DRK Photo v. McGraw-Hill Companies Incorporated et al

Filing 58

AMENDED ORDER denying 30 Defendant's Motion for Partial Summary Judgment. Signed by Senior Judge Paul G Rosenblatt on 3/19/13. (TLJ)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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DRK Photo,
Plaintiffs,

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v.

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The McGraw-Hill Companies, Inc.,
Defendant.

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CV 12-08093-PCT-PGR

AMENDED
ORDER

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Before the Court is Defendant’s Motion for Partial Summary Judgment. (Doc. 30.)

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Plaintiff opposes the motion (Doc. 47), which the Court will deny for the reasons set forth

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herein.

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Plaintiff DRK Photo, a stock photography agency, filed a complaint on May 15, 2012,

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alleging that Defendant McGraw-Hill (“McGraw”), a textbook publisher, infringed DRK’s

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copyright by exceeding the scope of license restrictions pertaining to certain photographs or

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failing to obtain permission to use the photographs. (Doc. 1.) The allegedly infringing acts

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occurred between July 1997 and October 2009. On October 10, 2012, McGraw filed the

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pending motion, asserting that the vast majority of DRK’s claims are barred by the statute

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of limitations. (Doc. 30.)

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DISCUSSION

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Under Federal Rule of Civil Procedure 56(a), “the court shall grant summary

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judgment if the movant shows that there is no genuine dispute as to any material fact and the

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movant is entitled to judgment as a matter of law.” Material facts are those that may affect

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the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A

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dispute as to a material fact is “genuine” if the evidence is such that “a reasonable jury could

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return a verdict for the nonmoving party.” “[A]ll justifiable inferences must be drawn in [the

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nonmovant’s] favor.” United Steelworkers of Am. v. Phelps Dodge Corp., 865 F.2d 1539,

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1542 (9th Cir.1989) (en banc) (citing Liberty Lobby, 477 U.S. at 255).

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The moving party bears the initial responsibility for informing the district court of the

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basis for its motion and identifying those portions of the pleadings, depositions, interrogatory

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answers, admissions and affidavits that it contends demonstrate the absence of a genuine

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issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A party

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opposing a motion for summary judgment “may not rest upon the mere allegations or denials

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of [that] party’s pleading, but . . . must set forth specific facts showing that there is a genuine

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issue for trial.” Fed.R.Civ.P. 56(e); see also Liberty Lobby, 477 U.S. at 250. The opposing

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party need not show the issue will be resolved conclusively in its favor. See Liberty Lobby,

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477 U.S. at 248–49. All that is necessary is submission of sufficient evidence to create a

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material factual dispute. Id.

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McGraw seeks partial summary judgment based on the argument that the bulk of its

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allegedly infringing uses of DRK’s photos occurred outside the three-year statute of

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limitations provided by the Copyright Act. (Doc. 30.) According to McGraw, all but 51 of

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the 1120 unauthorized uses alleged by DRK—those that occurred between April 15, 2008,

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and April 15, 2011—are not barred by the statute of limitations. (Doc. 37 at 2.)

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The Copyright Act provides that, “No civil action shall be maintained under the

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provisions of this title unless it is commenced within three years after the claim accrued.” 17

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U.S.C. § 507(b). Under the so-called “discovery” rule, a claim for copyright infringement

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“accrues when one has knowledge of a violation or is chargeable with such knowledge.”

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Roley v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994). “[T]he statute of

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limitations does not prohibit recovery of damages incurred more than three years prior to the

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filing of suit if the copyright plaintiff was unaware of the infringement, and that lack of

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knowledge was reasonable under the circumstances.” Polar Bear Productions, Inc. v. Timex

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Corp., 384 F.3d 700, 706 (9th Cir. 2004).

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The statute of limitations is an affirmative defense for which the defendant bears the

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burden of proof. Entous v. Viacom Intern., Inc., 151 F.Supp.2d 1150, 1154 (C.D.Cal. 2001).

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To prevail on its summary judgment motion, McGraw must produce evidence sufficient to

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show that “no reasonable trier of fact could find other than for the moving party” on the

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statute of limitations issue. Id. (quoting Calderone v. United States, 799 F.2d 254, 259 (6th

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Cir. 1986)).

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McGraw contends that DRK was put on constructive notice of printing overrun issues

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no later than August 15, 2006. (Doc. 30.) On that date McGraw notified DRK by letter of 13

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instances in which it had printed more copies of a textbook containing DRK’s photographs

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than the number referenced in the original invoice. (Doc. 30 at 6.) Along with the letter DRK

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enclosed a check for $89,595.71, as “payment under our photo license agreement for usage

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in a print run larger than originally anticipated.” (Id. at 6–7.)

