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Risk in Context

Court Decision Could Bring Stricter Underwriting Standards for Media Insurance Policies

Posted by David Finz February 04, 2016

A 2015 court decision held that an online service provider was not subject to the longstanding safe harbor benefits of protection from copyright infringement that is currently offered under the Digital Millennium Copyright Act (DMCA) of 1998. The case challenged the way companies that host user-generated content and their affiliates file traditional copyright registrations, and could increase liability for service providers and bring tougher underwriting standards for media insurance policies.

Until now, online service providers have enjoyed relative freedom under section 512 of the DMCA when they register with the US Copyright Office, either with their names or that of one of their affiliates. Companies or affiliates of that entity do not have to be listed separately to receive protection from copyright infringement.  

The Southern District Court of New York’s decision in BWP Media USA Inc., et al. v. Hollywood Fan Sites LLC, et al. No. 14-CV-121 (S.D.N.Y. June 30, 2015) could change all of that. Here, the defendant’s corporate parent — not its affiliates — filed the registration form with the US Copyright Office. The court thus held that the defendant was not covered under DMCA, and needed a separate filing to be covered.

While the court decision could be overturned and is not binding precedent outside of one federal district, the case provides a persuasive argument that questions the protection that DMCA previously offered. Regardless of the outcome, it has the potential to bring stricter underwriting requirements for entities that host user-generated content as underwriters look upon copyright infringement with renewed scrutiny.

Considerations include:     

  • Underwriters could start asking if all of your entities are named in one registration, or if you have prepared separate registrations for each entity in the organization that hosts user-generated content.
  • If registrations are not up-to-date, underwriters could look negatively on companies until they fix their paperwork, or provide a quote subject to the insured furnishing proof of all registrations.
  • If an entity is acquired during the time the copyright is filed, the entity may be subject to separate filing requirements than what has traditionally been the case, and it may be necessary to obtain separate insurance for that entity along with other units of the company.

The decision represents one court’s opinion, and may never make it to the US Supreme Court. However, the case is not a positive development for online service providers, and more challenges to DMCA could surface.  Other cases could soon follow, leading to broader liability issues for parent companies and their affiliates. At the time of filing all copyrights, it’s recommended you contact counsel about compliance with registration and your broker about insurance. 

David Finz

David Finz serves as a senior client advisor for Marsh FINPRO, within the E&O Center of Excellence. His responsibilities include consulting clients on their professional liability exposures, advising them on optimal insurance program structures, and negotiating broad coverage terms with underwriters.