Major Publishers Sue Shopify, Alleging Copyright Violations

Shopify, an Ottawa-based e-commerce company launched in 2006 by snowboarders seeking a platform to sell equipment, is now a juggernaut with a market value reported to be at least $180 billion and 1.75 million businesses in its portfolio. On Wednesday, five major publishers sued the Canadian company, accusing it of enabling digital piracy committed by its vendors.

Filed jointly by Macmillan, Cengage, Elsevier, McGraw Hill and Pearson, the lawsuit alleges that Shopify “plays host, enabler, and protector to a world of digital textbook pirates.” The plaintiffs assert Shopify has received detailed legal notices nearly every week since 2017 identifying specific Shopify subscribers who leverage the company’s services to commit piracy.

“Shopify routinely ignores illegal activity by the identified subscribers, putting its corporate finances over its legal obligations,” the lawsuit contends. “Shopify knows that it is assisting subscribers to infringe, but it does not care.”

A spokesperson for Shopify declined to be interviewed by phone but provided a statement saying that merchants who enlist with Shopify agree to its acceptable use policy (AUP).

“Shopify’s AUP clearly outlines the activities that are not permitted on our platform,” the statement said. “We have multiple teams that handle potential AUP violations, including copyright and trademark infringement, and we don’t hesitate to action stores when found in violation.”

More than 90 percent of copyright and trademark reports made thus far in 2021 were reviewed within one business day, the Shopify spokesperson said.

According to the lawsuit, the legal notices publishers have sent since 2017 identify the specific subscribers and store URLs infringing on publishers’ copyright, enumerating hundreds of pirate websites and many thousands of specific instances of copyright and trademark infringement on Shopify.

“When Shopify learns of specific instances of copyright and trademark infringement, Shopify shirks its legal obligations by continuing to assist repeat infringers in their infringement,” the lawsuit asserts. “Shopify not only provides its repeat-infringer subscribers with the tools they need to run their illegal businesses, but also provides them with anonymity, a false veneer of legitimacy, and a safe haven from which to break the law.”

Shopify offers a host of services to retailers, including web design, shipping, digital payments and fulfillment support, charging as little as $29 a month for mom-and-pop entrepreneurs to $2,000 for large companies, according to its website. It has been widely reported that Amazon founder Jeff Bezos has been wary of Shopify’s meteoric rise, propelling him to quietly acquire a top Shopify competitor, Selz, in January.

The lawsuit contends that Shopify assists in the sale of “ebooks” that are PDF copies of publishers’ textbooks, which retailers sell through digital storefronts Shopify helps erect. The lawsuit alleges that between 2017 and 2021, publishers’ lawyers sent Shopify more than 32,000 unique URLs pointing to examples of infringement. The lawsuit seeks statutory damages up to the maximum amount provided by law ($150,000 per infringed copyright and $2 million per counterfeited trademark). According to a report from Digimarc, a digital watermarking firm focused on copyright protection, in 2017 ebook piracy cost publishers $315 million in lost sales.

James Grimmelmann, Tessler Family Professor of Digital and Information Law at Cornell Law School, said it is significant when so many leaders in a given sector come together to take on piracy with a coordinated industry lawsuit. He said the precedents set by the music and film industries in fighting massive copyright violations are relevant. But he pointed out that textbook publishers are bedeviled by both exceptionally high prices and an audience of internet-savvy young people eager to avoid paying.

Grimmelmann said that for publishers the problem extends beyond just lost revenue, to the loss of value of an entire textbook, since many Shopify vendors sell solution manuals and answer keys meant only for professors. These materials have ended up on the internet and rendered the textbooks useless in the eyes of many professors.

The publishers’ strongest legal argument stems from the warnings Shopify has been given across many years, Grimmelmann said.

“They have some pretty damning facts about repeated notices involving the same storefronts,” Grimmelmann said. “They have good evidence that at least some of these storefronts get a lot of complaints, get shut down and then restart with a trivial name change still on the Shopify platform. And that’s the kind of fact that could go to show that Shopify is not effectively terminating repeat infringers.”

Despite the lawsuit’s claims that Shopify is willingly enabling piracy, Grimmelmann said he believes it is more accurate to say that Shopify is “not devoting as many resources to flushing [infringers] out and keeping them down” as publishers would like.

While Grimmelmann and the Association of American Publishers were unable to provide an estimate for how much money the industry loses to piracy each year, Grimmelmann said that as textbook prices have risen—partially to account for revenue lost to piracy—students find other ways of getting books, including by just sharing with friends.

“Textbook prices have become unsustainable,” he said, adding that as publishers raise prices to make up for more students not buying books, they then lose even more customers, and “it becomes a self-reinforcing cycle.”

Jonathan Band, a copyright lawyer in Washington, D.C., said that in this case, Shopify may be helped by the Digital Millennium Copyright Act, which limits the damages that can be obtained against service providers like Shopify if they comply with specific conditions. He said this law has helped YouTube, for example, avoid liability on its platform because the company follows DMCA requirements strictly.

He said publishers will have to prove that Shopify doesn’t qualify for the limitations provided by the “safe harbor” aspect of the DMCA, calling their legal notices asking Shopify to take down infringers only to see them pop back up similar to a “game of whack-a-mole.”

“They keep on sending these notices, and the rights holder and then the service provider takes it down and then it gets put right back up,” Band said. “The publishers don’t like the DMCA because they feel it’s not effective for them. They keep on sending these notices, and nothing stays down … What the publishers are trying to do here is come up with basically an argument as to why the DMCA does not apply.”