5 Common Causes of Copyright and Other Intellectual Property Risks for Businesses

5 Common Causes of Copyright and Other Intellectual Property Risks for Businesses

By Evynne Grover, Vice President, Claims Practice Leader – Media Liability, QBE North America

Copyright violations and other forms of intellectual property risk have long been a major concern for traditional publishers and entertainment companies, but the explosive growth of the internet and social media activity, as well as the ease of producing content, has 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 their product.  
  • The cosmetics company that has Instagram and Tik Tok accounts where they share influencer videos that are synced with music or have music incidentally in the background.  
  • A restaurant chain that has a Facebook account where they post photos of their food, as well as other articles and reviews of their restaurant that they located on the web. 
  • A non-profit 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 are 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 risks:

  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 the 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 and restaurant posts a video interviewing employees and patrons while a song happens to be playing on the sound system in the background. Even though the bar may have a “blanket license” with ASCAP or BMI that permits the bar’s 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 obtaining a license for the use. One law firm has been bringing many of these claims on behalf of record companies and music publishers. They have been focused on different industries like sports teams and traditional media companies, but they are 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 intellectual property 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. In another situation, a company 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 choose when to license their rights for commercial purposes. Similarly, when 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 could 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. While any creative contribution by an employee is usually owned by the company as a “work made for hire” under the Copyright Act, other types of relationships between the company and its workers, and other associated individuals or entities, are subject to varying contractual terms. Sometimes disputes erupt over the ownership of the intellectual property 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.

Mitigating Risk  
Considering these intellectual property risks, companies of all types would be wise to seek counsel that can give proper advice on intellectual property laws and how to manage the  intellectual property exposure. 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 also consult with its insurance broker on how to insure against these risks.  

A media liability insurance policy is specifically designed to provide defense and indemnity for errors and omissions 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. 

This article is for general informational purposes only and should not be construed as legal, commercial or other professional advice. Actual insurance coverage is subject to the language of the policy as issued.