Pacific Stock, Inc. v. Pearson Education, Inc.
Filing
119
ORDER DENYING PACIFIC STOCK'S MOTION FOR PARTIAL SUMMARY JUDGMENT; ORDER DENYING PEARSON EDUCATION'S MOTION FOR SUMMARY JUDGMENT re 70 ; 75 - - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 2/26/13. " The court den ies Pacific Stock' motion for partial summary judgment. The court also denies Pearson's motion for summary judgment. Given the dismissal of copyright infringement claims arising out of 20 images (1, 2, 4 to 7, 11, 20, 21, 24, 31, 34, 66, 75, 84, and 86-90), 131 images remain in issue with respect to Pacific Stock's copyright infringement claims. The parties should immediately contact the Magistrate Judge assigned to this case to hold a settlement conference. At the discretion of the Magistrate Judge, the parties may be required to have representatives with settlement authority attend the settlement conference." (emt, )CERTIFICATE OF SERVICEParticipants registered to rec eive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
PACIFIC STOCK, INC.,
)
)
Plaintiff,
)
)
vs.
)
)
PEARSON EDUCATION, INC.,
)
)
Defendant.
)
_____________________________ )
CIVIL NO. 11-00423 SOM/BMK
ORDER DENYING PACIFIC STOCK’S
MOTION FOR PARTIAL SUMMARY
JUDGMENT; ORDER DENYING
PEARSON EDUCATION’S MOTION
FOR SUMMARY JUDGMENT
ORDER DENYING PACIFIC STOCK’S MOTION
FOR PARTIAL SUMMARY JUDGMENT; ORDER DENYING
PEARSON EDUCATION’S MOTION FOR SUMMARY JUDGMENT
I.
INTRODUCTION.
Plaintiff Pacific Stock, Inc., alleges that Defendant
Pearson Education, Inc., has infringed on Pacific Stock’s
photograph copyrights.
Pacific Stock gave Pearson licenses to
use those photographs in textbooks that Pearson said it planned
to publish, but, according to Pacific Stock, Pearson exceeded the
terms of the licenses.
Pacific Stock asserts claims for
copyright infringement, fraud, and fraudulent concealment.
Both Pacific Stock and Pearson have moved for summary
judgment, Pacific Stock on a portion of the case, and Pearson on
the entire case.
The motions rely largely on evidence in the
form of dense charts containing line items representing orders,
print runs, and similar information.
That is, this is not a
record filled with new-smelling books to thumb through or
glorious color photographs to peruse.
The record is far less
exciting for any lover of either books or photographs.
At most,
postage-size versions of the photographs appear on some
documents.
Although Pacific Stock shows a likelihood that
Pearson has infringed on copyrights, questions of fact about
Pearson’s actual use of the stock photographs preclude a grant of
summary judgment to Pacific Stock.
Summary judgment is similarly
denied as to Pearson’s motion for summary judgment.1
II.
BACKGROUND.
The facts of this case are largely undisputed.
Pacific
Stock represents approximately 70 photographers, whose
photographs it licenses others to use.
Stock is Barbara Brundage.
The sole owner of Pacific
See Pearson Education, Inc.’s Concise
Statement of Facts ¶¶ 1-2, ECF No. 76; Pacific Stock’s Concise
Statement of Facts in Opposition ¶ 1, ECF No. 94.
Pearson publishes school textbooks and other
educational materials in which it sometimes includes Pacific
Stock’s “stock photos.”
The licensing process commences when
Pearson sends a “billing request” to Pacific Stock.
See
Pearson’s CSOF ¶¶ 3-4, ECF No. 76; Pacific Stock’s CSOF ¶ 1, ECF
No. 94.
Copies of the billing requests are filed as Exhibit D,
ECF No. 79.
All of these requests contain similar information.
1
As used in this order, image numbers refer to the images
included in Exhibit A to the Complaint of June 30, 2011. At the
hearing on these motions, Pacific Stock withdrew its claims
pertaining to 20 images (numbers, 1, 2, 4 to 7, 11, 20, 21, 24,
31, 34, 66, 75, 84, and 86-90). See Transcript of February 19,
2013, ECF No. 117.
2
For example, with respect to image 13, a picture of the Great
Wall of China, Pearson informed Pacific Stock on or about January
21, 2000, that Pearson wished to use a 1/4-page image in a
textbook, that the circulation of the textbook would be “Up to
40,000,” and that the distribution region for the textbook would
be “North America.”
See ECF No. 79, PageID # 1141.
Pacific Stock’s practice is to respond to billing
requests by sending invoices.
Each invoice sent to Pearson
stated the scope of the license to use the photograph in issue,
as well as the price Pacific Stock was charging.
For example,
with respect to image 13, Pacific Stock sent Pearson an invoice
dated February 1, 2000.
The invoice stated that, for a certain
price, Pearson would have a “One time non-exclusive use” of a
1/4-page photograph of the Great Wall of China for a textbook
with a “Print-run: Up to 40,000” and “Distribution Area: North
America.”
See ECF No. 80, PageID # 1234.
The invoice stated:
“Rights: NO electronic use (web site, CDROM, or other media
use.)”
The invoice also provided, “Use of any image is
conditioned on the receipt of payment in full.
In the event of
unauthorized use, it is agreed that a retroactive license can be
made available at a fee of ten (10) times the normal reproduction
charge.”
Id.
Effective September 18, 2003, Pacific Stock agreed to
pricing terms for Pearson’s use of Pacific Stock’s stock
3
photographs.
