As an attorney who deals with hi-tech cases, a few clients have expressed to me a situation that I feel any business owner who has a website should learn from.  The situation involves business owners that paid an independent contractor to build their websites. Unconcerned with where all the images came from, they never asked if the images were purchased or used with permission.  The business owners simply paid the contractor for the website and assumed that meant everything used to create the website was paid for as well.  That is, until demand letters started arriving for payment of the images that were used without permission.  The question becomes is this the business owner’s problem?  If they rightfully paid for the website, can they simply ignore the demand for payment?

Responding to Demand Letters

Obviously, as an attorney, I would never recommend any demand letters from any law firm be ignored. Certainly, in instances such as this a good rule of thumb would be to hire a business or copyright lawyer to look at the letter, investigate, and advise you on next steps. If it is legitimate, such an attorney can often negotiate and get the dollar demand reduced – and make sure a proper settlement agreement is signed, so you can continue to use the image and most importantly, they cannot come after you again later.

Should I Simply Send Money and Hope it Goes Away?

Do NOT simply send someone money in an attempt to settle. You want to make sure of the following:

  1. The copyright claim is valid.
  2. The party claiming infringement really owns the copyright.
  3. A settlement agreement is put in place, so they cannot come back at you later.

I’ve seen situations where a client attempted to settle, sending thousands of dollars to a copyright claimant, only to have later demands for more payment. Sending money in an attempt to settle doesn’t mean you’ve settled properly, unless you have an agreement saying so (with the right copyright owner). As it relates to copyright infringement claims, you need to treat them very seriously. Here’s why: images are protected by US Copyright Law, and US Copyright Law is one of the rare instances of “strict liability,” which means you can be liable for copyright infringement even if you had no intention of using someone’s copyrighted image. It’s like statutory rape – it doesn’t matter that you didn’t know the age of the minor or whether the minor even lied to you – you can be guilty of statutory rape simply for the act. It’s the same for copyright infringement. Even if someone lies to you, or you have a good-faith belief you properly purchased a license, or someone else obtained the image – if such a copyrighted image is being used by your business, your business then violates the copyright. Such a copyright violation – for images that are properly registered with the US Copyright Office – can be subject to statutory damages (up to $75,000 per infringing use), attorneys fees, actual damages, lost profits and more. It’s a very big penalty, and you definitely don’t want to have to defend against a copyright infringement action against you or your business. The strict liability nature of copyright infringement really causes problems for business owners. It’s important to understand that:

  1. Just because someone tells you the images are okay, doesn’t mean you’re okay.
  2. If images are available on Google or the Internet, doesn’t mean they are available for your use.
  3. Even if images are available from a “royalty free image” website, they still may not be okay for your use (I’ve seen instances where someone has posted copyrighted images to a royalty-free website).

What happens when you receive a letter from a law firm demanding that you pay some exorbitant amount for an image that would have otherwise cost you less than $100 to purchase? Typically, such law firms make a living out of suing such businesses (and the business owners personally). You run the risk of such a law firm suing you in some other state far away from your local community. If you defend yourself, you run the high risk of losing and having to pay all their costs and attorney’s fees, to boot. If you don’t defend yourself, you will certainly risk a “default judgement,” which means the court will decide against you and pretty much award the complaining party all the damages they were seeking (again, including their costs and attorney’s fees). Once they win the lawsuit against you, they will seek to domesticate the action, which will permit them to collect against you and negatively affect your credit. Therefore, you don’t want to ignore the demand letter and you want to do whatever you can to avoid the legal fight.

What Can You Do to Keep This From Happening To You?

The best way to avoid receiving demand letters, is to hire a web developer you can hold accountable – someone who can be properly sued and has the resources / credit to be held accountable. This is NOT your nephew from high-school. This is NOT someone from living in India or Romania. This IS a reputable marketing or web-development firm.  Make sure the “services agreement” you sign with them includes an indemnity paragraph, where the company agrees to indemnify you and your company against any and all third-party actions related to copyright infringement. After all, you’re hiring them to build you a great website and they are supposed to be the experts. Ask them to obtain (and provide you with copies of) proper licenses for all copyrightable work, and copies of receipts and the licenses for your file, so you can refer back to them if you ever have a problem.

If you already have a website, and you did hire your nephew or that web developer out of India or Romania, then I would strongly encourage you to consider redoing your website. Think about it this way: Would you rather pay my fees as a lawyer to fight a copyright claim plus whatever is needed to settle, or would you rather have a great, brand-new, modern-looking website?

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Law 4 Small Business, P.C. (L4SB).
A little law now can save a lot later.
Slingshot company.

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