SCOTUS on Music Piracy & Qualified Immunity

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1:39Terms and conditions apply. This is Bloomberg Law with June Grosso from Bloomberg Radio. The Supreme Court dealt a major blow to the music industry in its fight against the piracy of copyrighted songs on the Internet. A jury had awarded the stunning sum of$1 billion to Sony Music against Cox Communications for failing to shut down the accounts of people who repeatedly downloaded and distributed copyrighted songs without permission. But on Wednesday, the Supreme Court let Cox off the hook completely in a unanimous decision. The court held that Cox couldn't be held liable for copyright infringement, even if they knew their users were illegally downloading copyrighted works.

2:32My guest is intellectual property litigator Terrence Ross, a partner at Katnmuchin Rosenman. Terry, the jury said Cox had to pay a billion dollars in damages, And now the Supreme Court says, no, Cox doesn't have to pay anything at all. That's correct. The clause of action in the lower court was for contributory copyright infringement, which means that the defendant did not actually commit the copyright theft, but somehow contributed to the ability of a third party to commit copyright infringement. And the Supreme Court determined that the lower courts had applied the wrong standard for measuring whether or not contributory copyright infringement had occurred and therefore reversed as to liability, which eliminated the damages verdict.

3:24Cox got something like 163 ,000 copyright infringement notices and never cut off service to its subscribers. And Justice Sonia Sotomayor pointed out how flagrant that was during the oral arguments. 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. So was it surprising that this was a unanimous verdict? I mean, Justice Sotomayor said you did nothing. And now the court's saying you don't have to do anything. Well, as we discussed that week after the oral argument before the Supreme Court, I had commented that I thought this was one of the most opaque oral arguments I'd ever listened to at the Supreme Court.

4:17and you'd ask me what's going to happen. I said, I just plain don't know. I do not have a clue. And I was proved right. The oral argument centered so heavily on the really terrible facts for Cox surrounding its efforts, half-hearted at best, to comply with the safe harbor provision of the Digital Millennium Copyright Act. And they were just terrible facts. We know the jury thought they were so bad that they found Cox to be willfully liable for contributory infringement. And yet none of that came out in this opinion. There was some discussion, although very limited during oral argument, as to what the correct standard for contributory copyright infringement was.

5:04But Cox in particular had pushed that argument into a very odd place where it was drawing upon aiding and abetting cases from common torts, even cited to the recent Mexican government case against American gun manufacturers, which was auditing and abetting theory that the Supreme Court had tossed. And so the decision is maybe not surprising as to the result, but a little bit surprising after the oral argument that it went in the direction that it went. Justice Sotomayor and her concurrence wrote that without proof that Cox knew about individual instances of infringement, the record labels have at most shown that Cox was indifferent to infringement.

5:49There was evident that a Cox manager overseeing piracy compliance told his team to F the DMCA. I mean, there were over 163 ,000 infringement notices. And as we discussed, Cox kept giving them chance after chance after chance. I mean, it didn't seem like it was impossible for Cox to cut off some of these people. That's clearly all correct. Justice Thomas, who wrote the opinion for the majority of the court, simply chose to ignore the Digital Millennium Copyright Act. In essence, he said that Cox had failed to comply with the safe harbor in the Digital Millennium Copyright Act because they did not have a program in place to comply with copyright infringement notices.

6:39But then he said, and this is an important part, he said, but that does not prove the case for the recording companies. He said a mere failure to establish that you're entitled to take advantage of the safe harbor defense of the Digital Millennium Copyright Act, It does not establish the affirmative grounds for contributory copyright infringement. And then he went through an analysis of what he viewed to be the elements of cause of action for contributory copyright infringement. And he found, and this is the important part of his decision, he found that there was an affirmative action required on the part of the defendant to be accused of contributory copyright infringement.

7:27And that's what surprised, I think, a lot of us. There is a long history of decisions in the circuit courts and in the Supreme Court, stretching back to 1912, in which courts have allowed contributory copyright infringement cases go forward in situations, factual situations, which has seemed to be nothing more than providing a product or a service. And Justice Thomas starts off by recharacterizing those cases as our findings that a company cannot be liable as a copyright infringement for merely providing a service to the general public, even with knowledge that it will be used by some copyright infringers.

