From Internet Cases:
Plaintiff, a professional photographer, sued defendant company and an individual who was its “registered agent and … officer, director, manager, and/or other genre of principal” for copyright infringement over two photographs that appeared on the defendant company’s website. The infringement claims against the individual defendant included one for vicarious infringement.
The individual defendant moved to dismiss the vicarious infringement claim. The court denied the motion.
One “infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it.” Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005). “In order to establish vicarious liability, a copyright owner must demonstrate that the entity to be held so liable: (1) possessed the right and ability to supervise the infringing activity; and (2) possessed an obvious and direct financial interest in the exploited copyrighted materials.” Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d 505, 513 (4th Cir. 2002).
In this case, plaintiff alleged that the individual defendant controlled nearly all decisions of the company and was the dominant influence in the company.
. . . .
As a principal of the company, the individual defendant’s financial interests were intertwined with the company’s. Therefore, the individual defendant had a direct and obvious financial interest in the company.
Link to the rest at Internet Cases
PG suspects this is a case with a backstory that is more interesting than that described in the pleadings.
As a general proposition, one of the benefits of a corporation, limited-liability company (LLC) or limited-liability partnership (LLP) is that the business entity protects individuals who are acting in the name of the entity and within the scope of the entity’s business operations from being sued in their individual capacity for debts or obligations of the entity. Anyone with a claim against the entity must look to the assets of the entity to satisfy that claim instead of the personal assets of the officers/directors/partners/employees, etc.
If a limited-liability entity is operated as a shell with no assets from which to satisfy any sort of meaningful claim for business debts, a court may permit a claimant to sue the entity’s owners directly. This is sometimes called “piercing the corporate veil” in a legal context.
The copyright infringement claim against the individual owner/controlling person described in the OP is what caught PG’s attention.
Unlike most species of personal or business debts or other claims against a person or business, Section 504 of the United States Copyright Act provides for the potential for statutory damages which can help to avoid an argument about how much the reasonable royalties for the infringing use of the creator’s work might have been.
In a case such as that described in the OP, the fight over the appropriate amount of damages would likely be the most difficult and expensive part of the litigation if the infringer wanted to put up a fight.
Section 504 statutory damages are often between $750 and $30,000 per work, as determined by the court.
However, the damage amount can be increased up to $150,000 per work if the infringement is found to be willful (intentional). If the infringement is “innocent,” meaning the infringer did not know they were violating copyright law, the damages can be reduced to a minimum of $200 per work (if the work did not contain a proper copyright notice).
There is one important precondition for Section 504 damages, however. In order to qualify, the work that is the basis of the infringement claim must be registered with the US Copyright office (1) within three months of publication of the work, or (2) before the infringement starts.
See a more detailed but easy-to-understand description of Section 504 damages at The Copyright Alliance.
For indie authors, it’s a good idea to include copyright registration as one of the checklist items when the author releases a new book. For books, it’s a simple task that should not require an attorney.
Here’s a link to the Registration Portal for the US Copyright Office. Here’s a link to an online Form TX for non-dramatic literary works that includes detailed instructions.
In most cases, the Registration Portal is the easier and faster way of submitting Form TX or another standard copyright form. The Registration Portal will walk you through the process of selecting and filling out the appropriate form, then submitting the completed form electronically to the Copyright Office.
If an indie author has released books without registering their copyright to those books in the past, registering them after publication is still a good idea. As stated above, statutory damages can be awarded if the books were registered before infringement by a particular party began.
Also, it is important for indie authors to include a copyright notice in their books. This is inserted semi-automatically by Amazon and other online booksellers as part of the upload process.
Here’s an example of a copyright notice:
© 2019 John Doe
Here’s a link to a US Copyright Office Circular discussing copyright notices.
IMPORTANT NOTE for visitors from countries other than the US – PG’s discussion of infringement, penalties for infringement and copyright registration benefits and processes are applicable only to US copyrights and their infringement in the US.
There are two principal international copyright treaties/conventions – the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) and the Universal Copyright Convention (UCC) which can provide an author who is a national or domiciliary of a member country or works first published in a member country with protections against copyright infringement and rights to pursue infringers for damages or other remedies. The US and many other western countries are members of these conventions.