[Guest post] Under the influence: Influencer marketing – when private individuals become professionals and (potentially) responsible for IP infringements

The IPKat has received and is pleased to publish another guest contribution by Danish Katfriends Jakob Plesner Mathiasen, Hanne Kirk and Thit Nymand Nisbeth (all Gorrissen Federspiel) tackling influencer marketing from an IP perspective. Here’s what they write:

Under the influence: Influencer marketing – when private individuals become professionals and (potentially) responsible for IP infringements

by Jakob Plesner Mathiasen, Hanne Kirk and Thit Nymand Nisbeth

When deciding what restaurant to visit, which facial cream to purchase or even the destination for the next vacation, we often turn to friends and acquaintances for advice and inspiration. In an increasingly digitalized reality, those friends and acquaintances may be people we have never met. This emerging breed is - very tellingly - called influencer marketing.

Influencers’ purpose is to serve as inspiration and entertainment for their many followers, with whom they share their thoughts and personal life events. After following them for a while, they can seem like an old friend you’ve lost touch with and whom you now resume following in their next chapter.

Meanwhile, the influencers show us glimpses of their often quite movie-like lives, where the everyday activity is having drinks under foreign skies, attending famous concerts, and dressing up in the latest trends. And – let's be honest - most of us are quite entertained: we allow ourselves to be dazzled by luxury and a whiff of a desire to live the good and easy life that is presented by the main characters on various social media as a tangible dream.

However, the narrative and “reality” that we meet is usually based on sponsorships and paid collaborations with various brands trying to reach the consumers at any cost. From the companies’ point of view, the great power of influencers is their ability to connect with the consumers on a personal level making them more likely to buy the promoted products. Just as not all heroes wear capes, not all top-selling advertisers wear suits and carry-on suitcases. Instead, the influencers are wearing the latest trends and carry commercial messages (more or less) disguised as a lifestyle of their own. With great power comes great responsibility and increased necessity for regulation.

When is an influencer regarded as a professional?

Initially, an influencer steps out of the private sphere and is considered a professional when they are paid to promote a product or a service. The agreement between the company and the influencer can consist of direct payments, gifts, or discounts. Basically, money is the determining factor in distinguishing whether the influencer is acting as a professional as opposed to a private person.

In the Nordic countries, the authorities take a rather strict approach to when influencers have a commercial intent and act as professionals. The Danish Consumer Ombudsman stated that an influencer who also worked as a model had a commercial intent by merely posting pictures from her modelling jobs on her Instagram account, even though she had no actual agreement and was not paid by the companies, for which she had done the modelling jobs, for sharing the pictures. In the Ombudsman’s view, the influencer had a commercial relationship with the companies through her modelling work.

This leads to the exiting part *drumroll please* …the regulation! The effect of influencers being perceived as professionals is that a different and more comprehensive set of rules applies when it comes to the transparency of commercial messages and the use of intellectual property.

To illustrate the stricter requirements for advertising, we are staying in the home country of the fairy-tale writer H.C. Andersen, where the Danish Consumer Ombudsman fined an influencer for breaching the ban on covert advertising. Markings such as the English terms “#ad”, “#spons” and “#GAW” were not sufficient to inform Danish consumers that they were being presented with an advertisement. The Ombudsman hereby set a hard line for what influencers must comply with when acting as professionals promoting other businesses.

If this were a fairy-tale or a movie of its own, the next sequence would be to focus on shedding light on the use of intellectual property rights. Influencers joining “The Dark Side” by using their persona as a promotional pillar must play by the (inter alia) IP rules.

It is obvious that influencers must respect third-party IP rights when promoting products. Yet, influencer marketing often presents IP-related risks. Due to the personal aspect that is inherent in influencer marketing, consumers are more likely to follow recommendations from influencers, and this tendency can be exploited to market counterfeit goods. A report from the UK Intellectual Property Office [also discussed on The IPKat here] found that influencers have such a strong influence on consumers that 10% of the participating consumers ended up buying counterfeit goods after being exposed to influencer marketing of these products.

Among other things, influencer marketing entails the issue of liability for potential copyright infringements. The first zoom is in on the relation between influencers and the companies and the question: is copyright compliance a headache only for the influencers or for the companies commissioning the infringing content as well?

It is a well-known fact that every good story contains a great conflict that draws the lines of the narrative and keeps the audience on the edge of their seats. In our tale, the major battle plays out as a lawsuit over a company’s liability for copyright infringements committed by influencers in connection with their marketing of the company. The issue was heard by a U.S. District Judge in 2022 in the context of a motion for summary judgement on unauthorized use of music. While it might not be a fight to the death, it surely is interesting reading.

Universal Music Group filed a motion against Vital Pharmaceuticals, the owner of the energy drink label Bang Energy, for unlicensed use of music in their advertising on TikTok. Clearly, Bang was liable for direct infringement by using Universal’s music without permission in the content that Bang posted on their own TikTok account. The interesting aspect of the case was the fact that Bang had also paid influencers to advertise their energy drinks on TikTok, and the influencers had used music to which Universal had the copyrights in their videos.

TikTok and other platforms distinguishes between user-generated content, which is covered by the general licences between the platforms and the music industry, and content by professionals, which are not covered by these music licenses. Influencers by definition clash with this categorization, as they constantly shift between the role of private user of the platform and that of professional.

The main question of the case was whether Bang could be held liable for vicarious and/or contributory copyright infringement for the influencer videos. The issue of the influencers’ own liability for the copyright infringements was not addressed. However, it must be assumed that influencers are responsible for obtaining the necessary permission to use copyrighted material when acting as professionals.

Due to a technicality, the court only addressed the question of vicarious liability and not the substantive issue on contributory infringement. The court did not find that Bang had a vicarious liability for the influencers’ posts. However, other court cases are pending regarding such activities and the question regarding contributory copyright-liability is expected to be addressed soon.

Thus, the battle did not develop into a true blockbuster and ended with a bang (pun intended). Instead, it sets the stage for a sequel, as the issue of contributory liability of companies in relation to influencer marketing only seem to become increasingly important to clarify.

Did anyone say Directive on Digital Single Market?

This leads to the next discussion on liability, which you can view as a spin-off series, to the above. The following discussion concerns the allocation of liability between the influencers and the online platforms in cases where the influencers post copyright infringing content on these.

The European Union has contributed to the script by adopting the Directive on Digital Single Market, 2019/790 (“DSM Directive”), addressing both the scope of the general copyright licenses and the question on liability for the online platforms for hosting and communicating copyright infringing content to the public.

Article 17(2) of the DSM Directive is particularly interesting in relation to the perception of influencers, as it provides a de minimis threshold on who is considered users of online content-sharing services. The provision states that when an online content-sharing service provider obtains an authorization from the right holder, the authorization covers users of the service when they are not acting on a commercial basis or where their activity does not generate significant revenues. Article 17(2) sets a minimum scope of the required authorization and a licence between the rightholder and the service could of course go further than this.

In the guidelines to article 17, the Commission states that Member States should not set out quantitative thresholds when implementing the concept of ‘significant revenues’. Instead, the concept should be examined on a case-by-case basis. If we follow the robust enforcement in EU countries, it probably does not take much income for an influencer to exceed the threshold. However, we must wait in suspense for the courts to clarify where the line is drawn.

One thing is certain - influencer marketing is here to stay and there are many legal battles ahead. Stay tuned.