Photographic Illustrators Corporation v. Orgill, Inc. et al
Filing
194
Chief Judge Patti B. Saris: MEMORANDUM AND ORDER:PIC's motion for summary judgment (Docket No. 172) is DENIED, and Orgill's motion for summary judgment (Docket No. 167) is ALLOWED. SO ORDERED. (Lara, Miguel)
Case 1:14-cv-11818-PBS Document 194 Filed 04/04/19 Page 1 of 34
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
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Plaintiff,
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v.
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ORGILL, INC.,
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Defendant.
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___________________________________)
PHOTOGRAPHIC ILLUSTRATORS
CORPORATION,
Civil Action
No. 14-11818-PBS
MEMORANDUM AND ORDER
April 4, 2019
Saris, C.J.
INTRODUCTION
This copyright dispute involves photographs of lighting
products, like light bulbs. Plaintiff Photographic Illustrators
Corporation (“PIC”), a Massachusetts company specializing in
commercial photography, licensed photographs to Osram Sylvania,
Inc. (“OSI”) of lighting products that OSI manufactures and
sells. Defendant Orgill, Inc. is a distributor of OSI products
and uses some of these images in its online and print marketing
materials. PIC brought claims against Orgill under the Copyright
Act, the Digital Millennium Copyright Act (“DMCA”), and the
Lanham Act based on Orgill’s use of its photographs. In 2015,
the Court granted summary judgment to Orgill on the DMCA and
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Lanham Act claims but denied Orgill’s request for summary
judgment on the copyright infringement claim. See Photographic
Illustrators Corp. v. Orgill, Inc., 118 F. Supp. 3d 398 (D.
Mass. 2015) (PIC). The case was then stayed pending resolution
of an arbitration involving PIC, OSI, and other distributors of
OSI products. In November 2017, the arbitrator issued an award
resolving all of the claims in the arbitration.
Orgill has now renewed its motion for summary judgment on
the copyright infringement claim. Orgill asserts that it
received a sublicense that authorized its use of PIC’s images
and argues that the arbitrator’s award precludes PIC from
contesting this defense. PIC has also moved for summary
judgment, contending that Orgill did not receive a sublicense,
its use of approval images falls outside its sublicense, and its
sublicense is conditioned on including attribution to PIC on the
images, which Orgill did not do.
After hearing, the Court DENIES PIC’s motion for summary
judgment (Docket No. 172) and ALLOWS Orgill’s motion for summary
judgment (Docket No. 167).
FACTUAL BACKGROUND
The following facts are undisputed except where otherwise
stated. The Court assumes familiarity with the background of the
case from the prior summary judgment opinion. See PIC, 118 F.
Supp. 3d at 400-02.
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I.
PIC’s Copyright License with OSI
This case concerns photographic images that Paul Picone, a
photographer for PIC, took of OSI’s lighting products. PIC
provided OSI with these images to use in sales and marketing. To
this end, PIC had a licensing agreement with OSI (the “PIC-OSI
Agreement”), which gave OSI “a non-exclusive, worldwide license
in and to all the Images and the copyrights thereto to freely
Use, sub-license Use, and permit Use, in its sole and absolute
discretion, in perpetuity, anywhere in the world.” Dkt. No. 17311 ¶ 9. According to the terms of the PIC-OSI Agreement, “Use”
is to be given the “great possible interpretation,” and
includes, but is not limited to, the right to “copy, edit,
modify, prepare derivative works, reproduce, transmit, display,
broadcast, print, publish, use in connection with any
media . . . , and store in a database.” Id. ¶ 2(d). The
licensing agreement barred OSI from “sub-licens[ing] images in
exchange for valuable consideration such as a fee (e.g., as
stock photography)” (the “fee provision”). Id. ¶ 9. It also
provided that, “[t]o the extent reasonably possible and
practical, OSI shall . . . include a copyright notice indicating
PIC as the copyright owner and/or include proper attribution
indicating Paul Picone as the photographer for Images Used by
OSI” (the “attribution requirement”). Id. ¶ 10(b).
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II.
OSI’s Copyright Sublicense Agreement with Orgill
Orgill, a wholesale distributor for OSI, maintains a
network of retail dealers who sell hardware, home improvement
supplies, and building materials. Orgill’s inventory includes
almost one thousand OSI products, and Orgill uses images from
OSI in its electronic and paper catalogues. It also makes images
from OSI available for its dealers to use in advertising OSI
products. Orgill has used thirty-four images for which PIC holds
the copyright. Before this lawsuit began, Orgill did not have
direct contact with PIC.
On July 23, 2014, after PIC filed this lawsuit, OSI and
Orgill executed a Confirmatory Copyright Sublicense Agreement
(the “Confirmatory Sublicense”), effective nunc pro tunc as of
June 1, 2006. Under the Confirmatory Sublicense, OSI
“confirm[ed] that it previously granted permission to Orgill to
Use and to sublicense the right to Use the Images to its
dealers.” Dkt No. 56-13 ¶ 2, at 5. Its definition of “Use” is
materially identical to the definition in the PIC-OSI Agreement.
Id. ¶ 1(E), at 5. The Confirmatory Sublicense further states
that “Orgill covenants to include (and instruct its
sublicensees/dealers to include), to the extent reasonably
possible and practical with respect to size, prominence,
aesthetics, and Use, a copyright notice indicating PIC as the
copyright owner of the Images.” Id. ¶ 3(B), at 6.
