Failure to Act in Universal Furniture Case Results in Store Owner Facing Personal Liability for Copyright Infringement

The Fourth Circuit recently held that the co-owner of a furniture store is personally liable for various copyright infringement claims committed by his furniture business. In Universal Furniture International, Inc. v. Frankel, the Court held that Paul Frankel, the co-owner of the infringing furniture business, was liable because he knew that the infringement occurred but failed to stop it.

The plaintiff, Universal Furniture, first filed its copyright infringement claims against Mr. Frankel’s furniture company, Collezione Europa, Inc. Universal prevailed and was awarded $11 million in damages. Due to Collezione’s bankruptcy, however, Universal was unable to collect the judgment. Rather than allow the judgment to remain unsatisfied, Universal decided to pursue its claim against Mr. Frankel personally, as co-owner of Collezione, even though Mr. Frankel was not a party to the initial suit against Collezione.

Universal claimed that the Court’s findings in its case against Collezione should apply in its case against Mr. Frankel, including the findings that Universal owned valid copyrights, that Collezione had violated them, and that Mr. Frankel had knowledge of the infringement. Mr. Frankel, however, argued that because he was not a defendant in the first case against Collezione, he was not afforded a full and fair opportunity to defend against the allegations in that suit.

The Fourth Circuit disagreed with Mr. Frankel. The Court held that he played a substantial role in the first case — he testified on behalf of Collezione at a deposition, he was the sole in-court representative for Collezione, and he was the only employee to submit sworn statements. He also did not present any evidence that he would have conducted himself differently in the first case had his personal liability been at stake. The Court thus found that the findings of the first case — including findings that Mr. Frankel knew of the infringement, profited from it, and failed to stop it — all applied in the case directly against him. These findings, the Fourth Circuit held, were sufficient to hold Mr. Frankel vicariously liable for his business’s infringement.

Arent Fox is continuing to monitor this and other copyright infringement cases. Please contact Anthony V. Lupo, Randall A. Brater, or Leah C. Montesano with any questions.