Vicarious Liability Under the Lanham Act: The Amazon Affiliate Case
September 5 2014
By David Gabor
In a sensible decision, the Ninth Circuit Court of Appeals recently ruled that Amazon.com Inc. is not vicariously liable for copyright infringement based upon the conduct of its Associates who use copyrighted photos without permission on their linked websites.
This decision is particularly important because there are an increasing number of “copyright trolls” patrolling various Internet websites. These trolls, sometimes using computerized software to locate allegedly protected images, engage in “hit and run” litigation whereby they identify an alleged act of infringement and then seek a nominal — but still significant — sum (usually less than $5,000) to instantly settle the case. They even go so far as putting in credit card payment information in their “dunning letters.” Intent is not a factor. The trolls well know that establishing a fair use defense is probably more costly than simply settling the case. An entire industry is now being built on these kinds of spurious lawsuits, where a few years ago a polite takedown notice would have been all that was required.
At issue in the Amazon lawsuit was use by a particular “Associate” called Sandysbeachgifts.com that ran a third-party website not controlled by Amazon but that was linked to it under Amazon’s affiliate marketing program. That site was accused of using copyrighted photos without permission. Instead of just suing the website directly, the plaintiff decided to go after a far bigger fish – Amazon. Plaintiff raised various claims. including vicarious liability under the Lanham Act. Amazon chose to fight back and argued that, among other things, its Code of Affiliate Conduct expressly disclaims the existence of an actual partnership with its affiliates (and any attendant vicarious liability). In an unpublished opinion, the Ninth Circuit held that, in fact, the plaintiff did not adequately allege that Amazon exercised direct control over its Associate’s activities, even though its Associates are governed by an Amazon Operating Agreement. The appellate court further held that, in the context of a Lanham act claim (which was the only claim before it on appeal), in the absence of allegations of direct control (not to mention actual direct control), Amazon could not be held to be vicariously liable for its Associate’s conduct. Based on that logic, the Ninth Circuit affirmed the lower court’s dismissal of the complaint against Amazon.
The reason this decision is sensible should be obvious. The choice to use the allegedly copyrighted images was solely that of the participating Associate. If every time a site links to another website, even under a common sales program, the “marketplace program” (here, Amazon) should not have to act as the guarantor of the first website’s copyright integrity. To require that level of diligence would literally bring Internet affiliate sales programs to a grinding halt.
Accordingly, while the Ninth Circuit remains among the most reversed circuits in the country, it certainly seems to of gotten this one right.