Copyright troll bugging us, are we screwed?

Backstory: We are a UK based SaaS with public user profiles where anyone can upload images as their profile photo. Photos are not the primary feature of the site.

What happened: We received a copyright notice on behalf of a collection agency of sorts (representing big name publishers) saying that one of our users had uploaded an image which was copyrighted. We took the image down right away, but shortly thereafter we got a follow up email demanding several thousands of dollars on behalf of the rights holder for use of their image while it was up on the user's profile. We obviously don't want to pay and potentially open ourselves up for future similar claims. We contacted our lawyer and they told us there's not much we can do, and I'm really hoping they're wrong.

Has anyone faced a similar issue, and how did you handle it?

Thanks!

* Note: This incident happened -before- the EU upload filter law had passed, but we are still being hounded to pay up.

Here's what you do: ignore it.

Get a second opinion from a copyright specialist in the UK. If you were a US based company it would fall under the DMCA safe harbor as long as you were registered. I imagine the UK has something similar.

Things to check: Does the company actually own the copyright? When someone uploads an image does your privacy policy/terms of service indicate that you've been granted a license to use the photo OR at the very least does the uploader acknowledge that they have the right to the image? Is it possible that the uploader had been granted permission to use the photo inadvertently? Is the image in question actually the image that's copyrighted (the software used in rights management is often error prone). Was the image planted by the company?

Remember that you can negotiate the fee down, assuming they even bother to file a lawsuit.

The really important thing is to make sure that going forward you're protected from these types of complaints. This is what your current lawyer should have done when reviewing your terms and conditions, etc.

I agree. All other arguments aside and assuming they're 100% correct, I doubt they're going to waste resources to file a lawsuit over an image of a person that did not generate any monetary value. Ignore it.