Sony Music Entertainment and other copyright owners sued Cox Communications, an internet service provider, alleging secondary liability for the copyright infringement committed by Cox's subscribers. Sony argued that Cox was contributorily liable because it continued to provide internet service to subscribers whose IP addresses were known to be associated with infringement. During the relevant period, Sony's tracking service sent Cox over 163,000 notices identifying infringing activity. The District Court found Cox willfully liable and awarded $1 billion in statutory damages. The Fourth Circuit affirmed the contributory liability finding, reasoning that supplying a product with knowledge of infringement was sufficient culpable conduct, but reversed the vicarious liability finding. The Supreme Court granted certiorari to resolve the standard for contributory liability.
Justice Thomas delivered the opinion of the Court, clarifying that the Copyright Act does not expressly impose secondary liability, and the Court is loath to expand it beyond established precedents. The Court reaffirmed that contributory liability requires intent that the service be used for infringement, which can be shown in only two ways: affirmative inducement or a service tailored to infringement. The Court explained that inducement involves actively encouraging infringement through specific acts, such as marketing a product as a tool for infringement, as seen in *MGM Studios Inc. v. Grokster, Ltd.*. A service is tailored to infringement if it is not capable of substantial noninfringing uses, a standard derived from *Sony Corp. of America v. Universal City Studios, Inc.*. The Court emphasized that mere knowledge that a service will be used to infringe is insufficient to establish intent. In this case, Cox did not induce infringement; it repeatedly discouraged it by sending warnings, suspending services, and terminating accounts. Furthermore, Cox's internet service was capable of substantial noninfringing uses, as it is used for many lawful purposes beyond copyright infringement. The Fourth Circuit's holding that knowledge alone was sufficient went beyond the two forms of liability recognized in *Grokster* and *Sony*. The Court also rejected Sony's argument that the Digital Millennium Copyright Act (DMCA) safe harbor implies liability for serving known infringers, noting that the DMCA creates defenses rather than imposing liability and explicitly states that failure to comply with safe harbor rules does not bear adversely on a defense that the conduct is not infringing.
The Supreme Court reversed the Fourth Circuit's judgment and remanded the case. The $1 billion damages award against Cox is vacated, and the lower courts must dismiss the contributory liability claim unless Sony can provide evidence of inducement or tailored services. The decision limits the scope of secondary copyright liability for internet service providers, ensuring that they are not liable simply for continuing to provide service to subscribers known to infringe, absent active encouragement or a service designed for infringement.