When a Business Is Liable for Copyright Infringement by an Agency, Contractor, Employee, or User
Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).
Contributory and vicarious copyright liability are the doctrines that hold a business responsible for infringement someone else carried out. A company is vicariously liable when it profits from infringement it had the right to stop, and contributorily liable when it intentionally induces or encourages the copying. Federal law may also reach a company directly when its own website displays the work. Only the contributory theory requires intent. On the other two, not knowing about the copying may only reduce damages. Kolmogorov Law, P.C. handles these disputes for California businesses.
Call (909) 235-6116 or contact us online to discuss a copyright claim that blames your company for someone else's copying.
Direct, vicarious, and contributory liability
A direct infringer is anyone who violates one of the owner's exclusive rights. Those rights include reproducing a work, distributing copies, and displaying it publicly. (17 U.S.C. §§ 106, 501(a).) The statute names no mental state. A company that did not know an image was protected can still be a direct infringer.
The other two theories are judge-made. The Copyright Act does not expressly make anyone liable for another person's infringement, but the Supreme Court treats secondary liability as well established. One infringes contributorily by intentionally inducing or encouraging direct infringement. One infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it. (Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd. (2005) 545 U.S. 913.)
The direct theory fits most easily when the content is on the company's own site. The page that shows the photograph belongs to the company, so the claimant says the company displayed it, whoever chose the file. The Ninth Circuit adds a causation requirement. The company's own conduct, not just its ownership of the site, must have caused the copying. Our page on the elements of copyright infringement explains what the owner must prove.
Vicarious liability: profit and the right to stop it
Vicarious liability does not depend on what the company knew. The Supreme Court described the theory as reaching a defendant that profits directly from the infringement and has a right and ability to supervise the direct infringer, even if it initially lacks knowledge of the infringement. (Grokster, supra, 545 U.S. 913.)
An employee who copies on the job is the plainest case, because the employer directs the work and takes the benefit. A contractor is a closer call.
The financial benefit must come from the infringement itself. Recently, a federal appeals court set aside a vicarious liability verdict against an internet provider that received no direct financial benefit from its subscribers' infringement. The Supreme Court declined to review that ruling. (Cox Communications, Inc. v. Sony Music Entertainment (2026) 607 U.S. 583.)
Contributory liability after the 2026 Supreme Court decision
Before 2026, at least one federal appeals court held that supplying a product, knowing the recipient would use it to infringe, was enough for contributory liability. On March 25, 2026, the Supreme Court rejected that rule.
The provider of a service is contributorily liable for a user's infringement only if it intended that the service be used for infringement. That intent can be shown in only two ways. Either the provider induced the infringement, or the service is tailored to infringement, meaning it is not capable of substantial or commercially significant noninfringing uses. Mere knowledge that a service will be used to infringe is not enough. Neither is a failure to cut off accounts reported as infringing. (Cox, supra, 607 U.S. 583.)
Inducement means actively encouraging infringement through specific acts. A demand that describes the test as knowledge plus continued service relies on a rule the 2026 decision rejected.
How these claims reach a business
A design agency builds a company's website and fills it with photographs. Later a licensing agent writes to the company, because its site displays the images. Our page on answering a copyright demand letter covers the response.
A company runs a forum or marketplace where customers post their own listings, and one customer uploads someone else's video. Here a statutory safe harbor may protect the company from money damages for material stored at a user's direction. The conditions include removing or disabling access to the material expeditiously once the company knows of it or receives a proper notice, and keeping a designated agent on file with the Copyright Office. (17 U.S.C. § 512(c)(1), (2).) Our DMCA page explains the notice process.
What not knowing changes
Innocence matters at the damages stage. If the infringer proves that it was not aware and had no reason to believe its acts were infringing, the court may reduce statutory damages to as little as $200 per work. If the owner proves willfulness, the ceiling rises to $150,000. (17 U.S.C. § 504(c)(2).) The reduction is discretionary, and the burden is on the company that asks for it.
Where a proper copyright notice appeared on the published copies the defendant had access to, a court gives no weight to an innocent infringement defense offered to reduce damages, with a narrow exception. (17 U.S.C. § 401(d).)
Statutory damages are awarded once per work against all infringers who are jointly and severally liable, so a company and its agency may share a single award. (17 U.S.C. § 504(c)(1).)
Shifting the loss to the vendor
A contract between the company and its agency cannot stop the owner from suing the company. It can decide who pays in the end.
Look for three things in the agreement: a promise that the deliverables will not infringe, an indemnity clause, and a duty to defend. If they are there, send the agency a written tender with the demand attached and ask it to take over the response. Our page on indemnification clause disputes explains what a tender should say.
Send the claim to the company's liability insurer too. Our page on the duty to defend explains how to ask.
First steps after a claim arrives
- Take the material down, but keep a copy of the page, the file, and its upload history.
- Collect the vendor contract, invoices, and any license or stock account records.
- Do not explain or apologize to the claimant before the facts are known.
What to bring to the first meeting
- The demand letter or complaint, with every attachment.
- Screenshots of the page or product as it appeared.
- The agreement with the agency, developer, or contractor who supplied the content.
- License records for the work and the company's liability insurance policies.
Frequently asked questions
Our marketing agency used an unlicensed photo on our website. Are we liable even though we did not know?
Probably. Under federal copyright law, which governs California businesses, the company whose website displays a protected photograph can be sued as a direct infringer, and the statute does not require knowledge or intent. Not knowing may lower statutory damages to as little as $200 per work if the company proves it neither knew of nor had reason to suspect the infringement. The agency contract may let the company recover what it pays.
What is contributory copyright infringement?
It is liability for intentionally inducing or encouraging someone else's infringement. In a March 2026 decision that binds federal courts in California, the United States Supreme Court held that a service provider is contributorily liable only if it intended its service to be used for infringement. Knowing that some customers infringe is not enough.
What is vicarious liability for copyright infringement?
Vicarious liability applies to a party that profits directly from another's infringement and has the right and ability to supervise the infringer. Under federal law it can attach even when the party did not know about the copying at first. For a California business, the plainest example is an employee who copies on the job.
If a customer uploads infringing material to our company's platform, can the copyright owner sue us instead of the customer?
The owner can try, but federal law gives online service providers a safe harbor for material stored at a user's direction. A California company that hosts user content must meet the statute's conditions, which include registering a designated agent with the Copyright Office and removing or disabling access to the material expeditiously after proper notice. (17 U.S.C. § 512(c).)
Does innocent infringement eliminate copyright damages?
No. Under the federal Copyright Act, an infringer that proves it was not aware and had no reason to believe it was infringing may ask the court to reduce statutory damages to not less than $200 per work. The court is not required to do so. For a California business, the defense generally carries no weight if a proper copyright notice appeared on the copies it had access to.
Talk to a California copyright litigation attorney
If your company has been blamed for copying by an agency, a contractor, an employee, or a user, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is a business litigation firm in Irvine that represents companies and their owners in business, commercial, and intellectual property disputes, in court and in arbitration. The office is in Irvine, California.
Related reading: our intellectual property litigation page and copyright damages.
This page provides general information about federal copyright law and is not legal advice. Outcomes depend on the contracts, the facts of the copying, and the court.