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PROCEDURAL HISTORY
On April 11, 2014, PIC filed suit against Orgill and Farm &
City, Inc., one of Orgill’s dealers, in connection with their
use of PIC’s images of OSI products. PIC alleged copyright
infringement under 17 U.S.C. § 501 (Count I); mishandling of
copyright management information under the DMCA (Count II); and
false designation of origin and false advertising under the
Lanham Act (Count III). PIC sought permanent injunctive relief
against any further infringement, the recall and destruction of
all infringing copies of its images, and payment of actual
damages, attorney’s fees, and costs. PIC did not sue OSI, and
the Court denied OSI’s motion to intervene. 1
Orgill moved for summary judgment on all counts in February
2015. In its memorandum and order issued on July 29, 2015, the
Court granted Orgill summary judgment on PIC’s DMCA and Lanham
Act claims. See PIC, 118 F. Supp. 3d at 406-11. With regard to
the copyright claim, the Court first held that Orgill received
an implied sublicense from OSI to use PIC’s images. Id. at 403.
Orgill obtained the images from OSI’s representatives and
1
PIC dismissed Farm & City with prejudice on December 31,
2015 after the Court granted Farm & City summary judgment on the
DMCA and Lanham Act claims and held that it at most innocently
infringed PIC’s copyrights when it used photographs of OSI
products it received from Orgill. See PIC, 118 F. Supp. 3d at
406-11.
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external website, and OSI gave Orgill implied permission to use
the images to sell its products. Id. OSI also reviewed Orgill’s
catalogues twice a year and never objected to its use of the
images. Id.
Orgill argued that the Confirmatory Sublicense gave it
greater rights to use the images than the PIC-OSI Agreement gave
to OSI. The Court determined that the PIC-OSI Agreement
“provide[d] the benchmark” for evaluating the lawfulness of
Orgill’s conduct because OSI could not sublicense rights to
Orgill that went beyond the rights it licensed from PIC. Id. at
403-04. The Court then decided that PIC provided sufficient
evidence to raise a genuine dispute as to whether Orgill
infringed its copyrights. In particular, PIC put forth evidence
that Orgill sublicensed the images for a fee to Farm & City and
failed to include any attribution on the images before the
lawsuit, which violated the fee provision and attribution
requirement of the PIC-OSI Agreement. See id. at 404-05. Orgill
argued that, even if it did infringe PIC’s copyrights, it did
not do so knowingly, but the Court found that the references to
PIC in the Confirmatory Sublicense gave Orgill sufficient notice
that PIC held the copyrights to the images. See id. at 405-06.
Accordingly, the Court denied Orgill’s motion for summary
judgment on the copyright infringement claim. Id. at 406.
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On January 26, 2016, pursuant to the arbitration clause
within the PIC-OSI Agreement, OSI commenced an arbitration
against PIC. OSI brought claims stemming from PIC’s initiation
of over thirty copyright lawsuits against OSI’s customers, such
as this suit against Orgill. PIC asserted counterclaims against
OSI in the arbitration, including for copyright infringement for
violating the fee provision and attribution requirement in the
PIC-OSI Agreement. In October 2016, seven of the customers PIC
sued for copyright infringement (but not Orgill) agreed to
consolidate their lawsuits into the arbitration. At the request
of both PIC and Orgill, the Court stayed this lawsuit in
November 2016 pending resolution of the arbitration.
On November 20, 2017, the arbitrator issued a Partial Final
Award that resolved all of the claims in the arbitration. As
relevant here, the arbitrator found that the fee provision and
attribution requirement were only covenants of the contract, not
conditions on OSI’s license to use the images. Accordingly,
because covenants are only enforceable via contract law, OSI
breached the PIC-OSI Agreement by violating the attribution
requirement but did not commit copyright infringement. The
arbitrator also determined that the PIC-OSI Agreement permitted
OSI to impliedly sublicense use of the images to its customers,
which it had done for the seven customers that were parties to
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the arbitration. He therefore found that those customers also
were not infringing PIC’s copyrights by using its images.
On February 21, 2018, Orgill filed a renewed motion for
summary judgment in this case. Orgill contends that the
arbitrator conclusively determined that the attribution
requirement is not a condition on its sublicense and thus cannot
support a copyright infringement claim. In response, PIC filed
its own motion for summary judgment. PIC argues that the Partial
Final Award does not preclude its copyright infringement claim
against Orgill, which was not a party to the arbitration. PIC
also contends that Orgill’s sublicense defense fails a matter of
law because: 1) Orgill cannot prove that it had an implied
sublicense to use the images; 2) the Confirmatory Sublicense
made Orgill’s sublicense conditional on the attribution
requirement even though it was not a condition in the PIC-OSI
Agreement; and 3) Orgill’s use of approval images exceeded the
scope of its sublicense.
DISCUSSION
I.
Standard of Review
Summary judgment is appropriate when there is “no genuine
issue as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). A genuine
issue exists where the evidence “is such that a reasonable jury
could resolve the point in the favor of the non-moving party.”
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Rivera-Rivera v. Medina & Medina, Inc., 898 F.3d 77, 87 (1st
Cir. 2018) (quoting Cherkaoui v. City of Quincy, 877 F.3d 14,
23-24 (1st Cir. 2017)). A material fact is one with the
“potential of changing a case’s outcome.” Doe v. Trs. of Bos.
Coll., 892 F.3d 67, 79 (1st Cir. 2018). “The court must view the
facts in the light most favorable to the non-moving party and
draw all reasonable inferences in [its] favor.” Carlson v. Univ.
of New Eng., 899 F.3d 36, 43 (1st Cir. 2018). When the parties
cross-move for summary judgment, the court must evaluate each
motion “separately, drawing inferences against each movant in
turn.” Lawless v. Steward Health Care Sys., LLC, 894 F.3d 9, 21
(1st Cir. 2018) (quoting EEOC v. Steamship Clerks Union, 48 F.3d
594, 603 n.8 (1st Cir. 1995)).
