SCOTUS on Music Piracy & Asylum

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1:50This is Bloomberg Law with June Grosso from Bloomberg Radio. The music industry faced off against Internet providers at the Supreme Court this week. At stake, billions of dollars. And specifically, a$1 billion jury verdict against Cox Communications for not shutting down the accounts of customers who pirated more than 10 ,000 copyrighted songs by artists like Beyonce and Justin Timberlake. The lawyers painted pictures of extreme consequences if the court ruled against their client. Here are Joshua Rosencrantz for the internet provider Cox and Paul Clement for the music labels and publishers. The consequences of plaintiff's position are cataclysmic.

2:41There is no surefire way for an ISP to avoid liability. And the only way it can is to cut off the Internet, not just for the accused infringer, but for anyone else who happens to use the same connection. That could be entire towns, universities, or hospitals. If Cox is right on the law, then Cox could take tens of thousands of copyright notices and throw them in the trash, and they could have its employees say, F the DMCA. That is in fact what the record says, which is why they're asking you for an extreme rule. The issue is whether Internet providers should be held responsible for contributing to copyright infringement when they know their customers are pirating music but don't terminate their Internet access.

3:30Some justices like Samuel Alito questioned whether forcing Internet service providers to cut off infringers could affect institutions like hospitals or universities. What is an ISP supposed to do with a university account that has, let's say, 70 ,000 users? What is the university supposed to do? But other justices seemed skeptical that Cox had done enough to stop the piracy and questioned whether a ruling too favorable to Internet service providers would allow them to ignore clear copyright infringement by their users. Here are Justices Sonia Sotomayor and Amy Coney Barrett. You did nothing. And in fact, Counselor, your client's sort of laissez-faire attitude towards the respondents is probably what got the jury upset.

4:27What incentive would you have to do anything if you won? If you win and mere knowledge isn't enough, why would you bother to send out any notices in the future? What would your obligation be? My guest is intellectual property litigator Terrence Ross, a partner at Kattenmuchin Rosenman. Terry, explain the issue here. The issue in the case involves a process by which music companies, by music companies I really mean recording companies, track online sharing of musical compositions that they own the copyright in. The process allows them to identify the IP address and the ISP that is providing the service to that IP address.

5:14And so the music companies, recording companies regularly, on a daily basis, in fact, send notices of infringement to the ISPs that are providing the Internet service to these infringers. And there are days in which they're sending out 10 ,000 notices to each individual ISP service. And the recording companies finally became fed up that the ISPs were not doing something. They wanted the ISPs to cut off service to these identified infringers. And the ISPs dragged their heels on doing anything, taking any real concrete action to stop it. And so the recording companies finally sued Cox Cable Company, which is one of the largest ISPs in the nation, alleging that they had engaged in contributory copyright infringement.

6:10In its papers, Cox had argued that grandma will be thrown off the Internet because Junior visited and illegally downloaded songs. Did some of the justices seem to pick up on that concern? There was only one justice who seemed to give some credence that and that was Justice Alito. He was the only justice who really seemed to buy into the position by Cox that it was hesitant to kick people off because of, and then you can fill in the blank as to what the reason is, they're a grandmother, they're a university, they're a hospital. In fact, the hypothetically posed at oral argument in the Supreme Court was what happens when all you can do is identify that the IP address belongs to a university?

6:56Are you going to shut down the entire university? One of those odd hypotheticals that takes the case to the extreme. The facts are actually contra to that. And indeed, none of the other justices seem to buy into that argument. The reality is that over the period of time issue, Cox had received 163 ,000 notices of infringement and had kicked off of its service only 32 customers. The policy of compliance used by Cox was described in some detail, both at the Supreme Court and in the lower courts. And it was somewhat laissez-faire. to use the word that one of the justices used to describe it. They had originally started off and say, well, if we get three notices about a particular user, we're going to tell them we're cutting off their service.

7:53That rose gradually over time from being a three strikes you're out policy to being a 13 strikes and you're out policy. And the 13 strikes reset every six months. So if you didn't get to 13 within a six month period, you went back to zero. Or if you got kicked off after six months off, you got put back on. They also capped the number of notices that they were accepting from recording companies at 300 a day. And then probably the worst fact of all, which got brought up at the Supreme Court, if you can believe it, was the head of copyright compliance at Cox sent out an email to the people in charge of enforcing copyright policy, in which he said, F the DMCA.

