Piercing The Online Corporate Veil
I always liked that phrase “piercing the corporate veil” when I was in law school. It sounded sort of swashbuckling compared to much of the other mundane material we covered. What can I say? Law school does funny things to a guy. Of course, in reality, the term is not all that exciting. It really just means that in certain cases, individual shareholders in a corporation can be personally liable for the acts of the corporation. While a former presidential candidate had this to say on the subject, the truth is a little more complex. One reason people form corporations is to shield themselves from personal liability that the corporation commits. That is protection is the aforementioned “corporate veil.” But there are times when that veil may be pierced, and the people behind the corporation wind up on the hook.
Stuart and Marcia Rubin, a couple behind a company called Housewaresonly.com Incorporated recently found themselves on the wrong end of veil piercing. The couple set up a corporation that was apparently very skilled at borrowing the product descriptions a competitor wrote for its Web site and using those copied passages on its housewaresonly.com Web site. When the competitor, “reliabuy.com”, brought a copyright infringement suit, the Rubins filed a motion to dismiss arguing that it was the corporation, not them responsible for the infringement.
The court noted that while managing officers of a corporation are not automatically liable for infringements committed by the corporation, where the individuals “willfully and knowingly” commit the acts, they can be responsible. In this case, the Rubins were the only persons affiliated with the corporation, and thus, pretty much had to be the ones cutting and pasting the reliabuy content. The fact that the Rubins shut down the Web site and dissolved the corporation when reliabuy filed the lawsuit didn’t help their case.
The case offers a few lessons. First, don’t assume that mundane content – here descriptions of housewares – is not copyrighted. Content doesn’t have to be the great American novel to be protected. If there is some level of creation in the work (as opposed to just raw facts) it’s protected. Second, if this case is any indication, the more hands-on you are as an owner, the greater your risk for personal liability in a copyright claim. Be very careful before you cut and paste anything from the Web. Ask the Rubins if you don’t believe me.