Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 1 of 17 PageID #: 509
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MAINE
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`STOCKFOOD AMERICA, INC.,
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`v.
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`Plaintiff
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`PEARSON EDUCATION, INC.,
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`Defendant
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`No. 2:12-cv-124-JAW
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`MEMORANDUM DECISION AND ORDER ON MOTION TO AMEND
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`In this copyright infringement action, plaintiff StockFood America, Inc. (“StockFood”)
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`moves to file a second amended complaint removing unknown “John Doe” printer defendants
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`and adding claims for vicarious and contributory infringement. See Plaintiff’s Motion for Leave
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`To File Second Amended Complaint (“Motion”) (ECF No. 29) at 1. Defendant Pearson
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`Education, Inc. (“Pearson”) opposes the Motion insofar as it seeks to add the two new copyright
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`infringement claims on the grounds that (i) the addition of those claims would be futile, (ii) the
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`court lacks subject matter jurisdiction over the claims, and (iii) StockFood unduly delayed in
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`seeking to add those claims, prejudicing Pearson. See Defendant’s Opposition to Plaintiff’s
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`Motion for Leave To File Second Amended Complaint (“Opposition”) (ECF No. 31) at 1-2. For
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`the reasons that follow, I grant the Motion to allow the deletion of the “John Doe” defendants
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`and the addition of the contributory infringement claim, and otherwise deny it.
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`I. Applicable Legal Standards
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`Pursuant to Federal Rule of Civil Procedure 15(a)(2), “[t]he court should freely give
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`leave [to amend a pleading] when justice so requires.” Fed. R. Civ. P. 15(a)(2). Leave to amend
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`should be granted in the absence of reasons “such as undue delay, bad faith or dilatory motive on
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 2 of 17 PageID #: 510
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`the part of the movant, repeated failure to cure deficiencies by amendments previously allowed,
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`undue prejudice to the opposing party by virtue of allowance of the amendment, futility of
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`amendment, etc. . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962).
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`The First Circuit has explained:
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`A motion to amend a complaint will be treated differently depending on its timing
`and the context in which it is filed. . . . As a case progresses, and the issues are
`joined, the burden on a plaintiff seeking to amend a complaint becomes more
`exacting. Scheduling orders, for example, typically establish a cut-off date for
`amendments (as was apparently the case here). Once a scheduling order is in
`place, the liberal default rule is replaced by the more demanding “good cause”
`standard of Fed. R. Civ. P. 16(b). This standard focuses on the diligence (or lack
`thereof) of the moving party more than it does on any prejudice to the party-
`opponent. Where the motion to amend is filed after the opposing party has timely
`moved for summary judgment, a plaintiff is required to show “substantial and
`convincing evidence” to justify a belated attempt to amend a complaint.
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`Steir v. Girl Scouts of the USA, 383 F.3d 7, 11-12 (1st Cir. 2004) (citations, internal quotation
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`marks, and footnotes omitted).
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`The scheduling order in this case established a cut-off date of September 19, 2012, for the
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`filing of motions to amend. See ECF No. 27. The Motion was filed on that date. See Motion.
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`Hence, the liberal default rule applies.
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`II. Discussion
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`I group Pearson’s objections to StockFood’s motion to amend under two broad headings
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`– futility (including a purported lack of subject matter jurisdiction over the new copyright
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`infringement claims) and delay/prejudice.
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 3 of 17 PageID #: 511
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`A. Futility
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`1. Applicable Legal Standards
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`An amendment is futile when “the complaint, as amended, would fail to state a claim
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`upon which relief could be granted.” Glassman v. Computervision Corp., 90 F.3d 617, 623 (1st
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`Cir. 1996). “In assessing futility, the district court must apply the standard which applies to
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`motions to dismiss under [Federal Rule of Civil Procedure] 12(b)(6).” Adorno v. Crowley
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`Towing & Trans. Co., 443 F.3d 122, 126 (1st Cir. 2006).
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`The Supreme Court has stated:
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`While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
`detailed factual allegations, a plaintiff’s obligation to provide the grounds of his
`entitlement to relief requires more than labels and conclusions, and a formulaic
`recitation of the elements of a cause of action will not do. Factual allegations
`must be enough to raise a right to relief above the speculative level.
