Abbey House Media, Inc. v. Apple Inc. et al

Filing 82

OPINION & ORDER...Abbey House's September 9 motion to dismiss is granted in part. The counterclaims by S&S and Penguin are dismissed with one exception: the motion to dismiss the S&S counterclaim for breach of contract is denied. (Signed by Judge Denise L. Cote on 11/21/2014) (gr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------X
ABBEY HOUSE MEDIA, INC., d/b/a
:
BOOKSONBOARD,
:
:
Plaintiff,
:
:
-v:
:
APPLE INC.; HACHETTE BOOK GROUP, INC.; :
HARPERCOLLINS PUBLISHERS, LLC,;
:
VERLAGSGRUPPE GEORG VON HOLTZBRINCK
:
GHBH; HOLTZBRINCK PUBLISHERS, LLC,
:
d/b/a MACMILLAN; THE PENGUIN GROUP, A :
DIVISION OF PEARSON PLC; and S&S, INC.,:
:
Defendants.
:
:
---------------------------------------X
APPEARANCES
For Plaintiff Abbey House Media, Inc.:
Maxwell M. Blecher
Jordan L. Ludwig
Blecher Collins Pepperman & Joy P.C.
515 Figueroa St., Suite 1759
Los Angeles, CA 90071
Eric M. Creizman
Creizman PLLC
565 Fifth Ave., 7th Floor
New York, NY 10012
For Defendant Simon & Schuster, Inc.:
Yehuda Lev Buchweitz
James W. Quinn
Jeffrey Leonard White
Weil, Gotshal & Manges LLP
767 Fifth Avenue, 25th Fl.
New York, NY 10153
For Defendant The Penguin Group:
Amanda Christine Croushore
Saul P. Morganstern
Kaye Scholer LLP
425 Park Ave.
New York, NY 10022

14cv2000 (DLC)
OPINION & ORDER

DENISE COTE, District Judge:
Plaintiff Abbey House Media, Inc. (“Abbey House”), d/b/a/
BooksOnBoard, has brought antitrust claims against Apple, Inc.
(“Apple”) and five publishing companies, including defendants
Simon & Schuster, Inc. (“S&S”) and Penguin Group (“Penguin”).

In

response, S&S and Penguin filed counterclaims against Abbey House
alleging copyright infringement and breach of contract.

In this

Opinion, the motion to dismiss the counterclaims is granted in
part.
BACKGROUND
The following facts are asserted in the counterclaims and
taken from documents integral to those claims unless otherwise
noted.

S&S and Penguin each had an agreement with Abbey House to

act as its agent in the sale of e-books.
dated August 24, 2010 (“S&S Contract”).

S&S’s agreement is
The Penguin contract is

dated May 19, 2010 (“Penguin Contract”).
While the terms of the S&S Contract and the Penguin Contract
differ in some respects, they are structured identically.

As an

agent for the Publisher, Abbey House is given responsibility for
selling e-books and providing customer service to consumers.
Abbey House was paid a commission for each e-book sold.

Each

contract also included a third party, the Digital Fulfillment
Provider (“DFP”).

The DFP was appointed by the publisher, but

engaged by Abbey House, who was responsible for paying the fees
2

of the DFP.

In both contracts, the DFP was responsible for

providing Digital Rights Management (“DRM”) protection.

DRM

protection essentially works as a lock, restricting the manner in
which digital files can be viewed and copied.

DRM protection is

commonly used on e-books and other digital files to prevent the
unlawful copying and distribution of copyrighted material.
Under the terms of the S&S Contract, Abbey House was
responsible for ensuring that e-book purchasers agreed to abide
by content usage rules that permit only personal, noncommercial
use.

The contract states, in relevant part:
Agent will be responsible for . . . [conditioning]
purchase and use of Publisher Works on a Customer’s
express agreement to Agent’s content usage rules on its
site which shall provide, among other things, that any
use of Publisher Works is for personal and
noncommercial use only . . . . All content usage rules
and others statements of the terms of sale or other
disclosures provided to customers shall be consistent
with the terms of this Agreement.

(Emphasis added.)

The preamble to the contract provided that

S&S’s e-books were to be sold solely for “personal . . . use
without any time-based limitations.”
To ensure that the e-books were not subject to unauthorized
uses, the DFP was required to implement security measures:
[The DFP] shall implement such encryption and other
measures as are necessary to ensure that Publisher
works are secure from theft, unauthorized copying or
retransmission, printing, infringement, unauthorized
manipulation, or any other misappropriation
(“Misappropriation”) and shall transmit Publisher Works
only in encrypted form.
. . .
[The DFP] shall utilize DRM, encryption, and/or
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security technology approved by [S&S] . . . to secure
Publisher Works from Misappropriation. . .
(Emphasis added.)