8:39F the DMCA. Now, the DMCA refers to the Digital Millennium Copyright Act, which is one of the key statutes at issue here, and which requires ISPs to set up a policing mechanism against copyright infringement if they want to claim the safe harbor that is embedded in the Digital Millennium Copyright Act. In response to that, one of the minions for the head of compliance wrote back saying, well, we're helping law-breaking customers. And there were dozens of emails like this amongst the compliance group at Cox that just manifested a complete disdain for copyright laws, which obviously impacted the jury because the jury below had awarded a billion dollars in damages against Cox.

9:26And in the Supreme Court argument, It was clear that outside of Justice Alito, none of the eight other justices were buying what Cox was trying to claim was their reason for not cutting off people that you'd kick grandmas off of the Internet. The other eight justices just didn't buy it. And it was a loser argument for Cox. So then can you tell where most of the justices do stand? That's always a tough question in this case. I think it's tougher than most. I think outside of Justice Alito, the other eight judges were just incredibly skeptical of Cox's excuses for allowing this widespread infringement to go on.

10:05In the record below, there's apparently one period of time at which 21 percent of all traffic on the Cox Internet connection, 21 percent involved copyright infringement. And the lawsuit below didn't go after every single mom and pop business or every single college student. It was targeted only at distributors, not people who were downloading the occasional song, but people who were copying music digitally and distributing it on a mass scale. So there was this enormous skepticism expressed by the justices, except for Justice Alito, that Cox really wasn't fulfilling his obligation and needed to do something differently.

10:52Now, on the other hand, there also seemed to be some concern about the size of the jury verdict and whether or not the actions of Cox were sufficient to constitute willful contributory infringement, which is what set them up for much larger scale damages than if this had been found to be just ordinary copyright infringement. So what's the standard that the justices would use here? Cox contends that under a 2005 Supreme Court ruling, it can't be held liable for contributory infringement unless it affirmatively fostered piracy or clearly intended to promote it. The music companies say it's enough that Cox's new subscribers were using its service to download songs illegally.

11:45The case on appeal of the Supreme Court presented two pretty crisp issues for decision. The first issue, which I think is where the real fight is going to be, is whether or not contributory copyright infringement required some sort of affirmative action by the defendant. The second question presented for review was whether or not willfulness required some sort of knowledge of customer infringement. Now, the problem with that second question, the willfulness standard, is that Cox had failed to object in the trial court to the instruction that the judge gave to the jury about how to find willfulness.

12:31So after the case has finished, all the evidence is submitted, and the attorneys have made their closing argument, and just before the jury goes into the jury room to make a decision, the judge reads to them a series of instructions as to what the law is. And one of those instructions will go something like, Sony Music Corporation here has alleged that the contributor copyright infringement was willful on the part of cots. In order for you to find willfulness, you must consider the following factors. And typically, if a party doesn't believe the judge has stated the law correctly to the jury, they get up and they object.

13:08And indeed, they don't even have to do it at the time of trial. These jury instructions are sent out to the lawyers while in advance. And you file an objection with court saying we object to this and give the court a chance to refine it, improve it, so that there's no objection. Here, the Cox folks, for whatever reason, failed to object to the willfulness instruction. And that means they waived any objection to willfulness and had really no excuse in their briefing as to why they did that or why they should be excused from that. They pointed to a prior case. This is a series of litigations here.

13:42A prior case that was filed BMG, Virtus. Run Music Group versus Cox, also coming out of the same Virginia court. And in that case, they had objected to willfulness and it had been overruled by the Fourth Circuit. But that case was not on appeal here. The case that was on appeal, they failed to object to the willfulness instruction. And in fact, the fact that they'd done so at the first trial but not at the second trial sort of suggests that they knew they were supposed to do that and then failed to do it. So I just don't see question number two as being resolved in any way in favor of Cox. And indeed, I suspect the court will reach it so that we will get no further instruction from the Supreme Court on what constitutes willfulness.

14:27I think the court is focused really on the position that Cox is arguing that contributory infringement requires some sort of affirmative act. And that, as they phrased it, they can't be a contributory infringer by providing Internet service to one of their customers. So then do you think that they'll send it back to the lower court with an instruction? I just don't know what they're going to do here. I have to be frank. This is one of the more opaque oral arguments I've listened to. The other commentators have argued that the court might be looking for some sort of middle ground. Indeed, I think it was Justice Sotomayor commented at one point during the argument that the court was being forced to choose between two extreme positions.

15:24And in particular, Justice Sotomayor, who was very skeptical of Cox's position, but also didn't quite like the extreme argument being made by Sony Music Corp and the recording company, seemed really perplexed as to what to do, genuinely perplexed. The problem the Supreme Court faces here is that the standard for contributory copyright infringement has been pretty well settled in this court for more than a century. As early as 1912, there was a case that involved mimeograph machines, if you remember those. They were a pre-Xerox machine way of doing sort of a mass production, mass production being a couple hundred.

