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A victory for copyright owners and a warning for online services monetizing user content.

Greg Young Publishing, Inc. v. Zazzle, Inc. declared that the DMCA Safe Harbor rules do not protect an online service provider such as Zazzle that both hosts images uploaded by its users and also creates and sells physical products featuring such images ordered by the users.

Zazzle operates a website that allows site users to upload images of artwork, funny sayings, slogans and designs that a user wants to have printed on physical products such as coffee mugs, posters, and t-shirts that the user then sells to the public. When a sale occurs, Zazzle manufactures the ordered product and delivers it to the purchaser, and then pays a royalty to the user who had uploaded the content to Zazzle’s website. The problem is, many of the images uploaded are not owned by the uploading users, and in fact are infringing of copyright and unauthorized by the owners.

The court’s decision gives some distinctions for website owners and online service providers to consider in designing automated services that make use of user uploaded content. The court stated that the service provider’s “general ability to remove infringing materials and terminate the accounts of repeat infringers;” and/or its “limit[ed] monitoring” of its site or network for “apparent infringements” standing alone, do not result in a right and ability to control. Rather, the service provider must exert “substantial influence” over the activities of its users. These activities would include playing “an active role in selecting, monitoring, or marketing user content.”

The court concluded that Zazzle had the right and ability to control the sale of infringing products because “[u]nlike eBay or Amazon, Zazzle’s role is not limited to facilitating the sale of products owned and marketed by third parties. Zazzle creates the products.”

One possible solution for an online service provider to reduce its legal exposure is to require the uploading user to verify prior to uploading that he or she has the copyright or permission to use the content. Realistically, this may deter naïve users who simply did not know about the potential for copyright infringement and once learning of the problem, elect to discontinue the use. However, it is not likely to deter those who are looking for a quick buck and hope to make money before they are caught. If that risk materializes, they will simply stop selling that product or service.

Another solution may lie in the structure of the business model itself. Zazzle’s downfall was that it both operated the website and produced the product. That leaves open the possibility that having a third party produce products or fulfill orders would leave Zazzle in the same position as eBay and Amazon, as protected by the DCMA Safe Harbors. At the very least, this case demonstrated how critical is to be DCMA compliant if you want to take advantage of the Safe Harbor Rules. Working with an experienced IP attorney can help you navigate these somewhat complex territories.

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