In the event that Abbey House became aware

that any of S&S’s works had been subject to “misappropriation”
due to a breach of the security measures, including DRM
protection, Abbey House was required to “promptly inform” S&S
publisher of the breach.

All disclosures to customers were to be

“consistent with the terms of the” contract.
Under the terms of the Penguin Contract, Abbey House was
responsible for ensuring that the purchase and use of e-books was
conditioned on a user’s “express agreement to the Content Usage
Rules.”

The Content Usage Rules provide that e-books may be used

“solely for purchaser’s personal and noncommercial use.”

To

ensure that e-books were used solely for personal, noncommercial
use, the contract provided that the DFP would use “commercially
reasonable efforts to apply DRM to prevent End Users from
printing, copying, or pasting [Penguin] Content or forwarding an
e-book to a third party.”

The DFP was required to “immediately

notify” Penguin if it became aware of “any unauthorized or
improper use,” including “the unauthorized downloading of eBooks
by an End User or third part.”

The Content Usage Rules also

provide that end users acquiring e-books may “use eBooks on up to
six (6) transfer devices and an unlimited number of Non-Transfer
Devices at the same time; or as allowed by then current publisher
approved DRMs supported by the Digital Fulfillment Provider.”

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Abbey House’s e-book store, BooksOnBoard, ceased all retail
operations on April 6, 2013.
on April 30.

Other operations and support ceased

Before ceasing operations, Abbey House posted an

announcement on its website (“the Announcement”).

The

Announcement advised customers that they can download their ebooks onto their new reading devices by stripping DRM protection
using information and tools that are available on the Internet so
long as they are doing so “for personal use” of the e-books.
The Announcement reads in relevant part:
** BooksOnBoard ceased all retail operations on April
6, 2013 **
All support and other operations ceased April 30,
2013. There are no longer any employees with the
company.
Getting access to your downloaded books if you
change reading devices: for those of you who downloaded
your books to your PCs or Macs, you can strip DRM from
your books after which you will be able to readily port
them from device to device through drag and drop or
other means, without the need for further downloads.
There is a great deal of information online about
stripping DRM. (Please be sure to make backup copies
of your eBook files in a separate directory before
stripping in the event anything goes wrong in your
first attempts.) Many of our customers are using
Calibre or other tools to strip DRM from their
downloaded eBooks in order to have them available
indefinitely should they change reading devices. Many
argue that this is a legitimate use as long as this is
being done for personal use of eBooks purchased, not
for piracy. We are told this is in the spirit of the
eBook license and that it is common practice.
If you downloaded directly to iPhones or iPads,
there are software programs available that can allow
you to port files from those devices to another device.
In the late summer of 2013, Adobe had a breach so you
may need to go to Adobe and reset your credentials.
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All of this information is available by online search.
(Emphasis added.)
S&S and Penguin allege that Abbey House was aware that some
users were using Calibre or other tools to strip DRM protection.
On message boards on the Internet, some of Abbey House’s
customers responded to the Announcement.

One user stated: “Just

downloaded all my books . . . And removed the DRM (again) just in
case.”

Another user posted that “[m]ost of my books from Books

on Board are downloaded, de-drm’d and backed up . . . .”
S&S and Penguin each assert that some of their e-books were
stripped of DRM protection.

S&S asserts that “S&S e-books from

which DRM protection was stripped were copied, in violation of
copyrights held by authors published by S&S.”

Penguin alleges

that “Penguin e-books from which DRM protection was stripped were
distributed freely to other consumers . . . .”

But, neither S&S

nor Penguin identifies a specific title for which this occurred.
PROCEDURAL HISTORY
This action is related to other antitrust litigation pending
before this Court.

In 2011 and 2012, the U.S. Department of

Justice, many states, and a class of consumers sued Apple and the
five publishers (“Publishers”) in a series of cases that alleged
a conspiracy to fix prices and reduce competition in the e-book
market.

Each of the Publishers settled those lawsuits.

Apple

was found liable for a per se violation of federal and state
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antitrust laws following a trial in June 2013.

United States v.

Apple Inc., 952 F. Supp. 2d 638 (S.D.N.Y. 2013).

On the eve of a

damages trial, Apple settled the damages claims brought by the
class and states.