The burden on a summary judgment motion first falls on the
movant to identify “the portions of the pleadings, depositions,
answers to interrogatories, admissions, and affidavits, if any,
that demonstrate the absence of any genuine issue of material
fact.” Irobe v. U.S. Dep’t of Agric., 890 F.3d 371, 377 (1st
Cir. 2018) (quoting Borges ex rel. S.M.B.W. v. Serrano-Isern,
605 F.3d 1, 5 (1st Cir. 2010)). If the movant meets this “modest
threshold,” the burden shifts to non-movant to “point to
materials of evidentiary quality” to demonstrate that the trier
of fact could reasonably resolve the issue in its favor. Id. The
court must deny summary judgment if the non-movant “adduces
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competent evidence demonstrating the existence of a genuine
dispute about a material fact.” Theriault v. Genesis HealthCare
LLC, 890 F.3d 342, 348 (1st Cir. 2018).
II.
Legal Standard
A.
Issue Preclusion
Under the doctrine of issue preclusion (or collateral
estoppel), a party cannot relitigate factual or legal issues
that were adjudicated in an earlier action if “(1) the issues
raised in the two actions are the same; (2) the issue was
actually litigated in the earlier action; (3) the issue was
determined by a valid and binding final judgment; and (4) the
determination of the issue was necessary to that judgment.”
Manganella v. Evanston Ins. Co., 700 F.3d 585, 591 (1st Cir.
2012). Issue preclusion applies not only to the “ultimate issue”
in the first action but also to “necessary intermediate
findings, even where those findings are not explicit.” Id.
(citation omitted).
For issue preclusion to apply, the “identity of the issues
need not be absolute; rather, it is enough that the issues are
in substance identical.” Id. The “mere presence of a modicum of
factual commonality does not establish the requisite identity of
issues,” however. Faigin v. Kelly, 184 F.3d 67, 78 (1st Cir.
1999). An issue was not actually litigated in the earlier action
if its resolution “was based on something less than a full
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adversarial presentation.” Manganella, 700 F.3d at 594. The
resolution of the litigated issue must also have been “necessary
to the decision actually rendered,” not just to reach the same
outcome. Id.
Defensive nonmutual issue preclusion permits a defendant
who was not a party to the earlier action to estop “a plaintiff
from asserting a claim the plaintiff has previously litigated
and lost against another defendant.” Vargas-Colón v. Fundación
Damas, Inc., 864 F.3d 14, 28 (1st Cir. 2017) (quoting RodríguezGarcía v. Miranda-Marín, 610 F.3d 756, 771 (1st Cir. 2010)). The
application of defensive nonmutual issue preclusion is
appropriate only when “the party against whom issue preclusion
is asserted ‘has had a full and fair opportunity for judicial
resolution of the same issue.’” Id. (quoting Rodríguez-García,
610 F.3d at 771). In practice, determining whether the plaintiff
had a full and fair opportunity to litigate the issue boils down
to the same four-factor test applicable to issue preclusion more
generally. See, e.g., Acevedo-Garcia v. Monroig, 351 F.3d 547,
575-76 (1st Cir. 2003). Courts retain discretion to refuse to
apply nonmutual issue preclusion when “its application would
badly distort matters before the jury or would not result in
efficiency gains because litigation of the live issue may
require introduction of some of the same evidence pertinent to
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the estopped issues.” Rodríguez-García, 610 F.3d at 772
(quotations and citation omitted).
Arbitral awards generally receive the same preclusive
effect as judicial judgments. Manganella, 700 F.3d at 591;
FleetBoston Fin. Corp. v. Alt, 638 F.3d 70, 79 (1st Cir. 2011).
A defendant in litigation may invoke defensive nonmutual issue
preclusion against a plaintiff who was involved in a prior
arbitration against another party. 2 See, e.g., Manion v. Nagin,
394 F.3d 1062, 1066-67 (8th Cir. 2005); Boguslavsky v. S.
Richmond Sec., Inc., 225 F.3d 127, 130 n.4 (2d Cir. 2000) (per
curiam); Columbia Steel Fabricators, Inc. v. Ahlstrom Recovery,
44 F.3d 800, 802 (9th Cir. 1995). Because of the difficulty in
determining what exactly an arbitrator decided in an award,
particularly when he or she does not provide an explanation,
courts may have discretion as to whether to give an arbitral
award preclusive effect. See FleetBoston, 638 F.3d at 80-81. In
this case, the arbitrator wrote an extensive decision resolving
all of the parties’ claims and counterclaims. The Court has no
2
There is an open question of whether state or federal law
governs the preclusive effect of an arbitral award. FleetBoston,
638 F.3d at 79 n.10; see also W.J. O’Neil Co. v. Shepley,
Bulfinch, Richardson & Abbott, Inc., 765 F.3d 625, 629-30 (6th
Cir. 2014) (surveying how courts have addressed this question).
As the parties assume federal preclusion law applies, the Court
does as well. In any event, federal and Massachusetts preclusion
law are materially identical. See Manganella, 700 F.3d at 59091.
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difficulty applying the traditional requirements for issue
preclusion to this decision.
B.
