FILE PHOTO: General view shows the United States Supreme Court, in Washington, U.S., February 8, 2024. REUTERS/Amanda Andrade-Rhoades/File Photo

By Blake Brittain

WASHINGTON, Dec 1 (Reuters) - U.S. Supreme Court justices on Monday grappled with a bid by Cox Communications to avoid financial liability in a major music copyright lawsuit by record labels that accused the internet service provider of enabling its customers to pirate thousands of songs.

The justices during arguments in the case appeared skeptical of Cox's assertion that its awareness of user piracy could not justify holding it liable for contributory copyright infringement. But the justices also questioned whether holding Cox liable for failing to cut off infringers could impact a wide range of innocent internet users.

"We are being put to two extremes here," Justice Sonia Sotomayor said. "How do we announce a rule that deals with those two extremes?"

Cox has appealed a lower court's decision to order a new trial to determine how much the Atlanta-based company owes Sony Music, Warner Music Group, Universal Music Group and other labels for contributory copyright infringement. Cox said the retrial could lead to a verdict against it of as much as $1.5 billion.

Cox, the largest unit of privately owned Cox Enterprises, has argued it should not be held responsible for piracy by its users of music owned by the labels in a case being closely watched by internet service providers, or ISPs.

A ruling in favor of the labels, according to Cox, could force it to cut off internet access for "entire households, coffee shops, hospitals, universities" and others "merely because some unidentified person was previously alleged to have used the connection to infringe."

'LAISSEZ-FAIRE ATTITUDE'

Some justices appeared to agree with the labels that Cox was particularly lax in addressing user infringement.

"Your client's sort of laissez-faire attitude towards the respondents is probably what got the jury upset," Sotomayor told Cox attorney Joshua Rosenkranz.

A jury in Alexandria, Virginia, found in 2019 that Cox owed the labels $1 billion for its secondary liability for the copyright infringement by its customers of more than 10,000 copyrights. The Richmond, Virginia-based 4th U.S. Circuit Court of Appeals threw out the damages award in 2024 after reversing the jury's finding on one form of secondary liability.

ISPs are generally not liable for user infringement under U.S. law if they take reasonable measures to prevent it. But the labels accused Cox of failing to address thousands of infringement notices and failing to cut off internet access for repeat infringers or take other measures to deter piracy.

The labels have argued that Cox's lack of action to protect their copyrights was egregious enough to justify the infringement finding.

The jury, in awarding $1 billion to the record labels, found Cox liable both for contributory infringement and vicarious infringement, two forms of secondary copyright infringement liability. The 4th Circuit ordered a retrial on the size of the award after affirming the jury's finding of contributory infringement but reversing its finding on vicarious liability.

Contributory infringement involves holding parties liable for someone else's infringement because they knew about it and contributed to it. Vicarious infringement involves holding parties liable for someone else's infringement because they had the ability to control the infringement and benefited financially from it.

A GUN ANALOGY

The justices questioned Cox's argument that it could not be held responsible for contributory infringement when it knew only that some users infringed and did not act affirmatively to enable it.

"If I'm a gun dealer, and I'm selling to someone who says to me, 'I want 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," Sotomayor said. "Why isn't your continuing to provide internet service the same?"

"What incentive would you have to do anything if you won?" Justice Amy Coney Barrett asked. "You would have no liability risk going forward."

Justice Elena Kagan, on the other hand, questioned whether a win for the labels could cause Cox to stop responding to infringement notices altogether.

"If you win, it seems to me that the best response that Cox could have is just to make sure that it doesn't read any of your notices again," Kagan told Paul Clement, the lawyer representing the labels, "because all of your position is based on Cox having knowledge" of the infringement.

The justices also questioned the labels on the breadth of their contributory liability argument. Clement argued that an ISP must know that a user is "substantially certain" to infringe to be responsible for failing to act.

U.S. Deputy Solicitor General Malcolm Stewart, representing President Donald Trump's administration, argued in support of Cox on Monday.

Justice Samuel Alito said that the administration has told the Supreme Court "that the decision of the 4th Circuit would threaten universal internet access," noting a hypothetical situation in which an ISP shuts down a university's internet account shared by thousands of students and staff members based on a single user's infringement.

"I really don't see how your position works in that context," Alito told Clement.

Justice Neil Gorsuch also suggested that a lack of action by Congress to define contributory liability could be a "flag of caution in expanding it too broadly."

Alphabet's Google, Amazon, Microsoft and other internet-focused tech companies supported Cox in a joint filing to the Supreme Court. Music, film and book industry trade groups filed briefs in support of the labels.

(Reporting by Blake Brittain in Washington; Editing by Will Dunham)