Apple has appealed the finding of liability.

Three e-book distributors filed lawsuits against Apple and
the Publishers in 2013 and 2014, alleging that they were also
harmed by the e-book price-fixing conspiracy.

DNAML Pty, Ltd.

filed its complaint (“DNAML Complaint”) on September 16, 2013;
Lahovo, LLC (“Lahovo”) filed a complaint on March 14, 2014; and
Abbey House filed its complaint on March 21, 2014.

On June 5, a

motion to dismiss the DNAML Complaint was granted in part.

DNAML

Pty., Ltd. v. Apple, Inc., 13cv6516 (DLC), 2014 WL 2535113
(S.D.N.Y. June 5, 2014).

On June 20, Lahovo and Abbey House

stipulated that the June 5 decision would apply, with one
exception, to the Abbey House and Lahovo actions as well. 1
On July 21, S&S and Penguin responded to the Abbey House
complaint.

Both brought a counterclaim against Abbey House based

on BooksOnBoard’s website Announcement discussing the removal of
DRM protection from e-books.

S&S and Penguin allege contributory

copyright infringement and breach of contract.

On September 9,

Abbey House filed a motion to dismiss the counterclaims.
Penguin opposed the motion in a consolidated brief.

S&S and

The motion

was fully briefed on October 3.
The plaintiffs reserved the right to argue that claims arising
from sales between the United States and foreign countries were
1

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DISCUSSION
When deciding a motion to dismiss under Rule 12(b)(6), Fed.
R. Civ. P., a court must “accept all allegations in the complaint
as true and draw all inferences in the non-moving party’s favor.”
LaFaro v. New York Cardiothoracic Group, PLLC, 570 F.3d 471, 475
(2d Cir. 2009).

To survive a motion to dismiss, “a complaint

must contain sufficient factual matter, accepted as true, to
state a claim to relief that is plausible on its face.”
v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).

Ashcroft
A

complaint must do more, however, than offer “naked assertions
devoid of further factual enhancement.”

Id. (citation omitted).

A court is “not bound to accept as true a legal conclusion
couched as a factual allegation.”

Id.

At the pleading stage, intent and knowledge may be alleged
generally.

Fed. R. Civ. P. 9.

While “factual allegations of a

complaint are normally accepted as true on a motion to dismiss,
that principle does not apply to general allegations that are
contradicted by more specific allegations in the Complaint.”
DPWN Holdings (USA), Inc. v. United Air Lines, Inc., 747 F.3d
145, 151-52 (2d Cir. 2014) (citation omitted).

General

allegations of intent, or the lack thereof, may be contradicted
by specific allegations in a complaint.

Id. at 152.

“For purposes of a motion to dismiss, we have deemed a
complaint to include any written instrument attached to it as an
not barred by the June 5 decision.
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exhibit or any statements or documents incorporated in it by
reference, as well as . . . documents that the plaintiffs either
possessed or knew about and upon which they relied in bringing
the suit.”

Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000)

(citation omitted).

The S&S Contract and Penguin Contract were

relied upon by the S&S and Penguin in bringing this action, and
the terms of those contracts are relied upon to resolve this
motion.
Abbey House has moved to dismiss both of the claims asserted
against it.

Each counterclaim will be considered in turn.

I. Copyright Infringement
S&S and Penguin argue that Abbey House is liable for
copyright infringement either as a contributory infringer or for
inducement of infringement.

Their claims arise from the

assertion that the Announcement led users to remove the DRM
protection from e-books, and some users who removed the DRM
protection then copied and distributed these e-books.

The facts

alleged in the complaint are insufficient to plead either
contributory infringement or inducement of infringement.
A. Contributory Infringement
“[T]here can be no contributory infringement absent actual
infringement . . . .”

Faulkner v. Nat’l Geographic Enterprises

Inc., 409 F.3d 26, 40 (2d Cir. 2005).

To prevail on a claim of

copyright infringement, two elements must be proven.

First, the

plaintiff must prove ownership of a valid copyright.

Second, the

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plaintiff must prove that the defendant copied or displayed
“constituent elements of the work that are original” in violation
of one of the exclusive rights granted by 17 U.S.C. § 106.
Arista Records v. Doe 3, 604 F.3d 110, 117 (2d Cir. 2010)
(citation omitted).

