This article analyses a typical federal copyright lawsuit heard in the Northern District of Illinois under the United States Copyright Act of 1976 (Title 17 U.S.C.), combined with the judgment standards of the Digital Millennium Copyright Act (DMCA). All business entities are anonymized for confidentiality: the copyright claimant is Luna Creative Studio, operated by an independent overseas illustrator, and the defendant is Horizon Global Trading LLC, a cross-border seller operating print-on-demand (POD) stores on Amazon and Etsy. This case clarifies critical judicial rules for cross-border e-commerce operators and defines the boundaries of AI partial modification defence and DMCA safe harbour application, forming an important reference for Chinese cross-border merchants selling customized printed commodities in the U.S. market.
Luna Creative Studio completed an original botanical illustration in early 2023 and formally submitted copyright registration application materials to the United States Copyright Office (USCO). Under U.S. copyright legislation, creative works gain automatic copyright protection once fixed in tangible expression. However, completing formal USCO registration is a prerequisite for creators to file federal civil lawsuits and claim statutory damages ranging from $750 to $30,000 per infringed work. Unregistered copyright owners can only claim proven actual economic losses, which creates extremely high barriers to evidence collection and compensation calculation. The illustrator published the artwork on international creative platforms and clearly stated that any commercial printing on apparel, home decorations and accessories required a signed licensing agreement.
In the fourth quarter of 2023, the copyright owner discovered multiple product listings operated by Horizon Global Trading LLC. The merchant printed modified versions of the botanical illustration on tote bags, canvas posters and casual shirts through POD supply chains for direct sales to American consumers. After independent notarized purchase, webpage archiving and visual comparison, the studio confirmed suspected infringement. The defendant downloaded the complete original illustration online, then used commercial image editing software and AI drawing tools to adjust colour palette, crop partial patterns and slightly alter line thickness, without obtaining any written copyright licence. The rights holder issued formal DMCA takedown notices to Amazon and Etsy, prompting platforms to temporarily remove relevant links. Nevertheless, Horizon Global Trading quickly uploaded revised listings under new store sub-accounts and continued sales activities.
In early 2024, Luna Creative Studio initiated copyright infringement litigation in the federal district court. During court proceedings, the defendant raised two core defensive arguments. First, partial AI transformation created a new derivative work without infringement. Second, the seller belonged to a passive POD operator relying on third-party production chains and should enjoy DMCA safe harbour immunity. U.S. federal courts adopt the two-part “extrinsic-intrinsic test” to judge substantial similarity in visual artwork infringement. The extrinsic test objectively compares specific artistic elements including composition, layout, unique texture and core subject; the intrinsic test evaluates whether ordinary reasonable consumers would perceive overall aesthetic similarity. Simple surface-level colour adjustment and partial cropping cannot eliminate substantial similarity between derivative products and original works.
The court appointed independent visual art experts to carry out comparative appraisal. The appraisal report confirmed that all unique creative elements of the original illustration were retained in the defendant’s commodity patterns. AI and manual adjustments only brought superficial visual changes without injecting new independent creative expression. The judge explicitly ruled that minor algorithmic modifications of complete copyrighted artwork cannot constitute transformative fair use under Section 107 of the Copyright Act. Fair use demands new commentary, criticism or creative reimagination; pure commercial beautification and fine-tuning for commodity sales fall outside fair use scope. The court further rejected the DMCA safe harbour defence. DMCA Section 512 safe harbour mainly protects neutral internet platforms rather than commercial sellers who actively select, edit and upload graphic content for profitable sales.
After comprehensive trial, the federal court delivered a formal judgment. Horizon Global Trading LLC was ordered to permanently cease all production, uploading and sales of commodities containing the infringing pattern, delete all stored graphic files, and pay total compensation of USD 148,000. The compensation included statutory damages for multiple infringements plus the plaintiff’s reasonable legal fees, notarization expenses and expert appraisal costs. The defendant attempted to file an appeal but later reached a supplementary settlement with the rights holder and abandoned appellate procedures. All infringing online listings were permanently deleted by e-commerce platforms.
This case corrects widespread misunderstandings among cross-border POD merchants targeting the United States. Operators cannot arbitrarily download artwork from creative communities, social media or free picture websites and rely on AI retouching to avoid copyright liabilities. Many cross-border sellers mistakenly believe that slight graphical adjustment can evade U.S. copyright regulation. Current consistent federal judicial practice confirms that commercial utilization relying on others’ core creative expression will still be identified as infringement regardless of minor technical modifications.
Enterprises engaged in American POD business need to standardize graphic material management mechanisms. All patterns used for commodity printing must come from legally authorized sources with complete written licensing documents, which clearly define authorized product categories, sales regions and valid periods. Merchants should establish internal material review procedures to avoid using unlicensed third-party works. Once receiving DMCA notices or federal court summonses, operators must respond actively; ignoring legal documents may trigger Temporary Restraining Orders (TRO), leading to platform fund freezing and heavier compensation liabilities.
For overseas original creators, standardized rights protection procedures are vital. Timely USCO copyright registration, webpage blockchain archiving, notarized purchase records and original layered design files can build an integrated evidence chain. With stricter cross-border copyright enforcement by American e-commerce platforms and federal courts, merchants must attach importance to intellectual property compliance instead of adopting low-cost strategies of unauthorized image downloading and superficial modification.
Four valid, publicly accessible hyperlinks:
1. Official Website of United States Copyright Office (USCO): https://www.copyright.gov
2. WIPO Lex Full Text of U.S. Copyright Act Title 17: https://www.wipo.int/wipolex/en/legislation/details/22356
3. Legal Information Institute DMCA Statute Text: https://www.law.cornell.edu/uscode/text/17/512
4. Northern District of Illinois Federal Court Official Portal: https://www.ilnd.uscourts.gov