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`Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and internal punctuation
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`omitted).F This standard requires the pleading of “only enough facts to state a claim to relief that
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`is plausible on its face.” Id. at 570. “A claim has facial plausibility when the plaintiff pleads
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`factual content that allows the court to draw the reasonable inference that the defendant is liable
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`for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
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`In ruling on a motion to dismiss under Rule 12(b)(6), a court assumes the truth of all of
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`the well-pleaded facts in the complaint and draws all reasonable inferences in favor of the
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`plaintiff. Román-Oliveras v. Puerto Rico Elec. Power Auth., 655 F.3d 43, 45 (1st Cir. 2011).
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 4 of 17 PageID #: 512
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`2. Factual Background
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`The proposed second amended complaint contains the following relevant factual
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`allegations.1
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`1.
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`StockFood, a Maine corporation with its principal place of business in
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`Kennebunk, Maine, is a stock photography agency that licenses photographs for distribution
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`throughout the United States. [Proposed] Second Amended Complaint and Demand for Jury
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`Trial (“Proposed Complaint”) (ECF No. 30) ¶ 5. Pearson, a Delaware corporation, is a publisher
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`of educational textbooks, which it sells and distributes via employees and agents in Maine and
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`throughout the United States. Id. ¶ 6.
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`2.
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`Prior to the commencement of this action, the copyright holders granted
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`StockFood co-ownership of the copyrights to the photographic images depicted in Exhibit A to
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`the Proposed Complaint (“Photographs”). Id. ¶ 7; Exh. A (ECF No. 30-1) thereto.2
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`3.
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`Between 1989 and 2009, StockFood sold Pearson limited licenses to use copies of
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`the Photographs in numerous educational publications. Proposed Complaint ¶ 9. The licenses
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`were expressly limited by number of copies, distribution area, language, duration, and/or media,
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`as set forth in Exhibit A. Id.; Exh. A thereto.
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`4.
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`On May 3, 2010, and January 13, 2011, Julie Orr, Image Manager, Rights and
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`Permissions, for Pearson’s Curriculum Group, testified that Pearson published photographs in its
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`textbooks in some instances without obtaining any permission and, in other instances, had
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`1 The First Circuit has instructed that, in reviewing a complaint for sufficiency pursuant to Rule 12(b)(6), a court
`“should begin by identifying and disregarding statements in the complaint that merely offer legal conclusions
`couched as fact or threadbare recitals of the elements of a cause of action.” Ocasio-Hernández v. Fortuño-Burset,
`640 F.3d 1, 12 (1st Cir. 2011) (citation and internal punctuation omitted). “Non-conclusory factual allegations in the
`complaint must then be treated as true, even if seemingly incredible.” Id. “If that factual content, so taken, allows
`the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, the claim has facial
`plausibility.” Id. (citation and internal quotation marks omitted).
`2 Exhibit A lists 76 images. See Exh. A to Proposed Complaint.
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 5 of 17 PageID #: 513
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`printed in excess of license limitations. Proposed Complaint ¶ 16; Exh. B (ECF No. 30-2)
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`thereto.
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`5.
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`On March 15, 2012, StockFood requested that Pearson provide it with complete
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`information regarding Pearson’s unauthorized uses of the Photographs. Proposed Complaint
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`¶ 18; Exh. D (ECF No. 30-4) thereto. Pearson did not timely respond to StockFood’s request
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`and, when it belatedly responded, it declined to provide most of the requested information.
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`Proposed Complaint ¶ 18.
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`6.
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`Upon information and belief, Pearson used the Photographs without any
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`permission in some of the publications identified in Exhibit A and in additional publications. Id.
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`¶ 20. Because Pearson alone knows these wholly unauthorized uses, StockFood cannot further
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`identify them without discovery. Id.
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`7.
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`Upon information and belief, Pearson reproduced and distributed the Photographs
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`without StockFood’s permission to other entities, subsidiary companies, divisions, affiliates,
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`and/or third parties (“Third Parties”). Id. ¶ 24. Upon information and belief, the reproductions
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`and distribution took place in the United States. Id.
