By Richard Stim, Attorney
I own a craft consignment shop. Crafters make various items, ranging from clothes to home goods, and then I put them in the store. When an item is sold, the crafter and I each get a percentage of the profit. Recently, a crafter has been bringing me painted pictures and knit sweaters of Winnie the Pooh, which I know is owned by Disney. Is it legal for me to accept these for resale?
That lovable little bear who has made millions of children happy has also made countless millions of dollars in revenue for the Trustees of the Pooh Properties, as well as the Walt Disney Company (which purchased the franchise). Winnie the Pooh remains protected under copyright law and anyone who duplicates Pooh without authorization of the owner could be found liable for copyright infringement.
A store that sells infringing merchandise may also be legally liable as a "contributory infringer." A contributory infringer (sometimes town as a "vicarious infringer") is someone who contributes to infringing activity and has a direct financial interest in the infringement. Someone is liable for contributory infringement when they (i) have knowledge of the infringing activity and (2) make a material contribution to the activity.
Here, you know that the shirt-maker is infringing on a copyright. That it, you took inventory or otherwise saw that the crafter was selling the infringing product. You could not deny knowing that it was happening under your watch. And you're assisting in that infringement by allowing the infringing goods to be sold in your store. Your bottom line benefits directly from the sale of the fake Winnie the Pooh products. Therefore, you might have secondary liability if the copyright owner sued you and the crafter.
As a business person, you might wonder about the actual likelihood that the crafter, or you, would be caught and sued. Is it worth telling this crafter to stop bringing these products to your store?
In truth, the chances are fairly low. The Trustees of the Pooh Properties or Walt Disney, and other similar large copyright owners, spend most of their time tracking down "big" cases of infringement, such as companies making thousands of Winnie the Pooh sweaters and attempting to import them into the United States. It is relatively unlikely that they will discover (or prosecute) a small number of violations by an independent crafter or small consignment store.
If they do find out about your sales, the more likely result is that you may receive a letter from an attorney asking you to remove the infringing merchandise, at which point you absolutely should. Whether you ask the crafter to stop immediately, though, depends on your tolerance for risk.