Legal Question in Intellectual Property in California

Whether your use was for profit or not does not necessary mean you did not infringe on someone's copyright. Generally, if you used someone's copyrightable material without permission, and your use does not fall under fair use, you have likely infringed on someone's copyright.

My advice would be to determine that the image you used was theirs, and that they own the copyright to the image. If the answer to both those questions is yes, and If you can't prove that you have permission to use the image or if your use was not fair use, then I would advice that you try to settle the matter with them (sometimes these agencies are willing to negotiate a lower price).

To determine whether your use falls under fair use, you should consult an intellectual property attorney in your area.

Goodluck.

As a Franchise Attorney I basically agree wit the other attorney answer. If they hold a valid copyright and you've infringed, you're liable. As far as fair use goes, this is only a possible defense and seems very unlikely given the facts you've provided. Let this be a learning lesson: there's no free lunch, including "free" internet pictures. 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

Without denying that there's a possibility the third party's right to ask for license fees is valid and that $2,000 is supportable in court, I believe I'd be a little more stiff with them. Ask the third party the basis of its right to collect fees, whether anyone claims they were harmed, etc. In other words, make 'em prove they are entitled to be paid that much, or anything.