The social networking site Twitter is the target of a $250 million lawsuit recently filed by a group of 17 music publishers over alleged copyright infringements. According to a June 14 report from Forbes, the lawsuit was filed by the National Music Publishers’ Association and seeks up to $150,000 for each of the 1,700 songs that Twitter is claimed to have used and “handsomely” profited from, along with other damages.
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“It is a basic tenet of doing business that when you have something that by law is copyrighted, you need to have permission to use it,” said Melissa Martin, Broker, Professional Liability, Burns & Wilcox, Los Angeles, California. “Their competitors had already agreed to pay for licensing music. They made those agreements.”
Failing to do so on such a large scale “will undoubtedly be painted as negligent, almost bordering on intentional,” she said. “This is not an insignificant mistake to make.”
When a media company faces a copyright infringement lawsuit, some of its costs could be covered by Media Liability Insurance. However, it is a risk that businesses do not always consider, said Heidi Johnson, Broker, Professional Liability, Burns & Wilcox, Kansas City, Kansas.
“I think there are a ton of companies out there, small and large, that may not even realize that they could be at risk of infringing on somebody else’s copyright,” Johnson said. “I definitely see a lot of gaps where companies are not carrying insurance for this.”
Growing risk of infringement lawsuits
The music industry has been increasingly taking action over the use of unlicensed songs in social media posts, including filing copyright infringement lawsuits last year against an energy drink maker and a skin care company, Bloomberg Law reported in December. Previous litigation has shown that even when social media sites have music licensing deals in place, they may only apply to user-generated content and not marketing materials posted by brands, according to a September 2022 report by Music Ally.
Businesses that use and produce content should familiarize themselves with copyright laws, which are in force in both the U.S. and Canada. “Any company using any type of content could be sued for infringement,” Martin advised. “If you are producing any sort of content, whether that be online publications like a website or you are making flyers or mailers, or producing radio ads, you need to make sure that you are protected. Even if a business is just clipping things from a public website and posting it, they could be including information that belongs to someone else and that can leave them exposed to litigation.”
I think there are a ton of companies out there, small and large, that may not even realize that they could be at risk of infringing on somebody else’s copyright. I definitely see a lot of gaps where companies are not carrying insurance for this.
That risk is growing for today’s companies, which are more likely to be posting content online and participating in social media trends that may use copyrighted material, Johnson said. “Not only are more companies at risk, but more companies that have nothing to do with social media or media at all,” she said. “It exposes some of those non-media-related companies to the risk as well.”
Media Liability Insurance policies are specifically designed to address claims arising out of defamation, libel and slander, allegations of inflicting emotional distress, infringement or invasion of privacy, trademark infringement, copyright infringement, plagiarism, and more. “All of these things can be contemplated under a media policy,” Martin explained. “Copyright infringement would be front and center.”
While advertising and marketing agencies often carry this type of insurance, non-media companies could have some level of copyright infringement coverage on their Commercial General Liability (CGL) Insurance, Cyber & Privacy Liability Insurance, or Professional Liability Insurance. Even though social networking sites like Twitter provide a platform for individual users, they are generally seen as publishing or media companies, Martin said.
“They may not want to be treated as a publisher because it is a platform for free speech but the reality is they are monetizing the use,” she said. “Individuals get their news from Twitter, athletes make announcements on Twitter … so I definitely see the content exposure in that case.
Smaller companies may “fly under the radar” when it comes to copyright infringements, but they are not immune from lawsuits. There has been steady interest from all-size companies in Media Liability Insurance — “It is definitely not slowing down,” Martin said — but “a lot of companies do not know that they have the exposure or they do not have an insurance broker who points it out to them,” she said.
Business owners should know that “anything they create, print or disseminate puts them at risk,” Johnson emphasized. “If you are using someone else’s words or pictures or music, you run the risk of copyright or intellectual property infringement.”