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`8.
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`Upon information and belief, the Third Parties then translated the publications at
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`issue into additional languages or published them in local adaptations or reprints and included
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`the Photographs in these publications without StockFood’s permission. Id. ¶ 25. Upon
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`information and belief, the Third Parties’ unauthorized use of the Photographs occurred in whole
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`or in part in the United States. Id. ¶ 26.
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`9.
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`Upon information and belief, when Pearson licenses translation rights to Third
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`Parties, it transmits the electronic file for the Third Party’s use. Id. ¶ 27. Upon information and
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`belief, Pearson permits Third Parties to distribute its books in new territories without changing
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 6 of 17 PageID #: 514
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`the content, to translate its books into new languages, and to adapt its books for distribution in
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`additional territories. Id. ¶ 28.
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`10.
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`Upon information and belief, Pearson (i) knew when it reproduced and distributed
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`the Photographs that the Third Parties would reproduce and distribute them without StockFood’s
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`authorization and (ii) knew that the Third parties were in fact reproducing and distributing them
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`without StockFood’s authorization. Id. ¶¶ 29-30. Upon information and belief, Pearson had the
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`right and ability to supervise the Third Parties’ use of the Photographs. Id. ¶ 31.
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`11.
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`Upon information and belief, Pearson directly profited from its reproduction and
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`distribution of the Photographs to the Third Parties. Id. ¶ 33. Documents that Pearson produced
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`in discovery in this action show that these Third Parties pay Pearson a percentage of their sales
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`of these products for translation or adaptation rights, including access to all of the content in the
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`publications. Id.
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`3. Discussion
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`a. Asserted Pleading Deficiencies
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`The Supreme Court has explained:
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`One infringes contributorily by intentionally inducing or encouraging direct
`infringement and infringes vicariously by profiting from direct infringement while
`declining to exercise a right to stop or limit it. Although the Copyright Act does
`not expressly render anyone liable for infringement committed by another, these
`doctrines of secondary liability emerged from common law principles and are
`well established in the law.
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`Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930-31 (2005) (citations,
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`internal punctuation, and footnote omitted). “Absent an actionable claim for direct copyright
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`infringement, the claims for contributory or vicarious infringement must also fail.” Greenspan v.
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`Random House, Inc., 859 F. Supp.2d 206, 219 (D. Mass. 2012), aff’d, 2012 WL 5188792 (1st
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`Cir. 2012).
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 7 of 17 PageID #: 515
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`Pearson first argues, as a general matter, that the Proposed Complaint does not meet the
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`pleading standards of Twombly and Iqbal in that it offers only a formulaic recitation of the
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`elements of the causes of action, devoid of necessary factual allegations, and, worse, grounds
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`those recitations on information and belief. See Opposition at 3-4.
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`Pearson elaborates that:
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`1.
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`Despite months of discovery, the Proposed Complaint fails to set forth any act of
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`direct infringement by a Third Party, including the identity of any such party, where or when
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`such a party acted, and the instances in which any such party purportedly copied any of the
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`Photographs without permission. See id. at 4-5.
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`2.
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`Even if the Proposed Complaint adequately alleged direct infringement by a Third
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`Party, it fails to allege culpable conduct by Pearson. See id. at 5-7. It (i) alleges only that
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`Pearson distributed the Photographs in its publications to Third Parties, which falls short of
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`conduct amounting to a knowing inducement or material contribution to a third party’s
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`infringement, and (ii) fails to allege facts to support the conclusory allegations that Pearson “had
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`the right and ability to control the infringing conduct of other entities” or “received a direct
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`financial benefit from the unauthorized use of the Photographs.” Id. (quoting Proposed
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`Complaint ¶¶ 43-44). Although the Proposed Complaint does allege that Third Parties paid
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`Pearson a percentage of their sales of the products at issue, such a payment does not, in
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`Pearson’s view, plausibly establish that it did anything improper with respect to the Photographs.
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`See id. at 5-6.
