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Copyright Law

Copyright Infringement at the 2022 Olympics Illustrates the Broad Scope of Potential Defenders

Copyright Infringement at the 2022 Olympics Illustrates the Broad Scope of Potential Defenders

Amanda Milgrom

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This case leads to an interesting, and important, question: Who can be liable for infringing the artists’ song? How can Heavy Young Heathens name so many companies as defendants in the lawsuit? Could they all be responsible for copyright infringement?

In the case above, both Ms. Knierim and Mr. Frazier will certainly be held liable if Heavy Young Heathens is successful in its lawsuit. But these Olympic athletes likely would not have sufficient assets to cover the judgment in the event of the artists’ success. Copyright owners can seek up to $150,000 per infringement, and direct infringers such as these athletes likely don’t have the assets – so what do the artists do? They look beyond direct liability, to those who might be liable for indirect liability. There are two types of indirect liability: contributory and/or vicarious infringement.

Contributory infringement occurs when someone knowingly induces, causes, or materially contributes to the copyright infringement. Vicarious infringement (frequently applied to employers) does not require knowledge, but instead only requires that the potentially infringing party has the right and ability to, or be in a position to, supervise the infringers and directly benefit financially from the infringement.

Contributory infringement is premised on one’s failure to stop its own actions, which in turn facilitated the third-party infringement. Vicarious infringement is premised in one’s failure to stop a third party from directly infringing. These third-party liabilities are highly fact specific, considering the role of the third party in the action.

Here, Comcast Corporation, NBCUniversal Media, LLC, Peacock, USA Network, and U.S. Figure Skating will all have to spend countless dollars to defend themselves from third-party liability. What are some ways that you can you prevent third party liability in your business?

  1. As an employer, make sure to educate your employees about how they can avoid infringing another’s copyright. For example, if your employee creates PowerPoint presentations or posts on your website or social media, let them know about websites where the images are available for use to the public, such as unsplash.com. The owners of these images have provided them for free use by the public for any purpose.
  1. When hiring a third-party vendor for your business, read the terms of use that vendor. This may be located on the contract or on their website. Consider pushing back on any language where the vendor requires you to indemnify them in the case that they commit copyright infringement.
  1. If you own a website, the Digital Millennium Copyright Act provides a safe harbor – if you remove the potentially-infringing material as soon as you are notified, then the safe harbor will protect you from liability.

If you have questions, or would like to speak to one of our intellectual property attorneys, please reach out to amanda.milgrom@milgromlaw.com or jon.milgrom@milgromlaw.com.

ABOUT THE AUTHOR

PARTNER

Amanda Milgrom represents individuals and businesses of all sizes in various litigation matters regarding employment, intellectual property, and business disputes. She practices employment law, representing employees in discrimination lawsuits and counseling employers on best practices, drafting employee handbooks, and putting together suites of employment contracts.

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Contracts

LLC Member Bankruptcy and Automatic Buy-Out Provisions

LLC Member Bankruptcy and Automatic Buy-Out Provisions

Lindsey Brown

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When an LLC member claims bankruptcy, or otherwise becomes insolvent, it can pose problems for the LLC and other members. Many operating agreements contain provisions addressing this scenario, which often allow for the other members to immediately purchase the membership interests of the bankrupt or insolvent member. The buy-out process is often automatic, meaning the insolvent member has no choice in the selling of their membership interests. This is a harsh remedy, appropriately reserved for situations where the bankrupt or insolvent member is in serious financial peril. 

We recently worked on a litigation matter which involved an LLC member who had unpaid federal taxes. The operating agreement did not state whether this type of debt should trigger the insolvency provision. More specifically, the agreement failed to address whether the mere existence of this tax debt constituted a nonconsensual lien on the member’s membership interests, or if the affirmative filing of a federal tax lien was required. This was an important determination, as it ultimately would trigger the automatic buy-out process by the other members.

The drafter of the operating agreement had failed to articulate whether the mere existence of a federal tax debt, and in turn the arising of a statutory or inchoate lien, was sufficient to trigger the provision. It was also unclear whether the operating agreement required that such lien be filed in the state or county where the LLC was located. Ultimately, we were able to successfully advocate for our client, who had tax debt but did not want to offer their membership interests for sale under the terms of the insolvency provision. The Judge agreed that the Internal Revenue Service (IRS) must take affirmatives steps, such as filing a notice of federal tax lien, for the provision to be triggered. This makes sense, as the mere existence of a statutory lien does not pose any real or immediate threat to the LLC or its other members. While winning this argument was incredibly helpful to our client, it was not without cost.  

Had the drafter of the operating agreement clearly defined the triggering terms of the provision, the entire litigation could have been avoided. Making sure the terms and consequences of these type of insolvency provisions are crystal clear is of utmost importance. Drafting with such clarity affords protection to both the bankrupt member, and to the other members. While it is impossible to define every term or predict every situation that might arise in an LLC relationship, it is imperative that drafters of operating agreements clarify which specific scenarios trigger automatic buy-out provisions, as the consequences of such provisions are severe.

ABOUT THE AUTHOR

PARTNER

Lindsey is a litigation partner and mom to her one-and-a-half-year-old daughter. Lindsey is proud to work at Milgrom & Daskam, where being a parent and an attorney is celebrated and encouraged. Milgrom & Daskam works to support its working parents by fostering dialogue and understanding.

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