by Paul Alan Levy
In past blog posts, I have discussed our efforts to persuade the copyright enforcement law firm headed by Mathew Higbee to concentrate its efforts to pursue copyright infringement claims on behalf of its photographer clients on cases where it has reasonable claims of infringement by actual Internet users who put up his clients’ photographs (and not against the hosts of interactive web sites where the claimed infringements were committed by third parties). I have also decried the firm’s tendency to demand excessive damages payments far above what could likely be recovered in litigation. The Higbee firm plays on the legal ignorance of its targets as well as on the fact that, generally speaking, it costs more in legal fees to get sound advice, and to defend when defense is meritorious, than to simply pay the demanded ransom.
In several past cases, when the Higbee firm found that it would have to defend its claims against parties who could afford to defend themselves, it has dropped its claims rather than defending its demand letters. We have argued, as a result, that Higbee firm clients who had stood to profit from clearly unreasonable demand letter can be subjected to attorney fee awards when the target had to file a declaratory judgment action to silence the threats. One of the firm’s clients settled our attorney fees application for $10,000; our application for fees against two other Higbee clients is still pending.
In the course of discussing these fee applications, one tack taken by the Higbee firm to discourage us from pursuing attorney fees was to represent that it had taken to heart my criticism of their seeking damages, in the manner of Righthaven, from forum operators whose operators had failed to perfect their DMCA immunity by registering an agent for the receipt of DMCA takedown notices. Because the requirement of "volition" before an alleged infringed can be held liable provides an alternate, although for less perfect, defense in such cases, the Higbee firm claimed said that it was no longer pursuing claims against online hosts, based on their users’ alleged infringement. I suspected at the time that the claim about changed positions was false; and in the weeks after we received these assurances, several more hosts have reached out for help addressing Higbee firm demands over hosted photos or hosted deeplinks to photos. The lawsuit that we filed on Thursday against AdLife Communications and Marketing Co. is a case in point.
The Issues in Krueger v. AdLife Communications
The Higbee firm target in this case is Brian Krueger, who started LabSpaces.net as something of a social media site for scientists back in 2005, when he was a doctoral student at Iowa. Over the years, he added a blogging platform that attracted three dozen bloggers, as well as carrying press releases from universities as well as other institutions. In 2013, a doctoral student in psychology posted a series of blog posts on which she discussed ways in which merchants use psychological tricks to get their customers to buy more. One installment in the series, entitled “Sight,” and gave several practical examples in explicating an article in the Journal of Neuroscience. The author discussed several images in the article. One of her examples noted that in grocery stores “we’re bombarded with beautiful, fresh produce, setting the tone for the rest of our beautiful, fresh shopping trip.” Next to these words, users were directed to defendant’s Produce Photograph via a deeplink to the photograph as it appeared on blogspot.com, a location over which Krueger had no control.
Over the months of June and July, the Higbee firm sent Krueger a series of demands contending that the posting infringed the copyright of AdLife Marketing and Communications, a firm that hosts a large database of food photos which it makes available to grocery store chains for use in their advertising. Krueger removed the link, and told the Higbee firm he had done so, but that only appears to have whetted the firm’s appetite for the collection of damages: it told Krueger that he faced litigation unless he either paid $2525 in damages or, at least, made a reasonable counteroffer.
Krueger, though, was unusual among Higbee targets– his scientific work brings him into close contact with intellectual property lawyers, and he knew that he was not liable for infringement. Moreover, he did some quick research about the prices generally charged for the use of similar photos, and concluded that the damages demand was frivolous. So, he rebutted the Higbee firm’s claim of infringement, but at the same time he offered to pay $25 to make the claim go away. Higbee firm lawyer Theodore Sell, using one of the pugnacious turns of phrase that often shows up in his sabre-rattling emails for the Higbee firm, told Krueger that if he wanted to “avoid answering to a federal judge” for his alleged infringement, he would need to make a reasonable monetary counteroffer.
So, Krueger has now file an action for a declaratory judgment of non-infringement in the federal court for the Central District of California. Krueger invokes the same objections to the infringement claims that Kevin Schlossberg, Erik Anderson, and the Mockingbird Foundation raised successfully – that deeplinking is not infringement and that he, as a host, had no volitional involvement in the posting of the deeplink to the photo. He also argues that the blogger made fair use of the photo, which was posted, not for any purpose of advertising, but only to focus the discussion about the use of attractive displays as a psychological tactic to motivate purchases.
AdLife’s Inflated Damages Claim
But there is one more aspect to this case, which takes our dealings with the Higbee firm in a new direction. I have seen a goodly number of Higbee form demand letters on behalf of AdLife, and they consistently take an extreme and, I believe, indefensible position regarding the actual damages that the company can secure for the infringement. The typical AdLife demand letter seeks payment of $4525, a completely arbitrary figure that is supposedly justified on the ground that AdLife’s current practice is to provide licenses only for the entirety of its database of food photos, and at the rate of $999 per month. So, the argument goes, a web site where even a single photo has been posted for just a year would have had to pay AdLife $11,992 in licensing fees – thus, $4525 is put forward as a terrific bargain! (it’s not at all clear why the initial asking price in this case was only $2525 – consciousness of how weak the merits claim is?).
The problem for AdLife is that the law is clear in every circuit where I have seen the issue decided – when a copyright holder seeks actual damages in the form of its lost license fee, it is the market value of the infringing use that determines the actual damages, not whatever idiosyncratic licensing arrangements the copyright holder has chosen to use. So, if the copyright holder can show that its license arrangements are below market, then in theory it can seek a higher amount of damages. But where, as in a case like this, the copyright holder uses a licensing arrangement under which a single photo is never licensed by itself, the court needs to determine what the typical charge would be in the marketplace for use of a single comparable photo.
The trial court may never get to the issue of AdLife’s exorbitant actual damages claims in this case, because AdLife’s infringement claims are so weak on the merits. But we are watching a few other situations in which the Higbee firm is threatening to sue on behalf of AdLife unless the pigeon antes up $4525.