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`Pearson observes that the United States District Court for the Eastern District of
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`Pennsylvania recently denied a motion filed by the same attorneys to add similar claims for
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`contributory and vicarious infringement on behalf of a different plaintiff, holding that the
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 8 of 17 PageID #: 516
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`plaintiff’s “vague, broadly-worded assertion does not provide enough factual support to survive a
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`motion to dismiss under Rule 12(b)(6).” See Opposition at 6-7 (quoting Order, Grant Heilman
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`Photography, Inc. v. Pearson Educ., Inc., NO. 11-cv-4649, slip op. at 2 (E.D. Pa. July 26, 2012)
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`(“Heilman Order”), Exh. A (ECF No. 31-1) to Opposition).
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`StockFood’s allegations in the Proposed Complaint bearing on its claims of contributory
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`and vicarious copyright infringement are substantially similar, although not identical, to those in
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`the proposed complaint at issue in Heilman. Compare Proposed Complaint ¶¶ 24-33 with
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`[Proposed] First Amended Complaint, Heilman (“Heilman Complaint”), Exh. B (ECF No. 31-2)
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`to Opposition, ¶¶ 34-39. I reach the same conclusion as did the Heilman court with respect to
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`the claim of vicarious copyright infringement. The Proposed Complaint is too bare-bones, as to
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`that cause of action, to survive a motion to dismiss. Nonetheless, I conclude that the Proposed
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`Complaint, which contains some factual allegations not found in the Heilman Complaint, would
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`survive a motion to dismiss with respect to the claim of contributory copyright infringement.
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`Pearson first challenges both claims on the basis that the Proposed Complaint falls short
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`of adequately alleging direct infringement by Third Parties, in the absence of which neither claim
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`can be sustained. See Opposition at 4-5. StockFood rejoins that Pearson has declined to provide
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`the details of Third Party infringement in response to discovery requests on the basis that they
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`are not relevant to the “claims in suit” – a default that StockFood says will be the subject of a
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`forthcoming motion to compel3 – and that, in any event, the Proposed Complaint adequately
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`alleges direct infringement by the Third Parties. See Plaintiff[’s] Reply on Motion for Leave To
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`File Second Amended Complaint (“Reply”) (ECF No. 32) at 3-5. I agree.
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`3 Local Rule 26(b) prohibits written discovery motions without the prior approval of a judicial officer.
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 9 of 17 PageID #: 517
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` StockFood alleges that Pearson reproduced the Photographs and then distributed them to
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`Third Parties without its permission and that the Third Parties then translated publications
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`containing the Photographs into additional languages or published them in local adaptations or
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`reprints without its permission. See Proposed Complaint ¶¶ 24-25. StockFood further alleges
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`that the Third Parties’ unauthorized use of the Photographs took place in whole or in part in the
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`United States. See id. ¶ 26. Accordingly, StockFood supplies sufficient factual matter to allow
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`the court to draw a plausible inference that the Third Parties directly infringed its copyrights in
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`the Photographs. See Litecubes, LLC v. Northern Light Prods., Inc., 523 F.3d 1353, 1371 (Fed.
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`Cir. 2008) (“[T]he Copyright Act does not explicitly require that sales be in the United States,
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`and courts have generally held that the Copyright Act only does not reach activities that take
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`place entirely abroad.”) (citation and internal quotation marks omitted) (emphasis in original).
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`Given Pearson’s superior knowledge of the underlying facts, StockFood’s reliance on
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`“information and belief” does not prevent the Proposed Complaint from stating a plausible claim
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`of entitlement to relief as against Pearson. See, e.g., Arista Records LLC v. Doe 3, 604 F.3d 110,
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`120 (2d Cir. 2010) (“The Twombly plausibility standard, which applies to all civil actions, does
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`not prevent a plaintiff from pleading facts alleged ‘upon information and belief’ where the facts
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`are peculiarly within the possession and control of the defendant or where the belief is based on
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`factual information that makes the inference of culpability plausible.”) (citations and internal
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`quotation marks omitted); Wright v. Lehigh Valley Hosp. & Health Network, Civil Action No.
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`10-431, 2011 WL 2550361, at *3 (E.D. Pa. June 23, 2011) (“Although defendants take strong
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`issue with Wright’s use of ‘upon information and belief’ pleading, the allowance of pleading
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`upon information and belief has been held to be appropriate under the Twombly/Iqbal regime
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`where the facts required to be pled are uniquely in the control of the defendant.”).