8:13And that's the big surprise here. The cases had implicitly understood the provision of services and products that led to copyright infringement as an affirmative action on the part of the defendant. Now, the Supreme Court says that's not good enough. And indeed, in their recitation of past cases, they seem to be of the view that the only way you can bring a contributory copyright infringement case against a provider of a service or product is if they specifically promote that product or service as capable of engaging in copyright infringement. And who does that? Well, it's a great question. in the very famous Grokster case of a few years ago, which was a file sharing software program.

9:03In the early days of the Grokster program, it was actually advertised as capable of downloading and distributing files of music without bandwidth. So it does happen when you have a company that has no legal advisors and is managed by people with absolutely no sensitivity to copyright. So it does happen. But in the modern world, that is a true unicorn. It rarely ever happens. And so the result of this case is that it will be extraordinarily hard to ever again bring a cause of action for contributory copyright infringement. Justice Sotomayor did say that the majority opinion written by Justice Thomas strips ISPs of any real reason to deal with piracy, making the DMCA's safe harbor rules pointless.

10:04I think Sotomayor's point is well taken. I simply don't see a reason to comply with the safe harbor or the DMCA anymore. But I do want to point out that's a criticism of a result. The actual reasoning she disagreed with, and she disagreed with it on a very important point that on a quick read, you might easily miss. Now, but there requires me a little bit of history here. So the Copyright Act of 1976 provides for a cause of action for the direct infringement of copyrights. It does not provide for contributory copyright infringement or vicarious copyright infringement. Subsequent to the 1976 Act, the Supreme Court impliedly allowed causes of action for contributory and vicarious copyright infringement based on the fact that such causes of action had been allowed going back to the mid-19th century.

11:08And it wasn't really well addressed by the Supreme Court, but I believe the thinking was Congress, in passing the 76 Act, must have understood that there were such things as contributory and vicarious copyright, and therefore we're going to allow those to go forward. But those past decisions, the Betamax case, the Groxner case, never said we are limiting a secondary liability to contributory and vicarious copyright. And indeed, cases have generally been written wording such as amongst the causes of action for secondary liability are contributory vicarious infringement. Justice Thomas, however, throws in sort of an odd phrase here in which he says, I'm not even sure if he meant this or thought it through, but he essentially says that Those are the only causes of action for secondary liability.

12:06And this is where Justice Sotomayor then rightly takes him to task. She says, what about aiding and abetting liability? Now, we've never found such a case in the copyright field. But if you're going to allow contributory and vicarious copyright infringement, why can't you allow aiding and abetting liability? And oh, by the way, why are you limiting it at all? There may be other forms of action. So why are you limiting it to just contributory or vicarious copyright infringement? If we're going to say that a statute which does not actually allow those things, allows those things because of historical precedent, then we've got to look at the total historical precedent.

12:43Very unusual position for Justice Sotomayor to take, by the way. And the historical precedent says there are other types of secondary liability. And then she goes on to spend the rest of her opinion explaining why, in this case, she doesn't think that there is aiding and abetting liability, and therefore she concurs in the result, but not the decision. And so, yes, it was nine to nothing on the result, but it was seven to two on the reasoning for that result. But seven is a majority. And that means this court has now said that the only secondary causes of liability under the Copyright Act are for contributory copyright and vicarious, copyright infringement and nothing else.

13:28Stay with me, Terry. Coming up next. So what can the recording industry do about music piracy now? This is Bloomberg. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep.

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14:39So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day. A fire, a loss, a disruption that demands immediate attention.

15:21When that happens, what matters isn't just what you planned, it's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise, and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions. Their approach is grounded in experience, follow-through, and trust built over time. Bad days happen, and when they do, you deserve an insurance partner who understands risk, respects what you've built, and is ready to help you move forward.

15:57The Cincinnati Insurance Companies. Let them make your bad day better. Find an independent agent at CINFIN.com. The Supreme Court dealt a major blow to the music industry this week, ruling unanimously in favor of Cox Communications, finding that Internet service providers are not liable for copyright infringement for failing to disconnect customers who are downloading copyrighted music illegally. I've been talking to intellectual property litigator Terrence Ross of Cattenmuchin-Rosenman. Terry, does this decision effectively stop the music industry from being able to combat music piracy online?