Estimating the cost of ‘intangible’ damages
Copyright laws may continue to evolve to keep up with today’s shifting media landscape. In January, hundreds of artists signed a letter in support of a new U.S. copyright rule related to streaming royalties, Billboard reported. Last year in Canada, courts clarified compensable rights under the country’s Copyright Act and extended the length of copyright protection, among other changes, Lexology reported in a 2022 copyright year-in-review.
“We are not just a paper-printing world anymore,” Johnson said. “With social media, I think the [copyright infringement] risk has changed. It has just evolved.”
When companies are sued for copyright infringement, the costs can be significant. In May, hip-hop mixtape app Spinrilla was ordered to pay $50 million to music publishers to settle an infringement lawsuit involving thousands of copyrighted songs, Billboard reported. In 2021, Federal Court in Canada awarded $29.3 million in damages to a group of media broadcasters that sued a group of retailers over selling devices that allowed unauthorized access to Canadian television content, Canadian Lawyer reported.
You will be paying for the litigation, whether you did something wrong or not.
The financial impact of a copyright infringement lawsuit can vary greatly, depending on the severity of the claims, according to Johnson. “It is intangible,” she said, which makes it more difficult to estimate. “It is worth whatever the artist or the producer who created that content feels it is worth.”
Media Liability Insurance is generally a fraction of that potential cost, and it offers the important benefit of legal defense. “That is what racks up a lot of the claims,” Johnson said. “You will be paying for the litigation, whether you did something wrong or not.”
That is a key distinction, Martin agreed. “Do not discount the importance of having defense costs covered,” she said. “Even if you think you may ultimately be right and prevail in a lawsuit against you, that does not mean that you are absolved from paying your legal bills. When it comes to insurance, defense costs are one of the most valuable aspects of coverage.”
Directors and officers also at risk
For Twitter, the new $250 million copyright infringement lawsuit comes as the company faces a variety of other challenges. In the months since the company was purchased by Elon Musk last year, it has laid off a significant number of employees and faced declining ad revenue, the New York Times reported. Twitter was purchased for $44 billion last year but was valued at around $15 billion in May, according to Forbes.
“Even if Twitter was able to say they did not know about [the copyright violations], they could still be hit with a management liability lawsuit claiming they did not have the adequate staff to be able to catch the mistake,” Martin explained, noting that the overall negative publicity involving the company could also place it at higher risk for management liability lawsuits. “The prevalence of Twitter in the news casting the company in a negative light is just another aspect of overall management that could end up resulting in a claim against the directors and officers.”
This type of claim could be covered by a company’s Directors & Officers Insurance, which can respond in situations when investors lose money as a result of a company’s alleged mismanagement.
“Copyright offenses this prevalent typically do not go unnoticed and may have been brought to management’s attention,” Martin said. “If they were asked to stop using the unlicensed songs and they continued to do so, it may be alleged that everyone all the way up to the top of the management or operational structure may have known that they were not taking the proper steps to use this copyrighted content in a legal manner.”
Illegal acts are often excluded from Media Liability Insurance and other policies, Johnson said, which can create a “gray area” for coverage in some cases. “Insurance companies will generally provide the defense until the point they find out somebody admitted committing [the illegal act] and knew what they were doing,” she said.
To determine whether a company would be covered for potential copyright infringement claims, business owners should review their insurance policies with a specialized insurance broker, Johnson advised. “Insurance is almost always the last thing a business wants to think about — I have seen it for 23 years — but it is really important for them to at least do some sort of annual review and make sure any new risks are addressed,” she said. “Do they have new exposures to insure? Is there anything new that we were not doing last year? This can help prevent a gap in coverage.”
Martin agreed, encouraging business owners to also check with their broker for any duplication of coverage, which can lead to further issues. “You want to make sure your broker is reading what is covered under the policy and confirm there is no duplication of coverage, because that can lead to a claim going uncovered or having a harder time getting it paid,” she said. “The best thing you can do is be upfront with your broker about the things you are doing and have open dialogue.”
