Vicarious Liability for Copyright Infringement

If you do not know about or understand vicarious liability and you hired someone to create website content, keep reading.

There’s a general tendency for people to believe that he or she is not liable for acts he or she did not commit.  By and large that’s true, but vicarious liability is an exception where a person or business may be held just as liable for damages as the person who actually committed the act.  Vicarious liability is most commonly applied in the employer-employee relationship.  An employer is vicariously liable for employee acts done within the “course and scope” of employment.  But an employer is not liable for the acts of an independent contractor.  Even those individuals who are aware that employers may be vicariously liable for employee actions, but not for independent contractor actions, are unaware that this dichotomy is thrown out the window when copyright infringement is involved. And one area where this liability exposure is seen for the everyday business is hiring an independent contractor to create “unique” content for your website, blog, etc.

Copyright Infringement 101

A copyright owner can establish liability through direct infringement or secondary infringement.  Secondary infringement primarily includes contributory infringement or vicarious infringement, although different jurisdictions label things differently and some differences in how it’s applied to the facts of a given case.  The important points to understand regarding vicarious infringement is that knowledge of the infringing activity is not relevant and a person or business will be held liable for vicarious infringement if the copyright owner shows that a financial benefit was derived from the infringing activity and there was an ability and right to prevent the infringing activity.  In the context of a business hiring an independent contractor to create unique website content, these elements are not that difficult to establish.  And be wary that there are numerous companies that produce unique content for certain industries, diligently register the unique content with the United States Copyright Office and will aggressively protect their rights.

Corbis Corporation v. Nick Starr

One case dealing with vicarious liability for independent contractors infringing upon copyrighted works when creating unique content is Corbis Corporation vs. Nick Staff. The case revolves around a company that hired a web design company to redo their website from the ground-up. The defendant subcontracted some or all of the work to a third party. That third party used images in the website design that may have been protected by copyright.

The court found that Nick Starr was vicariously liable for infringement because it derived a financial benefit from the infringing material and he had both the right and ability to control the infringing conduct.  Nick Starr was just as liable as the party who did the infringing act.  And Corbis could collect the full amount of damages against Nick Starr rather than go after the subcontractor.  And as pointed out in my post concerning statutory damages, there’s a wide range.

Dangers of Vicarious Liability for Copyright Infringement

As the owner of a business, it is important for you to make sure all of your bases are covered, especially when it comes to a topic like copyright infringement. Here are some of the ways that it can hurt your business if you do not practice due diligence when hiring contractors to work on your website.

– Lawsuits – One of the major concerns of vicarious liability, of course, is the fact that your company can be sued – even if you subcontracted work to someone else. There are a lot of ways that a lawsuit can harm your reputation and business.

– Money – Of course, lawsuits can end up being very expensive, which can cost you quite a bit of money. If you have to go to court, you’re going to end up spending a lot of money.  The costs can really add up quick when you are trying to defend yourself in court.  I provided a link above to my blog post concerning statutory damages.  But it bears repeating here.  If the copyrighted material was registered with the U.S. Copyright Office you’ll be looking at statutory damages with a range of $750 to $30,000 per infringement.  And if Plaintiff can prove that the developer committed willful copyright infringement, the damages exposure quickly escalates up to $150,000 per infringement.

– Time – Beyond the lawsuits and money you are going to lose, there will be quite a bit of time lost as well while you deal with the issue. This is why it’s important to take a little time upfront so that you can save time and hassles later.

Vicarious Liability and Copyright for Fitness and Training Entrepreneurs

The Corbis Corporation v. Nick Starr case is important, of course, and there are a lot more details involved in the case. However, we want to take a closer look at ways you can protect yourself from vicarious liability for copyright infringement.

– Hiring Web Developers – The first thing you need to do is make sure the web developers or designers that you hire are reputable and have a good track record of providing their own work and not stealing work from others. You should spend as much time as is required to make sure the developers you hire are on the up and up when it comes to issues like copyright infringement.

– Checking Their Work – Even after you hire a company or individual and have properly vetted them out, make sure to check their work to ensure they are not violating copyright laws.  Be very proactive with this.

– Insurance – Ideally, the independent contractor has liability insurance that will indemnify and defend you in the event that the cross-hairs focus on you for copyright infringement.  And closely look at your general liability policy, or have your lawyer do so, to see whether coverage exists under the “Advertising Injury” coverage form, which will depend greatly on how “Advertising Injury” is defined and what’s expressly excluded from coverage.

– Check the Photos – This may be difficult if you have a lot of images, but it is worth the time. One way to do this is to ask the developer or person working for you where they got the images they used and whether or not they have permission to use them.

– Check the Content – In addition to photos, you also want to make sure you check the written content. While there are websites like Copyscape that will help you with this for a price, a gentleman in my networking group had a very practical step that can be taken.  Run a Google search with quotes around select passages in the proposed content.  If the search results yield numerous links to duplicate content, at best plagiarism is not what you bargained for and will drag down your search engine optimization efforts, and at worst infringes upon someone else’s copyrighted material. However, this step is not fool proof because it won’t yield positive hits on registered material that is not yet published on the internet.

– Indemnity Provisions – It is critical that your agreement with the independent contractor contains a provision that the independent contractor will indemnify you for any infringing acts.  It’s strongly recommended that you hire a lawyer to draft this for you.  Why this is so important is because without clear written language giving you indemnity rights against the independent contractor, courts generally hold that the secondary infringer (the person held vicariously liable) doesn’t have indemnity rights against the primary infringer.

– Payment Conditions – Add a provision in the agreement that the last installment payment will be made to the website developer after you have had the opportunity to check the content and photographs for potential copyright infringement.  This will hopefully deter the website developer from taking short cuts.

As you can see, there are many different dangers that vicarious liability for copyright infringement can cause. This is why it is important to take your time and hire the right people and make sure you have the right type of contract to protect yourself. If you have any questions on how to protect yourself from vicarious liability or drafting contracts with independent contractors, contact us.

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