16:08And there was a case in which a publisher sued a mimeograph company for knowingly selling mimeograph materials to a company that it knew was engaged in infringing copyright at work by using the mimeograph machine. And the standard was set out there and has been repeated over and over since that time, 1912. And the standard is pretty simple. Well, if you provide something that you know is going to be used by a person to commit copyright infringement, you've engaged in contributory infringement. And the past cases haven't spoken in terms of needing an affirmative act. Although one could argue this did not come up at the Supreme Court hearing that providing the Internet service is an affirmative act.

16:56The Cox Company argued in Supreme Court that that's not an affirmative act, but that's sort of a stretch. in order to try to get around that line of cases, the Cox company argued that contributory infringement is really akin to aiding and abetting liability in the context of torts and criminal law. And that's a real stretch that I think is just dead wrong. It would give the court a way to get out of this dilemma, but it would mean the court would have to overturn half a dozen cases going back to 1912 for over a century and say, now they're not good law anymore. I don't see the court doing that here.

17:34So I just don't see question number two as being resolved in any way in favor of Cox. And indeed, I suspect the court won't reach it so that we will get no further instruction from the Supreme Court on what constitutes willfulness. I think the court is focused really on the position that Cox is arguing that contributory infringement requires some sort of affirmative act and that, as they phrased it, they can't be a contributory infringer by providing Internet service to one of their customers. So then do you think that they'll send it back to the lower court with an instruction? I just don't know what they're going to do here.

18:21I have to be frank. This is one of the more opaque oral arguments I've listened to. The other commentators have argued that the court might be looking for some sort of middle ground. Indeed, I think it was Justice Sotomayor commented at one point during the argument that the court was being forced to choose between two extreme positions. And in particular, Justice Sotomayor, who was very skeptical of Cox's position, but also didn't quite like the extreme argument being made by Sony Music Corp and the recording company, seemed really perplexed as to what to do, genuinely perplexed. The problem the Supreme Court faces here is that the standard for contributory copyright infringement has been pretty well settled in this court for more than a century.

19:15As early as 1912, there was a case that involved mimeograph machines, if you remember those. They were a pre-Xerox machine way of doing sort of a mass production, mass production being a couple hundred. And there was a case in which a publisher sued a mimeograph company for knowingly selling mimeograph materials to a company that it knew was engaged in infringing copyright work by using the mimeograph machine. And the standard was set out there and has been repeated over and over since that time, 1912. And the standard is pretty simple. Well, if you provide something that you know is going to be used by a person to commit copyright infringement, you've engaged in contributory infringement.

20:07And the past cases haven't spoken in terms of needing an affirmative act, although one could argue this did not come up at the Supreme Court hearing that providing the Internet service is an affirmative act. The Cox Company argued in the Supreme Court that that's not an affirmative act, but that's sort of a stretch. In order to try to get around that line of cases, the Cox Company argued that contributory infringement is really akin to aiding and abetting liability in the context of torts and criminal law. And that's a real stretch that I think is just dead wrong. It would give the court a way to get out of this dilemma, but it would mean the court would have to overturn half a dozen cases going back to 1912 for over a century and say, now they're not good law anymore.

20:56I don't see the court doing that here. Do you think we'll see the justices coming up with some sort of middle ground? So it's a shame that Justice Ginsburg is no longer on the court. We've had many conversations about her knowledge of copyright law and her ability to cobble together coalitions for positions under the Copyright Act that are actually quite pragmatic and useful. And I just don't see anybody either with that depth of knowledge of copyright law or the ability to do that sort of log rolling on this court. And so I think it's going to be a real struggle for this court to come up with some sort of middle ground, particularly in light of the fact that the law here is just so set for such a long period of time and fits exactly into the past case law and these sort of odd cases that Cox cited to the Supreme Court, including this recent gun distribution case, you know, the case the Supreme Court decided recently where the gun companies were being sued for deaths in Mexico.

21:59And the argument was they were aiding and vetting this criminal activity. And the gun company said, well, we sold the guns to dealers in Texas, not knowing what they were going to do with them. And if anybody's contributed to them, but it's not us, we had no knowledge of it. and that case just doesn't fit here, either legally or factually, and yet Cox sort of bet a lot on that. I mean, it was almost as if they're saying, oh, hey, we cite to some case in which, you know, the Second Circuit, which everybody believes in on the Supreme Court, that'll get us over the hump. It's just such a stretch that, in fact, backfires.