Among the exclusive rights granted by § 106

are the rights to reproduce and to distribute copyrighted works.
17 U.S.C. § 106.
Under common law tort principles, a defendant is liable for
contributory copyright infringement if, “with knowledge of the
infringing activity, [the defendant] . . . materially contributes
to the infringing conduct of another.”
at 117 (citation and emphasis omitted).

Artista Records, 604 F.3d
The knowledge standard

is objective, and includes persons who “know or have reason to
know of the direct infringement.”

Id. at 118 (citation and

emphasis omitted).
A secondary infringer makes a “material contribution” to the
infringement when it provides substantial assistance to the
direct infringer.

Contributory liability derives from common law

principles permitting a person who furthers a tortious act to be
held jointly and severally liable with the prime tortfeasor.
at 117.

Id.

Under common law tort principles, a person is liable for

the conduct of another when, knowing that the tortfeasor’s
conduct constitutes a breach of duty, the person gives
“substantial assistance” to the tortfeasor.

See, e.g., Gen.

Elec. Co. v. AAMCO Transmissions, Inc., 962 F.2d 281, 288 (2d
10

Cir. 1992); Restatement (Second) of Torts § 876(b); see also
Perfect 10, Inc. v. Visa Inter. Service Ass’n., 494 F.3d 788,
796-97 (9th Cir. 2007).

In deciding whether contributory

liability should attach, courts look to “the function that the
alleged infringer plays in the total reproduction process.”
Artista, 604 F.3d at 118. (citation omitted).

Simply making

something easier or more profitable is not sufficient when the
aid provided lacks a direct connection to the infringing conduct.
Perfect 10, 494 F.3d at 796.
S&S and Penguin have failed to allege a plausible claim of
contributory infringement.

It is assumed for purposes of this

analysis that S&S and Penguin have adequately alleged that at
least some customers who purchased e-books from S&S and Penguin
through Abbey House have infringed the publishers’ copyrights by
stripping DRM protection from those e-books, copying the e-books,
and then distributing them to others.

But, S&S and Penguin have

failed to allege that Abbey House knew of that illegal
distribution or materially contributed to it. 2
First, there is no plausible claim that Abbey House knew of
Penguin’s counterclaim is unambiguously concerned with the
illegal distribution of its e-books after DRM protection is
stripped. S&S’s counterclaim is more ambiguous regarding the
direct act of infringement with which it is concerned. But,
S&S’s counterclaim and brief repeatedly state that the danger of
the removal of DRM protection is that e-books can easily be
copied and re-distributed. For example, the counterclaim
explains that a single copy could “quickly be distributed to
millions of readers” after DRM protection is stripped. Thus,
S&S’s counterclaim is also construed to refer to copying for
2

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any illegal distribution.

All that is alleged is that Abbey

House knew its customers were removing DRM from their e-books.
As explained in the Announcement, with the demise of Abbey House,
customers would no longer have access to its servicers to assist
them in reading the e-books they had purchased on either their
current device or on any new advice.

To continue to have access

to their library of e-books purchased through Abbey House should
problems arise or if they wished to transfer their e-books to
another e-reader, consumers would have to strip DRM from their
books.

Knowledge that consumers may do this is not knowledge

that some consumers would go further and illegally distribute ebooks to others.
For similar reasons, S&S and Penguin have not plausibly
alleged that Abbey House materially contributed to the improper
distribution of e-books.

While it is alleged that Abbey House

informed its customers of a third-party’s product that would
enable them to strip DRM from their e-books, such stripping is
not itself an act of copyright infringement.

Nor is the

stripping of DRM to transfer an e-book to a consumer’s newly
purchased e-reader the act of infringement at issue here.

With

the demise of Abbey House, the stripping was as essential for
their personal, noncommercial use as it was for a commercial
misappropriation of the publishers’ works.

Moreover, most of the

cases in which courts have found a party to have provided
nonpersonal use and distribution to others.
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material assistance to infringers are those in which the parties
have themselves manufactured or provided a service or device that
is employed in the act of infringement. 3

The parties have not

cited, and the Court has not found, any case finding contributory
infringement where the product or service allegedly used to
facilitate copyright infringement was owned and controlled by an
unrelated third party.
Accordingly, the counterclaims based on contributory
infringement are dismissed.

S&S and Penguin have not alleged

facts sufficient to plead either knowledge of the copyright
infringement alleged here or a material contribution to that
infringement.
B. Inducement of Infringement
Inducement of copyright infringement requires “purposeful,
culpable expression and conduct” that encourages copyright
infringement.

