Spearheaded by the RIAA, several major music industry companies have taken some of the largest U.S. Internet providers to court.

The music companies accuse these providers of failing to terminate the accounts of the most egregious pirates by ignoring millions of copyright infringement notices.

The liability lawsuits are seen as a major threat to the ISP industry, as multiple companies face hundreds of millions of dollars in potential damages. This is not just a hypothetical threat, as the $1 billion verdict against Cox has shown.

RCN Countersued RIAA and Rightscorp

In response to these lawsuits, several ISPs have submitted counterclaims that scrutinize the copyright infringement notices. Internet provider RCN did the same and also targeted the RIAA and anti-piracy company Rightscorp in its response.

Rightscorp’s notices, which often included a settlement offer, are used as evidence in several repeat infringer lawsuits. However, RCN believes that some of these notices were fraudulent or lacked crucial information. Making matters worse, Rightscorp allegedly destroyed the evidence supporting its notices.

RCN’s claims were characterized as violations of the California Unfair Competition Law (UCL). Needless to say, Rightscorp and the music companies vehemently disagreed. They asked the court to dismiss the counterclaim, arguing that the ISP doesn’t have standing.

To state a proper claim there has to be some form of injury that can be directly linked to the alleged fraud. RCN argued that this is the case here as it incurred significant costs to process the problematic notices, but Rightscorp and the music companies see things differently.

RCN Countersued RIAA and Rightscorp

Yesterday, US District Court Judge Michael A. Shipp ruled on the matter. In a detailed memorandum opinion, the Judge sides with the music companies and Rightscorp, dismissing the counterclaim while leaving the door open for an amended complaint.

Judge Shipp doesn’t refute that Rightscorp may have sent problematic notices but the Court doesn’t see how RCN was injured as a direct result of the alleged fraud.

The ISP argued that it designed and implemented an advanced ‘DMCA system’ to deal with infringement notices. But this system isn’t just for Rightscorp notices, the Court says.

“At no point does RCN allege that it created its DMCA System specifically because of Rightscorp’s infringement notifications or that Rightscorp’s infringement notifications imposed any additional costs on RCN,” Judge Shipp writes.

No Direct injury

The same goes for the ongoing costs that are linked to operating and maintaining the DMCA system. RCN failed to show costs that are directly linked to the problematic notices.

“RCN does not specifically allege, however, that any of these costs are due to Rightscorp’s infringement notifications. Such non-specific allegations are insufficient to confer statutory standing on RCN.”

Finally, the ISP argued that it incurred, and continues to incur, costs in evaluating and defending itself against the allegedly fraudulent piracy notices. This includes legal costs that had to be paid.

Again, Judge Shipp is not convinced. These allegations and the details provided in the complaint are not sufficient. They fail to show “cognizable injury” as a direct result of the alleged misconduct.

“Without facts showing that RCN suffered a qualifying injury in fact, the Court finds RCN has not established standing under the UCL. Accordingly, Counterclaim Defendants’ Motions to Dismiss RCN’s Counterclaim are granted,” Judge Shipp concludes.

Leave to Amend

Rightcorp and the music companies also brought up other issues in their defense, but these have not been considered yet. This may happen at a later stage if RCN chooses to file amended claims – which the court allowed – showing that fraudulent notices directly resulted in financial injury or other costs.

This isn’t the first counterclaim over problematic copyright infringement notices. Earlier this year ISP Bright House Networks lost a similar case over ‘false’ takedown notices, and last November the court dismissed Charter’s takedown abuse claims as well.

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A copy of US District Court Judge Michael Shipp’s opinion memorandum is available here (pdf)