Copyright Infringement and License Defense
Under 17 U.S.C. § 501(a), “[a]nyone who violates the
exclusive rights of the copyright owner . . . is an infringer of
the copyright.” To win on a copyright infringement claim, the
plaintiff must prove two elements: “(1) ownership of a valid
copyright, and (2) copying of constituent elements of the work
that are original.” Soc’y of Holy Transfiguration Monastery,
Inc. v. Gregory, 689 F.3d 29, 39 (1st Cir. 2012) (quoting
Situation Mgmt. Sys., Inc. v. ASP. Consulting LLC, 560 F.3d 53,
58 (1st Cir. 2009)). A copyright owner may transfer a
nonexclusive right to use the copyright. Estate of Hevia v.
Portrio Corp., 602 F.3d 34, 40 (1st Cir. 2010). While this
transfer often occurs via writing, it “also may occur without
any particular formality, as by conduct manifesting the owner’s
intent.” Id. at 40-41. Such an “implied license” is limited and
only “permits the use of a copyrighted work in a particular
manner.” Id. at 41 (quoting I.A.E., Inc. v. Shaver, 74 F.3d 768,
775 (7th Cir. 1996)). “Uses of a copyrighted work that stay
within the bounds of an implied license do not infringe the
copyright.” Id.
The existence of a license authorizing use of copyrighted
material is an affirmative defense. Fed. R. Civ. P. 8(c)(1);
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Spinelli v. Nat’l Football League, 903 F.3d 185, 197 (2d Cir.
2018). Accordingly, the burden of proving the existence of an
implied license lies with the party claiming its protection.
Estate of Hevia, 602 F.3d at 41. However, once the licensee
demonstrates the existence of a license, the burden shifts to
the licensor to show that the licensee’s use exceeded the scope
of the license. See Spinelli, 903 F.3d at 197.
Orgill does not dispute that PIC owns a valid copyright for
the images or that it used PIC’s images. However, Orgill
contends that it received an implied sublicense from OSI to use
the images and thus cannot be held liable for infringement. PIC
counters that Orgill received no implied sublicense, Orgill
violated a condition of its sublicense by failing to provide
proper attribution on the images, and Orgill exceeded the scope
of its sublicense by using approval images. The Court addresses
PIC’s three arguments in turn.
III. Existence of an Implied Sublicense
PIC first argues that Orgill did not receive a sublicense
from OSI to use its images, both based on the relationship
between OSI and Orgill and because an implied sublicense is a
legal impossibility. Orgill responds that the Partial Final
Award precludes this challenge to the existence of its implied
sublicense and that PIC’s arguments fail on the merits.
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A.
Preclusive Effect of the Partial Final Award
Orgill correctly contends that the Partial Final Award
precludes PIC from contesting that the PIC-OSI Agreement gave
OSI the authority to grant implied sublicenses to its customers.
In his Partial Final Award, the arbitrator wrote:
Relying on the very broad language of paragraphs 2 and
9 of the Agreement, OSI allowed its customers Use of
the PIC images without the need of written
authorization. While PIC contends OSI was required to
employ written sub-licenses, there is no such
requirement in the Agreement, a matter conceded by Mr.
Picone. The language in Paragraph 9 and the
acknowledgment by PIC and its counsel that the Images
could be and were intended to be Used by OSI’s
customers provides the basis for an implied license
from OSI for such customer use of the Images.
Dkt. No. 169-1 at 44-45 (cleaned up).
This finding meets the four requirements for issue
preclusion. OSI’s authority to grant implied sublicenses to its
customers was the same issue in the arbitration as here.
Although Orgill was not itself involved in the arbitration, this
issue goes to OSI’s authority under the PIC-OSI Agreement, not
how it utilized that authority with individual customers. The
arbitrator’s explanation makes clear that PIC and OSI actually
litigated this issue, as PIC unsuccessfully argued that OSI had
to use express sublicenses. The Partial Final Award is a final
and binding judgment that receives preclusive effect. See
Manganella, 700 F.3d at 591. The arbitrator’s finding about the
validity of the implied sublicenses was essential to his
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conclusion that OSI’s customers did not infringe PIC’s
copyrights. Given that this issue was thoroughly litigated in
the arbitration, Orgill properly invokes defensive nonmutual
issue preclusion to estop PIC from relitigating this question.
The Partial Final Award does not, however, preclude PIC
from challenging whether OSI granted Orgill an implied
sublicense. It is unclear whether the arbitrator decided that
OSI gave all its customers implied sublicenses or just the
customers who were parties to the arbitration. However, even if
he did decide this issue as to all of OSI’s customers, it was
not necessary to do so to determine that only the customers who
were parties to the arbitration did not commit copyright
infringement.
The Partial Final Award also does not preclude PIC from
arguing that implied sublicenses are a legal impossibility.
Orgill provides no indication that PIC raised this issue in the
arbitration. Instead, PIC argued that the PIC-OSI Agreement did
not permit implied sublicensing. Thus, although the arbitrator
implicitly assumed or decided that implied sublicenses were
possible, the issue was not actually litigated.
B.
Implied Sublicense
In its 2015 summary judgment ruling, the Court stated:
As PIC conceded at the hearing, the defendants have
borne their burden of showing that OSI impliedly
licensed Orgill’s use of the images. In accordance
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with longstanding business practice, Dennis Sills has
obtained product images from OSI since 1998 “either by
talking to [OSI's] rep” on the telephone, “calling
customer service and talking to whoever is there,” or
searching OSI’s external website. Orgill then uses
these materials (which include the images in question)
to advertise and sell OSI products through dealers
like Farm & City. Although Sills does not recall
receiving explicit permission from OSI to use the
images, he stated that such permission had “been
implied in more ways than I count,” since “it’s
understood in our business that . . . I’m using their
pictures to sell their products.” Moreover, Orgill has
reviewed Orgill’s catalogues twice a year for the past
five years, and has never objected to the way that
Orgill displays the images.
