Did you know that copyright infringement can result in damages up to $150,000 per piece? In the context of online copyright infringement, it means a possibility of millions of dollars in damages. Of course, you run your business under a policy of best practices, and copyright infringement is not allowed. However, did you know that lack of knowledge is not a good defense against copyright infringement?
The digital age and the expansion of the Internet have opened many doors and diluted the old geographical barriers of commerce and communications. However, these same developments have increased the concerns of law enforcement authorities in regard to copyright infringement. The laws and judicial decisions have also become stricter.
Under U.S. law, a person is liable for copyright infringement if that person uses, distributes, copies, displays, reproduces, alters, or in some other way, uses or exploits a work of authorship without the author's authorization. That said, if a work is misappropriated in the context of an employment or a work-for-hire relationship, the hiring party can be liable too.
In Erickson Prods., Inc. v. Kast, an individual planning to launch his financial advisory business website was found contributorily and vicariously liable for the acts of copyright infringement charged to a web developer hired to design the initial version of the site. In this case, the works at issue were a series of photographs took from the Internet without the appropriate licensing.
To challenge the plaintiff's copyright infringement allegations, Kast explained that the web developer, by contract, was obligated to obtain licenses for any photographs procured, that he had not generated any revenue from his planned business and that had actually obtained licenses for additional photos provided by him to develop the website.
Regardless of those arguments, the court issued a jury instruction stating that Kast should have known about the infringement, and if the jury found enough evidence of that, he would be found contributorily and vicariously liable. Based on the finding of liability the plaintiff was awarded $450,00 for infringement on three photos.
Kast was no the web developer's employer, so why was he found liable for copyright infringement?
Vicarious liability for copyright infringement requires proof of the following elements: (1) the right and ability to supervise the infringing conduct, and (2) a direct financial interest in the infringement. A tangential or incidental financial benefit is not sufficient. Regarding the element of financial interest, some courts have explained that vicarious liability exists when the defendant “profit[s] from direct infringement while declining to exercise a right to stop or limit it.”
Vicarious liability is easy to prove in the context of an employer-employee relationship. However, it is not limited to that context. Additionally, regardless of the relationship between the defendant and the direct copyright infringer, if there is a right to stop the unlawful conduct of the infringer, courts are likely to find liability. As a result, a lack of knowledge is not a valid excuse.
In Barnaby Music Corp v. Catoctin Broad. Corp., a radio station played copyrighted musical compositions without the copyright owners' consent. The court concluded that the president of the defendant company was vicariously liable, whether or not he knew that the station had broadcast the compositions.
In this case, the court explained that a person may be vicariously liable if he has the right and ability to supervise the infringing activity and also has a direct financial interest.Moreover, liability can be imposed “even in the absence of actual knowledge that the Copyright monopoly is being impaired.”
Vicarious liability requires the right of supervision and financial interest. There are no special considerations in regard to the relationship between the direct infringer and the defendant. The concept of financial interest (not economic profit) is indefinite and will be analyzed by the court on a case by case basis. Thus, as long as there is some quantifiable benefit derived from the infringement a person can be found liable.
To avoid vicarious liability, keep this in mind:
1. Request information about the source of any material used for a project.
2. Explain to employees and contractors that the use of any kind of copied materials is prohibited.
3. Do not promote, encourage, or foster infringing uses.
4. Perform supervision over the development of materials created by others, like websites, advertisements, press releases, newsletters, or links to third-party reviews or testimonials.
5. Develop mechanisms that enable monitoring and control of activities.
6. Include contractual provisions that allow you to reject or unilaterally take down any materials that are found infringing.
 MGM Studios Inc. v Grokster, Ltd., 545 US 913 (2005)
 Barnaby Music Corp. v Catoctin Broadcasting Corp., 1988 US Dist LEXIS 15394 (WDNY Aug. 9, 1988, No. CIV-86–868E)
 Shapiro, Bernstein & Co. v. H. L. Green Company, 316 F.2d 304 (2d Cir. 1963)