Internet memes—those attention-getting images, videos, and catchy phrases that whip across the Internet via email and social media—have long been a part of online culture. But while a corporate strategy of exploiting memes can be highly entertaining and can capture consumers' attention, using these online assets can be risky if intellectual property rights are infringed in their dissemination. If marketers at your company use Internet memes for corporate purposes, you risk unwittingly infringing the rights of intellectual property owners.

Originally created by consumers for entertainment, Internet memes are becoming popular among corporate marketers. Internet memes exemplify a sort of online pop-culture Darwinism—survival of the funniest, if you will—in which the most clever creations are shared across the web. Memes evolve and spread rapidly, sometimes reaching worldwide popularity overnight. One author may create an image or idea around which other authors create permutations that are, virtually speaking, spread far and wide. Prominent examples include Keyboard Cat, Futurama Fry, Condescending Wonka, Ridiculously Photogenic Guy, Sexy Sax Man, and, of course, various images from the Cheezburger Network, one of the first websites to popularize Internet memes.

Given the vast popularity of some of the most widely disseminated memes, it is not surprising that corporate marketers increasingly seek to harness this popularity to promote commercial interests. Major brands, including Nike, McDonalds, Cisco, and General Motors, are beginning to use them for advertising purposes.

However, Internet memes pose a number of intellectual property-related questions for companies. In particular, your company's marketing team or its marketing agency partners may assume that no one owns any protectable intellectual property exploited in these memes and that they are therefore freely available for use by any corporation for any purpose. This assumption could not be further from the truth and could lead to disastrous consequences, including significant legal fees and damages.

Another misconception is that, if the meme were copyright- or trademark-protected, adopting it would be considered fair use under the Copyright Act. However, the fair use defense is not necessarily available when a work is appropriated for commercial use.

According to court precedent, four factors are particularly relevant in guiding the determination of whether a use is a fair use:

1. The purpose and character of the use.

2. The nature of the copyrighted work.

3. The substantiality of the portion of the work used in relation to the copyrighted work as a whole.

4. The effect on the potential market for, or value of, the copyrighted work.

While no single factor is decisive, making copies of a copyrighted work for commercial or profitmaking purpose would most likely be seen as presumptively unfair, whereas a noncommercial, nonprofit activity weighs in favor of a finding of fair use.

When for-profit enterprises use copyrighted materials, courts typically deny the company the fair use defense. Instead, the courts usually hold that the company should have legally licensed the copyrighted materials and thereby financially compensated the work's author. If the meme were to be posted on your company's corporate Facebook page, for example, a court would most likely hold the company liable for copyright infringement, because of the purpose and character of the use and the fact that the company is a for-profit enterprise.

The moral: Do not rely on the fair use defense to shield your company's use of an Internet meme from allegations of intellectual property rights infringement. However, certain strategies can help mitigate the risks.

First, you should determine the extent to which the meme is protected by copyright or trademark. The creator of an Internet meme may very well hold the copyright to the intellectual property represented by the meme's words and images. As owner of a copyright, the meme creator holds a bundle of exclusive rights to use and profit from the work he or she creates, including the right to reproduce the work, prepare derivative works from it, distribute copies of it, and display it. The owner of a copyright can also profit from licensing some or all of these exclusive rights to others.

In addition, the Internet meme may be based on a separate work that incorporates copyrights, trademarks, or rights of publicity of third parties. For example, imagine that your company has obtained a license from an author to use a meme consisting of a humorous caption superimposed over an image of George Costanza, a character from the television show Seinfeld. Although you may have a license to use the meme, it is unwise to assume that the meme author is authorized to use the image of Costanza or authorized to license its use to your company. In using this meme, you risk violating the right of publicity of the actor playing Costanza, Jason Alexander, as well as Jerry Seinfeld and Larry David's copyrights as scriptwriters for the show, and possibly Castle Rock Entertainment's rights to the Seinfeld trademark, because your use could arguably suggest that your company is endorsed by, authorized by, or sponsored by these parties, when that is not the case.

If your company uses a copyright-protected meme without obtaining a license for its use, the company's copying of the meme, distribution of copies, performance, preparation of derivative works, or display of the work will be unauthorized, and a court will likely consider these actions to constitute copyright infringement. If a copyrighted work is infringed, the copyright holder is entitled to damages, the infringer's profits, and possibly statutory damages ranging from $200 to $150,000, depending on the "innocence or willfulness" of the infringer.

Instead, you need to obtain licenses to use the Internet meme and ensure that the Internet meme itself is not violating any third-party IP rights or, as in the case of the Seinfeld character, any celebrity's right of publicity. Of course, the author of the Internet meme may be willing to grant you a license to use the meme and may even indemnify you against third-party challenges.

However, author indemnification is not adequate protection against the risk of copyright or trademark infringement. As a cursory look at case law will illustrate, an indemnification is only worth as much as the indemnifier. If your company has deeper pockets than the indemnifying Internet meme author, your company will undoubtedly be implicated in any right-of-publicity or infringement action and will incur legal fees and possibly damages to resolve the matter, indemnification or not, and to compensate the work's creator for the infringement.

So what should you do?

First, any time your company wants to use an Internet meme, consider who might claim intellectual property rights in it. Was the work created in its entirety by an independent author? Or was it derived from an underlying source and repurposed? Entire companies have emerged for the sole purpose of identifying the most popular memes and becoming official licensing agents for the authors. Due diligence will help determine who may claim protectable intellectual property and whether a proper license is necessary.

Marketers might look to one of the popular make-your-own meme websites, such as the Cheezburger Network's LOLcats site, to create a meme in hopes that other users will share it across the Internet. If your company uses one of those sites, make sure the materials you are using are free for commercial use or have been licensed for your specific purpose. Again, do not assume that an easily obtained image is therefore risk-free.

Second, even if you successfully locate the Internet meme's creator and obtain a license to use the meme, make sure it does not infringe any third party's underlying intellectual property rights. Many of today's most popular online memes are based on pre-existing materials, some of which may contain copyrighted images or may impinge on third-party rights of publicity or trademarks. Regardless of what the author is willing to state in an indemnification or license agreement, your company should conduct its own evaluation of the meme to make sure that it does not infringe any third-party intellectual property rights.

Third, move quickly. News, images, and ideas move rapidly across the web through the power of social media, each concept quickly glossed or replaced by the next. The ephemeral quality of memes is part of their appeal—e.g., "Did you see that meme that everybody else in the world saw today and will be old news tomorrow?"

In the time it takes to read this article, an Internet meme could spread to thousands of consumers. Just as quickly, it could be forgotten, its popularity peaking and fading like a shooting star. If you want to use memes, you need to move quickly in your investigations and negotiations.

When coupled with due diligence and regard for intellectual property rights, an Internet meme can be an attention-getting tool in online marketing and can spread a corporate brand more quickly and easily than nearly any other marketing vehicle. These advantages, however, are undermined when a company risks its reputation and legal budget by not addressing potential intellectual property risks in advance. Don't make the mistake of leaving intellectual property considerations to your marketing teams and their agencies, as they may not be attuned to the nuances of the law pertaining to derivative works and fair use.

And with that advice at hand, may your meme take the Internet by storm.

Originally published in the November 14, 2012 online edition of CORPORATE COUNSEL © 2012

This article is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. Brinks Hofer Gilson & Lione does not intend to create an attorney-client relationship by offering this information and review of the information shall not be deemed to create such a relationship. You should consult a lawyer if you have a legal matter requiring attention. For further information, please contact a Brinks Hofer Gilson & Lione lawyer.