Structuring a Licensing Agreement to Prevent Copyright Infringement [e208]

July 22, 2015

Nasir and Matt talk about the lawsuitalleging Zillow of copyright infringement even though it has a licensing agreement to use certain photographs.

Full Podcast Transcript

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha.

MATT: And I’m Matt Staub.

NASIR: And we are here to tell you about business and the law.

MATT: And, for some reason, it got a lot hotter where I’m recording from the last episode to this one, and I don’t know what exactly happened but I don’t really like it.

NASIR: I think it’s the excitement in the air. Actually, I think everyone’s feeling it right now. I mean, I think, as soon as people started playing this, people are feeling the heat – just the excitement of this episode.

MATT: It must be.

NASIR: I’m pretty sure.

MATT: We’ve definitely talked about Zillow before – I had to have think, right?

NASIR: Yes, it’s “wolliz” backwards.

MATT: “Willoz” – I’m very aware of Zillow but I was not aware of Zillow Digs which I guess is their home improvement site.

NASIR: I think it’s new.

MATT: It has to be – well, I’d have guessed it’d have to be. I’ve never heard of it at all.

NASIR: Yeah, I’m pretty sure, yeah.

MATT: Well, in the context of what we’re going to discuss, it would make sense if it was new, if they’re just now bringing issue of it.

NASIR: Yeah.

MATT: So, what is that issue? Well, I’ll tell you. It’s going to be a copyright infringement issue. Let me give a little backstory on this – not a personal backstory but a backstory for this thing. There’s a company called VHT?

NASIR: Yeah, I’m sure it stands for something but that’s what the name says.

MATT: Yeah. So, VHT and then, of course, Zillow. So, VHT is in the business of essentially having a huge database of real estate photos. I think more than 4 million real estate photos – kind of everything – home exteriors and interiors, a whole bunch of different photos. But they have a licensing agreement with Zillow which allows Zillow to use the photos that VHT has on their site – on the regular Zillow site – they’re allowed to use the photos for the purposes of marketing the properties for sale which makes sense because, I mean, I guess Zillow is a way to find information on just finding information on a property but also the ideas to see which houses are for sale and learn more about them – kind of an open MLS to some degree for non-real estate people. So, Zillow Digs is the home improvement site that they have which VHT was aware of but they’re saying that, you know, this new thing was supposed to be for home improvement. It’s more for marketing, things like that. VHT was concerned because they were saying, “Well, this isn’t really for our purposes that we agreed to of marketing the properties for sale. This is the purpose of selling advertising or for design elements that you’re using our photographs,” and it really hasn’t been too many. I think they only said a little over 300 of their photographs have been used so it’s not like we’re talking about a lot but it gets into the question of, because there is this licensing agreement, and I guess we would need to know who it was between, if it was between VHT and Zillow and if Zillow is a parent company that wholly owns this other Zillow Digs or how exactly it’s set up. We’ll assume for this purpose that the agreement covers it – the licensing agreement. But the scope of the license that’s granted is really what’s an issue here. This is going to come up for any time that there are photos that are going to be licensed out because, if it’s not under the scope of the license, then we’re going to run into infringement issues.

NASIR: So, VHT, basically… I’m trying to think of other equivalents to this in like the music industry or what-have-you but basically, if you’re a real estate agent, you can call VHT and I’m not surprised if people have already heard this already but they’ll send a “VHT professional photographer” out to that location and take a photograph, and these are probably all independent contractors and so forth, and the photographers probably have a deal with VHT, et cetera. And then, VHT has a deal with like Zillow to provide these photos and copyrights are, you know, whoever actually creates the work, it usually is the default they own the copyright but copyright is a personal property right and it’s basically subject to all the various state laws and regulations that govern the ownership of any personal property. And so, in the same way, you can actually assign that property to somebody else. And so, most likely in this case, the photographer may assign the property or the copyright to VHT but, when VHT makes a deal with Zillow, they don’t assign the copyright. They do what’s called a license and that’s basically you’re allowed to use it for these purposes and sometimes you can have a license that’s very wide and expanded or it could be very restrictive in scope. Zillow’s argument is that they are complying within the scope of the license itself and obviously the other company, VHT, is saying otherwise and that’s going to come out in the law. But what’s interesting about all this and I’m pretty sure looking at the lawsuit, it is a very short lawsuit, actually.

MATT: It’s mostly exhibits, though.

NASIR: Oh, yeah, you’re right. It’s mostly exhibits and so forth which makes sense. A copyright infringement lawsuit is pretty straightforward. It talks about how Zillow and VHT were in discussions of how they can get these images on Dig and Zillow was actually even considering – according to VHT – of paying an extra fee for these images. When you start at negotiations, obviously that fell apart and now you post the images anyway? You’re almost asking for trouble. It would have been better for them just to not ask permission and just do it anyway rather than ask for permission and then get denied and then get a lawsuit later.

