The US Court of Appeals for the Ninth Circuit examined issues of vicarious and contributory infringement—along with willfulness—in connection with a copyright infringement case involving a real estate website that featured three photographs taken from a competitor’s website. The original images were owned by the photographer and plaintiff, and had been licensed to the competitor. Erickson Productions Inc., Jim Erickson v. Kraig Rudinger Kast, Case No. 15-16801 (9th Cir. Apr. 16, 2019) (Lloyd, J).
In July 2011, after receiving a cease-and-desist letter from Erickson alleging copyright infringement of certain photos used on Kast’s website, Kast had his web development vendor, Only Websites (OW), immediately remove the images. Kast refused, however, to pay the monetary damages as demanded. Kast’s refusal to pay prompted Erickson to file a lawsuit for direct, vicarious and contributory copyright infringement, and to petition for enhanced damages on grounds that Kast’s alleged copyright infringement was willful.
In the ensuing trial, the jury found Kast vicariously and contributorily liable for copyright infringement due to his hiring of OW, which posted the three copied images to Kast’s website. The jury also found that the infringement was willful based on a jury instruction (proffered by Erickson) that Kast “should have known” his actions (via OW) infringed on Erickson’s copyright. Kast appealed.
On appeal, the Ninth Circuit examined the appropriateness of the jury’s vicarious and contributory liability verdicts, as well as the finding of willful infringement.
To establish vicarious liability, a plaintiff must prove that the defendant has (1) the right and ability to supervise the infringing conduct, and (2) a direct financial interest in the infringing activity. Finding no evidence of a direct financial benefit from the infringement, the Ninth Circuit agreed with Kast and vacated the vicarious liability verdict.
The Court explained that the mere enhancement of the attractiveness of Kast’s website with the infringing photos is not a direct financial benefit unless the “availability of” the infringing material “acts as a draw for customers,” thus requiring a causal relationship between the infringing activity and the financial benefit. In this instance, Erickson made no contention that anyone purchased Kast’s services because they had access to or saw the photographs at issue.
The Ninth Circuit also addressed a question of first impression in the circuit, holding that the avoidance of paying copyright license fees (here, for the Erickson photographs) did not constitute a direct financial benefit for Kast, especially since the jury did not find Kast directly liable for copyright infringement. In other words, even if the direct infringer avoided copyright fees, that alone is not enough to establish a direct financial benefit to a vicarious infringer.
The Ninth Circuit affirmed the jury’s contributory liability verdict, finding that Kast’s actions in working with OW on his company website and in relation to the infringing photos met the contributory infringement test requiring (1) knowledge of another’s infringement, and (2) either material contribution to, or inducement of, such infringement.
Kast argued that jury instructions on the definition of “knowledge” as being a “reason to know” rather than “actual knowledge” or “willful blindness” were erroneous. The Ninth Circuit acknowledged some “inconsistency” in its own case law on the “knowledge” element, but concluded there was supporting precedent for the “reason to know” jury instructions, such that the instructions were not erroneous.
Finally, the Ninth Circuit vacated and remanded the jury verdict on willfulness, finding that the instruction proffered by Erickson and given by the district court was erroneous. Erickson proffered the instruction that Kast “should have known” his acts were an infringement. The Court explained that the “should have known” instruction is a negligence standard that does not fit within the willfulness framework, as it is a less culpable mental state than actual knowledge, willful blindness or recklessness—i.e., the other factors used in the instruction on the willfulness standard. The Court observed, “[w]e have never held merely negligent content to be willful, and we decline to do so now.”
Since Kast presented evidence that he did not know OW might be infringing, the Court explained that the willfulness instruction likely was prejudicial and the issue must be remanded for a review of the record evidence—including Kast’s use of other licensed photos and his prompt removal of the infringing photos—under the correct willfulness instruction.