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| Too Hot to Handle - On Disk or Online Advertising agencies use a huge amount of copyrighted software and creative materials in-house at all times to support their own internal operations and to service their clients. There are at least two situations in which agencies can and do inadvertently become liable for what their employees do-often but not always in violation of specific agency employee policies-to "assist" their employer. The assistance is undetected-or even tacitly appreciated-until someone-usually a disaffected former employee-reports the agency to the copyright proprietor whose work has been infringed as a result of these "out of corporate channels" acquisitions and uses of copyrighted products. Enforcement actions can be swift and expensive for the agency to defend. The plaintiff copyright owner may well be a sizable company vigilant in enforcing its copyrights or the copyright owner may come from an organized industry with an aggressive trade association. Owners and trade associations are ready to threaten and sue over even the most "innocent" of copyright infringements on theories ranging from direct infringement to contributory or vicarious infringement by the agency due to the inadequately supervised acts of its employees and/or due to the benefits the employer has received from those acts. Trade associations in the software industry keep a close eye on advertising agencies. Agencies may lack any license or, at any given time, they may lack the right number of licenses for the copies of popular creative software being used on the premises-and off premises on employee PCs used at home and on the road for business. For example, Adobe software seems to multiply like rabbits in the agency environment. The problem presented to the employer ranges from the employee who buys one copy at CompUSA and makes 100 copies for his best buddies in the agency (i.e. the agency has at most one shrink wrap user license and 100 infringing copies) to employees who want dupes at home without the agency buying or licensing the extra copy (i.e. a third to half of all copies used on PCs for agency business are infringing); the most common scenario is simply more copies in the office than there are purchases of legitimate copies or negotiated user licenses held by the agency. In the worst-case scenario, the employee may have used a corporate credit card to purchase the software online and may have it delivered directly to the office before making copies for the entire creative staff. What the agency employer needs to know is that, except possibly in the case of the true rogue employee who infringes despite the most stringent policies that are actively enforced, the agency will be liable for infringement since its business will have benefited from the infringement. Even worse, the agency's directors and officers may also be personally liable for infringement. The software company and/or trade association, when they learn of the infringement and move against the agency, will want big money, promises never to do it again (possibly promises extending to affiliated agencies) and public apologies. The Napster case (A&M Records v. Napster), recently affirmed on appeal to the Ninth Circuit after a district court decision adverse to Napster, highlights another problem for the agency as employer-copyrighted materials obtained by employees over the Internet. If, as the district court held, Napster is contributing to massive copyright infringement by aiding users to locate, trade and download copies of MP3 music files, the agency must carefully consider whether employees should be permitted to use Napster, particularly over agency computer systems from an agency domain or email address. Napster, like MP3.com and Scour, is attempting to settle with the music companies and move to a licensed pay per use model, but it is far from clear whether this will be successful. Meanwhile, Judge Marilyn Patel ruled against Napster on the fair use defense-i.e. the defense that Napster's users were using the software to obtain electronic copies of the music for personal fair use rather than infringing commercial use. There may be some uses of copyrighted materials within the agency that can qualify for fair use and do not require a license, such as internal research in the creative area, although this research fair use right is far from clear as a result of the cases in the print media area dealing with corporate reprographics (the Texaco case) and college course packs (the Kinko's case). The recording industry, too, has an aggressive trade association in RIAA which might be interested in a test case against a large corporate end user because Gnutella, FreeNet and Ogg Vorbis are freeware and there is no sponsor like Napster to sue when these programs are used for music transfer between users on the Internet. No agency wants to be the next test case behind Texaco and Kinko's to try the fair use defense as to copyrighted music obtained on the Internet. The problem goes beyond music and affects any creative material obtained over the Internet from a source other than the copyright owner or other rights holder. Use of any of the Internet's creative content sharing facilities within the agency must be analyzed and only permitted if it is clear that the use can be defended as fair and non-infringing. What should the agency do to protect itself from suit or defend itself effectively if challenged? 1. Prepare and circulate stringent employee no infringement policies, coupled with informational meetings. 2. Do regular compliance audits to see if there are more copies in use than licenses. Use the IP department for routine audits and consider periodic use of outside auditors, particularly if internal audits reveal problems that could be widespread. 3. Discipline employees caught violating these policies. Repeat offenders may be too expensive not to terminate and failure to terminate them sends the wrong message to other employees and to the court if the company is sued. 4. Have new employees acknowledge that they have reviewed and agree to adhere to no infringement policies at the time of hiring. 5. Include no infringement restrictions on employee use of corporate credit cards, Internet and email access. 6. Post no infringement policies on company internal computer systems particularly at Internet sign on. 7. If infringing copies are found, destroy them and obtain legal copies and/or licenses. 8. Require that all software for company use (including freeware and shareware available on the Internet) should be acquired by or through the IT department, all music by or through rights buyers or the rights clearance department. This is an exercise in protecting real corporate assets (hundreds of thousands of dollars) from the too helpful employee who infringes to save less than $100 or so or to avoid having to ask for (or even pay for, in the case of home computer copies) a legal copy of Adobe software or Metallica's latest song. Most valuable software and music are registered copyrights and infringements carry costs ranging as high as $30,000 for garden variety infringements to $150,000 for willful ones of a single work; if there is litigation rather than an expensive settlement, the loser runs the added risk that it will have to pay the costs and attorneys fees of the winner, as well as paying for its own defense. The amounts claimed by the music industry in the MP3.com case run to millions of dollars. This is serious money to risk losing to save license fees, internal administrative expenses and some employee grumbling. © 2001 Davis & Gilbert LLP |
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