Buying 'copyright free' content that wasn't actually copyright free.

[TerryS]

Hi,

Very interesting reading through this forum as it relates to my business. Thanks for all your advice this a fantastic forum for shedding light on somewhat complicated issues.

I have 2 hypothetical cases that I’m wondering if someone could please give me some insight into. The cases revolve around someone buying a copyrighted image from a stock website that it turns out didn’t have the right to distribute as copyright-free in the first place.

CASE 1
Imagine the following scenario... I buy and use an image from a stock site who are selling it as 100% copyright free. It turns out that the image had not actually been cleared by the original owner (perhaps they hired a designer who didn’t clear it). Am I myself still liable for damages for my use of it?

As I understand copyright has a strict liability so I assume the answer is yes?

Say I profited a large amount from my use of the image and there is legit, calculable damages from my use of the image. Is there any case to be made that the stock site I actually bought it from is instead liable for these particular damages and not me (even though the profit in case from this specific usage is in my bank account)?

CASE 2
On the same note, and I suppose it's a more general question with regards to damages. Could I subsequently and successfully sue the stock website myself for selling this copyrighted work to me as a '100% copyright free work' and get the same exact amount back that I had to pay in damages in case 1.

I assume me having to pay for damages in case 1 would count as evidence of financial loss in case 2?

Also, even if the stock website were to take the copyrighted image down would they still be liable to the copyright owner if someone were to, in the future, use the image that they previously downloaded (before it was removed) and make a substantial profit from it?

Thanks for any assistance,

Terry

[AndyJ]

Hi Terry,

I am not sure exactly what you mean by the term 'copyright free'. Normally stock agencies only deal with licences to use works which are in copyright. There have been instances where for example, Getty, have offered licences for works which had previously been made available under a creative commons licence by the copyright owner, but even in such instances, copyright in the work still existed, it was just that the owner was happy for anyone to use the image without a formal licence. At best the stock agency in a situation like that would be acting deceptively. However the case you describe is somewhat different. I wonder if you are actually talking about an image which made available under a royalty-free licence, and have misunderstood this to mean 'free'.

Case 1.
Yes, theoretically by using the image without the permission of the copyright owner that would make you liable for copyright infringement, but if you were able to show that you reasonably believed that the stock agency was authorised to supply the image under licence and you had paid the licence fee, then this would be secondary infringement and due to the circumstances, you could use the last part of section 23 in your defence, meaning that you would not be liable since you had a reasonable belief that you had a valid licence to use the work. Although the calculation of damages would then be irrelevant, let's just cover it here anyway. There are two ways in which damages can be assessed, and it up to the copyright owner to decide which to pursue; he can't have both. The first is the actual loss he has suffered by not having received the licence fee which would have been due had he sold one to you; the second approach is called an account of profits, and is pretty much what you have described, that is to say, a determination of the profit you had made by your use of the image in question. The infringing use would have to have been the sole or main reason for the profit. If a defendeant can show that use of the infringing work was only partially the reason for the profit, then the amount of damages would be set at a proportionately lower level.

Case 2.
Assuming that for whatever reason you were found liable for damages, then you in turn could make a claim against the stock agency for the loss you had suffered as a result of their actions, ie the amount of damages awarded against you by the court. This would be under either contract law, or possibly the Sale of Goods Act, rather than under copyright law. Only the copyright owner would have a claim against the agency under copyright law (section 16(2)), that is to say, authorising someone else to use an image without a valid licence. In that case the account of profits method would not be applicable, as the agency would have had no control over how the image was actually used, and clearly the only profit they themselves would have made would have been the amount of the licence fee which was charged.

And if the image was taken down, the agency could be liable for any future infringement assuming the person actually responsible for the infringing act had previously obtained what they thought was a valid licence.

I hope these really are hypothetical examples, because if this is a real instance of an infringement claim, it is going to be costly and time consuming to resolve it, as you will probably need the services of a lawyer, even if it doesn't actually go to trial.

[TerryS]

Hi Andy,

Thanks for your reply. You're correct I did mean 'royalty-free' not copyright free.

