Thoughts on startups by investors that
fund them & entrepreneurs that run them

Copywrong Again: Founding the Next Pinterest or Napster?

As I wrote in Part I of this post, many of the most creative and disruptive startup businesses in recent years have involved the use of intellectual property in innovative, non-traditional ways that defy easy categorization and stretch the boundaries of concepts such as the fair use doctrine in copyright. When presented with a product or service in development, we often have to admit that there is no clear precedent and look for the best analogous situation to assess legal risk.  Is Instapaper like collecting press clippings?  (If so, do you have to buy a copy of each paper first?)  Is pinning a photo or article on Pinterest more akin to showing someone an article in a magazine you’ve bought or actually making and handing them a copy?  Does using a friend’s name or photo in a Facebook “Sponsored Story” (e.g., “David S. Rose likes Gust. Click thumbs up to Like it too”) more closely resemble a personal recommendation by that friend to buy the product, or plastering the friend’s photo on the product packaging in stores?

Copyright is not the only type of IP right implicated — and others such as rights of privacy and publicity become increasingly relevant in the age of social media — but it provides many of the most accessible examples.  Let’s use Pinterest as a case study.   For those who may not have tried the service, Pinterest is an online “pinboard” of sorts, enabling users to create “boards” on various areas of interest (see mine, Term Sheet, as an example). There is nothing new per se about a user-generated content site on which users select and post items of interest from around the Internet; “social bookmarking” and recommendation tools have been around for years, and of course sites such as Facebook and MySpace allow users to post images and links by the millions.

What sets Pinterest apart its its heavy emphasis on visual elements.  In many cases the item being “pinned” (or “repinned” by others) is primarily an image itself rather than the underlying site or story to which the image is linked.  This visual design accounts for much of the enthusiasm that drives Pinterest’s massive growth, but to some — notably professional photographers — it’s an example of rampant copyright infringement for which the site should be liable.  Enough of a fuss was raised that Pinterest made a point of going back to review, revise and clarify its Terms of Use Agreement in an attempt to alleviate these concerns.

What gives?  To gauge the legal risk incurred by the company, we have to start by reviewing the basics of copyright law as it applies to photo licensing.  Without turning this into a long, boring law school exam question, here are the key questions followed by answers:

  • Does posting a photo on Pinterest involve making a “copy?”
  • If yes, is the photo I’m planning to post copyrighted?
  • If yes, do I own the copyright or have permission (a license) from the copyright holder?
  • If not, can I still do it anyway?
  • If so, what, if anything, can the copyright owner do about it?
  • Finally, from the site operator’s perspective, is Pinterest liable for any infringing photos that I (or its millions of other users) might post on the service?

We can dispense with most of these quickly.  Yes, posting a photo online is making a copy.  In general, yes, it’s safe to assume any photo is copyrighted unless it’s either so old as to have fallen out of copyright or has been explicitly placed in the public domain.  No, in  most cases, unless it’s a photo I took myself, I don’t have ownership or a license to post it.  This gets us to the interesting part:  Can I still do it (lawfully) anyway?  Without going way down the rathole of the fair use doctrine in copyright, the answer is a resounding “maybe.”

To the entrepreneur building a startup, the last two points are the ones that really matter. Granted no business owner wants to see his or her customers sued, but the liability issues that can kill a startup of this nature or render it unfundable are ones of secondary liability:  In legal parlance, is Pinterest liable for contributory or vicarious infringement because of what its users are doing?

At this point, for anyone left wondering whether or when to consult a good lawyer, the answer should be self-evident.  If the difference between creating an enterprise worth ten figures (let’s call it “Instagram“) and getting sued into bankruptcy (let’s call that one “Napster“) rests on points of IP law such as fair use and secondary liability, there’s no such thing as getting too much, or too early, advice from the right professionals.  In getting up to speed, there’s also no substitute for reading the work of commentators whose grasp of the subject matter is detailed enough to make a thorough, reasoned analysis (notably Techdirt’s Mike Masnick — himself a lawyer — in this example).

In closing, it’s worth noting that even the most seasoned attorneys and law professors will disagree on some of these subjects.  As with other potentially complex, risky undertakings like surgery, it never hurts to get a second opinion — although chances are, with lawyers as with doctors, you’ll always manage to fine one who is risk-averse enough to tell you not to do it.
This article is for general informational purposes only, not a substitute for professional legal advice. It does not result in the creation of an attorney-client relationship.

Written by Antone Johnson

user Antone Johnson Founding Principal,
Bottom Line Law Group

Antone is a business lawyer and executive advising technology and media companies, entrepreneurs and investors in corporate, commercial and intellectual property matters. Johnson is Founding Principal of Bottom Line Law Group, a business and IP law firm and was the former VP and head of worldwide legal affairs at eHarmony.

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4 thoughts on “Copywrong Again: Founding the Next Pinterest or Napster?”

  1. Mitch Labuda says:

    Courts have ruled that it is strict liability and the user is held accountable. Napster was a file sharing site and now has gone straight.

  2. EthicalFan says:

    Pinterest is a business that seeks to make a profit. It is “fair use” for you to put a photograph in your PhD dissertation in a commentary related to the photograph. It is not fair use for Pinterest to be sold for billions to Google or some other web 2.0 company on the backs of millions of photographers who did not get paid or participate in the acquisition proceeds (just like they did with Youtube). The only reason why Pinterest gets away with this is because Google, Youtube and others have gotten away with massive abuses of the DMCA safe harbors. Additionally they have spent millions through EFF and other shadow organizations misleading the public and the courts regarding copyright on the Internet. If they can continue to take advantage of the creative class, they can continue to make unfair profits. They claim that companies like Pinterest are “innovating” when they profit from photographs without paying for the photographs. If you can get away with it, theft is always a profitable business model. After Pinterest gets sued it will have to start paying royalties just like Youtube now does after it got sued by Viacom.

  3. EthicalFan says:

    Instagram is primarily used to enhance and host photographs posted by the copyright owner. Pinterest and Napster were/are primarily used to duplicate other people’s copyrights without permission.

  4. Kunvay says:

    We agree that startups need to be careful when managing and negotiating copyright and intellectual propery rights. Though we are wary of business models that depend entirely on challenging the very limits of what could be considered fair use. Pinterest and Tumblr come first to our mind in this regard.