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According to McGraw, DRK was thus “alerted to exactly the same pattern of conduct

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of which it complains here.” (Id. at 11.) McGraw further asserts that “DRK cannot contend

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that it reasonably believed that the printing overrun issue was necessarily confined

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exclusively to the 13 instances McGraw-Hill disclosed in August 2006” because it “made no

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such representations” to DRK. (Id.) Therefore, according to McGraw, DRK was chargeable

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with knowledge of the infringement because a reasonable person would have become

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suspicious and investigated further. (Id.)

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DRK responds that McGraw’s 2006 supplemental payment did not prompt it “to

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believe McGraw had actually infringed hundreds of DRK’s other licenses,” but instead had

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the opposite effect, leading DRK to “reasonably believe[] McGraw’s notification about 13

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specifically identified invoices McGraw needed to ‘true-up’ meant McGraw had not

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exceeded his other invoices.” (Doc. 47 at 2.) Therefore, DRK argues, it could reasonably

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have regarded the 2006 payment as the resolution of an isolated, specific incident rather than

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an indication of a broader pattern of infringement. (Id.) As DRK states, a rational

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interpretation of McGraw’s 2006 payment is that McGraw was not concealing its print

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overruns.

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In further support of the argument that its response to the overrun payment from

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McGraw was objectively reasonable, DRK notes that “37 other photographers and stock

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photo agencies received virtually identical letters and payments from McGraw in August

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2006.” (Id. at 10.) DRK contacted seven of these licensors; as set forth in declarations from

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their representatives, none of these licensors “suspected McGraw had infringed licenses

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beyond those it specifically disclosed.” (Id.; see Doc. 48, Ex’s 2–9.)

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One of these licensors was Grant Heilman Photography, Inc., which filed a copyright

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infringement case against McGraw in the Eastern District of Pennsylvania. In Grant Heilman

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Photography, Inc. v. McGraw-Hill Companies, Inc., No. 12-2061, 2012 WL 5944761

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(E.D.Pa. November 28, 2012) (“GPHI”), the district court addressed the same statute of

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limitations argument and denied McGraw’s motion for partial summary judgment. In GPHI,

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as in this case, the plaintiff received an unsolicited check from McGraw as payment for a

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print overrun. Id., at *1. In GPHI, as in this case, McGraw argued that the payment

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constituted notice an imposed on the plaintiff a “duty to determine if McGraw was exceeding

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the terms of any other licence [plaintiff] had issued. Id., at *4 In GPHI, as in this case, the

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plaintiff contended that it “reasonably perceived McGraw’s voluntary disclosures as the acts

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of an honest business partner, thus fostering trust in McGraw’s good faith rather than

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cynicism.” Id. The court concluded that there were genuine factual disputes about whether

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the plaintiff had notice of other infringing activity by McGraw, and therefore McGraw was

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not entitled to summary judgment. Id., at *5. The court concluded that “McGraw has failed

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to meet its burden of showing that the 2006 and 2007 incidents were, as a matter of law,

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sufficiently obvious to place any reasonable copyright holder on notice that other infringing

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activity might be afoot.” Id.

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The same genuine factual disputes exist here, rendering summary judgment

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inappropriate. See, e.g., General Bedding Corp. v. Echevarria, 947 F2d 1395, 1398 (9th Cir.

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1991) (denying summary judgment where material facts existed as to whether defendant had

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constructive notice of fraud); Beneficial Standard Life Ins. Co. v. Madariaga, 851 F.2d 271,

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275 (9th Cir. 1988) (“Ordinarily we leave the question of whether a plaintiff knew or should

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have become aware of a fraud to the jury.”); Ajaxo, Inc. v. Bank of America Technology and

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Operations, Inc., 625 F.Supp.2d 976, 982 (E.D.Cal. 2008) (denying summary judgment

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where “[g]enuine issues of disputed material facts exist as to when each Plaintiff learned or

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could have learned about the existence of its copyright infringement claims.”).

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In sum, McGraw has not shown that no reasonable trier of fact could find for DRK

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on the statute of limitations issue. Therefore, McGraw is not entitled to summary judgment.

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Accordingly,

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IT IS HEREBY ORDERED denying Defendant’s Motion for Partial Summary

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Judgment (Doc. 30).
DATED this 19th day of March, 2013.

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