Online Piracy

The Etsy Copyright Infringement Problem

Etsy Copyright Infringement

Etsy the online e-commerce website focusing on handmade goods, crafts and vintage items, has continually come under fire due to incessant copyright infringement found in its marketplace shops.   This shouldn’t come as a surprise given that the site has over almost 1.4 million active sellers with almost 30 million items listed each year.  The majority of sales are not through large corporate entities with the benefit of legal counsel but rather by individuals or small businesses that neglect their due diligence when purchasing goods for sale in the Etsy Marketplace. The result is that many Etsy stores contain dozens of similar items that are likely cases of copyright infringement.  The incidents are not isolated either, but happen often enough for artists claiming Etsy sellers are ripping off their designs to become a popular topic on discussion boards across the internet.  

Here is a typical scenario: an artist is surfing through Etsy looking for a Mother’s Day gift, when on the screen they are confronted with their own artistic work adorning a t-shirt, a hat or a nice fluffy pillow. Outraged, they contact Etsy and ask for removal of the item only to find it popping up by a new seller a week later, leaving the artist feeling helpless and frustrated. Unfortunately, while Etsy has become more aggressive in dealing with infringement over the past couple of years, the problem is far from resolved.

Without a doubt, the action of the Etsy seller constitutes copyright infringement, but is there any recourse for the content creators in stopping these infringements?

Copyright Infringement and Etsy

Firts let’s review the law behind infringements. Copyright law was designed to give certain rights to the creators of artistic works, encouraging creative expression by ensuring that only creators benefit from the sale or reproduction of their work. Copyright is available for any 1) original works of authorship, 2) fixed in a tangible medium (meaning more than just an idea in your head) and 3) having a minimal degree of creativity. The bar for creativity is pretty low but how much creativity is necessary to receive copyright protection is hard to gauge. There is no bright line but the courts have said that things like short phrases, tag lines or advertising slogans do not receive copyright protection (although they can receive trademark protection). So a quote on a t-shirt may not be infringing but your drawing, even a stick figure drawing, would likely be infringing.  

Before the United States signed onto the Berne Convention, which is the international copyright treaty, registration with the U.S Copyright Office was required for copyright but is now automatic, assigned the moment the work is created. While registering your work still affords a host of benefits, it’s definitely not necessary, except a valid registration is a requirement of filing a copyright infringement lawsuit in U.S. Federal Court.  

As a creator, U.S. Copyright Law affords you certain exclusive rights regarding your creative product. Only the copyright holder has the power to:

  1. reproduce (i.e., make copies of) the work;
  2. create derivative works based on the work (i.e., to alter, remix, or build upon the work);
  3. distribute copies of the work; or
  4. publicly display the work.

Etsy SellerSo, if an Etsy seller violates any of these rights, they are liable for infringement, even if they legitimately purchased the items from a wholesaler or distributor.  That’s right! Copyright law is a “no fault” law.  If any one of these exclusive  rights are violated, there is no excuses.  The reason for the infringement has no merit.  So while artists often disparage these sellers and crooks and thieves, very often they are actually unaware that they are infringing, having purchased the goods in what they presumed was a legal manner from a reputable seller.  In fact, copyright law, at least as far as penalties afforded those who register their work, recognizes the difference between an innocent infringement and an intentional one.  For any work registered with the U.S Copyright Office prior to an infringement or within three months of the works publication is entitled to statutory damages, which range from a minimum of $750 to a maximum of $30,000 per infringement, the specific amount being determined by the court. (Plus, your legal fees will also be paid for if you win).  However, if the copyright holder can prove that the infringer intentionally and knowingly violated his or her copyright, then the damage award increases to a range of $30,000 to $150,000 per infringement.  

Unfortunately, in reality, this isn’t as good as it sounds.  On the one hand, very few people register their works so the majority of infringement cases do not include statutory damages but only the profit from the infringing sales, or if  proven, the lost sales the copyright holder may have received as a result of the infringement.  Most of these marketplace seller don’t sell much so there is little profit form infringing goods.  Remember the statistics from earlier?  There are 1.4 million sellers and about 30 million items sold each year.  On average then each seller only sells a handful of items and often make very little profit from them.  This sellers that are moving a lot of product are selling a few of a many different items, with no particular item generating significant income.  Although large sales may happen, on the whole they are rare.  Since entitles only to the infringing profit and lost sales,  the potential award may not be enough to warrant a lawsuit.  

For example, let’s say you discover someone selling your artwork on a t-shirt.  Each shirt sells for $20 and about 300 are sold.  That is $6000 that could potentially be yours.  But since you are only entitled to the profit, you have to remove the costs from the $6000. If each shirt costs the seller $8 and then they add in other costs like shipping and marketing expenses, the profit on this shirts can easily come down to $3000.  Any lawsuit would cost you far more than that in legal fees.  Even more problematic, if you were to sue, many of these sellers have likely spent the money or taken it as salary, leaving little within the company to grab.  And, with the advent of the Limited Liability Corporations (LLC) which is much easier to create than traditional Corporation many Etsy owners have turned to this corporate form to protect their personal assets when the company is sued.  Even if the company potentially had funds available to warrant a lawsuit, you would have no idea how many t-shirts had been sold nor the profit on each shirt as you are not entitled to those numbers until you sue.  So, you would have to pay an attorney to file a complaint in court before you know the potential award.  

Ok, so in most cases, there may be little you can do but but there are situations where you do know that ta significant amount of infringing work had been sold or you have registered your work prior to the infringement so you at least know that the legal fees would be paid for by the infringer.  In that case, you have greater opportunity and may even be able to find an attorney who will work on contingency, where you layout only the hard costs, like filing fees, but don’t have to pay for the lawyer’s time.  The attorney’s fee comes out of the final settlement or award.  Still, you cannot get money from a small company that doesn’t have any cash on hand.  However, you might be able to increase your chances by bringing other players into the case, such as the company that sold the goods to the Etsy seller, or even Etsy itself.  Unfortunately, with Etsy infringements, you are likely to run into a few roadblocks.  