Metro-Goldwyn-Mayer Studios Inc. v. Grokster,

Ltd., 545 U.S. 913, 937 (2005). 4

A claim of inducement -- more

so than contributory infringement -- emphasizes the intent of the
secondary infringer.

See Flava Works, 689 F.3d at 758-59; 3

See, e.g., Sony Corp. of Am. v. Universal City Studios, Inc.,
464 U.S. 417, 420 (1984); Artista Records, 604 F.3d at 113; Flava
Works, Inc. v. Gunter, 689 F.3d 754, 756 (7th Cir. 2012); Perfect
10, 494 F.3d at 793; A & M Records v. Napster, 239 F.3d 1004,
1011 (9th Cir. 2001); see also 3 Nimmer on Copyright §
12.04(A)(3).
3

Following the Supreme Court’s decision in Metro-Goldwyn-Mayer
Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 914 (2005),
inducement is analyzed as requiring different elements than
4

13

Nimmer on Copyright § 12.04(A)(4).

“Evidence of active steps

taken to encourage direct infringement, such as advertising an
infringing use or instructing how to engage in an infringing use,
show an affirmative intent that the product be used to infringe
. . . .”

Grokster, 545 U.S. at 936 (citation omitted).

Mere

knowledge of the possibility that infringement may occur is
insufficient to establish the intent required for inducement.
Id. at 937.

While most inducement cases have involved a product

or device, inducement liability can extend to services.

Columbia

Pictures Indus., Inc. v. Fung, 710 F.3d 1020, 1033 (9th Cir.
2013) (operator of website cataloged and tracked “torrents” or
pieces of files).
The facts alleged in the counterclaims are insufficient to
plead the intent required for inducement of copyright
infringement.

While instructions may suffice in some

circumstances to establish an intent to infringe, the
instructions must relate to “an infringing use.”
U.S. at 936 (emphasis added).

Grokster, 545

Here, Abbey House discussed only a

noninfringing use in the Announcement: the removal of DRM
protection by consumers so that they could continue to read their
purchased e-books on new devices after Abbey House went out of
business.

This does not promote the infringement at issue here.

Indeed, the terms of the Announcement, in which Abbey House told
its users that removal of DRM-protection was permissible if done
contributory infringement.
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for personal use, contradicts the general allegation that Abbey
House had the specific intent to induce copyright infringement.
That some users may have used the e-books in an infringing manner
after removing DRM protection does not change this analysis; this
was not the use for which Abbey House gave instructions or that
it encouraged.
S&S and Penguin’s arguments to the contrary conflate the
removal of DRM protection with the infringement alleged in the
counterclaims.

There is no question that Abbey House encouraged

the removal of DRM protection.

The act of infringement

underlying the inducement claim, however, is not the removal of
DRM protection.

Rather, it is the copying and distribution of e-

books to others after such protection has been removed.

The

counterclaims do not allege that Abbey House encouraged such
infringing acts.
The counterclaims for inducement of infringement are
dismissed.

Because both counterclaims based on copyright

infringement are dismissed, Abbey House’s argument that no actual
infringement has been alleged need not be addressed.
II. Breach of Contract
Abbey House has also moved to dismiss the counterclaims
asserting that it breached its contractual commitment to
distribute e-books only with DRM protection.

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Both contracts are

governed by New York law. 5
“[T]he fundamental, neutral precept of contract
interpretation is that agreements are construed in accord with
the parties’ intent.”

In re Delta Air Lines, Inc., 608 F.3d 139,

146 (2d Cir. 2010) (citation omitted) (applying New York law).
The best evidence of what parties to a written agreement intend
is what they say in their writing.

Id.

An agreement that is

complete, clear and unambiguous on its face must be enforced
according to the plain meaning of its terms.

Law Debenture Trust

Co. of New York v. Maverick Tube Corp., 595 F.3d 458, 467 (2d
Cir. 2010) (citation omitted) (applying New York law).

“The

court should read the integrated contract as a whole to ensure
that undue emphasis is not placed upon particular words and
phrases, to safeguard against adopting an interpretation that
would render any individual provision superfluous.”
(citation omitted).

Id. at 468

“Further, the courts may not by construction

add or excise terms, nor distort the meaning of those used and
thereby make a new contract for the parties under the guise of
interpreting the writing.”

Id. (citation omitted).

A. The S&S Contract
Abbey House contends that S&S has failed to plead its breach
of contract claim.

The counterclaim asserts that the

Announcement encouraged readers to strip the DRM protection from
Both contracts state that the contracts are to be governed by
the laws of the State of New York. No party has suggested that
5

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e-books in violation of the S&S contract.

