Lit Alerts — June 2023

Insurance: Ambiguous Policy Obligates Insurer to Defend IT Company Against Privacy Class Actions

Earlier this month, the U.S. Court of Appeals for the Seventh Circuit unanimously affirmed a decision by a lower court that an insurer must defend an IT company against two putative class actions alleging violations of the Illinois Biometric Information Privacy Act (BIPA) from the IT company’s sale of Clearview AI facial recognition data to the Chicago Police Department. In Citizens Ins. Co. of America v. Wynndalco Enterprises LLC, the three-judge panel found “intractably ambiguous” the insurance policy’s catch-all provision in its violation-of-statutes exclusion. Applying “well-established canon,” the court construed the ambiguity against the insurance company and in favor of the insured.

The plaintiffs in both suits alleged that the IT company violated BIPA by capturing, collecting, storing, and using their biometric identities without their notice and permission. After the IT company tendered both complaints to its insurer and requested a defense, the insurer claimed the injuries alleged by the plaintiffs constituted a “personal advertising” injury arising out of a “statute” of the type excluded in the IT company’s insurance policy. While the insurance policy was silent on injuries arising from statutes regulating privacy interests, it defined a covered “personal and advertising injury” to include injuries arising out of publications that “violate[] a person’s right of privacy.” The court concluded that a literal reading of the insurance policy’s catch-all provision would have precluded coverage for numerous other statutory causes of action that the policy in the first instance purported to cover, such as slander, libel, trademark, and copyright. As a result, the injuries alleged in both putative class actions fell within the policy’s ambit.

Copyright: Ninth Circuit Affirms Per-Image Damages Award for Use of Content From a Registered Compilation

The U.S. Court of Appeals for the Ninth Circuit recently affirmed a district court’s decision to base a damages award on copyright infringement of each photo in a compilation rather than on a single infringement of the compilation of those photos. In VHT Inc. v. Zillow Group Inc., VHT, a real estate photography company and photo database owner, sued Zillow for copyright infringement relating to Zillow’s use of approximately 2,700 VHT images in Zillow’s listings and home design webpages. The Ninth Circuit held that Zillow’s search functionality on the home design pages was not fair use and thus VHT was entitled to damages.

Central to damages was whether the photos constituted a compilation. “If the photos at issue are deemed a compilation, VHT is entitled to a single award of statutory damages…. If the photos are not a compilation and each individual photo constitutes an infringement, any statutory damages award could be multiplied by the 2,700 individually infringed photos.” The Ninth Circuit held that “[a]lthough the Copyright Act states that ‘all parts of a compilation … constitute one work,’ it does not say that any work included in a compilation cannot also exist as a separate, independent work.” While the 2,700 photos were part of a database registration with the Copyright Office, “Zillow used each photo independently … [and] did not copy any selection, coordination, or arrangement of the photos from the database.” As such, the Ninth Circuit affirmed the damages award based on infringement of each individual photo.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.