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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF HAWAII
`PACIFIC STOCK, INC.,
`CIVIL NO. 11-00423 SOM/BMK
`Plaintiff,
`ORDER DENYING PACIFIC STOCK’S
`MOTION FOR PARTIAL SUMMARY
`JUDGMENT; ORDER DENYING
`PEARSON EDUCATION’S MOTION
`FOR SUMMARY JUDGMENT
`
`vs.
`PEARSON EDUCATION, INC.,
`Defendant.
`_____________________________
`ORDER DENYING PACIFIC STOCK’S MOTION
`FOR PARTIAL SUMMARY JUDGMENT; ORDER DENYING
`PEARSON EDUCATION’S MOTION FOR SUMMARY JUDGMENT
`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,
`
`))))))))))
`
`I.
`
`
` 2473
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF HAWAII
`PACIFIC STOCK, INC.,
`CIVIL NO. 11-00423 SOM/BMK
`Plaintiff,
`ORDER DENYING PACIFIC STOCK’S
`MOTION FOR PARTIAL SUMMARY
`JUDGMENT; ORDER DENYING
`PEARSON EDUCATION’S MOTION
`FOR SUMMARY JUDGMENT
`
`vs.
`PEARSON EDUCATION, INC.,
`Defendant.
`_____________________________
`ORDER DENYING PACIFIC STOCK’S MOTION
`FOR PARTIAL SUMMARY JUDGMENT; ORDER DENYING
`PEARSON EDUCATION’S MOTION FOR SUMMARY JUDGMENT
`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,
`
`))))))))))
`
`I.
`
`
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`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. The sole owner of Pacific
`Stock is Barbara Brundage. 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
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`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.
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`2
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`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
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`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. For a 3/4-page or full-
`page, the “base rate” increased. 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. See Ex. E, ECF No. 80.
`2
`Effective March 9, 2004, Pacific Stock and Pearson
`agreed to more detailed pricing terms. See Ex. 10, ECF No. 84-4.
`
`2
`
`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
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`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. See Ex. D, ECF No. 79, PageID
`# 1147. 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
`
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`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. It also asserts claims of
`fraud and fraudulent concealment. 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
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`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. See Decl. of Paul Maki ¶ 3(f), ECF No. 71-2,
`PageID #440. 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
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`7
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`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. See ECF
`Nos. 103-4, Interrogatory No. 3. “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
`
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`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. See Ex. C, ECF Nos. 72-
`73. 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). See Opposition at 27 n.6, ECF No.
`99. 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. See Decl.
`of Barbara Brundage ¶¶ 7, 8, and 11, ECF No. 27-1.
`
`9
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`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. 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. 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] co-
`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
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`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
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`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.” Fed. R. Civ.
`P. 56(a) (2010). See Addisu v. Fred Meyer, Inc., 198 F.3d 1130,
`1134 (9 Cir. 2000). The movants must support their position
`th
`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
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`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
`(9 Cir. 2000). The burden initially falls on the moving party
`th
`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 (9 Cir. 1987) (citing
`th
`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. Nissan
`Fire, 210 F.3d at 1102-03. 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.” Miller,
`454 F.3d at 987. 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
`
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`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 (9 Cir. 2005) (quoting Anderson v.
`th
`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 (9 Cir. 2003); Addisu v. Fred
`th
`Meyer, Inc., 198 F.3d 1130, 1134 (9 Cir. 2000) (“There must be
`th
`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
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`its license.” S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087
`(9 Cir. 1989).
`th
`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. See Ex. E,
`ECF No. 80. 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,
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`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
`
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`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 (9 Cir. 2006), involved a
`th
`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 (9 Cir. 2010), as
`th
`amended on denial of rehearing. In MDY, the Ninth Circuit
`
`17
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`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
`
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`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
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`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. See 17 U.S.C.
`§ 411. 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
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`invalidity of the plaintiff’s copyrights.’” Entm’t Research Grp.
`v. Genesis Creative Grp., 122 F.3d 1211, 1217 (9 Cir. 1997)
`th
`(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
`
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`transfer exclusive ownership of the copyrights to Pacific Stock.
`
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