Imagine this: someone is selling stolen iPhones in your spare bedroom that you’ve rented out.
What makes you culpable? How much knowledge of the activity are you allowed to have before you become culpable? What should you do if the owner of the iPhones asks you to help in their investigation? Hopefully, this does not happen to you, but this is a useful framework to keep in mind as we discuss “secondary liability” for intellectual property (“IP”) infringement.
First, some assumptions: (1) You’re a print-on-demand company. (2) You do not create your own content.
The Foundation Of Liability
Secondary liability requires “direct” infringement, which requires two main things:
1. Ownership of a Valid Copyright: The plaintiff must demonstrate that they are the rightful owner of a valid copyright in the work. This is most easily accomplished by presenting a certificate of registration from the U.S. Copyright Office, which serves as prima facie evidence of ownership. (A plaintiff must at least apply to register their work before they’re allowed to sue in federal court.)
2. Copying of Protected Elements: The plaintiff must show that the defendant copied original elements of their work. Courts typically allow this to be proven with circumstantial evidence, which requires showing two things:
2.1 Access: The alleged infringer had a reasonable opportunity to view or access the original copyrighted work. In the digital age, proving access to a publicly available work is often straightforward.
2.2 Substantial Similarity: The defendant’s work is “substantially similar” to the protected elements of the plaintiff’s work. This is often the most contested part of a copyright case, as it involves a subjective assessment of whether the works are too similar overall (read: it’s a gut call).
When a user of your platform uploads a design that meets these criteria, they have committed direct infringement. Your legal risk stems from how you are connected to that initial act.
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Understanding Secondary Liability In Copyright Law
The U.S. Copyright Act grants creators exclusive rights to reproduce, distribute and display their works. When a user of your POD service uploads and sells a design they don’t own, they are committing direct copyright infringement. But what about your company? Even though you are just providing the platform and printing services, you can be held liable under two theories of secondary liability: contributory and vicarious infringement.
a. Contributory Copyright Infringement
A POD company can be found liable for contributory copyright infringement if it (1) has knowledge of the infringing activity and (2) induces, causes, or materially contributes to that activity.
The key here is knowledge. If a rights holder notifies you of a specific infringing design on your platform and you fail to take it down, you are knowingly contributing to the infringement.
The Supreme Court’s decision in MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), established that a company can also be liable for infringement if it distributes a device or service with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement. For a POD company, providing editing tools won’t suffice, but advertising the ability to print “fan art” of popular characters in a way that encourages infringement just might.
Tim Billick
Partner, Practus LLP
b. Vicarious Copyright Infringement
Vicarious infringement is another flavor of secondary liability. It applies if a company (1) has the right and ability to supervise the infringing activity and (2) receives a direct financial benefit from it. Notably, knowledge of the infringement is *not* a requirement for vicarious liability.
For a POD company, the ability to control what is sold on your platform (for example, through terms of service and content moderation) and the fact that you profit from each sale can satisfy these elements. A case that highlights the complexities for online platforms is Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007), where the court analyzed these principles in the context of an image search engine.
c. The Fair Use Doctrine
Fair use is a crucial defense to copyright infringement. It allows for the limited use of copyrighted material without permission for purposes such as criticism, comment, news reporting, teaching, scholarship, or research. The statute, 17 U.S.C. § 107, outlines four factors that courts consider:
1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes. A key consideration here is whether the new work is “transformative” – does it add something new, with a further purpose or different character, or does it merely supersede the original? Parody is a classic example of transformative use, as established in Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994).
2. The nature of the copyrighted work. Use of a highly creative work (like a film or song) is less likely to be fair use than use of a factual work (like a news article).
3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole.
4. The effect of the use upon the potential market for or value of the copyrighted work. Does the new work serve as a market substitute for the original?
For example, a user’s design that is a clear parody or a piece of political commentary incorporating a copyrighted work may have a strong fair use argument. However, simply taking a popular character and putting it on a t-shirt is unlikely to be considered fair use.
