This case discusses the potential liability of a corporate officer for the infringing acts of the corporation. Defendant Larry Chasin, CEO of the corporate defendant IDS, filed a motion for summary judgment against Plaintiff Blue Nile. Blue Nile filed a cross motion for summary judgment against defendant Chasin on the issue of Chasin’s liability for copyright infringement. Judge Thomas S. Zilly, Western District of Washington, Seattle, denied Chasin’s motion for summary judgment and granted Blue Nile’s motion for summary judgment, finding Chasin liable for copyright infringement (pdf).
Blue Nile, Inc. is an online jewelry and diamond retailer. It alleged that defendants Ideal Diamond Solutions, Inc. (IDS) and Larry Chasin infringed its copyrights by posting Blue Nile’s copyrighted images of diamonds and jewelry on websites owned and operated by IDS and Chasin.
Chasin created IDS to provide brick and mortar jewelry retailers with web services to enable them to compete online. The court determined from declarations and the parties’ moving papers that IDS was the “brainchild” of the defendant Chasin, that it is a small company and that defendant Chasin controlled the company’s corporate affairs.
Chasin did not dispute the allegations of infringement in Blue Nile’s moving papers. The bases for Chasin’s motion for summary judgment and his defense to Blue Nile’s motion were “1) he cannot be held liable for copyright infringement because he had no role in creating the infringing websites and no knowledge that content used on the websites was copyrighted by Blue Nile; and 2) he cannot be held liable for IDS’s alleged infringement.” (Opinion pdf pages 2-3).
The court found that Chasin was mistaken as a matter of law and that no genuine issue of material fact existed and therefore granted Blue Nile’s motion and denied Chasin’s motion. (Opinion pdf page 3). The court did not rule on whether IDS infringed Blue Nile’s copyrights, but the order is written on the assumption that IDS did infringe.
Summary judgment shall be granted if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).
(Opinion pdf page 3).
The non-moving party must demonstrate that there is a genuine issue of material fact for trial by identifying “specific facts” to establish a genuine issue.
This blog also discusses the standard for granting summary judgment in Ninth Circuit Upholds Ruling that Sony’s God of War Video Game Not Infringing in Dath v. Sony, Photograph of Model Dancing Copyrighted Bronze Dance Steps Could be Fair Use and Copyright Infringement Suit Regarding Precast Concrete Vault Drawings Yields Summary Judgment Rulings.
Personal Liability for Copyright Infringement
Copyright is a strict liability tort; therefore there is no corporate veil and all individuals who participate are jointly and severally liable.
(Opinion pdf page 4.)
Corporate officers are liable as joint tortfeasors with the corporation when the corporate officer is the dominant influence in the corporation and determines the policies that produce the copyright infringement.
Because Chasin controlled the corporation, his argument that he did not create the infringing websites or know that infringing material was posted was not a defense. The court stated that
[t]he Copyright Act is a strict liability regime under which any infringer, whether innocent or intentional, is liable.
(Opinion pdf page 5).
The court also indicated that there is a genuine question of material fact regarding whether Chasin is an “innocent infringer.” Innocent infringement is discussed in my post Fair Use in AP Fairey Dispute but not in Cooks Source Magazine Controversy. The distinction between an innocent infringer and an intentional infringer is important in calculating damages under the Copyright Act. 17 U.S.C. §504(c)(2). Regarding innocent infringement, §504(c)(2) states:
In a case where the infringer sustains the burden of proving, and the court finds, that such infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages...
Vicarious Liability for Copyright Infringement
The court ruled that Chasin is alternatively “liable for vicarious copyright infringement because he had the right and ability to supervise the infringing activity and also had a direct financial interest in such activities.” (Opinion pdf page 5). Chasin admitted that he had the ability to remove infringing content, that he controlled corporate affairs, that he invested his own money in IDS and that he received a salary and benefits from IDS.
Vicarious liability is also discussed on this blog in Game Developer Alleges Copyright and Computer Fraud and Abuse Act Violations in Suit Against Unknown Defendants.
This case is Blue Nile, Inc. v. Ideal Diamond Solutions, Inc., et al., No. C10-380Z, Western District of Washington at Seattle.