See Ex. 9, ECF No. 84-3.
Pearson calls this
agreement a “preferred vendor agreement,” and says that the
agreement was attractive to Pacific Stock because it encouraged
Pearson’s use of Pacific Stock’s stock photographs by setting a
price and eliminating the need to negotiate for each individual
photograph.
See Pearson’s CSOF ¶¶ 6-8, ECF No. 76; Pacific
Stock’s CSOF ¶ 1, ECF No. 94.
The September 2003 agreement set a
“base rate” for up to a 1/2-page photograph, with distribution of
up to 40,000 copies in North America.
page, the “base rate” increased.
For a 3/4-page or full-
If distribution was over
40,000, a percentage was to be added to the “base rate.”
If
distribution was to exceed 100,000, a higher percentage was to be
added to the base rate.
See Ex. 9, ECF No. 84-3.
The invoices
for images 1 to 10 and 12 to 19 preceded the effective date of
the pricing agreement.2
See Ex. E, ECF No. 80.
Effective March 9, 2004, Pacific Stock and Pearson
agreed to more detailed pricing terms.
2
See Ex. 10, ECF No. 84-4.
Although the parties have filed many of the documents in
this case under seal, they originally did so without obtaining
court approval. Only after the court sought the parties’
compliance with Local Rule 83.12 was a motion to seal the
documents filed. Although the documents contain sensitive
business information, the court feels the need to provide some
minimal level of detail to take this matter out of the
theoretical realm and into a practical, understandable one. With
the sealed status of certain exhibits in mind, the court refrains
from stating dollar amounts and percentage numbers. The court
notes that, at trial, exhibits will likely be publicly available.
4
The terms set forth in this agreement are generally the same as
in the previous one.
In relevant part, the March 2004 agreement
clarified the pricing for “Extended Print Runs.”
If distribution
was over 40,000, the same percentage agreed to earlier was to be
added to the “base rate.”
If distribution was to exceed 100,000,
the same percentage agreed to earlier was to be added to the base
rate.
Id.
After the pricing agreements had been entered into,
Pearson continued to send “billing requests” to Pacific Stock for
use of stock photographs, and Pacific Stock continued to send
Pearson invoices containing licenses for the use of the
photographs.
For example, on or about January 12, 2006, Pearson
sent a “billing request” for a picture of a beach, image 22,
saying that it wished to use a 1/4-page picture in a textbook
with a circulation of up to 40,000, with distribution mostly in
the United States, but not more than 10% abroad.
Pearson
indicated that it was willing to pay an additional percentage
over the “base rate” for this use.
# 1147.
See Ex. D, ECF No. 79, PageID
Pacific Stock sent Pearson an invoice with a price for
use of the beach photograph.
The price was generally consistent
with the prices set forth in the pricing agreement.
Pacific
Stock granted Pearson a one-time, nonexclusive use of image 22
that allowed Pearson to use a 1/4-page picture in a textbook with
a run of up to 40,000 and distribution mostly in the United
5
States, with up to 10% abroad.
See Ex. E, ECF No. 80, PageID
# 1250.
At the hearing on the motions, Pearson indicated that,
except with respect to image numbers 134 and 135, it had not
asked Pacific Stock for extensions or expansions of the various
image licenses.
Barbara Brundage testified in October 2012 that she had
become suspicious that publishers might have been exceeding the
terms of the licenses Pacific Stock was granting “Over the past
couple of years.”
See Deposition of Barbara Brundage at 49, Oct.
25, 2012, ECF No. 98-2.
Brundage apparently became suspicious of
how Pearson was using the photographs in the Spring of 2011.
Id.
at 51.
On June 31, 2011, Pacific Stock filed the present
Complaint against Pearson.
See ECF No. 1.
The Complaint asserts
that Pearson committed copyright infringement by violating
licenses for 151 stock photographs.
fraud and fraudulent concealment.
It also asserts claims of
Id.
Pacific Stock has
withdrawn its claims with respect to 20 photographs, leaving
licenses for 131 still in dispute.
Pacific Stock’s motion for partial summary judgment
addresses 59 of the 131 images.
See Pacific Stock’s Motion for
Summary Judgment, ECF No. 70 (seeking summary judgment with
respect to image numbers 3, 8, 9, 10, 12, 13, 14, 15, 16, 18, 19,
6
22, 28, 29, 30, 33, 35, 36, 37, 63, 64, 67, 68, 69, 70, 71, 74,
76, 78, 80, 85, 91, 92, 98, 103, 104, 105, 107, 108, 112, 113,
114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126,
127, 134, 135, 136, and 146).
A report from “Global Rights Data Warehouse” indicates
that Pearson may have exceeded the licenses granted to it with
respect to each of the 59 photographs.
This report was created
by Pearson, apparently for this litigation, and turned over to
Pacific Stock.
PageID #440.
See Decl. of Paul Maki ¶ 3(f), ECF No. 71-2,
For example, with respect to image 13, which was
licensed for use in up to 40,000 copies of a textbook, the report
notes that the image may have been used in more than 140,000
copies.
See Ex. F, ECF No. 81, PageID # 1421.
Similarly, the
license for image 22 was for 40,000, but may have been used in
more than 45,000 volumes.
Id., PageID # 1424.
Pacific Stock has
summarized the data in Exhibit F and reprinted the pertinent data
in Exhibit A, which is more easily readable than Exhibit F.
See
ECF No. 78.
Pearson notes that the report tracks the number of
textbook volumes, not the number of times an image was used.