Fortunately, there is no active issue with this specific scenario but I just wanted to make sure I am aware about such a possible scenario. I buy a lot of 'royalty-free' content and would like to be fully aware of the real risks, particularly in this current climate where more and more inexperienced people can upload to stock websites who may not necessarily understand copyright - something I've come across in the past.

I understand, good to know there would still possibly be a case for not being liable if you didn't know it was protected. I will look into contract law and the Sale of Goods Act.

Out of interest - If the copyright owner was unable to sue me for using the image and I can keep all profit, could they still request an 'account of profits' from my use of the image to calculate their damages for their case against the stock agency?

Thanks again,

[AndyJ]

Hi again terry,

I'm glad this really was a hypothetical case.

I just want to make it clear exactly what the law says about being liable or not for secondary infringement (section 23)

The copyright in a work is infringed by a person who, without the licence of the copyright owner [possesses, or uses etc] an article which is, and which he knows or has reason to believe is, an infringing copy of the work.

So in the example we are talking about, having obtained a seemingly valid licence to use an image, the alleged secondary infringer could show that he had no reason to believe the work was an infringing copy, and thus the liability would fall away. Note that this not the same as saying it would be "a case for not being liable if you didn't know it was protected". Technically, while a work is in copyright, it is always 'protected' in the sense that there is no legal mechanism* for renouncing the rights which come with copyright. The clearest way for a copyright owner to express his or her wishes on the matter is to attach a licence such as those provided by the Creative Commons scheme. But even there, if a user fails to abide by the terms of the CC licence (for example by not providing an attribution where this was required), then the copyright owner still retains all his/her rights of redress under copyright law.

And for the sake of clarity it is worth stressing that the defence under section 23 mentioned above cannot be applied where primary infringement is alleged. In that instance, strict liability applies and the belief or state of mind of the alleged infringer is irrelevant.

Taking your last question, if the copyright owner wishes to sue the agency for authorising the use of an image under an invalid licence then only normal damages could be claimed, although if the behaviour of the agency was found to be reckless or egregious, then additional damages might well be awarded to the owner. But an account of profits could not be used to calculate damages since the party being sued (the picture agency) would have had no responsibility for the use to which the image was put by the licensee.



* under the equitable doctrine of estoppel by acquiescence, it is possible that someone who takes no action to assert their rights in a timely manner despite knowing that infringement is taking place may be denied the opportunity to enforce those rights at a later stage.

[TerryS]

Thanks once again for your insight here.

So in the example we are talking about, having obtained a seemingly valid licence to use an image, the alleged secondary infringer could show that he had no reason to believe the work was an infringing copy, and thus the liability would fall away.

Would the liability then just disappear entirely or would it transfer to the the agency?

And for the sake of clarity it is worth stressing that the defence under section 23 mentioned above cannot be applied where primary infringement is alleged. In that instance, strict liability applies and the belief or state of mind of the alleged infringer is irrelevant.


Am I right in thinking in this particular case would I be the secondary infringer and the stock agency the primary infringer? Would that not make the stock agency strictly liable? Sorry if I'm misunderstanding you.

But an account of profits could not be used to calculate damages since the party being sued (the picture agency) would have had no responsibility for the use to which the image was put by the licensee.

So does this mean the image agency could never under any circumstances be responsible/liable for my usage and profit of the work and the damage that may cause the copyright owner?

[TerryS]

Perhaps I'm wrong in assuming that if there is secondary infringement there is always primary infringement?

[AndyJ]

Hi again Terry,

Liability for primary infringement through authorising the issue of copies without the permission of the copyright owner would exist whether or not there was secondary infringment. The liability wouldn't transfer; each party would be liable for its own specific part in the overall infringement. If the alleged secondary infringer can convince the court that he did not know that he was dealing with an infringing copy, he would be off the hook as far as damages were concerned, but the primary liability would be unaffected by this.

I think it's fair to say that where there is secondary infringement there willl usually also be a primary infringer, although that person or organisation may not always be in a jurisdiction where it it is practical for the copyright owner to pursue them. Very often secondary infringement occurs with imported goods, and the primary infringer who created the copies (think of bootleg DVDs or software) might be very difficult to trace if they are located in some backsteet operation in South East Asia.

