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A Company’s Officers May Be Held Liable for the Company’s Infringement

Asher Worldwide Enterprises, LLC (AWE) sold discount commercial kitchen and restaurant equipment at its website Reliabuy.com. The site provided descriptions, product feature listings and promotions alongside the goods, and AWE applied for U.S. copyright registrations to protect them.

Housewaresonly.com (Housewares), a direct competitor of AWE, copied over sixty percent of those descriptions and used them on its site.  In fact, changes on AWE’s website were often tracked on the Housewares site. As a consequence, AWE sued Housewares for copyright and trademark infringement. AWE also sued Stuart and Marcia Rubin, Housewares’ president and registered agent (and only employees), in their individual capacities because the pair was actively depleting the company’s assets presumably to avoid financial liability from the suit.

The Rubins moved to dismiss the lawsuit against them personally because a company’s officers are generally not liable for the infringing acts of the company. The standard in the Seventh Circuit, which covers Indiana, Illinois, and Wisconsin and where this suit was being heard, for this issue was established in the 1926 case of Dangler v. Imperial Mach., Co., 11 F.2d 945 (7th Cir. 1926). The court summarized this standard of eight decades as follows:

“…for personal liability for corporate intellectual property infringement to extend to corporate officers, a special showing must be made that they acted willfully and knowingly and personally participated in the infringing activities or used the corporation to carry out their own deliberate infringement.”

The Rubins argued that AWE did not make the “special showing” required to hold them personally liable for the company’s infringement. The court disagreed.The complaint alleged that the Rubins were the company’s only employees, and it was “at least plausible,” at this stage in the lawsuit, that the Rubins were personally involved in the infringement. For this reason, the court denied the couple’s motion to dismiss.

This case should be a lesson for officers in any company, but especially for those in small or closely-held businesses.  In those instances, officers are typically more hands-on and direct and control more of the company’s day-to-day activities. Even then, the standard for personal liability remains high because it requires willful action, knowledge and personal participation in the infringement. The court here even admitted that the facts as alleged in AWE’s complaint presented a “close question.” If the facts are right, however, plaintiffs can reach into the company’s coffers as well as its officer’s individual pockets to recover for infringement.

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