Donovan you are going to lose your ass on this one. I know you think you are right and have a valid argument but it legally will not hold up in court. Call your attorney and ask him for some advice before you get to far into this if you have not done so already. $500 is nothing compared to what you could be losing here.
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Penalties for copyright infringement differ in civil and criminal cases. Civil remedies are generally available for any act of infringement without regard to the intention or knowledge of the defendant, or harm to the copyright owner. Criminal penalties are available for intentional acts undertaken for purposes of "commercial advantage" or "private financial gain." "Private financial gain" includes the possibility of financial loss to the copyright holder as well as traditional "gain" by the defendant.
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The minimum amount that can be awarded for infringement in a civil case is $500 and the maximum is $20,000 per instance. How many banners do you have up? Take that and multiply it by the minimum $500 and see what number you come up with.