MATT: Basically, what happened was they engaged discussion and they were told “no” or I guess they were told, “You just have to pay us more,” and they’re like, “Oh. Well, actually, never mind, “ and they just tried to do it anyways and I was hoping that one of the exhibits would be the actual agreement that they have but it looks like it’s essentially just all the copyright filings for some of the photos that issue and then just list of the photographs that were on there. Unfortunately, we don’t see what the true… I guess there’s probably language in the actual complaint itself but I would like have to see more in terms of what the licensing agreement actually said to see whether Zillow is violating that agreement or not. It sounds like they probably are but it’s really going to be how they construe the language of what is greater like we were saying. I mean, if its broad then, okay, maybe it will work out but, if it’s very specific, then the purpose behind it then, you know, Zillow is going to run in to some trouble.

NASIR: Yeah, and they haven’t mentioned damages but what’s interesting here is that VHT is saying it found at least 316 of its images that are being used. I think you mentioned that already but they typically charge $10.00 to $100 per photograph and, if you think about it, if you multiplied that by 316, it’s probably not that much money but that’s why I think that this lawsuit is after… I would want to see the dates and so forth how they lined up. I guess the Zillow Digs launched back in 2013 so it’s been a while – a couple of years. I’ve never heard of it, obviously. But this might be a strategic lawsuit to try to figure out a way to get back on the negotiation table.

MATT: Yeah, it could be, and we don’t know either. It could be a situation where they were doing everything perfectly legal and then, for whatever reason, they decided to stop doing that or, you know, whatever point the negotiation discussion started and that went south… We just don’t really know for sure on why all of the sudden Zillow decided to start using some of these photos.

NASIR: VHT actually alleges – this is actually pretty interesting – they allege, after they complain in writing to Zillow that, “Hey, you’re using our photos,” apparently, they allege Zillow actually began encouraging users themselves to add photographs themselves to the Dig site which, of course, ended up being the same images anyway. And so, whether they can hide behind their users or not, we’ve talked a little bit in the past about how, when you have user generated content, whether you’re responsible for what they post. But DMCA requests and copyright infringement, once you’re given notice, you do have to comply with it or go through that procedure.

MATT: Yeah.

NASIR: These photos are pretty nice though to give them some credit. I don’t know. I can’t differentiate if they’re VHT photos or someone else’s but well done – well done!

MATT: You’re very artistic so that’s a big compliment from you.

NASIR: It is.

MATT: I guess, from the business owner perspective, I mean, what’s the takeaway with this? You know, it doesn’t necessarily have to be for use of images, things like that, but if you’re going to enter into – well, I think this applies to many things but if you’re going to enter into a licensing agreement, you want to make sure that you can narrowly define these terms if you are the licensor because, if you have a situation like this where there’s some ambiguity possibly then the other people might not be able to get away with it. On the flipside, if you’re the licensee, I guess you would be fine with a more broad description of what that entails.

NASIR: Absolutely, and this stuff happens outside of photography. You have any kind of web development or intellectual property that’s being developed, licensing and any kind of intellectual property acts the same way as a copyright. You know, intellectual property is a personal property that can be completely assigned – meaning, once you give it away, you no longer have any rights to it or you can grant a limited license which may be exclusive, non-exclusive, and can have all these wide ranges to it. It can get very complicated if you’re not contemplating what you’ll be using in the future. For example, if Zillow had in mind to be able to use these photographs on their Dig site, then they should have construed – well, assuming what VHT is saying is correct – they should have made the scope of the license a little bit more broad.

MATT: Yeah. You know, it’s hard to really know without having read through all this – or having seen the actual agreement – but I’m kind of surprised, well, I guess you brought this up. What’s the real motive behind this lawsuit? I don’t think it’s the money aspect of it. I think it’s to really re-open the negotiation so VHT can get compensated for this long term because, like you’re saying, the actual monetary damages under this – unless there’s some big statutory damage or something like that – aren’t going to be that great – not even worth it in terms of what they’re going to pay the attorney’s fees on this. It seems like it might be more of a ploy to open it up for bigger discussion.

NASIR: The statutory damages may add up but I also think that it seems like VHT is a powerhouse when it comes to real estate photography and, if they allow their images to go unchecked to be placed on these other websites, then their inherent value with the business that they do because, in fact, the only value that they have is in their photographs. That’s the value that they produce. If they take it lightly, that affects their bottom-line straight away.

MATT: Yeah, you’re right. It’s good to set the precedent too. I mean, obviously, Zillow is much bigger than most of the other people they may be working with – or at least an individual – but it is setting the precedent that, “Hey, we’re not going to mess around. If you don’t take us seriously, we will figure this out in court and you’re going to lose,” – at least that’s I guess their thought behind it.

NASIR: Well, all right, I think that’s covered it – real estate photography. I was thinking about getting somebody in real estate photography, from their perspective. I guess I should have mentioned that since we didn’t get them but I was just thinking out loud.

MATT: I know some people but, yeah, we already recorded so…

NASIR: Oh, let’s call them right now. All right. Well, thanks for joining us everyone.

MATT: Yep, keep it sound and keep it smart.


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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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