The
report therefore does not speak to whether any of the images was
actually used in a textbook.
At the hearing on the motion, Pearson asserted that the
images may not have been included in the textbooks as a result of
7
last-minute editorial decisions.
Pearson also noted that, when
Pacific Stock began questioning Pearson’s use of the images,
Pearson began removing the photographs from the textbooks.
While
Pearson conceded at the hearing that it was likely that a high
percentage of the textbooks did contain the images, it turns out
that no one, not even Pacific Stock, has actually reviewed the
textbooks to determine whether the images are actually included
in them.
Pearson admitted at the hearing that, if the textbooks
contained the images, Pearson had exceeded the numerical limits
of various licenses.
Pacific Stock complains that Pearson should not be
allowed to argue at this time that the images may not have been
used in the textbooks.
Pacific Stock says that, in response to
an interrogatory concerning “Product Use,” Pearson referred
Pacific Stock to various documents, including Exhibit F.
Nos. 103-4, Interrogatory No. 3.
See ECF
“Product Use” as that term was
used in the Interrogatories was defined by Pacific Stock as
meaning “all uses of any of the Images as a part of or related or
ancillary to that listed in the ‘Title’ column on Exhibit A.”
ECF No. 103-3.
Pearson is apparently taking the position that
determining the number of times an image was used in a textbook
cannot be discerned from Exhibit F alone.
For its part, Pacific
Stock is complaining that Pearson gave it no reason to think that
Exhibit F’s references to textbooks named in billing requests or
8
invoices might actually be irrelevant to the interrogatory
response because those textbooks might not include images
licensed by Pacific Stock.
On the issue of who owns the copyrights to the images,
Pacific Stock claims to have a Certificate of Registration from
the Register of Copyrights for each of the 59 images at issue in
its motion for partial summary judgment.
73.
See Ex. C, ECF Nos. 72-
Pearson challenges the registration of 18 of the 59 images
(numbers 8, 22, 28, 29, 30, 35, 36, 78, 85, 92, 103, 105, 115,
125, 134, 135, 136, and 146).
99.
See Opposition at 27 n.6, ECF No.
Pearson is not contesting Pacific Stock’s proper
registration of the other 41 images (numbers 3, 9, 10, 12, 13,
14, 15, 16, 18, 19, 33, 37, 63, 64, 67, 68, 69, 70, 71, 74, 76,
80, 91, 98, 104, 107, 108, 112, 113, 114, 116, 117, 118, 119,
120, 121, 122, 123, 124, 126, and 127).
Pearson notes the 18 disputed images were part of six
registration certificates corresponding to compilations of the
work of multiple photographers.
Pearson contends that a
registration of a collective work does not have the effect of
registering each of the individual works included in the
collective work.
Pacific Stock protests that it registered the
18 images in the manner it did pursuant to 37 C.F.R.
§ 202.3(b)(5) and guidance from the Copyright Office.
of Barbara Brundage ¶¶ 7, 8, and 11, ECF No. 27-1.
9
See Decl.
The ownership Pacific Stock asserts in the various
copyrighted images was obtained through assignments.
See Decl.
of Barbara Brundage ¶ 8, ECF No. 71-1 (“Pacific Stock has been
assigned, and is the owner of, the copyrights in all of the
images at issue in this case.”).
In her deposition, Brundage
explained that Pacific Stock and the photographers entered into
“Contributor Agreements.”
According to Brundage, from 1992 to
2003, photographers gave Pacific Stock the exclusive right to
license their images in Hawaii, but retained the right to license
their images outside of Hawaii.
ECF No. 98-2.
See Brundage Test. at 191-95,
Beginning in 2003, the “Contributor Agreements”
provided Pacific Stock with a worldwide exclusive right to
license the photographers’ images.
Id. at 197-98.
Each
photographer still retained the right to use the images in the
photographer’s personal marketing materials and to personally
license the image as well.
Id. at 199.
Pacific Stock says it also obtained through assignments
the right to pursue copyright violations on behalf of the various
photographers.
See, e.g., ECF Nos. 76-16 and 76-17.
An
assignment dated June 14, 2011, from Doug Perrine states that
Perrine
hereby assigns to Agency [Pacific Stock] coownership of all copyrights in the image.
This assignment authorizes Agency, in its
sole discretion, to present, litigate and
settle any accrued or later accruing claims,
causes of action, choses in action--which is
10
the personal right to bring a case--or
lawsuits, brought by Agency to address
unauthorized uses of the image by licensees
of Agency, as if Agency were the undersigned.
ECF No. 76-16.
An assignment dated June 17, 2011, from Jody Watt
almost identically provides that Watt
hereby assigns to Agency [Pacific Stock]
ownership of all copyrights in the image.
This assignment authorizes Agency, in its
sole discretion, to present, litigate and
settle any accrued or later accruing claims,
causes of action, choses in action--which is
the personal right to bring a case--or
lawsuits, brought by Agency to address
unauthorized uses of the image by licensees
of Agency, as if Agency were the undersigned.
ECF No. 76-17.
The only difference between the assignments is
that Perrine assigns “co-ownership,” while Watt assigns
“ownership.”
Pearson seeks summary judgment on certain grounds with
respect to all 131 of the images in issue.
It also says that,
with respect to 75 images (numbers 1, 4 to 6, 11, 20, 21, 23 to
27, 31, 32, 34, 37 to 39, 50 to 62, 65 to 66, 72 to 73, 77, 79,
83, 84, 86 to 90, 93 to 97, 99 to 102, 106, 109 to 111, 129 to
133, 136, 139 to 145, and 147 to 151), Pacific Stock has no
evidence at all that Pearson exceeded the scope of the licenses.
