Copyright infringement letter received, need advise please

[Soph97]

Hi,

We run a small online clothing website. We took over the website 4 months ago from a friend who was struggling to keep it going. We trade as a limited company.

We received a letter today from solicitors representing a company that we are using celebrity images on our website and on a twitter account.

These images are usually of a dress shown next to an image of a celebrity wearing a similar style. All the images uploaded were by the previous owners.

Of the 14 images the solicitors are claiming are infringement only 3 were on our website, the others were on a twitter account just to promote similar styles.

The 3 images in question on our website were uploaded around 2 or 3 years ago and we removed from the website after the letter. The twitter account was last updated in 2015 and the images in that account were uploaded by a social network company on behalf of the previous owners around 4 years ago. We never gained access to the twitter account we did not take ownership of the twitter account.

The solicitors are claiming very high loss of earnings for the parent company and high estimation of our profits for the items sold (around £50k)

The website is not high traffic and in the four months we gave traded with the 3 images we have sold one item with a profit of £3.50.

I understand that we are responsible for the content on our website since we took over. As we did not upload the images ourselves are we responsible for the copyright infringement? Also, although the twitter account relates to our website are we responsible for the images uploaded on that account several years ago by a media agency even though we did not take ownership of that twitter account.

Any help would be much appreciated.

Thanks
Soph

[AndyJ]

Hi soph,

This sounds complicated. Is the limited company through which you are trading something which you (the present owners of the site) incorporated yourselves or was it in existence before you came along and you just acquired the company and its assets?

If it is the former, then it is unlikely that you will be liable for any infringing activities for the period before you took over the the site. However if the limited company was already in existence and you merely became the owners of the company, then it is more likely that the company - and thus its current directors - will be liable for the earlier infringing activity even if you were not, as individuals, actually responsible for the actions complained of.

Where the alleged infringement has continued on the website during your period in control, then technically you will be liable for this but unless the limited company was already in place, any claim to damages could only be based on the period after the transfer. If an agency was also responsible for uploading the images to the website, then it is likely that you will only be liable for secondary infringement - possessing and using infringing copies in the course of business - and not primary infringement. And if the Twitter account is not operated or owned by you then it seems unlikely that you would be liable for any infringement which may have occurred and continues to occur there. Given that the majority of the disputed images are on the Twitter account, eliminating these from the claim should substantially reduce the overall value of the claim.

I strongly advise you to consult a solicitor or go to Citizens Advice as the amount of damages being claimed is not trivial.

[Soph97]

Hi Andy,

Thank you for your advice.

We formed a LTD company 4 months ago to run this business when we took it over. All the images were uploaded at least 2 years before.

One question, you say the directors are liable on certain occasions, does it mean they can go after our personal assets like the house etc even thou we are a LTD company?

Thanks
Soph

[AndyJ]

Hi Soph,

I'm pleased to hear that you formed the company. This means that your liability just arises from when you took over the website. It doesn't sound as if the transfer was particularly formal, but ideally the previous owner should have provided an indemity absolving you from any earlier liabilities and warranting that the website etc was free from infringements and other things such as debts.

A company can be limited by guarantee - that is, the members of the company are only liable up to a specific amount - or by shares. The former is the more common form. You should check your articles of association to find out which your company is. A 'member' of a company means anyone who has a financial stake or share in the company. Directors are special members under company law and have specific responsibilties for ensuring the company is run on a sound financial basis. This means that the directors may be personally liable for the debts etc of the company up to a fixed amount, as members, and of course a director may, for instance in the case of copyright infringement, be personally liable if they were the directing mind behind the act of infringement. However in your case since there appears to have been no primary infringement, it is unlikely any company officer or director would be personally liable.

Of course if you raised capital or took out a loan to start the company, then it is possible that your home etc may form security for the loan, but that is entirely separate from the specific liabilities arising from copyright infringement.

[Nick Cooper]

Obviously, as Andy says, you should be seeking proper legal advice on this, but it's interesting that you says the solicitors for the claimed rights holders are basing the amount demanded on a, "high estimation of [your] profits." I think it is the case that they can only claim the equivalent of the regular licensing cost of the images, and what you have or haven't made is immaterial.

[AndyJ]

Hi Nick,

There are two ways of assessing standard damages. The first is as you describe, the loss of income to the right holder resulting from the infringement, and the second is an account of profits, which is calculated on the assessed profits of the infringer. The claimant can usually choose which method of assessing damages they wish to go for. The problem with the account of profits method is that very often the claimant will have no access to the sales figures of the infringer, especially at the time the claim is filed. Therefore during the pre-trial case management, the claimant will sometimes ask the court to order discovery of the accounts and sales figures in order to decide which is likely to be the more lucrative approach.

[Nick Cooper]

Hi Nick,

There are two ways of assessing standard damages. The first is as you describe, the loss of income to the right holder resulting from the infringement, and the second is an account of profits, which is calculated on the assessed profits of the infringer. The claimant can usually choose which method of assessing damages they wish to go for. The problem with the account of profits method is that very often the claimant will have no access to the sales figures of the infringer, especially at the time the claim is filed. Therefore during the pre-trial case management, the claimant will sometimes ask the court to order discovery of the accounts and sales figures in order to decide which is likely to be the more lucrative approach.

Ah, right. Obviously in this case the claimed rights holders seem to have plucked sales figures out of thin air to come to such an outrageously high demand.