PIC, 118 F. Supp. 3d at 403 (alterations in original) (citations
omitted).
Urging the Court to reconsider this opinion, PIC first
argues that the Court improperly found an implied sublicense
based solely on delivery of its images to Orgill. See 17 U.S.C.
§ 202 (“Transfer of ownership of any material object . . . does
not of itself convey any rights in the copyrighted work embodied
in the object . . . .”); Corbello v. DeVito, 777 F.3d 1058, 1067
(9th Cir. 2015) (“[T]he copyright statute forbids courts from
inferring a transfer of copyright or a license from mere
delivery of the material object in which the work is
embodied.”). The Court in its 2015 opinion did not, however,
rely solely on delivery. It also pointed to Orgill’s
conversations with OSI representatives, the lack of objection
from OSI to Orgill’s use of the images, and the implied
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permission Orgill stated it received from OSI. See PIC, 118 F.
Supp. 3d at 403; see also John G. Danielson, Inc. v. WinchesterConant Props., Inc., 322 F.3d 26, 41 (1st Cir. 2003) (permitting
consideration of delivery as one of multiple factors in
determining whether an implied sublicense exists). PIC did not
demonstrate a genuine issue of material fact as to the existence
of the sublicense. See PIC, 118 F. Supp. 3d at 403.
PIC also contends that copyright law does not recognize an
implied sublicense. 3 PIC points to the three-part test for
finding an implied license that the First Circuit utilized in
John G. Danielson, Inc. v. Winchester-Conant Properties, Inc.,
“which requires that the licensee request the creation of the
work, the licensor create and deliver the work, and the licensor
intend that the licensee distribute the work.” 322 F.3d at 41.
PIC claims Orgill cannot meet this standard because Orgill did
not even know it existed before the lawsuit, let alone request
that it create or deliver any of the images. More fundamentally,
PIC states that no court has ever recognized an implied
3
Orgill claims that PIC waived this argument by not raising
it in its opposition to Orgill’s prior motion for summary
judgment. Orgill relies on the proposition that parties cannot
raise new arguments on a motion for reconsideration under
Federal Rule of Civil Procedure 59(e). See, e.g., United States
ex rel. Ge v. Takeda Pharm. Co., 737 F.3d 116, 126 (1st Cir.
2013). Rule 59(e) deals with motions to alter or amend a final
judgment, and the Court’s 2015 summary judgment order was
interlocutory. Accordingly, PIC has not waived this argument.
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sublicense from a licensee (as opposed to an implied license
from a copyright owner) because creation of an implied license
requires direct contact between the owner and licensee.
PIC’s claim that an implied sublicense is a legal
impossibility raises a novel question. No other court has
directly addressed whether an implied sublicense is possible
under these circumstances. However, there is no strict threepart test for an implied license that requires proof of request,
delivery, and intent. Instead, the First Circuit has twice
emphasized that the “touchstone for finding an implied
license . . . is intent.” Estate of Hevia, 602 F.3d at 41
(alteration in original); Danielson, 322 F.3d at 40. It has
framed the implied license inquiry as “whether the totality of
the parties’ conduct indicates an intent to grant . . .
permission.” Estate of Hevia, 602 F.3d at 41 (quotation
omitted); see also Conway v. Licata, 104 F. Supp. 3d 104, 123
(D. Mass. 2015) (reading First Circuit precedent as “noting the
copyright owner’s intent as the key to determining the existence
of an implied license”).
A number of other courts of appeals have similarly
suggested that intent is the key to the existence of an implied
license. See Corbello, 777 F.3d at 1067; Latimer v. Roaring
Toyz, Inc., 601 F.3d 1224, 1235 (11th Cir. 2010); Johnson v.
Jones, 149 F.3d 494, 501-02 (6th Cir. 1998). But see Muhammad19
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Ali v. Final Call, Inc., 832 F.3d 755, 762 (7th Cir. 2016)
(relying on the three-part test to show an implied license). The
Fifth Circuit has explicitly rejected the argument PIC advances
here. See Baisden v. I’m Ready Prods., Inc., 693 F.3d 491, 501
(5th Cir. 2012). The two leading copyright treatises agree. See
3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright
§ 10.03[A][7] (2018) (noting that, “[w]hen the totality of the
parties’ conduct indicates an intent to grant such permission,
the result is a nonexclusive license” (footnote omitted)); 2
William F. Patry, Patry on Copyright § 5:131 (2019) (stating
that an implied license arises “when the circumstances . . .
demonstrate that the parties intended that the work would be
used for a specific purpose”).
This focus on intent is consistent with the nature of an
implied license. An implied license is simply a type of impliedin-fact contract. I.A.E., 74 F.3d at 776; Effects Assocs.,
Inc. v. Cohen, 908 F.2d 555, 559 n.7 (9th Cir. 1990). Impliedin-fact contracts are created whenever the parties exhibit
“mutual agreement and intent to promise” in a way “not . . .
expressed in words.” 1 Williston on Contracts § 1:5 (4th ed.
2018). An analysis into the existence of an implied license
should therefore focus on mutual agreement and intent.