This list includes 2 images that Pacific Stock has also moved for
summary judgment on, image numbers 37 and 136.
It also includes
17 images concerning which Pacific Stock has withdrawn its claims
(numbers 1, 4 to 6, 11, 20, 21, 24, 31, 34, 66, 84, and 86 to
11
90).
Thus, Pearson’s argument that Pacific Stock lacks evidence
that the licenses were exceeded ends up concerning 58 images, not
75.
III.
STANDARD.
Under Rule 56 of the Federal Rules of Civil Procedure,
summary judgment shall be granted when “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a) (2010).
Fed. R. Civ.
See Addisu v. Fred Meyer, Inc., 198 F.3d 1130,
1134 (9th Cir. 2000).
The movants must support their position
that a material fact is or is not genuinely disputed by either
“citing to particular parts of materials in the record, including
depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including those made
for the purposes of the motion only), admissions, interrogatory
answers, or other materials”; or “showing that the materials
cited do not establish the absence or presence of a genuine
dispute, or that an adverse party cannot produce admissible
evidence to support the fact.”
Fed. R. Civ. P. 56(c).
One of
the principal purposes of summary judgment is to identify and
dispose of factually unsupported claims and defenses.
Celotex
Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
Summary judgment must be granted against a party that
fails to demonstrate facts to establish what will be an essential
12
element at trial.
See id. at 323.
A moving party without the
ultimate burden of persuasion at trial--usually, but not always,
the defendant--has both the initial burden of production and the
ultimate burden of persuasion on a motion for summary judgment.
Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102
(9th Cir. 2000).
The burden initially falls on the moving party
to identify for the court “those portions of the materials on
file that it believes demonstrate the absence of any genuine
issue of material fact.”
T.W. Elec. Serv., Inc. v. Pac. Elec.
Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987) (citing
Celotex Corp., 477 U.S. at 323); accord Miller, 454 F.3d at 987.
“A fact is material if it could affect the outcome of the suit
under the governing substantive law.”
Miller, 454 F.3d at 987.
When the moving party fails to carry its initial burden
of production, “the nonmoving party has no obligation to produce
anything.”
In such a case, the nonmoving party may defeat the
motion for summary judgment without producing anything.
Fire, 210 F.3d at 1102-03.
Nissan
On the other hand, when the moving
party meets its initial burden on a summary judgment motion, the
“burden then shifts to the nonmoving party to establish, beyond
the pleadings, that there is a genuine issue for trial.”
454 F.3d at 987.
Miller,
This means that the nonmoving party “must do
more than simply show that there is some metaphysical doubt as to
the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio
13
Corp., 475 U.S. 574, 586 (1986) (footnote omitted).
The
nonmoving party may not rely on the mere allegations in the
pleadings and instead “must set forth specific facts showing that
there is a genuine issue for trial.”
Porter v. Cal. Dep’t of
Corr., 419 F.3d 885, 891 (9th Cir. 2005) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 256 (1986)).
“A genuine
dispute arises if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.”
California v.
Campbell, 319 F.3d 1161, 1166 (9th Cir. 2003); Addisu v. Fred
Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000) (“There must be
enough doubt for a ‘reasonable trier of fact’ to find for
plaintiffs in order to defeat the summary judgment motion.”).
On a summary judgment motion, “the nonmoving party’s
evidence is to be believed, and all justifiable inferences are to
be drawn in that party’s favor.”
Miller, 454 F.3d at 988
(quotations and brackets omitted).
IV.
PACIFIC STOCK’S MOTION FOR PARTIAL SUMMARY JUDGMENT.
Pacific Stock moves for summary judgment on its
copyright infringement claim with respect to 59 images.
Pacific
Stock alleges that Pearson used 59 of its copyrighted photographs
in a manner exceeding the terms of the licenses granted by
Pacific Stock.
As the Ninth Circuit has noted, “A licensee
infringes the owner’s copyright if its use exceeds the scope of
14
its license.”
S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087
(9th Cir. 1989).
Questions of fact preclude the grant of partial summary
judgment to Pacific Stock with respect to the copyright
infringement claim concerning those 59 images.
A.
Pacific Stock Fails to Establish That the Images
Were Actually Included in Textbooks In a Manner
Exceeding the Scope of the Licenses.
As demonstrated by a report Pearson itself prepared,
Pearson may have exceeded the licenses it had for the 59 images.
See Ex. F, ECF No. 81.
Each license contains limits.
Most say
that Pearson is granted the right to use an image in up to 40,000
copies of a textbook distributed in North America.
ECF No. 80.
See Ex. E,
Pearson’s report, Exhibit F, indicates that the
number of copies printed exceeded the numerical limit in the
license.
The problem is that it remains unclear whether any of
the 59 images was actually included in any of Pearson’s
textbooks.
If they were included, Pearson likely exceeded the
scope of its various licenses by exceeding the limits in the
licenses, but this court cannot say that there is no issue of
fact as to whether the images indeed appeared in the textbooks.
The court is not without sympathy for Pacific Stock in
feeling ambushed in this regard, but Pearson clearly stated in
its response to Pacific Stock’s interrogatory about “Product Use”
that it was referring Pacific Stock to numerous materials,
15
including but certainly not limited to Exhibit F.
Pacific Stock
does not say that Exhibit F and the other materials in
combination would fail to respond to the interrogatory.