And yes, the picture agency would be strictly liable for primary infringement by authorising the issue of copies without the permission of the copyright owner.

I can't think of any circumstances in which the person who authorises the making of copies (contrary to section 16(2)) would be liable for the extent of any profits made by the putative licensee, unless there was strong evidence of collusion or conspiracy between authoriser and licensee*. However it is highly likely that the copyright owner would ask the court to issue an injunction against the licensee preventing any further use of the image, or under other circumstances, make an order for the seizure of any unauthorsied copies of the work in question. The situation is similar to that which exists if you innocently buy a stolen car. Although you may be the innocent party, the car can still be seized and you have to bear the financial loss.

*Were there to be compelling evidence of collusion, this would undermine the defence on the part of the secondary infringer that they did not know they were dealing in an infringing copy.

[TerryS]

Thank you Andy, very helpful. It's a very interesting topic!

If the alleged secondary infringer can convince the court that he did not know that he was dealing with an infringing copy, he would be off the hook as far as damages were concerned, but the primary liability would be unaffected by this.


If the copyright holder first decides to sue me directly for using the image and profiting from it could they not argue that I committed a primary infringement, as that has a strict liability and my knowledge would be seen as irrelevant?

So from what I gather the image agency would always be a primary infringer for their copyright infringement (ie. selling the copyrighted work as royalty free) but the damages for their primary liability are not able to be calculated from the profit made by me, as that's a separate copyright infringement and would have be treated as such. In fact my profit in their case of infringement is completely irrelevant?

If this is the case, then surely the copyright holder may never be able to actually get fuly compensated for the substantial usage & profit made by me for the work?

I can't think of any circumstances in which the person who authorises the making of copies (contrary to section 16(2)) would be liable for the extent of any profits made by the putative licensee.


Just to clarify, you are referring to the stock agency as “the person who authorises the making of copies” right?

Thanks again!

[AndyJ]

Hi Terry,

A copyright owner holds a number of rights, the main ones being: the right to make copies of a work or to authorise others to do so (the reproduction right), the right to distribute those copies (the distribution right) and the right to publish or make the work available to the public (the publication right). There are a couple of other minor rights such as the right to allow adaptations to be made of the work. An adaptation can include making a translation of, for example, a book or a play, or turning a book etc into a film.

Primary infringement occurs when someone else does one or more of things without the permission of the copyright owner. So for instance if you go to a picture agency website and download an image that you find there without paying for a licence, or you select an image using google search, and just make a copy of it without permission, then, generally speaking that amounts to primary infringement. There are all sorts of caveats to that general statement: the amount taken has to be substantial; and there may one of a number of exceptions to copyright which could apply to the circumstances in which the copied work is then used. These exceptions can be found here.

However if you use the picture agency website and get the same image along with an appropriate licence for the sort of use you intend for the image, but it then transpires through no fault of your own that the agency does not hold the permission of the copyight owner to distribute the image or issue the sort of licence which was sold to you, then they become the primary infringer because they authorised you to do something which they had no authority to do. And then the second part of section 23 would operate to protect you if you were the innocent party. It might be easier to see this by reference to the criminal act of receiving stolen goods. If you shoplift a pack of razor blades from Asda, that's theft. If you then pass on the razor blades to your brother to sell on ebay, he may be guilty of receiving stolen goods if, in the circumstances, he knew they were stolen. However if he can convince a jury that he had no idea the blades were stolen and believed them to be your property, he would not be convicted of receiving. I wouldn't want to take this analogy too far as there are lots of differeneces between the two examples, however perhaps you can see where the distinction lies between a primary act of infringement and a secondary one.

