Insurance Coverage for Common Copyright and IP Risks

Copyright violations and other forms of intellectual property (IP) risk have long been a major concern for publishers and entertainment companies, but the explosive growth of the Internet and social media, as well as the ease of producing content, have turned nearly every business into a publisher. Examples include:

• The “widget” manufacturer that maintains a website with an online catalog and instructional videos for use of its product.
• The cosmetics company that has Instagram and Tik Tok accounts where staff share influencer videos that are synced with music or have music incidentally in the background.
• A restaurant chain that has a Facebook account showing photos of its food, as well as articles and reviews of its restaurants.
• A nonprofit entity that posts activist videos and short-form films on its YouTube and Twitter accounts that are filmed in front of a graffiti-marked building.

Like companies in the media and entertainment industry, each of these businesses is, indeed, engaging in activities that risk violating the intellectual property rights of another party.

Here are five common activities that can expose companies to intellectual property risk:

1. Publication of photos and video clips on websites and social media.

Companies that post or share photos and video clips in the content they create or distribute are subject to liability for copyright infringement if they do not have permission to do so from the copyright owner. For anyone who thinks “How will they find out?” or “Who is looking at our Facebook page that has only 216 followers?”: There is a cottage industry of plaintiff attorneys who represent photographers and their licensing agents. They use software that scours the Internet and social media sites for specific photos.

If a company uses a photo without permission or removes the copyright-identifying information, the lawyer or representative will make a demand, usually not for their regular license fee but for a settlement amount that is exponentially larger than a license fee. Or they might just file a lawsuit in federal court. These claims may have significant defense costs, and the defendant could be subject to actual damages or statutory damages as well as attorneys’ fees under the Copyright Act.

2. Use of third-party music in social media posts.

When a company posts a video on its website or social media posts—such as Tik Tok or Instagram Reels—that is synced to music owned by a third party, copyright exposure arises for the use of that music if it was not properly licensed. This risk also applies if music plays incidentally in the background. For instance, a local bar or restaurant may post a video interviewing employees and patrons while a song happens to be playing on the sound system in the background. Even though the establishment may have a “blanket license” with ASCAP or BMI that permits public performance of the song, that license does not include the synchronization rights needed to sync the song to video.

Similar to the industry representing photographers, there is an industry of song-tracking companies and attorneys who scour the internet and social media to find songs that were used without a license for that use. One law firm has been bringing many of these claims on behalf of record companies and music publishers. They have primarily been focused on specific industries, like sports teams and traditional media companies, but the firm is also pursuing other non-media industries.

3. Promotional materials and advertising could violate trademark and trade dress rights.

When a company disseminates content that promotes its products or services, if it uses a word, phrase, slogan, or label that is confusingly similar to the IP owned by someone else, the company could be exposed to a trademark or trade dress infringement claim.

A trademark is a designation of source and is the subject of a sophisticated statutory framework. For instance, if Company A expands its brand to add a category of services it has not provided before, and if Company B owns the trademark rights for that brand name in the new category, Company A could be exposed to liability for trademark infringement when it promotes its new services under that name.

As another example, consider a company that has an employee design a label for a product it distributes, and the employee draws inspiration from a famous manufacturer’s label for a totally different product. The employee’s creative inspiration may result in a trademark and trade dress lawsuit by the famous manufacturer.

Defense of trademark and related claims can be very expensive to defend, plus injunctive relief could be sought that imperils a company’s ability to use that name or trade dress, and potentially devalue its investment.

4. Misappropriation of name or likeness.

Promotional materials and advertising can also subject a company to claims for misappropriation of name or likeness, otherwise known as a violation of the right of publicity.

While some company employees might think it is useful, fun, or effective to reference and/or post photos of celebrities, politicians, or sports figures in their promotional materials or advertising, this creative use could give rise to significant liability exposure. Many public figures are well aware of the value of their name and likeness, and they choose when to license their rights for commercial purposes. If they learn that someone has used their name or likeness without their permission to sell products or services, or otherwise imply that they have endorsed the products or services, they might sue for misappropriation of name or likeness, violation of their right of publicity, federal trademark infringement, or other related claims.

5. Misappropriation of ideas, plagiarism, and trade secrets.

The work of any company is the sum of the input and creative effort of its employees, independent contractors, and other associated staff or vendors. Any creative contribution by an employee is usually owned by the company as a “work made for hire” under the Copyright Act, but other types of relationships between a company and its workers—and other associated individuals or entities—are subject to varying contractual terms.

Sometimes disputes erupt over the ownership of the IP rights that accompany such creative contributions. For example, a company might hire a new employee from a competitor who has great ideas for developing a product. The competitor might sue the company if it believes its former employee shared its trade secrets with the company. A worker who authored written material and pitched a concept to a company could bring a claim of idea misappropriation if the worker believes the company took the written material or developed the concept without appropriately compensating the worker.

How to Mitigate the Risk

Considering these intellectual property risks, companies of all types would be wise to seek counsel who can give proper advice on IP laws and how to manage IP exposures. However, even when companies act under the guidance of legal counsel, mistakes still happen and claims can still be made. Therefore, a company should perform a thorough review of its business practices and how they could give rise to intellectual property exposure, and should also consult with its insurance broker on how to insure against those risks.

Corporate risk managers might consider a media liability insurance policy, which would be specifically designed to provide defense and indemnity for errors and omissions (E&O) arising out of the creation, dissemination, publication, distribution, printing, or licensing of content. Media liability insurance policies typically cover traditional copyright and trademark claims, as well as claims for idea misappropriation, right of publicity violations, and theft of trade secrets. A key benefit of coverage under a media liability insurance policy issued by a dedicated media liability insurer is the handling of the claim by someone well versed in intellectual property laws who can provide insight into defenses and strategy, and who will assign top defense counsel who specialize in intellectual property law.

Evynne Grover is vice president, claims practice leader–media liability, at QBE North America. With more than 20 years of insurance industry experience, she manages media liability claims, predominantly concerning allegations of defamation, copyright infringement, trademark infringement, right of publicity violations, and privacy torts, against television productions, film productions, newspaper publishers, television networks, multimedia companies, and other content creators.

From: law.com