Copyright Owners Claim Personal Liability for Infringement Against Corporate Officers

file000848283744.jpgTwo corporate officers, who are also the sole shareholders and employees of their business, may be personally liable for alleged copyright infringement, after a federal district court in Illinois denied their motion to dismiss. Asher Worldwide Enterprises, LLC v. Housewaresonly.com Incorporated, et al, No. 1:12-cv-00568, mem. op. (N.D. Ill., Aug. 26, 2013). Courts may find corporate officers personally liable for claims made against the business, known as “piercing the corporate veil,” in situations where a director willfully participates in the conduct that gives rise to the claim. The court in the present case considered the size of the defendant corporation, and found the individual defendants’ direct involvement in the alleged infringement to be a reasonable inference.

The plaintiff, Asher Worldwide Enterprises (AWE), sells “discount commercial kitchen and restaurant equipment” through a website. The defendant, Housewaresonly.com, was a direct competitor. According to the court’s opinion, AWE created original product descriptions and other content for its website, and registered all such content with the U.S. Copyright Office. The defendant allegedly published about one hundred and fifty of AWE’s descriptions on its site from March to October 2010. Internet searches for AWE’s website during that time allegedly returned pages on the defendant’s site. AWE claims that after it redesigned its website in September 2010, the defendant republished at least two hundred more of its product descriptions.

AWE initially sued Housewaresonly.com in a Washington federal court, claiming copyright infringement, 17 U.S.C. §§ 501 et seq.; and false designations of origin, false description, and dilution under the Lanham Act, 15 U.S.C. § 1125(a)(1). The Washington court determined that it did not have personal jurisdiction over Housewaresonly.com and transferred the case to Chicago. After the transfer, AWE reportedly found that Housewaresonly.com’s corporate officers were winding down the business and attempting to deplete any remaining assets. It further found that the address provided as the corporation’s headquarters was a UPS Store, leaving it unable to obtain service of process. It amended its complaint to include the two individuals as defendants.

The individual defendants, Stuart Rubin and Marcia Rubin, filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the plaintiff had not made the “special showing” required for the court to hold them personally liable for actions of the corporation. The court reviewed the standard for holding corporate officers personally liable, described in Dangler v. Imperial Mach., Co., 11 F.2d 945, 947 (7th Cir. 1926). It requires evidence that an officer acted “willfully and knowingly,” and outside of their capacity as an officer; that they used the corporation to carry out their own unlawful acts; or that the corporation served solely to shield the officer from liability. The court denied the motion to dismiss, finding that AWE had made this “special showing,” and that it is “plausible” that the individual defendants acted in one of the manners described in Dangler.

Small business attorney Samuel C. Berger handles a variety of legal matters for New York and New Jersey entrepreneurs and businesses. Our fixed-fee legal-service packages enabling our clients to understand their rights and obligations, to keep their operations running smoothly, and to grow their businesses and prosper according to their goals. To schedule a confidential consultation with a member of our legal team, contact us today online or at (212) 380-8117.

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