As a platform, you should be aware that this is a complex, case-by-case analysis – so you cannot bank on it always working in your favor. (It is also important to note that rights holders are required to consider fair use before sending a takedown notice under the DMCA, as established in Lenz v. Universal Music Corp., 801 F.3d 1126 (9th Cir. 2015).)
d. Proactive Risk Management
The most powerful tool for a POD company to shield itself from copyright liability is the Digital Millennium Copyright Act. The DMCA provides a “safe harbor” for online service providers that host user-generated content. To qualify for this protection under 17 U.S.C. § 512, you must:
- Designate a DMCA Agent: You must designate an agent to receive notices of claimed infringement from rights holders and register that agent with the U.S. Copyright Office. This information must also be publicly available on your website.
- Implement a Notice-and-Takedown Procedure: When you receive a valid takedown notice from a rights holder, you must act expeditiously to remove or disable access to the allegedly infringing material.
- Adopt a Repeat Infringer Policy: You must have and enforce a policy that provides for the termination of users who are repeat infringers.
- Accommodate Standard Technical Measures: You must not interfere with standard technical measures used by copyright owners to identify or protect copyrighted works.
Secondary Liability In Trademark Law
Similar to copyright, trademark law, governed by the Lanham Act, also has doctrines of secondary liability. Trademarks protect brand names, logos, and slogans from being used in a way that is likely to cause confusion among consumers.
a. Contributory Trademark Infringement
The standard for contributory trademark infringement was set by the Supreme Court in Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844 (1982). A company is liable if it “intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement.”
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One of the most important cases for online marketplaces is Tiffany (NJ) Inc. v. eBay Inc.`, 600 F.3d 93 (2d Cir. 2010). In that case, the court held that generalized knowledge that counterfeit goods might be sold on its platform was not enough to hold eBay liable. Instead, the rights holder must provide notice of specific instances of infringement.
Once eBay had knowledge of a specific infringing listing, it had a duty to act. The court also discussed the concept of “willful blindness,” stating that a service provider could be liable if it consciously avoided knowledge of specific infringements.
b. Vicarious Trademark Infringement
Vicarious trademark liability is less common for platforms like POD services because it typically requires a principal-agent relationship, like a franchisor and franchisee. However, it’s not impossible for a court to find that a POD company exercises such a degree of control over its sellers that it creates this type of relationship.
Beyond Copyright & Trademark
Another critical area of legal risk is the “right of publicity.” This right protects an individual from the unauthorized commercial use of their name, image, likeness, or other recognizable aspects of their identity. If a user uploads a t-shirt design featuring a photograph of a famous actor, the name of a popular athlete, or the face of a social media influencer, they may be violating that person’s right of publicity.
Crucially, you must understand two things about this right:
- It is separate from copyright and trademark.A photograph of a celebrity has a copyright owner (usually the photographer) and a subject (the celebrity). Using that photo on a product could infringe the photographer’s copyright *and* violate the celebrity’s right of publicity.
- It is governed by state law. There is no federal right of publicity law. It is a patchwork of state statutes and common law that varies significantly from one jurisdiction to another. States like California and New York have very strong protections, while others have weak or nonexistent ones.
As a POD company that likely ships products nationwide, you are exposed to the laws of every state where your products are sold. Therefore, it is essential to have a clear policy prohibiting the violation of an individual’s publicity rights. You should consult with legal counsel to understand this complex legal landscape and ensure your terms of service and content moderation efforts are sufficient to address this risk.
Here are other essential best practices:
- Robust terms of service: Your user agreement should clearly state that users are responsible for the content they upload and that they represent and warrant that they have the necessary rights (including copyright, trademark, and publicity rights) to use and sell their designs.
- Content moderation: While not a silver bullet, a combination of automated filtering and human review can help you proactively identify and remove obviously infringing content.
- User education: Provide resources to your users about the basics of intellectual property rights. An educated user base is less likely to cause problems.
Billick is a partner at Washington, D.C.-based law firm Practus LLP.