Instead,
Pacific Stock chooses to place all its reliance on Exhibit F.
Exhibit F is simply an insufficient basis for summary judgment as
to the 59 images in issue.
If Pacific Stock does establish use exceeding the
limits in a license, that use would be evidence of copyright
infringement.
The limits in the license define the scope of the
license; they are not simply covenants enforceable only through a
breach of contract action.
Pearson’s reliance on Netbula, LLC, v. Storage Tech.
Corp., 2008 WL 228036 (N.D. Cal. Jan. 18, 2008), for the
proposition that use exceeding the limit of a license is a
contractual issue is misplaced.
That very case noted that, “when
a license is limited in scope and the licensee acts outside the
scope, the licensor can bring an action for copyright
infringement.”
Id. at *2 (quotation marks omitted).
A
contractual right, by contrast, is enforceable only through a
breach of contract action, which usually provides a lesser remedy
than a copyright infringement action.
See id.
Accord Sun
Microsystems, Inc. v. Microsoft Corp., 2000 WL 33223397, *3 (N.D.
Cal. May 8, 2000) (“a licensee’s breach of a covenant independent
of the license grant does not support a claim for copyright
16
infringement”).
In Netbula, the license at issue contained a
limit on the number of software users.
Noting that the license
did not limit how the software was to be used, the court
determined that the numerical limit on users involved a
contractual promise.
See 2008 WL 228036 at *5.
Numerous other decisions provide a closer analogy to
the present case.
LGS Architects, Inc. v. Concordia Homes of
Nevada, 434 F.3d 1150, 1157-58 (9th Cir. 2006), involved a
license issued by an architect to allow use of designs in a
certain subdivision.
The developer attempted to use the designs
in a different subdivision.
The Ninth Circuit viewed the
developer’s use as exceeding the scope of the license.
Id.
In the same vein, the district court in Grant Heilman
Photography, Inc. v. John Wiley & Sons, Inc., 864 F. Supp. 2d 316
(E.D. Pa. 2012), faced with a preliminary injunction motion,
ruled that a stock photography company was likely to succeed on
the merits of its claim for copyright infringement.
The license
in Heilman limited a textbook publisher to using photographs in
20,000 textbooks, and the publisher exceeded that numerical
limit.
The analyses in LGS Architects and Grant Heilman
Photography are akin to the approach taken in MDY Industries, LLC
v. Blizzard Entertainment, Inc., 629 F.3d 928 (9th Cir. 2010), as
amended on denial of rehearing.
In MDY, the Ninth Circuit
17
examined the difference between exceeding the scope of a license,
which results in a cause of action for copyright infringement,
and the breach of a covenant, which results in a breach of
contract action.
The Ninth Circuit stated, “To recover for
copyright infringement based on breach of a license agreement,
(1) the copying must exceed the scope of the defendant’s license
and (2) the copyright owner’s complaint must be grounded in an
exclusive right of copyright (e.g., unlawful reproduction or
distribution.”
Id. at 940.
In MDY, the Ninth Circuit provided an example clearly
applicable to the present case:
“[C]onsider a license in which the copyright
owner grants a person the right to make one
and only one copy of a book with the caveat
that the licensee may not read the last ten
pages. Obviously, a licensee who made a
hundred copies of the book would be liable
for copyright infringement because the
copying would violate the Copyright Act’s
prohibition on reproduction and would exceed
the scope of the license. Alternatively, if
the licensee made a single copy of the book,
but read the last ten pages, the only cause
of action would be for breach of contract,
because reading a book does not violate any
right protected by copyright law.”
Id. (quoting Storage Tech. Corp. v. Custom Hardware Eng’g &
Consulting, Inc., 421 F.3d 1307, 1316 (Fed. Cir. 2005)).
This
case involves claims that Pearson exceeded the scope of its
various licenses with respect to the number of textbooks in which
an image could appear.
Those claims mirror the example in MDY of
18
the person who made a hundred copies of a book while licensed to
make only a single copy.
That person “would be liable for
copyright infringement,” having exceeded the scope of the
license.
Id.
Because Pacific Stock’s claim goes to exceeding
the scope of an exclusive right of copyright granted in the
various licenses, as opposed to a covenant contained in those
licenses, Pacific Stock has a copyright infringement claim
against Pearson for exceeding the numerical limits of the various
licenses.
If Pearson wanted to exceed those numerical limits, it
needed to obtain a license to do so.
As admitted by Pearson at
the hearing on the present motions, with respect to most of the
images, Pearson made no attempt to obtain further licenses to use
the images.
To the extent Pearson relies on the district court’s
ruling in Sun Microsystems as requiring a breach of contract
action when a numerical limit in a license is exceeded, this
court notes that Sun Microsystems was decided before the Ninth
Circuit issued its MDY decision.
B.
The Denial of Pacific Stock’s Motion is Not Based
on Pearson’s Other Arguments.
The denial of Pacific Stock’s motion for partial
summary judgment rests solely on the factual issue identified
above.
That issue makes it unnecessary for this court to address
the other arguments advanced by Pearson in opposition to Pacific
Stock’s motion.
19
However, because it may assist the parties in
presenting future motions, this court explains here why it deems
Pearson’s other arguments unpersuasive.
1.
Pearson Does Not Establish That Questions of
Fact as to Pacific Stock’s Copyright
Registrations Preclude Summary Judgment.
Pearson argues that Pacific Stock fails to show that it
has rights in 18 of the 59 images that are the subject of Pacific
Stock’s motion.