The First Circuit has referenced the three-part test on
which PIC relies as a means of determining if a copyright owner
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manifested the requisite intent for an implied license. See
Estate of Hevia, 602 F.3d at 41; Danielson, 322 F.3d at 41. It
has never stated, however, that the three elements of request,
delivery, and intent are the only way a defendant in a copyright
infringement suit can show that intent. See Estate of Hevia, 602
F.3d at 41 (describing the three-part test as “most commonly
used in determining if an implied license exists with respect to
most kinds of work”); see also Nimmer, supra, § 10.03[A][7]
(noting that it is “questionable . . . to transmute those three
factors into the only applicable test — and to hold that there
can be no implied license when one of those factors is absent”
(footnote omitted)); Patry, supra, § 5:131 (stating that these
three factors, “while perfectly acceptable, do not exhaust the
possibilities”). In fact, in Estate of Hevia, the First Circuit
skipped a separate analysis of request and delivery and found an
implied license based solely on intent. 602 F.3d at 41-43; see
also Danielson, 322 F.3d at 40-42 (also skipping the request and
delivery factors and focusing on intent, though ultimately
finding no implied license).
PIC relies heavily on an unpublished case from the District
of Oregon that states that an implied sublicense is a “legal
impossibility.” Catalogue Creatives, Inc. v. Pac. Spirit Corp.,
No. CV 03-966-MO, 2005 WL 1950231, at *2 (D. Or. Aug. 15, 2005).
That case involved a purported implied sublicense granted by an
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implied licensee. See id. (“[D]efendant has offered no case law
supporting the proposition that the recipient of an implied
license may grant an implied sublicense by its conduct.”). It
says nothing about whether, as here, an express licensee who was
specifically authorized by the copyright owner to issue a
sublicense can grant an implied sublicense.
Since only intent, not request and delivery, is a necessary
element for finding an implied sublicense, it is not dispositive
that Orgill did not have any direct contact with PIC. Instead,
to determine whether Orgill received an implied sublicense, the
Court must ask whether PIC intended to permit sublicensing when
it licensed the images to OSI and whether OSI intended to
sublicense the images to Orgill. As noted above, the arbitrator
conclusively determined that PIC intended to permit OSI to
sublicense the images. And PIC has provided no evidence to
suggest that the Court erred in finding in its 2015 ruling that
OSI intended to grant a sublicense when it provided the images
to Orgill and allowed Orgill to obtain them from its system. PIC
has had two opportunities to raise a genuine issue of material
fact that OSI did not intend to grant Orgill a sublicense, and
it has failed to do so.
IV.
Attribution Requirement
Because Orgill received a sublicense to use PIC’s images,
the burden shifts to PIC to show that Orgill’s use of the images
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exceeded the scope of its sublicense. See Spinelli, 903 F.3d at
197. In its 2015 summary judgment ruling, the Court held that
PIC raised a genuine issue of material fact as to whether Orgill
violated its sublicense by failing to include attribution to PIC
or Picone on the images it used. 4 See PIC, 118 F. Supp. 3d at
405. The Court identified this attribution requirement in the
PIC-OSI Agreement. See id. at 403-04. Orgill argues that the
arbitrator conclusively determined that the attribution
requirement is not a condition of its sublicense. The Court
declined to address this issue in its prior ruling. See id. at
404 n.4.
PIC cannot relitigate the arbitrator’s decision that the
attribution requirement in the PIC-OSI Agreement is not a
condition because it was the central issue in the arbitration
and its resolution was necessary for the arbitrator to find that
OSI was not liable for copyright infringement. But Orgill’s
sublicense could give it fewer rights than OSI has. See id. at
404 (referring to the terms “govern[ing] OSI’s right to use the
images” as “the minimum limitations on the [Orgill’s] use of the
images” (emphasis added)). PIC therefore argues that the
4
The Court in its prior ruling also declined to grant Orgill
summary judgment on PIC’s claim that it violated its sublicense
by further sublicensing the images to its dealers for a fee. See
PIC, 118 F. Supp. 3d at 404-05. PIC no longer presses this
argument.
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Confirmatory Sublicense between OSI and Orgill makes the
attribution requirement a condition of Orgill’s sublicense. 5 The
arbitrator’s decision does not preclude this argument because
Orgill was not a party to the arbitration and OSI did not have
similar confirmatory agreements with the customers involved in
the arbitration.
A.
Legal Standard
A defendant’s liability for failure to comply with a
provision of a license agreement “raises issues that lie at the
intersection of copyright and contract law.” MDY Indus., LLC v.
Blizzard Entm’t, Inc., 629 F.3d 928, 939 (9th Cir. 2010)
(quoting Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d
1115, 1122 (9th Cir. 1999)). “Generally, a ‘copyright owner who
grants a nonexclusive license to use his copyrighted material
waives his right to sue the licensee for copyright
infringement . . . .’” Jacobsen v. Katzer, 535 F.3d 1373, 1380
(Fed. Cir. 2008) (quoting Sun Microsystems, 188 F.3d at 1121).
Accordingly, if the licensee breaches the terms (“covenants”) of
5
At the hearing, PIC’s counsel reiterated its argument from
the first round of summary judgment briefing that the
Confirmatory Sublicense was an invalid retroactive license. PIC
does not raise this argument in its briefing on the renewed
summary judgment motions. In any event, PIC now relies on the
terms of the Confirmatory Sublicense for its argument that the
attribution requirement is a condition, so the Court need not
address the issue of the validity of the Confirmatory
Sublicense.
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the licensing agreement, it is only liable for breach of
contract. See MDY Indus., 629 F.3d at 939.
However, if the licensee fails to satisfy a condition of
the license, “it follows that the rights dependent on
satisfaction of that condition have not been effectively
granted, rendering any use . . . without authority,” i.e.,
copyright infringement. Nimmer, supra, § 10.15[A][2]; see also
Jacob Maxwell, Inc. v. Veeck, 110 F.3d 749, 753-54 (7th Cir.
