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.