A registered copyright is generally a
precondition to a copyright infringement claim.
§ 411.
See 17 U.S.C.
To obtain the protection of federal copyright laws, the
holder of a valid copyright may register the copyright with the
United States Copyright Office.
See 17 U.S.C. § 408.
In
applying for copyright registration, an applicant who is not the
author of the work that is the subject of the application must
provide “a brief statement of how the claimant obtained ownership
of the copyright.”
Id.
A registration creates a rebuttable
presumption of validity:
In any judicial proceedings the certificate
of a registration made before or within five
years after first publication of the work
shall constitute prima facie evidence of the
validity of the copyright and of the facts
stated in the certificate. The evidentiary
weight to be accorded the certificate of a
registration made thereafter shall be within
the discretion of the court.
17 U.S.C. § 410(c).
“A certificate of copyright registration,
therefore, ‘shifts to the defendant the burden to prove the
20
invalidity of the plaintiff’s copyrights.’”
Entm’t Research Grp.
v. Genesis Creative Grp., 122 F.3d 1211, 1217 (9th Cir. 1997)
(quoting Masquerade Novelty, Inc. v. Unique Indus., Inc., 912
F.2d 663, 668 (3d Cir. 1990)).
“An accused infringer can rebut
this presumption of validity, however.
To rebut the presumption,
an infringement defendant must simply offer some evidence or
proof to dispute or deny the plaintiff’s prima facie case of
infringement.”
Id. at 1217-18 (internal citations omitted).
Pacific Stock claims ownership of the 59 images through
assignments.
See Decl. of Barbara Brundage ¶ 8, ECF No. 71-1
(“Pacific Stock has been assigned, and is the owner of, the
copyrights in all of the images at issue in this case.”).
In her
deposition, Brundage explained that Pacific Stock and the
photographers entered into “Contributor Agreements.”
She
testified that, from 1992 to 2003, photographers provided Pacific
Stock with an exclusive right to license their images in Hawaii.
See Brundage Test. at 191-95, ECF No. 98-2.
Beginning in 2003,
the “Contributor Agreements” provided Pacific Stock with a
worldwide exclusive right to license the photographers’ images.
Id. at 197-98.
Except with respect to the images created by Doug
Perrine and Jody Watt, Pearson does not challenge Pacific Stock’s
ownership of the copyrights.
With respect to Perrine and Watt,
Pearson says that the 2011 agreements were insufficient to
21
transfer exclusive ownership of the copyrights to Pacific Stock.
See, e.g., ECF Nos. 76-16 and 76-17.
The problem with this
argument, however, is that Pearson does not meet its burden of
establishing that the earlier Contributor Agreements had not
transferred such ownership.
Images by Perrine and Watt appear to be among 18 of the
59 images whose copyright registrations Pearson is challenging
(numbers 8, 22, 28, 29, 30, 35, 36, 78, 85, 92, 103, 105, 115,
125, 134, 135, 136, and 146).
Pearson is not contesting that
Pacific Stock properly registered the other 41 images (numbers 3,
9, 10, 12, 13, 14, 15, 16, 18, 19, 33, 37, 63, 64, 67, 68, 69,
70, 71, 74, 76, 80, 91, 98, 104, 107, 108, 112, 113, 114, 116,
117, 118, 119, 120, 121, 122, 123, 124, 126, and 127).
See
Opposition at 27 n.6, ECF No. 99.
Pearson claims that Pacific Stock improperly used
compilations in registering the 18 images.
Pacific Stock, on the
other hand, says it registered the photos in the manner it did
because it was following directions from the Copyright Office.
On the present record, the court sees no reason to fault Pacific
Stock for having registered the photos in accordance with the
guidance given by the Copyright Office.
Given the state of the
present record, the court is not persuaded by Pearson’s citation
of cases indicating that certain compilation registrations were
22
insufficient to register the individual components of a
compilation.
Pearson complains that the registrations for the 18
images do not identify the authors of each work.
unsuccessful in establishing this point.
Pearson is
The registrations for
the various images are attached as Exhibit C, ECF No. 72-1.
Exhibit C, which is about 2 inches thick, is an example of the
kind of exhibit this court has struggled to decipher.
The
parties do not tell this court where in a voluminous exhibit the
court should look, assuming the court will make its way through
numerous and lengthy exhibits.
This approach violates Local Rule
56.1 (c) (“The concise statement shall particularly identify the
page and portion of the page of the document referenced.
The
document referred to shall have relevant portions highlighted or
otherwise emphasized.”).
Pursuant to Local Rule 56.1(f), “the
court shall have no independent duty to review exhibits in their
entirety, but rather will review only those portions of the
exhibits specifically identified in the concise statements.”
Notwithstanding the considerable burden the parties have placed
on the court, the court has done its best to parse Exhibit C.
For purposes of the present discussion, the court uses
as an example image 95, which appears to be representative of the
registrations for the various compilations.
Image 95 appears to
have been registered as part of the documents submitted as ECF
23
No. 72-1, PageID #s 448 to 467.
Although Pearson argues that the
compilation registrations did not identify the “authors” of the
pictures, the photographers appear to have been identified in the
Continuation Sheets for Application Forms.
Unfortunately, the
text of the exhibit is very small and somewhat blurry, making a
definitive determination difficult.
Assuming the photographer,
or author, is identified, this case is distinguishable from the
cases cited by Pearson on this point.
In summary, Pearson is unpersuasive in urging the court
to deny any part of Pacific Stock’s partial summary judgment
motion on the basis of defects in the copyright registrations.