22:38One starts to think, well, what's wrong with their case that that's the best they've got? And that's a question they didn't ask during two hours of Supreme Court oral arguments. Thanks so much, Terry, as always. That's Terrence Ross of Catmuchin Rosenman. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business.

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24:33See complete disclosures at public.com slash disclosures. These days, it seems like AI agents are just about everywhere you turn, every field and every function. But without identity, you can't trust they'll serve your business instead of jeopardizing it. Fortunately, Okta helps you get identity right by securing your AI agent's identities, giving you a single layer of control, a single standard of trust. So whether an AI agent supports a single user or your entire enterprise, with Okta, you'll turn risk into opportunity. Secure every agent. Secure any agent. Okta Secures AI. Turning now to another Supreme Court case this week.

25:10The court considered the federal judiciary's role in asylum cases. And the justices appeared open to allowing courts to defer to administrative decisions on whether immigrants have shown they face harm serious enough to qualify for asylum. Joining me is immigration law expert Leon Fresco, a partner at Holland and Knight. So asylum seekers can ask a federal appeals court to review their case if the Board of Immigration Appeals denies their asylum claim. This case is about the role of the Federal Appeals Court versus the role of the Board of Immigration Appeals? Correct. Basically, here's the issue.

25:50When a person asks for asylum, they have to prove at the end of the day that they have what's called a well-founded fear of future persecution on the basis of their race, religion, political origin, social group, things like that. One of the main parts of such a case, there's a presumption that if you have experienced what's called past persecution, there is a presumption that you will then have a well-founded fear of future persecution. So what does that mean? That means that people go into immigration court and they explain what happened in their country that caused them to leave. And there's cross-examination and the judge can ask questions.

26:36At the end of all of this, there's two determinations. One, did the person experience past persecution? And number two, was it on the basis of one of the protected grounds? So in this Supreme Court case, what happened was there literally was no dispute about the credibility of the facts raised by the foreign national in this case, Douglas Humberto Urias Orellana, who said that he fled El Salvador after repeated threats and violence from a hitman linked to a drug lord. and he said that the drug lord shot his half brothers and tracked and threatened his family and so since there was no dispute about the facts there was not a factual issue that was being raised on appeal instead the court said i'm going to take all of the facts that you've presented today as true and i'm going to say that they still do not rise to the level of the high level of this word persecution such that we can say that you experienced past persecution such that you would get the presumption of future persecution.

27:46So now Mr. Urias Oriana then says, well, how is that possible? I would like to get review of that. And so when it gets to the First Circuit Court of Appeals, the First Circuit says we're going to defer to the Board of Immigration Appeals, which is the administrative court that decides this issue at the end of the day, we're going to defer to them and say that even though the facts are not in dispute, we still have to give some deference to their decision in terms of, let's say there's a scale and you're weighing it, how many pebbles go on one scale, how many pebbles go on the other scale, that even that determination gets some deference that the federal courts can't just reweigh the evidence on their ends and decide whether the facts that were undisputed in a particular case constituted persecution such that the person should win their asylum case.

28:49So that creates sort of a circuit split. So the case goes to the Supreme Court. what are the justices going to decide? The Supreme Court then has to decide, okay, what happens in a case like this where there's not a dispute about the actual facts, but there's a dispute about whether the facts, when you weigh them, there's quote-unquote significant enough pebbles on the scale. Does the foreign national win or do they lose? Can we re-weigh that on our own or do we have to give some deference under some standard of deferential review. And so the foreign nationals obviously claiming there should be de novo review.

29:33The court should look at this and say, okay, were the threats here that were undisputed sufficient to say that that was past persecution? And the government says, no, no, no, the standard is actually much different. And that this is actually a mixed question of law and fact. And so you have to treat that with some type of deferential review. And so you had justices like Justice Gortz saying a reasonable fact finder standard as opposed to de novo review. and others wanted to weigh it even more deferentially potentially than even that and say that basically if there's substantial evidence to support the determination of the lower administrative court, that's enough.

30:23So that would be even a broader deferential standard. And it appears as if really there's not a lot of excitement in the Supreme Court for having a complete de novo review of this process. So the issue is really going to be how much deference is given in these types of cases moving forward. So, Leon, just to clarify, everyone accepts that the facts of the asylum claim are determined by the court below, the immigration court. So the only question is how the federal appellate court is going to weigh those facts? Correct. So what the lower court said in this case was, yes, all these very bad and serious things happen to you but when we put all those pebbles on the stone they're not sufficiently weighty enough on the scale to actually constitute persecution for the purposes of winning your case and then the question is okay when this gets to the federal court can they literally re-weigh all of that exact evidence and say no no no those stones do weigh enough to tip the scales in favor of the foreign national?