I’ve heard that some photo organizations may be suggesting that the way to avoid the costs of litigating an infringement claim is to have a liquidated damages clause in your site’s terms of service (TOS), because then (they say) it’s a breach of contract rather than an infringement. For example, if you put something on your site’s TOS like “If you use any of the work from this site without a license, you agree to pay to PhotoBob three times his usual fees for the license” and someone uses your work, then you can bring a breach of contract case in small claims court and avoid the cost of litigating infringement in federal court.
I have to say, I think this is very bad advice. I hope that pro groups are not recommending it. Short answer? It probably won’t work and, even if it could, it’s not a good choice. Let me explain.
First, it is very possible that your TOS are not binding on your visitors. There is case law that says that in order for TOS to be binding, a user has to either click to agree to those terms (called a clickwrap agreement) or those terms have to be so obvious as to, essentially, be on each page of your site–just having a separate page with your TOS won’t cut it. (Lawyers reading this, yes, I’m generalizing from the cases–we need to know the nitty gritty but creatives really don’t.)
Second, even if you could make the TOS stick, you would be limited to winning no more than your 3X number, and you’d have to prove that you usually got $X as a license fee in the first place. 3X is likely not going to be much money. In fact, it’s going to have to be under like $5,000 if you want to stay in small claims, depending on what the small claims court rules are where you are–that is, there are limits on how big a case you can bring in small claims. Oh, and you probably can’t use a lawyer (many small claims courts bar representation) so you’re going to have to do it all yourself.
Oh, and let’s say you win a judgment in small claims and the defendant doesn’t pay. You can’t then go marching into federal court claiming that it’s now an infringement and demand a lot more money. Even if by some miracle you did pull that off, that is that the court didn’t dismiss the case immediately, the court would likely say your damages are limited to the judgment you got already or darn close to it.
Third, how are you going to prove that the infringer got the work from your website? Have you posted it anywhere else, like Instagram? Good luck enforcing your site’s TOS, then.
Fourth, and this is the big one (yes, I buried the lede): copyright pre-emption will likely make your breach claim a loser. See, copyright is exclusively federal law and can only be adjudicated in federal court; so, if you bring a claim that is really an infringement claim, a smart defendant is going to tell the small claims court “Hey, this is really infringement we’re talking about here so you have to dismiss this case because this court doesn’t have jurisdiction.” I think a defendant is going to win with that and, boom, you’ve just waisted all your time (and filing fees).
There is one possible exception to pre-emption here, but it’s a narrow window and one I don’t like anyway. That is, if you agreed to license the work to the defendant and it later failed to pay for the license, then courts have said that is a breach of contract rather than an infringement (unless the terms of the written license stated that the license was contingent upon full and timely payment). See Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 559 N.7 (9th Cir. 1990). Now, I think you should have written licenses and those licenses should specifically state that no license is granted until full and timely payment is received; but, if you have that, then the courts say it is not a breach of contract and, so, there you go… pre-emption again.
Really, I think it’s cutting off your nose to spite your face to try and convert an infringement claim into a breach of contract one. I mean, if you register your work in a timely manner (before the infringement) then you have the right to elect statutory damages and you have a decent chance at being awarded your attorneys’ fees as well. That is very, very likely going to be a much larger number than what you’d ever get in small claims court. More importantly, if you want to avoid litigation (and I always say: you want to avoid litigation), you have a better chance at negotiating a better result if you have statutory damages and maybe attorneys’ feesto back up your claim. A breach of contract claim is almost always some kind of wonky and the damages are limited–why do that to yourself?