Returning to civil justice which usually applies to copyright infringement, the aim of the process is to put the claimant (that is, the copyright owner) back in the position he would have been in if he had sold you a licence to use the image. Let's assume that the fee you paid to the agency was the amount that the copyright owner expected for his work, then that is the amount he has lost because the sale went ahead without his permission. The copyright owner can set the value of his permission at any level he wishes. Say this was his first novel and he wanted a publisher to take it on and publish it. The copyright owner would be in weak bargaining position and might have to accept whatever the publisher proposed as the value of the publishing right; however if the copyright owner was already a best selling author, he could demand a much higher publishing fee. The same will apply to the owner of the copyright in a photograph (usually the photographer). If the photographer enters into an agreement with a stock agency for them to market his work, they will agree the split of any earnings from selling licences (for example the agency may keep 20% of all money earned). The agency will probably be in the best position to know the market value of the image, based on the subject matter, the quality of the image and the potential market, and in most cases the photographer will agree to allow the agency to set the price for the licence(s) they offer. Most agencies operate two broad types of licence: Rights Managed or Royalty Free. The word 'free' here is deceptive - it means without the need for repeat royalty payments. If you buy a Royalty Free licence you are allowed to use the image in a particular way (say on a website or a promotional flyer) and you don't need to pay royalties based on the volume of hits on your site or the number of copies of the flyer which are distributed. Royaly Free licences can be limited in their duration, but that is less common. Rights Managed licences on the other hand may well have a lower up-front cost but royalties will be payable once the distribution number reaches various milestones, or the royalty may be based on the duration the image is in use or a combination of both factors.

From this, if you bought Royalty Free licence for an image and provided that you used the image in the way the licence permitted, then the amount of sales you made would not affect the licence fee income to the copyright owner who would receive 80% of the specific licence fee. However, if your sales were were directly related to the intrinsic value of the image it is probably the case that a Royalty Free licence was not the correct one, and that you should have obtained a Rights Managed licence. Obviously, if this was the case, then the agency would not be responsible for selling the wrong licence if you did not explain what use you needed the image for, and thus you would then become a primary infringer because the licence you obtained was incorrect for the usage. It would be like buying TV licence but using it as if it was a road tax licence to run your car.

And finally let's deal with the cases where an account of profits is the most appropriate remedy. Let's go back to the example of someone who just found an image they liked somewhere on the internet, and they then put it on a product they were selling in order to make the packaging more attractive to potential buyers. Since they didn't seek to get a licence, the copyright owner had no opportunity to set the price of an appropriate licence, thus it is diffiuclt to say how much he has lost by the infringement based on the conventional method of calculating damages (ie putting the owner in the position he would have been in if a proper licence had been negotiated), and so the account of profits method is to be preferred as a remedy.

[TerryS]

Hi again Andy,

I mostly understand your points, but it still seems to me that there would have 2 different cases of copyright infringement in this specific scenario...

1. the stock site selling it as royalty free to me, and
2. me using it and profiting off of it

Would it be right to say that potentially both me and the stock website could be primary infringers for our own individual cases of infringement and in law they could treat each case as such.

I think I'm just getting confused by the way you are presenting the idea because I feel that if this scenario was to arise the original copyright owner of the image would most likely go after me first because that's where the money made from the image would be. If they went after the stock site, their payout would be less substantial (as the court can't use an account of profit from my profits to determine the stock library's financial damages).

However if you use the picture agency website and get the same image along with an appropriate licence for the sort of use you intend for the image, but it then transpires through no fault of your own that the agency does not hold the permission of the copyight owner to distribute the image or issue the sort of licence which was sold to you, then they become the primary infringer because they authorised you to do something which they had no authority to do.

If the copyright owner was to come to me though and decided they want to seek damages due to my specific usage (as thats the one that made most money from it) they may be able to claim that they never would have agreed to sell it as royalty free license in the first place, so whether I treated it under such license would be irrelevant and I'm assuming would make me a primary infringer?

[AndyJ]

Hi Terry,

it is certainly possible that the copyright owner's first instinct would be to go after you but that doesn't mean that a court would accept a claim of that nature at face value. The weak point in this whole scenario is the assertion that the agency had issued a licence without the authorisation of the copyright owner. By and large picture agencies are pretty honest and thorough about their documentation, and so the likelihood of them deliberately issuing a licence knowing that they had no authority to do so is slim. The only realistic scenario I can see, beyond some simple human error, is that the photographer was using the agency as per their standard terms, but then the photographer decided to cancel the arrangement and withdrew his images. However in the meantime the agency had issued a licence at around the same time as the photographer cancelled his contract. In such circumstances it is likely that the licence would be seen as valid, and so there would be no question of the copyright owner having a claim against the licensee.