1997) (stating that, if the terms at issue were conditions,
“absent performance of the conditions, the ‘license’ would not
have issued” and the use would have constituted copyright
infringement). Thus, in order to sue for copyright infringement,
the copyright owner “must demonstrate that the violated
term . . . is a condition rather than a covenant.” MDY Indus.,
629 F.3d at 939.
State law governs whether a contractual term is a covenant
or a condition. See id.; Nimmer, supra, § 10.15[A][1]. Under
Massachusetts law, a “condition precedent defines an event which
must occur before a contract becomes effective or before an
obligation to perform arises under the contract.” Mass. Mun.
Wholesale Elec. Co. v. Town of Danvers, 577 N.E.2d 283, 288
(Mass. 1991). “If the condition is not fulfilled, the contract,
or the obligations attached to the condition, may not be
enforced.” Id. A contractual term is a condition only when the
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parties so intended. Id. “To ascertain intent, a court considers
the words used by the parties, the agreement taken as a whole,
and surrounding facts and circumstances.” Id. Although not
“absolutely necessary,” the use of “[e]mphatic words,” such as
“if and when,” “provided that,” and “on condition that,” are
strong evidence that the parties intended to create a condition.
Id. (quotations omitted). Without such words, a court will
construe a contractual term as a condition only “if the intent
of the parties . . . is clearly manifested in the contract as a
whole.” Id.
B.
Analysis
Orgill argues that the attribution requirement in the
Confirmatory Sublicense is not a condition, and it is not liable
for copyright infringement even if it failed to attribute the
images to PIC or Picone. The Confirmatory Sublicense states that
the attribution requirement is “[w]ithout effect on the rights
of Orgill . . . to Use the Images as granted in” the preceding
paragraph. Dkt. No. 56-13 ¶ 3(B), at 6. This statement
demonstrates that the parties did not intend to render Orgill’s
sublicense ineffective for failure to comply with the
attribution requirement. This interpretation is bolstered by the
title of the section under which the attribution requirement
falls: “Covenants.” Dkt. No. 56-13 at 6. A contractual term may
be both a condition and a covenant, see Jacobsen, 535 F.3d at
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1380, so this title is not determinative. But it provides
further confirmation that the parties saw the attribution
requirement as a covenant whose violation would constitute a
breach of contract, not as a condition on the validity of
Orgill’s sublicense.
PIC emphasizes that the Confirmatory Sublicense grants
Orgill the right to “Use” its images and that it defines the
term “Use” with “the broadest possible interpretation . . . ,
subject to the limitations herein.” Dkt. No. 56-13 ¶¶ 1(E), 2,
at 5 (emphasis added). It argues that “subject to” is emphatic
language that demonstrates an intent to create a condition.
“Subject to” is not, however, an example of such emphatic
language. See Fantastic Fakes, Inc. v. Pickwick Int’l, Inc., 661
F.2d 479, 484 (5th Cir. Unit B Nov. 1981) (noting that “subject
to” is ambiguous in this context); cf. Mass. Mun. Wholesale, 577
N.E.2d at 288 (leaving “subject to” out of a list of such
emphatic language).
More importantly, the Confirmatory Sublicense makes
Orgill’s “Use” rights “subject to the limitations herein” but
does not clearly state which limitations in the rest of
agreement this phrase refers to. Given the unambiguous language
prefacing the attribution requirement stating that it does not
affect Orgill’s “Use” rights, the attribution requirement is
plainly not one of the “limitations herein.” The structure of
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the agreement distinguishes this case from Jacobsen, where the
court held that the licensing agreement made an attribution
requirement a condition because it clearly stated that the user
could copy, modify, and distribute the work “provided that” he
include an attribution. 535 F.3d at 1381.
PIC contends that reading the attribution requirement as a
covenant, not a condition, renders the “subject to the
limitations herein” language meaningless because there are no
other limitations in the Confirmatory Sublicense to which the
phrase could possibly refer. It is a fundamental principle of
contract interpretation that a “contract is to be construed to
give reasonable effect to each of its provision” and a court
should not read a provision out of the contract. Balles v.
Babcock Power Inc., 70 N.E.3d 905, 916 (Mass. 2017) (quoting
J.A. Sullivan Corp. v. Commonwealth, 494 N.E.2d 374, 378 (Mass.
1986)). The Court need not definitively determine all the other
provisions in the Confirmatory Sublicense that are conditions,
but Paragraph 5, which bars Orgill from transferring the right
to use the images except as specified in Paragraph 2, is one
condition. And reading the attribution requirement as a
condition of the sublicense itself would render meaningless the
clear language that the requirement is “[w]ithout effect on the
rights of Orgill . . . to Use the Images as granted in” the
preceding paragraph. Dkt. No. 56-13 ¶ 3(B), at 6.
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Accordingly, the attribution requirement is not a condition
on Orgill’s sublicense. Even if Orgill used the images without
attributing them to PIC or Picone, Orgill is not liable for
copyright infringement.
V.
Approval Images
Finally, PIC argues that Orgill exceeded the scope of its
sublicense by using preliminary “proofs” that it sent to OSI for
approval (“approval images”). PIC contends that the PIC-OSI
Agreement did not authorize OSI to use approval images and OSI
therefore could not grant Orgill permission to use those images.
PIC offers an affidavit from Picone who explains that he can
identify the accused images as approval images based on the
rugged edges around the products, which he removes in a final
image, and the lack of drop shadow, which he adds in a final
image.
Orgill contends that the arbitrator conclusively determined
that the PIC-OSI Agreement permitted OSI to use approval images.