16:44Are there any other options available to music labels now? Okay, so it seems to me there are two options here. One is legal and one's legislative. on the legislative side, they could go to Congress and say, look, this is an absurd decision. It's completely gutted the Digital Millennium Copyright Act. This is not what you intended with the Digital Millennium Copyright Act. And I thought I saw a congressman put out a press release yesterday essentially saying that. They could then ask Congress to rewrite the Digital Millennium Copyright Act to provide that the ISPs must comply with the safe harbor provisions in order to avoid contributory or vicarious copyright infringement.

17:29So that's one route that the music companies could pursue. The other route, which is more complicated, is to serve subpoenas upon COX or other ISPs for the IP addresses that are doing the most downloading of copyrighted music and get the names and addresses of whoever the owner is and then sue that owner. So you bypass Cox and you sue the person who's actually engaged in the music file downloading for copyright infringement. Now, this was a course of action that occasionally has happened in the past, And it's relatively successful because the defendant usually caves in quickly and they enter into some settlement where they agree never to download music again.

18:21It seems to me that that remains a viable option from a legal side. It's just very cumbersome. You don't always get courts willing to enforce such a subpoena and it requires follow on litigation. So it's going to be a little bit more costly. But those are the only two options I see for the music company at this point. Are there estimates of how much the music labels lose or artists lose because of the piracy of copyrighted music? I've seen all sorts of estimates, but it's over a billion dollars a year typically. Now, the interesting thing about this case is that the music companies didn't even pursue all the copyright infringements that were being utilized through the Cox system.

19:06They were only going after the really large downloads and distributions of files. And the jury found damages of a billion dollars. And that was against a single ISP, not the many ISPs in this country, and for only a portion of the copyright infringement that was going on. So that suggests that the number is many billions of dollars. Do you have any hint as to how the justices got to this sort of radical position that basically eliminates liability for Internet service providers, even when they know their subscribers are downloading music illegally? Justice Sotomayor at oral argument was clearly perplexed as to what to do.

19:55She thought the positions on either side were extreme, yet she ended up not being the one who fashioned the way out for the Supreme Court. I call this a way out, not a compromise. This was a way to avoid a really hard decision with respect to the damage element, but was not a compromise. It was basically a complete 180 change in direction of the cases that have existed for 120 years now in the courts that adopts such a radical view of secondary liability under the Copyright Act that I don't think was intended by Congress, that it basically kills off the two causes of action. Only a complete moron could be found liable for contributory or vicarious copyright infringement at this point in time.

20:42So I don't know what went on behind Call of the Door. I found it fascinating that Justice Thomas wrote the opinion. Justice Thomas tends to write opinions that are short, sweet, and to the point. And so sometimes he gets designated for a case that the court does not want to spend too much time intellectualizing. They just say, look, here's what we think. You only get contributory infringement if you show an affirmative act. There was no affirmative act found. Case over. And that's what this opinion is. It certainly doesn't address any of the past cases involving contributory copyright infringement, except for Grokster and Betamax, both of them Supreme Court cases, which were only slightly helpful in this decision.

21:25They really needed to look at the full spectrum of contributory copyright cases over the last century, and they failed to do that. There's a similar music industry suit against Verizon for$2.6 billion. Do you think that's now dead in the water after this decision? So I don't know the facts of that case. At a minimum, the district court is going to have to say, okay, in light of Cox Communications versus Sony, we need to do a rethink here. It may be possible that there are facts involving Verizon that are better for the music companies, but I wouldn't be surprised if that's true. And look, to understand the extent of the problem, June, at one point in time, over the entire Cox internet system, 21 % of all traffic involved music copyright infringement.

22:18The fall of the traffic is infringement upon copyrighted music. I mean, it's just a phenomenal number. And here the Supreme Court says, well, no, there's actually no remedy for that. And that's not what Congress thought when they passed the Digital Millennium Copyright Act. And Terry, this is supposed to be a textualist court. But were they reading the text of the statutes here? You know, none of this is in the Copyright Act. I mean, the whole purpose of having a statute is to set out the meets and bounds of causes of action and rights. And none of this is in the Copyright Act. I just plain don't get it.

