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It’s the first $50K that kills you

Brad-FrazerClients and potential clients inevitably ask some variant of the question, “Can I?” For example, “Can I copy these lyrics and use them in my novel?” Or, “Can I use this trademark even though someone else is already using it?” Or, “Can I use this picture I copied from another website in my marketing video?”

I have learned to restructure all such questions into this format: “If you do the thing contemplated by your question without permission, will you have any defenses in the ensuing lawsuit if you get caught and sued?”

That is the real issue here. It is interesting to me how often people who ask a “Can I?” question forget that a lawyers’s opinion about whether you can do something is irrelevant to the issue of whether you will get caught and sued. The ultimate arbiter of whether you can or cannot do something is a judge after you’ve been caught, sued and either won or lost. If you win, you can do the thing; if you lose, you cannot.

Not to be flip, but I feel that’s really the right way to ask the question and perhaps the best way to be a wise consumer of legal services: to remember that you are really asking your lawyer to opine on whether or not you have any defenses if you get caught and sued.

Non-lawyers have told me of their belief that there is some kind of vetting process by a judge or other person before a lawsuit is filed to ensure the claim has merit and thus, that the odds of their getting sued is low if they have a colorable defense. This is of course not true. There is no obligation that a lawyer fully vet and analyze the merits of all possible defenses before a lawsuit is filed.

Or clients will state that they believe the likelihood of getting caught and sued is so remote that they are willing to proceed with the task and take the chance that they will not get caught and sued instead of asking permission or changing their plans. Or, they report that they have insurance or third-party indemnification and so the risk is mitigated by these factors. These are all business decisions, and clients are well able to make such business decisions after I’ve advised them of the legal risks. But for those unfamiliar with litigation, I always remind them that, “It’s the first $50K that kills you.”

By this I mean that if you guess wrong and get caught and sued, even if you have a defense or insurance or indemnification, you still are now a named defendant in a lawsuit that everyone can find and see, and you have to deal with the downstream repercussions of that, including perhaps bankrolling your defense until, e.g., (a) insurance, if any, kicks in; (b) your indemnitor ponies up; or (c) you win the lawsuit and are awarded fees as the prevailing party (a rare occurrence).

Here is a real world example. A potential client recently emailed and asked, “Can I make a short film for kids about healthy eating and nutrition using The Hulk and Spiderman as characters? That’s a fair use, so I should be fine, right?” This was my answer: “Let me recast your question. If you do this without permission and get caught and sued by Marvel Comics for copyright infringement, will you have a defense under the Fair Use doctrine? Are there other legal defenses available to you? Do you have insurance? Indemnification? Do you have the first $50K that you might need to defend yourself before insurance and/or indemnification kicks in?”

When confronted with this line of thinking, the client changed her plans.

So the next time you ask you lawyer, “Can I?,” I respectfully suggest that you at least conceptually restructure the question to be something like this: “If I do __________________ and get caught and sued for [e.g., breach of contract / defamation / copyright infringement / cybersquatting / trademark infringement], will I have a defense in the ensuing litigation?”

This exercise will help you better understand the legal advice you are getting, which will help you make the correct business decision about the legal risks of your actions.

Brad Frazer is a partner at Hawley Troxell where he practices internet and intellectual property law. He is a published novelist (search for “Bradlee Frazer” at www.diversionbooks.com), frequent speaker and regular author of internet content. He may be reached at bfrazer@hawleytroxell.com.

 

 

 

About Brad Frazer