The arbitrator did state that “Paragraphs 2 and 9 of the 2006
License Agreement worked in tandem to grant OSI the right to Use
— and authorize Use of — all of PIC's images, past and future”
and that the “Agreement's definition of ‘Images’ did not
distinguish between PIC images sent for ‘approval’ purposes or
in ‘final’ form.” Dkt. No. 169-1 at 44. And after OSI admitted
to using approval images right before the arbitration, the
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arbitrator must have determined that its license permitted it do
so as part of his finding that OSI had not committed copyright
infringement.
However, OSI has not met its burden of demonstrating that
this issue was actually litigated in the arbitration. Nothing in
the Partial Final Award states that PIC argued that the PIC-OSI
Agreement did not authorize use of approval images, and OSI has
not submitted any briefs or transcripts showing that PIC made
this argument. The fact that PIC had the chance to raise this
issue in the arbitration does not render it “actually litigated”
if its resolution “was based on something less than a full
adversarial presentation.” Manganella, 700 F.3d at 594; cf.
Dunellen, LLC v. Getty Props. Corp., 567 F.3d 35, 38 (1st Cir.
2009) (noting that issue preclusion does not apply if the
parties stipulated to the issue in the first proceeding).
Although PIC is not precluded from raising the approval
images theory by the Partial Final Award, PIC did not adequately
disclose the theory during discovery. A party must supplement an
interrogatory response “in a timely manner if [it] learns that
in some material respect . . . the response is incomplete.” Fed.
R. Civ. P. 26(e)(1)(A). Failure to do so may result in the
exclusion of the omitted information, “unless the failure was
substantially justified or is harmless.” Fed. R. Civ. P.
37(c)(1). A district court has broad discretion to determine the
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appropriate sanction for failure to supplement discovery
responses. See id. 37(c)(1)(C); Genereux v. Raytheon Co., 754
F.3d 51, 59 (1st Cir. 2014) (“[P]reclusion is not automatic, and
a lapse may be excused if the court determines that, in the
particular circumstances, a different remedy is more condign.”).
Orgill propounded an interrogatory asking PIC to explain
the basis for its allegation that OSI never authorized Orgill’s
use of PIC’s images. The closest PIC came to referencing the
approval image theory in its initial or supplemental response
was its statement that “Orgill exceeded the scope of any rights
it could have been granted by [OSI] in at least two respects”
and then describing its attribution requirement and fee
provision theories. Id. at 9-10. This reference to “at least
two” ways in which Orgill exceeded the scope of its license
plainly did not put Orgill on notice that the question of
approval images would be an issue in this litigation. See
Anderson v. Cryovac, Inc., 862 F.2d 910, 929 (1st Cir. 1988)
(“The purpose of discovery is to ‘make a trial less a game of
blindman’s buff and more a fair contest with basic issues and
facts disclosed to the fullest practicable extent.” (quoting
United States v. Proctor & Gamble, 356 U.S. 677, 682 (1958))).
PIC’s response to Orgill’s interrogatory was materially
incomplete because it omitted an entire theory upon which PIC
relies to negate Orgill’s license defense.
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PIC’s failure to disclose its approval images theory was
not substantially justified or harmless. At the hearing, PIC’s
attorney stated that PIC did not advance this theory earlier
because it had other meritorious arguments. However, a plaintiff
is not allowed to PIC its battles and then seek to reopen a new
front at the close of discovery. This type of strategic decision
does not justify failing to disclose an entire theory upon which
a motion for summary judgment is based. Picone’s purported
ability to easily recognize approval images belies any notion
that PIC had no reason to be aware of Orgill’s alleged use of
approval images earlier. The failure to disclose was not
harmless either, as it left Orgill with no discovery on the
approval image issue. Orgill has no way of challenging the
assertions in Picone’s declaration that he did not intend to
license use of approval images to OSI and that he recognizes
some of the images Orgill used as approval images.
PIC filed its complaint in this case almost four years
before moving for summary judgment on its copyright infringement
claim. During these four years, PIC gave Orgill no indication
that its use of approval images would be an issue, even though
Picone asserts that he can identify approval images by sight.
Given PIC’s failure to excuse its delay and the length of this
litigation, the Court declines to reopen discovery to permit
Orgill to investigate its use of approval images and whether its
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sublicense permits use of such images. Instead, the Court
excludes the approval images theory pursuant to Federal Rule of
Civil Procedure 37(c)(1).
VI.
Conclusion
In its 2015 ruling, this Court held that Orgill received an
implied sublicense from OSI to use PIC’s images. PIC’s arguments
that this holding was erroneous are without merit. Although the
Court held that PIC raised a genuine dispute of material fact as
to whether Orgill violated the attribution requirement of its
sublicense, PIC is estopped by the Partial Final Award from
arguing that the PIC-OSI Agreement established the attribution
requirement as a condition of Orgill’s sublicense, and the Court
is not persuaded that the attribution requirement is a condition
of the Confirmatory Sublicense. The Court also excludes PIC’s
theory that Orgill exceeded the scope of its sublicense by using
approval images because PIC failed to disclose this theory
during discovery. Since Orgill received a sublicense to use
PIC’s images and did not exceed the scope of the sublicense,
Orgill did not commit copyright infringement as a matter of law.
ORDER
Accordingly, PIC’s motion for summary judgment (Docket No.
172) is DENIED, and Orgill’s motion for summary judgment (Docket
No. 167) is ALLOWED.
SO ORDERED.
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/s/ PATTI B. SARIS
Patti B. Saris
Chief United States District Judge
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