||“Capital” Punishment: Evaluating an Investor’s Secondary Copyright Infringement Liability after Veoh
In UMG Recordings, Inc. v. Veoh Networks, Inc., the U.S. District Court for the Central District of California considered claims that investors in a privately-held corporation were secondarily liable for copyright infringement. The Veoh court findings, which set outcurrent secondary copy-right infringement law, provide guidance for investors by clarifying their potential liability forcopyright infringement committed by the company in which they invested. However, because the decision was fact-specific, this guidance is incomplete. For example, the court found that the investor neither controlled the infringing activities nor reaped direct financial benefit from them. This leaves open for further decisions the situation in which only one factor is present. In addition, Veoh bases secondary liability on such subjective concepts as “control,” “supervision,” “ability to supervise,” “reason to know,” “material assistance,” “encouragement to infringe,” and “direct financial interest.” Therefore, future cases involving similar facts are susceptible to contrary results based on the court’s interpretation of these concepts. This Article examines the standards established and the cases distinguished by the Veoh court to determine conditions under which an investor may be held liable for the copyright infringement of the investment targetand proposes practical steps to minimize liability exposure.
|James L. Proctor, Jr.