Website copyright infringement is expensive, even if you didn’t know about it.
Typically on Friday afternoons (and sometimes into the evenings) I indulge my legal nerd side to the highest possible degree, spending time becoming lost on a reading trail of cases citing other cases, winding my way down a rabbit hole until I find myself running a Caucus Race … with myself. On one such recent adventure, I read a 9th Circuit opinion that made me think it’s time to speak up on copyrights again. The case reads a bit like “Alice in Wonderland,” with lots of twists and turns in the intricacies of legal reasoning that fascinate people like me—and make the eyes of people like my clients glaze over … until it costs them a boat load of money.
Pay attention here, so you aren’t one of the business owners that has to pay big dollars in order to understand the importance of being legal.
The legal drama in Erickson Productions, Inc. v. Kast revolves around photos, copyright and web design. Erickson Productions, Inc. owned three stock photos that it licensed to Wells Fargo for use on their website. In 2010, Kraig Kast hired a website developer to update his business’s website and asked him to mimic the website of competitor Wells Fargo.
The good news is that—unlike many business owners—Kast actually had a written agreement with his web designer. As is typical, the agreement required Kast’s approval on all work, “including the design, development, and finalization of the website.”
The website development process was closely managed by Kast, including design reviews and change requests. Ultimately the updated website included three stock photos that were copied from Wells Fargo’s website. We don’t know the juicy details on whether Kast specifically directed the developer to use the photos or whether the developer did so of his own accord.
In any event, when Erickson learned that Kast used his photos, he sent a cease and desist letter (1) demanding that the photos be removed, and (2) demanding damages for copyright infringement. Kast immediately directed the developer to remove the photos but refused to pay damages. Erickson sued Kast and the website developer. The developer didn’t respond to the lawsuit, so Erickson obtained a judgment against him, no problem. The case against Kast, however, went to trial.
At trial, the jury found Kast had “vicariously and contributorily infringed” on Erickson’s copyrighted and awarded the maximum statutory damages of $150,000 for each photograph, or $450,000. Kast appealed the jury award to the 9th Circuit.
On appeal, the 9th Circuit agreed with the jury’s findings on some things and disagreed, as a matter of law, on others. They agreed that Kast was liable for contributory infringement and outlined the basis for their reasoning:
A party engages in contributory copyright infringement when it
“(1) has knowledge of another’s infringement; and (2) either (a) materially contributes to; or (b) induces that
The court of appeals wasn’t convinced that the willfulness of Kast’s conduct was properly established and sent it back to the trial court to revisit the issue. Unless they find that Kast (1) was actually aware of the infringing activity, or (2) that he recklessly disregarded the copyright holder’s rights, Kast won’t be required to pay the maximum statutory damages.
In other words, because the 9th Circuit agreed that Kast is liable for contributory infringement, he will have to pay Erickson, but he will only have to pay $450,000 if the trial court finds that his conduct was willful.
This is an excellent illustration of how winners can be losers. Kast won a couple of the issues on appeal to the 9th Circuit. But what did he lose? He lost (1) the damages he will have to pay after the trial court makes its new findings, (2) attorneys fees, (3) court costs, (4) litigation expenses, (5) time that he could have used to focus on growing his business, and (6) tons of really good sleep over the course of 9 years that this matter has been pending.