“Free” Online Images May Be Expensive Copyright Infringements

Time and again clients come to us with a letter from a third party demanding that they cease and desist from using an image on their website and hand over an accounting of their income and profits. In many such cases, the client or their web designer found the infringing image on the Internet, liked it and decided to use it. Hey, it was on the Internet and there wasn’t a copyright notice on it, so it’s in the public domain, right? WRONG.

The use of a copyright notice is no longer required under United States law (and the laws of most foreign countries) and many people understandably don’t like using them, as it detracts from an image’s appearance. While the lack of a copyright notice might (sometimes) be an issue for works first published prior to 1989, web owners should assume that ALL images posted on other people’s websites are protected by copyright unless proven otherwise. An assessment of whether a given image is in the public domain is no simple matter and should be left to someone with sufficient knowledge both of copyright law and the circumstances of the image’s initial publication. A table showing what works are in the public domain according to their year of first publication and national origin can be viewed [http://copyright.cornell.edu/resources/publicdomain.cfm] here, but as the reader will quickly see, the issue is somewhat of a minefield.

What’s the penalty for using a work that is under copyright? It could be high. For works first published in the United States, a copyright holder must, in order to invoke the protection of the copyright laws, register the copyright with the United States Copyright Office. This can be done before or after the infringement has commenced. If registration is done before the infringement first occurs, the owner will be entitled to statutory damages and attorney’s fees. (More on that below.) If registration is done after infringement commences, the owner will only be entitled to an award of actual (non-speculative) monetary damages and profits. For works first published outside the United States, if the owner has not also registered his or her copyright in the United States — and most owners of foreign copyrights don’t — the owner will only be entitled to the same award as the U.S. owner who files after infringement commences, i.e., actual monetary damages and profits.

[http://www.copyright.gov/title17/92chap5.html#504] Section 504 of the Copyright Act explains, in general terms, what statutory damages, damages and profits are available to the owner. “Actual damages and profits” means the actual damages suffered by the owner “as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.” For example, if an owner lost out on a contractual opportunity due to an infringement, that would count as an actual damage. Furthermore, an owner’s claim that he or she would have charged the infringer $1,000, had he or she asked for a license, might in some circumstances serve as a measure of damages: the owner would at least have to show that it entered into “benchmark” licenses with other persons for similar uses of the same copyrighted property.

As for profits, the copyright owner “is required to present proof only of the infringer’s gross revenue.” Then the infringer is “required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.” For non-commercial infringements, the calculation might seem easy: if there is no sale of an infringing item, then there is no profit. But it’s not quite that simple. If an image is used to advertise a product or service, some portion of the profits earned from that product or service will likely be awarded to the copyright owner, and the onus will be on the infringer to prove exactly what percentage. (Courts have awarded higher than twenty percent of the infringer’s profits in such cases.) For commercial infringements — as in the use of an image on an article of clothing — the calculation of profits will generally be more straightforward: gross income less cost of goods sold less expenses of the business amortized against sales.

At any time before final judgment in a copyright case, the copyright owner who has registered his or her copyright prior to the commencement of the infringement may choose statutory damages instead of actual damages and profits. This option is not only less time-consuming, but it will generally result in higher awards than damages and profits. The statutory sum per infringement (not per infringing copy) is a minimum of $750 or a maximum of $30,000, as the court considers just. If the case involves only one infringing copy, statutory damages should be at the lower end of that range, while if the case involves hundreds or thousands of infringing copies, statutory damages will be at the upper end. However, in 2012 the Supreme Court upheld [http://www.wired.com/threatlevel/2012/05/supreme-court-file-sharing/] an award of $675,000.00 against a college student in Boston for illegally downloading 30 songs — an award of $22,500.00 per infringement. There is a lot to criticize about the Court of Appeals decision that was affirmed by the Supreme Court, but the case shows the extent of what is at stake when statutory damages are available. Even worse, where the copyright owner proves that the infringement was committed willfully, the court may increase the upper range to $150,000. A copyright owner who publishes his or her work without a copyright notice may have a more difficult time proving willful infringement than one who has stamped the work with a “c-in-a-circle” — © —” followed by the year of copyright and the name of the copyright owner. Caveat: Online copyright notices don’t need to be on the image itself for an argument of willful infringement to succeed. They may appear anywhere on a web page or website, or may be included in the metatags of an image or other download.)

On the other hand, if the court finds that the infringer wasn’t aware of the infringement and had no reason to believe that his or her acts constituted infringment, then at the court’s discretion, the award of statutory damages may be reduced to a mere $200. This is often a difficult circumstance to prove, because ignorance of the law is never an excuse — that is, “I found it on the Internet” is not a defense.

These measures of damages are in addition to the substantial legal fees, and sometimes expert fees, that the infringer will incur in defending a case. They are also in addition to the legal fees of the copyright holder who has registered his or her copyright prior to the commencement of the infringement. Legal fees are the primary reason that the parties in most copyright infringement cases want to settle quickly. The majority of infringements involve low or no profits. Even an infringement that turns a profit of $20,000 is probably not high enough to litigate over, considering that going to court will exceed that amount. Thus it is usually better to split the difference and come to a settlement that both parties can live with.

The next time you use an image you found on the Internet, however, think twice and follow this simple rule: if you are in doubt, don’t use it. Also be sure that you know the sources of all your web designers’ images. Copyright infringement could cost you serious money.