(Photo: Diego M. Radzinschi/ALM)

The merely negligent publication of an unlicensed photograph on a website is not going to cost $150,000 in statutory damages for copyright infringement.

At least it won't in the Ninth Circuit, thanks to some pro bono IP lawyering from Orrick Herrington & Sutcliffe.

The court ruled Tuesday that Kraig Kast is entitled to a new trial over three copyrighted photos that were uploaded to a wealth management website he had under development. Although nobody other than Kast and his developer viewed the photos, he was ordered to pay $450,000 after jurors were instructed they could find willful infringement if Kast knew or should have known the website was infringing.

“Should have known” is a negligence test, Judge Michael Daly Hawkins wrote for a unanimous panel in Erickson Productions v. Kast.

“Negligence is a less culpable mental state than actual knowledge, willful blindness, or recklessness, the three mental states that properly support a finding of willfulness.”

Absent willfulness, the maximum statutory damages are $30,000 per infringing use, which would likely cap Kast's exposure to $90,000 in a retrial.

Chris Cariello, Orrick senior associate. (Photo: Courtesy Photo)

Orrick senior associate Christopher Cariello argued the appeal after the Ninth Circuit send out a request for pro bono assistance for Kast, who had been representing himself on appeal.

The Ninth Circuit regularly seeks help in immigration, excessive force and prisoners' rights cases. In this instance, the court was looking for counsel to brief the willfulness issue, along with whether Kast was vicariously liable for infringing acts by his web developer.

“I do a lot of copyright work,” said Cariello, who's part of Orrick's U.S. Supreme Court and appellate group. “So I jumped at the opportunity.”

Cariello said the vicarious liability issue, while more wonky, has significant implications for internet publishers of collaborative or user-generated content. To be held vicariously liable for another's infringement, a plaintiff has to prove the defendant obtained a direct financial benefit from the infringement. The Ninth Circuit ruled that standard wasn't met, even if Kast may have avoided paying photographer Jim Erickson's license fee.

Erickson had licensed his photos to Wells Fargo, which operated a competing website Kast was trying to emulate. Three of Erickson's photos were copied from the Wells Fargo site to Kast's site, though there was some dispute as to how much control Kast exercised over the decision.

Either way, Erickson argued that Kast should be vicariously liable because he benefited from not having to pay a license. The Ninth Circuit ruled that cannot supply the basis for vicarious infringement. “Otherwise, the requirement of a direct financial benefit would be rendered meaningless, since … a direct infringer necessarily saves money by failing to obtain a license,” Hawkins wrote.

The Ninth Circuit described it as a decision of first impression for any circuit. But Cariello said the fact pattern is not uncommon on the internet. Suppose, for example, a company hires a consultant to publish a Twitter feed, and the consultant includes an infringing photograph in the feed. Before the company can be held liable, a plaintiff will have to show that the infringement provided some benefit to the company's bottom line beyond the avoided license fee.

“It's hugely significant on the internet, where you can have so many different parties providing content that's publicly accessible,” Cariello said.

The Ninth Circuit did uphold the jury's finding that Kast was liable for contributory infringement, an issue that was outside the scope of the pro bono briefing.

Kevin McCulloch of The McCulloch Law Firm had argued that the Ninth Circuit previously rejected the notion that damages questions—“how much money someone made, how many people went to a website”—should be an element of copyright liability.

“The website is owned by Mr. Kast, the business is owned by Mr. Kast, he started it for commercial purposes. He got all the money,” McCulloch argued at the March hearing. “If there was any benefit at all, it went to Mr. Kast and nobody else.”