2.
Pearson Does Not Show That Questions of Fact
Relating to the Preferred Vendor Agreements
Preclude Summary Judgment as to Pacific
Stock’s Copyright Infringement Claims.
The court is similarly unpersuaded by Pearson’s
argument that questions of fact relating to the preferred vendor
agreements preclude summary judgment on the copyright
infringement claims by Pacific Stock.
Although the agreements
set forth agreed-upon prices for Pearson’s use of Pacific Stock’s
photographs, they give Pearson no right to any use greater than
Pearson paid for.
Pearson may well have been entitled under the
preferred vendor agreements to enhance the licenses by, for
example, increasing the number of times it could reproduce an
image.
However, any such enhancement had to be requested and
paid for.
Nothing in the agreements allowed Pearson to
24
unilaterally enhance its usage without notification to Pacific
Stock and without payment; certainly nothing in the agreements
rendered inapplicable copyright infringement laws requiring
compliance with the scope of a limited license when a licensee
has not even sought a license enhancement.
3.
Pearson Does Not Show That an “Implied
License” Precludes Summary Judgment on
Pacific Stock’s Copyright Infringement
Claims.
Pearson argues that it had an “implied license”
allowing it to use Pacific Stock’s images in the manner it did.
Although there is no evidence that Pacific Stock ever refused a
request by Pearson to use a stock photograph in a textbook, that
does not mean that Pacific Stock was barred from refusing a
request.
Nor does that mean that Pearson was free to use the
images in any way it wanted, without even requesting permission.
In Field v. Google, Inc., 412 F. Supp. 2d 1106, 1116
(D. Nev. 2006), the district court noted that a license can be
implied when a copyright holder engages in conduct giving rise to
an inference that the owner consents to the use.
This court has
not been presented with evidence of any conduct or course of
dealing suggesting that Pearson was free to do as it pleased.
the contrary, each invoice issued by Pacific Stock stated, “Use
To
of any image is conditioned on receipt of payment in full.”
25
4.
Pearson Does Not Show that Pacific Stock’s
Copyright Infringement Claims are TimeBarred.
Finally, Pearson asks the court to deny Pacific Stock’s
motion on the ground that the copyright infringement claims are
untimely.
Although raised in its opposition to Pacific Stock’s
motion, Pearson is in essence relying on an affirmative defense
with respect to which it has the burden of proof.
See Cal.
Sansome Co. v. U.S. Gypsum, 55 F.3d 1402, 1406 (9th Cir. 1995)(“A
defendant raising the statute of limitations as an affirmative
defense has the burden of proving the action is time barred.”).
The Copyright Act provides, “No civil action shall be
maintained under the provisions of this title unless it is
commenced within three years after the claim accrued.”
§ 507(b).
17 U.S.C.
“A cause of action for copyright infringement accrues
when one has knowledge of a violation or is chargeable with such
knowledge.”
Roley v. New World Pictures, Ltd., 19 F.3d 479, 481
(9th Cir. 1994).
Accordingly, the Ninth Circuit has noted that
“the statute of limitations does not prohibit recovery of damages
incurred more than three years prior to the filing of suit if the
copyright plaintiff was unaware of the infringement, and that
lack of knowledge was reasonable under the circumstances.”
Polar
Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 706 (9th Cir.
2004).
26
Pearson presents no evidence indicating that Pacific
Stock either knew or should have known of the alleged copyright
violations more than three years before the filing of this
action.
Brundage, the sole owner of Pacific Stock, testified in
October 2012 that she became suspicious that publishers might
have been exceeding the terms of Pacific Stock’s licenses “Over
the past couple of years.”
See Deposition of Barbara Brundage at
49, Oct. 25, 2012, ECF No. 98-2.
Brundage’s suspicions as to
Pearson’s use of the photographs apparently arose beginning in
the Spring of 2011.
Id. at 51.
filed on June 30, 2011.
The Complaint in this case was
Pearson fails to establish that Pacific
Stock’s action is untimely.
V.
PEARSON’S MOTION FOR SUMMARY JUDGMENT.
A.
Pearson is Not Entitled to Summary Judgment on
Pacific Stock’s Claims Relating to 58 Images for
Which Pearson Claims Pacific Stock Presents No
Evidence.
Pearson argues that, with respect to 58 images (image
numbers 23, 25 to 27, 32, 37 to 39, 50 to 62, 65, 72 to 73, 77,
79, 83, 93 to 97, 99 to 102, 106, 109 to 111, 129 to 133, 136,
139 to 145, and 147 to 151), Pacific Stock lacks evidence to
support any claim that the licenses were exceeded, and that
summary judgment should therefore be granted to Pearson as to
those images.
In fact, the record includes evidence creating
questions of fact that preclude summary judgment with respect to
the 58 images.
27
First, with respect to image numbers 37 and 136, the
court looks to Exhibit F, ECF No. 81.
Exhibit F, a document
prepared by Pearson itself, suggests that Pearson may have
exceeded the numerical limits in the licenses for those images.
While, as noted earlier in this order, the import of Exhibit F is
in dispute, it suffices to avoid summary judgment in Pearson’s
favor with respect to image numbers 37 and 136.
That leaves 56
images in issue as to Pearson’s “lack of evidence” argument.
Pacific Stock responded to Pearson’s motion by
withdrawing its claims as to certain images, but its memorandum
opposing Pearson’s motion said nothing about these specific 56
images.