S&S has identified two

contract provisions in support of its claim.

They are the duty

imposed on Abbey House to ensure that “disclosures” to consumers
are “consistent with the terms” of the contract, and to “promptly
inform” S&S of misappropriation due to a breach in security
measures.

S&S has adequately plead a claim for breach of

contract under both provisions.
The S&S contract provides that “[a]ll content usage rules
and other statements of the terms of sale or other disclosures
provided to customers shall be consistent with the terms of this
Agreement.”

S&S has adequately pled a breach of this provision

by alleging that the Announcement’s instructions regarding the
removal of DRM was inconsistent with the contract’s requirement
that e-books be sold with DRM protection.
The S&S Contract also provides that Abbey House “must
promptly inform” S&S should Abbey House become aware the S&S’s ebooks have been “subject to Misappropriation due to a breach” of
security measures, including DRM protection.

The contract

defines misappropriation to include “theft, unauthorized copying
or retransmission, printing, infringement, unauthorized
manipulation, or any other misappropriation.”

At the very least,

the removal of DRM protection is an “unauthorized manipulation”
since the S&S Contract required e-books to be sold with DRM
protection.

S&S alleges that Abbey House did not promptly inform

any other state’s law should apply.
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S&S of any removal of DRM protection of which it became aware.
Abbey House argues that it has not breached the contract
because it did not encourage customers to remove DRM protection
for non-personal or commercial use.
analysis.

This does not alter the

The contract requires DRM protection for all e-books,

and the counterclaim pleads a violation of that requirement.
Nor does the fact that the DFP was responsible for
maintaining DRM protection change this analysis.

A single

contract describes the obligations of S&S, Abbey House, and the
DFP.

The contract required Abbey House’s disclosures to be

consistent with its terms and required Abbey House to promptly
advise S&S of any removal of DRM protection.
Accordingly, S&S has adequately pled a claim for breach of
contract.

Abbey House’s motion to dismiss S&S’s breach of

contract counterclaim is denied.
B. The Penguin Contract
Abbey House also contends that Penguin has failed to plead a
breach of contract claim.

The counterclaim asserts that Abbey

House breached the content use restrictions of the contract by
posting the Announcement on its website.
While the Penguin Contract is structured similarly to the
S&S Contract, it does not contain the disclosure or reporting
requirements on which S&S relies in bringing its breach of
contract claim.

But, Penguin has identified one provision in its

own contract to support its counterclaim.
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This provision

requires Abbey House to “condition purchase and use of eBooks on
an End User’s express agreement to the Content Usage Rules.”

The

Content Usage Rules, which limit the use of e-books to personal,
noncommercial use, state that end users may: “Use eBooks on up to
six (6) Transfer devices and an unlimited number of Non-Transfer
Devices at the same time; or as allowed by the then current
publisher approved DRMs . . . .”

A “transfer device” is a

“computer that can transfer eBooks to any other device.”

A non-

transfer device is a “device . . . that cannot transfer a eBook
to any other device . . . .”
The Penguin counterclaim does not allege that Abbey House
failed to abide by this provision when it sold e-books to its
customers.

The provision essentially required Abbey House to

communicate to purchasers that a sale of a Penguin e-book was
conditioned on an agreement to use the e-book on no more than six
computers, with no limitation imposed on the number of e-readers.
Nothing in the Announcement breaches that requirement.
To the extent that the contract provision could be read to
apply to Abbey House’s interaction with its customers after the
purchase of an e-book (and Penguin does not explain what ability
Abbey House had post-sale to condition a customer’s use of an ebook on any agreement), the counterclaim also does not plead a
violation in that circumstance.

The Announcement was directed to

e-books previously purchased through Abbey House and suggested a
way in which the purchasers could continue to read those e-books
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on newly purchased devices despite the presence of DRM
protection.

Since the Content Usage Rules allow a customer to

use an e-book on “an unlimited number” of e-readers, the
counterclaim does not plausibly plead that the Announcement
violated the obligation of Abbey House to condition use of ebooks on the customer’s agreement to abide by these terms.
Penguin’s counterclaim for breach of contract is dismissed.

CONCLUSION
Abbey House’s September 9 motion to dismiss is granted in
part.

The counterclaims by S&S and Penguin are dismissed with

one exception: the motion to dismiss the S&S counterclaim for
breach of contract is denied.
Dated:

New York, New York
November 21, 2014

__________________________________
DENISE COTE
United States District Judge

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