22:54And, you know, over the years, there have been a lot of good justices who know copyright law. And even Justice Scalia, who was all about the text, never, ever stopped to say, wait a minute, there is no secondary liability in the 76 Copyright Act. What are we talking about here? It's just crazy. Well, it will be very interesting to see what action the record labels take next now that this avenue has been foreclosed. Always a pleasure, Terry. Thanks so much. That's Terrence Ross of Katnuchin Rosenman.

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24:29Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. 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. Let's create smarter business, IBM.

25:08If you follow markets, you know the value of long-term thinking. You plan, you diversify, you prepare for volatility. But in life, even the best strategies can't prevent every bad day. A fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned, it's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise, and personal attention. Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions.

25:46Their approach is grounded in experience, follow-through, and trust built over time. Bad days happen, and when they do, you deserve an insurance partner who understands risk, respects what you've built, and is ready to help you move forward. The Cincinnati Insurance Companies. Let them make your bad day better. Find an independent agent at c-i-n-f-i-n dot com. Once again this week, the Supreme Court weighed in in favor of police officers, shielding them from liability under the theory of qualified immunity. The conservative justices found that a Vermont police officer who used a restraint technique known to be painful to remove a nonviolent protester from the state capitol in 2015 is protected from a civil rights lawsuit for the use of excessive force under qualified immunity.

26:39The three liberal justices dissented, writing that the court has turned qualified immunity into a, quote, absolute shield for law enforcement officers. The case is one of two this week in which the justices weighed in on qualified immunity, a hotly debated legal doctrine that involves protections for police facing lawsuits. In the other case, the court lets stand a decision by the Fifth Circuit granting qualified immunity to officers in Texas accused of targeting a journalist for arrest over disagreements with her reporting. My guest is Anya Bidwell, a senior attorney at the Institute for Justice.

27:18Anya, will you start by explaining what qualified immunity is? Qualified immunity is a doctrine that the Supreme Court invented in the late 60s at first, but it then significantly amended its test. And in 1982, it announced this rule that in order for the officer to be sued, a plaintiff must show that the violation of the law was clearly established. So it doesn't matter if an officer acted in bad faith, right? It could be that the officer acted in bad faith. But as long as there isn't a case directly on point saying that the exact same conduct was deemed unconstitutional before, then that violation is not clearly established.

28:14The court justified this idea in reasonable ways, like the officer needs to have fair warning, right? A reasonable officer needs to have fair warning that what they're about to do violates the law. The problem is that the way this fair warning clearly established law test has been interpreted pretty much anything but bars plaintiffs from recovering for violations of the Constitution. And the Supreme Court's latest summary reversal, in this case, Zorn, really kind of demonstrates how difficult it is for a person to sue a police officer, even if they come to court armed with a decision that they say clearly establish that what the officer did is unconstitutional.

29:03Like in Zorn, there was a case in the Second Circuit that said that it could be a violation of the Constitution of the Fourth Amendment excessive force prohibition if you put a protester's hand in a wrist lock. Right. There is a case like that. So they came to court and they showed that case and the court said, fine, thank you for showing us this case. that's a good point, we will deny qualified immunity to the officer. And then it gets to the Supreme Court and the Supreme Court says, well, actually, it is not exactly what we are looking for, even though every reasonable officer would have been fairly warned that putting a protester's arm in a wrist lock unjustifiably is unconstitutional.

29:47And the Supreme Court, without really delving into the details, just said, yeah, that doesn't look right for us. And in this case, the justice has just summarily reversed the Second Circuit in like a six-page opinion. One of the problems is that the Supreme Court is refusing to deal with the doctrine heads on, right? Grant oral arguments, grant merits briefings, so both sides could spend time wrestling over this. And then the Supreme Court would announce the doctrine in the most complete manner. Instead, they just keep granting and summary reversing without oral argument, without the briefing, and basically saying, nah, that doesn't look right to us.

30:32The second circuit, you were wrong in this case or whatever circuit, you're wrong in that case. And we're just going to reverse without really explaining ourselves. So what the lower courts are left with are like not super clear directions about what to do other than the court is very hostile, especially in the cases involving police officers being accused of excessive use of force to deny qualified immunity to the officers. The result then is that it's victims of the constitutional violations who are carrying the burdens of those constitutional violations. That's the problem, right? The court is so concerned with being unfair to the officers that they are forgetting about being unfair to the people who were actually hurt.