However, because the court is considering both Pacific
Stock’s partial summary judgment motion and Pearson’s summary
judgment motion simultaneously, and because Pacific Stock’s
opposition to Pearson’s motion conspicuously refers to Pacific
Stock’s own motion, the court reaches out and examines Exhibit B,
ECF No. 78, submitted in support of Pacific Stock’s partial
summary judgment motion.
As counsel for Pacific Stock explains
in his declaration, Exhibit B is a summary of information culled
from Pearson’s own documents, specifically Exhibit H, ECF No. 745, a CD containing information about the media in which Pearson
published Pacific Stock’s images, and about the geographical
distribution of Pearson’s publications.
¶¶ 3(b), (h), (i), ECF No. 71-2.
28
Declaration of Paul Maki
According to Exhibit B, all of the 56 images were used
by Pearson in either forms of media (e.g., electronic) or
geographical locations beyond the provisions of the licenses.
This evidence precludes summary judgment on the basis of “lack of
evidence.”
B.
Pearson’s Other Arguments Relating to Copyright
Infringement Are Unsuccessful.
In its summary judgment motion, Pearson advances other
arguments applicable to the copyright infringement claims for all
131 images covered by Pacific Stock’s Complaint.
These arguments
mirror the arguments Pearson raised in opposition to Pacific
Stock’s partial summary judgment motion.
Thus, for example,
Pearson argues that copyright infringement laws are inapplicable
because its actions involve only breaches of covenants, that the
preferred vendor agreements preclude copyright infringement
claims, and that the Watt and Perrine photographs were not
properly registered.
These arguments fail to carry the day with
respect to Pearson’s own motion even more decidedly than they
failed when Pearson sought to achieve the less burdensome task of
defeating Pacific Stock’s motion.
C.
Pearson is Not Entitled to Summary Judgment on
Pacific Stock’s Fraud and Fraudulent Concealment
Claims.
Pearson also seeks summary judgment with respect
to Pacific Stock’s fraud and fraudulent concealment claims,
29
arguing that the record does not contain evidence of fraud or
fraudulent concealment.
This court disagrees.
To prevail on a fraud claim, a plaintiff must
demonstrate (1) that false representations were made by the
defendant, (2) with knowledge of their falsity (or without
knowledge of their truth or falsity), (3) in contemplation of
plaintiff’s reliance upon them, and (4) that the plaintiff
detrimentally relied on them.
Hawaii’s Thousand Friends v.
Anderson, 70 Haw. 276, 286, 768 P.2d 1293, 1301 (1989).
Fraudulent concealment is just a form of fraud.
See
Tachibana v. Colo. Mountain Dev., Inc., No. 07-CV-00364, 2011 WL
1327113, *3 n.7 (D. Haw. Apr. 5, 2011) (“We interpret the
reference to ‘fraudulent concealment’ as simply a means of
clarifying for Defendants that the type of fraud alleged includes
fraud by omission and concealment, and not just affirmative
conduct.”); Sung v. Hamilton, 710 F. Supp. 2d 1036, 1047 (D. Haw.
2010) (treating a fraudulent concealment claim as fraud based on
alleged failures to disclose information); Associated Eng’rs &
Contractors, Inc. v. State, 58 Haw. 187, 219-20, 567 P.2d 397,
418 (1977) (“Fraud in its generic sense, especially as the word
is used in courts of equity, comprises all acts, omissions and
concealments involving a breach of legal or equitable duty and
resulting in damage to another.”).
30
A claim for fraudulent
concealment is therefore evaluated under the four fraud elements
discussed above.
Sung, 710 F. Supp. 2d at 1047.
Pearson argues that Pacific Stock lacks any evidence on
which a fraud claim may be based.
However, Pacific Stock has
submitted evidence demonstrating a possible fraud claim.
For
example, with respect to image 14, Pearson sent Pacific Stock a
billing request on July 30, 2002, asking to use the image in “Up
to 40,000” copies of a textbook.
See ECF No. 79, PageID # 1142.
Despite that numerical limitation in its own billing request,
Pearson appears to have made a forecast in October of 2001 that
it would print more than 55,000 copies of the textbook.
No. 100-2, PageID # 2054.
See ECF
Possibly, Pearson made adjustments to
its projections between October 2001 and July 2002, but the
evidence is sufficient for the purposes of this motion to suggest
that Pearson asked for a license to use an image in “Up to
40,000” volumes while planning to use the image in a greater
number of volumes.
The extent of the fraud that Pacific Stock will be able
to prove at trial is unclear, but the court concludes that there
are, at the very least, triable factual issues as to fraud.
VI.
CONCLUSION.
The court denies Pacific Stock’ motion for partial
summary judgment.
The court also denies Pearson’s motion for
summary judgment.
Given the dismissal of copyright infringement
31
claims arising out of 20 images (1, 2, 4 to 7, 11, 20, 21, 24,
31, 34, 66, 75, 84, and 86-90), 131 images remain in issue with
respect to Pacific Stock’s copyright infringement claims.
The parties should immediately contact the Magistrate
Judge assigned to this case to hold a settlement conference.
At
the discretion of the Magistrate Judge, the parties may be
required to have representatives with settlement authority attend
the settlement conference.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, February 26, 2013.
/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge
Pacific Stock, Inc. v. Pearson Education, Inc., Civ. No. 11-00423 SOM/BMK; ORDER
DENYING PACIFIC STOCK’S MOTION FOR PARTIAL SUMMARY JUDGMENT; ORDER DENYING PEARSON
EDUCATION’S MOTION FOR SUMMARY JUDGMENT
32
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