Hi, this is my first post... thank you all for your help : )

I was hired in to manage a web development company in late 2008. The previous manager wasn't really doing a stellar job if you know what I mean...

Anyway, one of our old clients received a letter from a Canadian stock photo company stating that an image was stolen from them and they want over $2200 compensation.

The image in question is a 100px by 100px picture of a globe on the contact page of a site of the clients site.

I did some research trying to find out where the client got the image from. It didn't have a watermark, so I knew it was taken from another site... I dug around and found the exact same image (including the same cropping lines and degradation).

The site that it came from is an outdated actors website. The site has absolutely no copyright/privacy statements anywhere on its 10 pages. There is a link to a web developer that is no longer in business. Absolutely nothing to indicate that the picture is reserved. In fact the picture is so rough and pixelated, I have reason to believe that they originally copied it from a thumbnail... then my client decided that he wanted the same distorted image on his site.

Of course, we have promptly removed the image...

I did some research and found this:

Removal of infringing material is also an element of a 1998 law establishing that an Internet Service Provider (ISP, a company that provides Internet access to individuals and businesses) can avoid liability by following certain rules including speedy removal of infringing material.
This was written by stanford.edu on copyright and fair use of the internet

Can anyone give me some advice on how to approach this issue. I've taken extreme caution as a developer when asking permission for images... it seems my predecessor did not Even so, the image was originally stolen by another company... and we have removed the image immediately, does that protect my client at all?

Thanks again