• Grokster Case Reminds Employers of Risks from Copyright Infringement By Employees
  • July 7, 2005
  • Law Firm: Parker, Poe, Adams & Bernstein L.L.P. - Charlotte Office
  • On Monday, the U.S. Supreme Court concluded that Internet file-sharing networks can be liable for their customers' use of the sites to illegally trade copyrighted materials. Similar legal principles apply to employer-owned computer networks. The software, entertainment and other industries are increasingly vigilant about illegal copying and use of their intellectual property. Several years ago, Microsoft established a hotline and basically encouraged employees to report illegal software use by their employers. More recently a number of suits have been threatened against employers that allowed employees to illegally share music and other files using the company's computer system. These concerns have led many employers to assess their legal vulnerability from these activities.

    Under federal copyright law, both the employer and individual managers and officers can be liable if they have the ability to stop illegal activity but fail to act. Unlike some other vicarious liability situations (i.e., company automobile accidents), federal copyrights laws will not shield officers and supervisors from personal liability for acts by their subordinates. As a result of these realities, a number of employers are taking aggressive measures to detect and deter such illegal activities. The first step in this process is adoption of a clear policy by the employer prohibiting use of the company electronic communications systems for illegal activities. This prohibition should extend to use of company software beyond licensing authorization, use of personal or other outside software on the company system without approval, and file sharing activities.

    Some company systems can be configured to detect and prevent use in violation of this policy. Violations should be considered serious disciplinary matters. Employers should also train managers and employees on the requirements of copyright laws, and their responsibilities for assuring compliance. U.S. courts are considering several major copyright cases that could increase these potential liabilities, and bring even more attention to this growing area of risk management.