.

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