An Orrick pro bono team secured a precedent-setting ruling from the Ninth Circuit U.S. Court of Appeals, resolving an issue of first impression concerning vicarious liability in copyright infringement litigation and reaffirming the standard for establishing willful infringement. The decision also set aside a $450,000 judgment against our client, Kraig Kast, who is now entitled to a new trial on claims a wealth management website he was developing had infringed a photographer’s copyrights by uploading unlicensed photos.
In the lower court, Kast, who was launching a financial advisory business, was found vicariously liable (but not directly liable) for infringement because a web developer he had hired used the unlicensed images, and also liable for contributory willful infringement. Kast appealed the verdict pro se, prompting the Ninth Circuit to enlist Orrick to represent him pro bono to address two complex and unresolved legal issues at the heart of the case:
A three-judge Ninth Circuit panel, in a published opinion, found for Mr. Kast on both issues. In the first Circuit-level opinion on the vicarious liability question, the panel held that, as a matter of law, the avoidance of licensing fees by a direct infringer does not constitute a direct financial benefit sufficient to impose vicarious liability for copyright infringement on another party. This ruling is particularly noteworthy because it settles an issue of wide applicability - both within the confines of the Internet, and in a multitude of other contexts.
The court also reaffirmed that, for a finding of willfulness, a jury must find that the defendant was actually aware of the infringing activity, or that the defendant’s actions were the result of reckless disregard for, or willful blindness to, the copyright holder’s rights. The court also found a “should have known” instruction reflects a negligence standard, and does not fit within the willfulness framework. On this basis, the court reversed the statutory damages award and remanded for a new determination of willfulness on the basis of the existing record.
This ruling clarifies that “recklessness” is the floor for conduct which can be considered willful. With the 9th Circuit’s decision, the willfulness standard remains a meaningful one, which ensures that willfulness will not ensnare one who stumbles into infringement through mere carelessness.
The Orrick team was led by senior associate Christopher Cariello, who argued the case, partner Paul Fakler and managing associate Margaret Wheeler-Frothingham.