Legal Question in Business Law in Colorado

I have a question about liability between new owners and old owners of a business based on the Purchase Agreement. The business received a letter today about copyright infringement with a settlement offer of $600. The copyright infringement occurred during the old ownership (March 9, 2009) and was the use of a photo on the website used without permission from the copyright holder. The sale date of the business was June 22, 2010. There are two clauses in the purchase agreement that relate to the owner's liabilities:

a. Business Operating Expenses and Business Liabilities. Each of the parties hereto shall pay its own expenses in relation to the operation of the business under their respective dates of ownership. Seller shall be responsible for all operating expenses and any other business liabilities incurred from the founding day of the business, March 26th 2008 through the Closing Date, June 22, 2010 for up to one year, or until the Buyer sells or closes the business. Buyer shall be responsible for all operating expenses and any other business liabilities incurred from the Closing Date forward. Both parties agree to pro-rate all expenses based on these dates and reimburse the other party for all liabilities paid outside of their ownership dates (ie. June 2010 Xcel Energy utility bill will be paid on July 1st, 2010 by the Seller. Buyer will reimburse seller for utilities owed under Buyers� period of ownership of 8 days in June out of 30 days. The same scenario would be true where the Seller owes the Buyer.).

o. Marketing. All rights and financial obligations with regard to The French Press' website, e-mail list, twitter account, and all other marketing related tools shall transfer from the Seller to the Buyers.

Please advise on who owns the copyright infringement liability (new owners, old owners, or both for their respective ownerships and use of the copyright photo)?


Asked on 2/24/11, 9:41 am

1 Answer from Attorneys
Kevin B. Murphy Franchise Foundations, APC

As a Franchise Attorney I can say this. It all depends how that clause (and possibly others) in the purchase agreement are interpreted. For example, did the liability arise when the copyright owner sent the demand letter or back when the original infringement first happened? Is it even a liability at this point? Are there defenses? What about the continuing infringement that continued after the business was sold? As with most legal issues, arguments can be made for both sides. That's why we have a judicial system that makes the final determination. Try to work something out with the Seller. Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Foundations, a Professional Corporation

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Answered on 2/24/11, 12:52 pm


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