If there were some other circumstances and the agency was flagrantly authorising licences when it had no authority to do so, the copyright owner would be able to claim far more than just the basic damages based on the licence fee. There would be a strong case for aggravated damages and possiibly a claim for fraudulent conversion.

The subject which I have tried to avoid all through this discusssion is the law of agency. However I think I do now need to at least introduce the subject. Where an agent is acting on behalf of a principal (in this case, the copyright owner), then the agent owes a duty of care to the principal (more precisely, a fiduciary duty), but equally assuming that the agent is acting within the bounds of the agency agreement, the principal can also liable for the omissions or neglect of the agent when entering into relations with a third party (eg a licensee). I don't intend to develop the relationship between a principal and agent any further than that as it is outside the scope of this forum. Suffice it to say, if there was once a formal relationship between the copyright owner and the stock agency and this somehow broke down, then you as the third party are entirely insulated from that dispute. If there was never any kind of relationship between the copyright owner and the agency, you are still the innocent third party because you acquired the licence in good faith, believing that the agency was authorised to deal in licences on behalf of the owner.

[AndyJ]

Hi Terry,

On the off chance that you are still viewing the forum, here is a link to a recent case in which the issue of secondary infringement (among other issues) had to be decided. It concerned the making and selling of music on CD and vinyl, but the same principles apply to photographs. You only need to read from paragraph 32 onwards to follow how the court decided in this case. Just to set the scene: the first defendant (LTEV) thought it had a valid licence from the copyright owner (FBT) to make the CDs, and the second defendant (Plastic Head) was responsible for distributing the CDs. At trial it was found that LTEV did not have a valid licence and thus was liable for primary infringement, but that Plastic Head had no knowledge that the works were infringing copies, and so they (Plastic Head) were not liable for secondary infringement.

[TerryS]

Hi Andy,

Apologies for the late reply.

I’ve read through the court case you shared, thanks for sharing, a very interesting read.

I’m slightly confused by the case... am I right in thinking LTEV were guilty for primary infringement but the distribution side of things / the secondary infringement they were found to be not guilty?

In this case the distribution company was not found liable as it specifically did not do it willingly, is that correct?

So do you think there would have been a penalty for the primary copyright infringement (ie LTEV)? Just that it doesn’t mention that or what it was.

Thanks for all your help above by the way it’s all helped me tremendously.

[TerryS]

Also, out of interest, what were the damages likely to be in that case? I assume the claimant could not get an account of profits done from the distributor as they were not found liable?

So would they have to get the damages from the vinyl developer? I assume this would not be as much?

[AndyJ]

Hi Terry,

It is worth noting that in that case the two defendants LTEV and Plastic Head were both operated by the same individual. Although in law they were treated as separate entities, to all intents they were just different departments of the same organisation. The reason I flagged up the case for you was because of the similarities with your example. LTEV made the vinyl and CD copies (in fact they authorised an outside company to do the manufacturfing process) but because they didn't have the authority to do this, that was how primary infringement arose. Plastic Head, being a step further down the line, were merely dealing in unauthorsied copies (section 23) and as it could not be shown that they knew them to be infringing copies, they were not liable. The reason that LTEV were also found not liable for the secondary infringement was because the comapny's owner, Mr Stephen Beatty, genuinely believed that he had acquired the rights the Eminem album "Infinite'. This didn't save him or LTEV from primary infringment because of strict liability, but it did cover the secondary infringement activities of both companies.

As for damages, it is normal practice these days for cases like this to be split into a trial to decide liability, and then if necessary, a second trial to determine the 'quantum' of the damages. Often the parties will come to a mutually agreed settlement over damages without needing to trouble the court a second time, thus saving the court time. However in this case, that did not happen and a second hearing was necessary. Note that the task was delegated to a more junior judge. You can read his judgment here. If you just want to know what the final figure was, go to the last paragraph. However, if you have time, it is worth reading how the court came to the decision that it did in this case.