Etsy, Copyright Infringement and China

As mentioned earlier, the vast majority of sellers in the Etsy marketplace are small mom-and-pop type stores that generate profit in the tried and true method of buying low and selling high.  Etsy provides the infrastructure which helps the sellers limit their expenses, enabling them to sell goods at reasonable rates, often below similar items found in competitors sites outside of Etsy.  How do Etsy sellers buy such cheap products?  They buy from China, through online wholesalers, such as Alibaba.com.  Etsy Seller

Consider this: When most Americans think of copyright infringement or knock-off items, they think China. China has been very laissez-faire in its protection of international copyrights.  Factories that produce large amounts of goods are more than willing to circumvent licensing due to the large fees that would entail. Consider a t-shirt factory making hundreds of different t-shirts with individual designs. The cost of licensing fees, the time necessary for developing those agreements, accounting requirements for payment to the licensees, amongst other monetary considerations, provides a real incentive for these factories to avoid the whole licensing process. Combine that with the lack of copyright enforcement by the Chinese government, and there becomes very little reason for a Chinese manufacturer to pursue licensing agreements with U.S. artists. And, with so many artists showing off their artistic creations in high resolution on their websites, it’s easy for a Chinese manufacturer to download all the works of a particular artist and applying them to various goods.  

Etsy sellers buy from these online Chinese wholesalers assuming that the company has the legal right to sell the goods when in fact, they are infringing.  As soon as the goods are made available for sale in the seller’s Etsy marketplace, they are infringers even though they paid for the products legitimately.  In a traditional purchasing workflow, there would be recourse.  A retail seller of infringing goods sued by a copyright holder would likely have the wholesaler handle the case since the purchase agreement would include an indemnification clause requiring that the wholesaler be responsible for any legal action due to copyright infringement for items purchased.  But if the wholesaler is in China, the small Etsy seller is not going to be able to hold it responsible for selling infringing goods.  And so, the seller remains responsible, but are hard to sue due to issues discussed earlier. 

So, if you can’t sue the Etsy seller and you cannot sue the Chinese wholesaler, then what about Etsy?  

Is Etsy Responsible for the Behavior of its Stores?

As a major online marketplace, one would hope that Etsy would be responsible for infringing items sold on their site. However, Etsy is protected by the “Safe Harbor” provision of the Digital Millennium Copyright Act (DMCA) as long as Etsy is merely a passive conduits for user generated content.  Etsy is providing the forum but does not take part in the manufacturing of any of the goods sold.  As such, they have the benefit of the “Safe Harbor” and cannot be sued for infringement. Why would the government let companies like Etsy off the hook?  Well, given that copyright law is no-fault, then anytime a user uploads infringing content to companies like Etsy, YouTube or Vimeo, they could be sued.  There is no way a company could operate under those conditions so the Congress carved out an exception so these companies could exist.  In return, however, the online provider, such as Etsy, must implement and follow certain procedures.  You may heard of these procedures under the moniker,”takedowns.”  If a copyright holder finds their work on Etsy, they can make a takedown request and Etsy is required to remove the infringing work from its site, unless the uploader, which in this case would be an Etsy seller, makes a counterclaim stating that the work is not infringing.  At that point, Etsy can allow the work to remain on the site until the case is resolved in court.  

At Etsy, anyone can make a store.  There is little preventative due diligence on Etsy’s part. A person can just sign up, give the store a name and they are now a purveyor of goods. Creating the shop is free although there is a small charge for a listing and each listing will have a shelf life of about four months or until a product is sold.  Etsy takes 3.5% of each sale.  The problem for creators is that while Etsy must takedown infringing work on request, they have no requirement to monitor or be proactive, only reactive. 

So, if a person or company wants to sell your infringing work, they can just sign up, give the store a name and they are now a purveyor of goods. Creating the shop is free although there is a small charge for a listing and each listing will have a shelf life of about four months or until a product is sold.  Etsy takes 3.5% of each sale.  So if an item is selling well for a particular seller, and they lose it due to a takedown request, they may just put it up again so you have to issue another takedown.  Eventually, if you stay on top of the seller issuing takedowns continuously, putting the item back up would be pointless for the seller.  To their credit, Etsy has gotten a lot better about dealing with repeat infringers, often taking the store off the Etsy marketplace, but the seller can just open up a new account under a different name and start selling the items again. So the copyright holder must maintain vigilance and constantly check to make sure that the infringing items are not added again.  That is not a great outcome for creators.

————-

So, there are few situation that warrant legal action and for those cases in which legal action is appropriate, suing Etsy sellers, their distributors Etsy is not really an option.  The best you can do, until Congress decides to make appropriate changes to the DMCA, is to 1) register your work so that you can invoke statutory damages, which may provide opportunity to sue in many more cases than without it, and 2) use online monitoring services like ImageRights, to track your images across the web, including sites like Etsy. At least this way you won’t have to continually search through Etsy, hoping to find your work in one of the millions on sale.  While not the perfect solution, at least you will always be notified when someone uploads your work without permission. Then you can issue a takedown notice and keep the infringer from benefiting from your creativity. 

About the author

Steve Schlackman

As a photographer and Patent Attorney with a background in marketing, Steve has a unique perspective on art and law. Should you have any questions on Intellectual Property contact him at [email protected] His photography can be seen online at Fotofilosophy.com or on display at the Emmanuel Fremin Gallery in New York City.

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