Five major textbook publishers – Macmillan Learning, Cengage Learning, Elsevier, McGraw Hill and Pearson Education – are suing Shopify for allegedly violating copyright laws, reports Insider Higher Ed. Shopify has served as a storefront for merchants who sell PDF versions of publishers’ textbooks as ebooks. According to the lawsuit filed in the U.S. District Court for the Eastern District of Virginia, between 2017 and 2021, the publishers’ legal team provided more than 32,000 unique URLs showing where copyright violations have been made.

The lawsuit seeks $150,000 per copyright infringement due to Shopify’s willful violations of the Copyright Act or actual damages and Shopify’s profits from the infringement in an amount to be determined at a jury trial. They also request statutory damages up to the maximum allowed which is $2 million per counterfeited trademark, for Shopify to be prohibited from future copyright violations, the destruction of all textbooks, test banks and ISMs and related products, and reasonable attorneys’ fees and costs.

The lawsuit acknowledges that Shopify, a paid subscription ecommerce service, provides online merchants with a complete business toolkit that includes a website, webhosting, product fulfillment, marketing, customer support, analytics, capital investments and payment processing, among other services.

Shopify allegedly ignoring illegal activity

“Shopify plays host, enabler, and protector to a world of digital textbook pirates. Shopify has received detailed notices virtually every week for years identifying specific Shopify subscribers using Shopify’s services for piracy. Yet, Shopify routinely ignores illegal activity by the identified subscribers, putting its corporate finances over its legal obligations. Shopify knows that it is assisting subscribers to infringe, but it does not care,” reads item #2 of the lawsuit’s introduction.

Shopify has a one-strike policy about copyright infringement will not be allowed, and the lawsuit alleges that Shopify does not enforce this policy. In an interview with Nilay Patel of The Verge in May of this year, Harley Finkelstein, president of Shopify, said, “Copyright infringement [is] allowed on other platforms. If we see a store that is infringing on any type of intellectual property, either on a trademark or a copyright or anything of that nature, it’s gone. We don’t allow it. We notify the merchants and say, ‘Here’s the reason why we’re taking these steps.’ And we give them a chance to explain or provide us proof that they actually do own the IP.”

Court intervention necessary

The lawsuit said that court intervention is needed to stop Shopify from willful copyright and trademark violations. The plaintiffs themselves have even purchased pirated works by direct digital download on product pages or checkout pages on Shopify sites. They believe Shopify is well aware of the problem and, as such, have condoned the illegal activity in the name of profit.

“Shopify assists, supports and profits from numerous illegal websites on its platform that reproduce and sell infringing digital copies of the Works, many of which bear identical or substantially indistinguishable reproductions of the Marks. The objective of the Pirate Websites is to make money from infringement. The owners of those websites are not authorized to reproduce or distribute digital copies of the Publishers’ textbooks, test banks, or ISMs, including the Works, nor are they authorized to use the Marks in any way,” says the complaint.

Of paragraphs 1 through 80 of the company, the key issue appears to be not just that Shopify manages a platform where piracy can occur, but they knowingly ignored notices identifying pirated content, and they allowed the merchants to remain on the platform.

“Shopify’s actions described above, which are ongoing, have caused and will continue to cause irreparable damage to the Publishers, for which the Publishers have no remedy at law. Unless Shopify is restrained by this Court from continuing its infringement of the Publishers’ copyrights, these injuries will continue to occur in the future. The Publishers are accordingly entitled to injunctive relief restraining Shopify from further infringement,” the complaint reads.

As of yet, Shopify has not made a public statement contradicting the allegations, but they will have to respond in court even if they don’t prepare a statement for the public.

Q3 2021 highlights

The lawsuit comes about six weeks after Shopify revealed its third quarter financials. Total revenue for the quarter was $1.12 billion, a 46% increase year over year. Subscription Solutions revenue was $336.2 million, a 37% increase year-over-year, and Merchant Solutions revenue was $787.5 million, a 51% increase year-over-year. Net income for the quarter was $1.15 billion, or $9.00 per diluted share, compared to net income of $191.1 million in the third quarter of 2020.

Insider Take

As a publisher who is very sensitive to copyright issues, this is an appalling situation if the allegations are true. The digital textbook market has changed the face of education forever, making textbooks more interactive, more accessible and also more shareable for cunning pirates who wish to profit off the work of others. If true, the publishers have every right to expect reparations and a reversal in behavior for Shopify. Copyright violations are in no way acceptable. Based on Shopify’s most recent financials, any fines or settlements will have to be hefty to amount to more than a slap on the wrist. This case will likely drag on for years. In the meantime, Shopify would be wise to police its merchants to see if pirated content remains on the site and, if so, remove it immediately.