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 10 of 17 PageID #: 518
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`Nor does StockFood’s failure to enumerate specific details of the alleged Third Party
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`infringement prevent the Proposed Complaint from adequately alleging direct infringement by
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`the Third Parties. See, e.g., American Inst. of Physics v. Schwegman Lundberg & Woessner,
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`P.A., Civ. No. 12-528 (RHK/JJK), 2012 WL 3799647, at *3 (D. Minn. July 2, 2012) (“A plaintiff
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`asserting fraud must plead ‘the who, what, when, where, and how’ of its claim because Federal
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`Rule of Civil Procedure 9(b) subjects such a claim to a heightened-pleading requirement. But no
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`similar requirement exists for copyright plaintiffs, who are constrained only by Federal Rule of
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`Civil Procedure 8(a)(2), requiring ‘a short and plain statement of the claim showing that the
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`pleader is entitled to relief.’ Here, Plaintiffs have alleged that Defendants copied their protected
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`works; they need not suffuse their Complaint with details regarding when, or the precise manner
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`in which, such copying occurred.”) (citations omitted) (emphasis in original).4
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`StockFood also pleads sufficient facts for the court to draw a plausible inference of
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`contributory infringement by Pearson. “A party may be liable for contributory copyright
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`infringement if it (1) has knowledge of a third party’s infringing activity, and (2) induces, causes,
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`or materially contributes to the infringing conduct.” Med-Sys., Inc. v. Masterson Mktg., Inc., No.
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`11CV695 JLS (BLM), 2011 WL 5873399, at *6 (S.D. Cal. Nov. 23, 2011) (citation and internal
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`quotation marks omitted).
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`With respect to the first element, StockFood alleges that Pearson knew when it
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`reproduced and distributed the Photographs that the Third Parties would reproduce and distribute
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`them without StockFood’s authorization and knew that the Third Parties were in fact doing so.
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`4 Moreover, as discussed below with respect to the issue of alleged undue delay in filing the Motion, StockFood
`explains that Pearson had refused, as of the time of the filing of the Motion, to (i) provide requested discovery in this
`case that would flesh out details of the Third Party infringement or (ii) permit StockFood to import into the Proposed
`Complaint, from parallel copyright infringement cases, factual information that was labeled as “confidential” and
`provided pursuant to a confidentiality order entered in those other cases.
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 11 of 17 PageID #: 519
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`See Proposed Complaint ¶¶ 29-30. This suffices to allege knowledge of the Third Parties’
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`infringing activities. See, e.g., Acosta v. United States, No. Civ. 04-265-P-S, Civ. 03-116-GZS,
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`2005 WL 757581, at *2 (D. Me. Feb. 16, 2005) (rec. dec., aff’d Mar. 28, 2005) (noting the “usual
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`rule” that “malice, intent, knowledge, and other condition of mind of a person may be averred
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`generally”) (citation and internal punctuation omitted).
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`With respect to the second element, StockFood alleges that, pursuant to licenses between
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`Pearson and the Third Parties, Pearson transmitted electronic files containing the Photographs to
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`the Third Parties knowing that they (the Third Parties) would reproduce and distribute the
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`Photographs without StockFood’s permission. See Proposed Complaint ¶¶ 27-29. These
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`allegations, taken as true for purposes of the Motion, suffice to show that Pearson induced,
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`caused, or materially contributed to the Third Parties’ infringement.5
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`Nonetheless, I agree with Pearson that StockFood’s claim of vicarious copyright liability
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`fails to state a claim upon which relief can be granted. A claim for vicarious copyright liability
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`entails a showing that a defendant has “the right and ability to supervise the infringing activity”
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`and has “a direct financial interest” in the activity. Pegasus Imaging Corp. v. Northrop
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`Grumman Corp., No. 8:07-CV-1937-T-27EAJ, 2008 WL 5099691, at *2 (M.D. Fla. Nov. 25,
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`2008). StockFood adequately pleads the second element by alleging that the Third Parties pay
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`Pearson a percentage of their sales of the products at issue for translation or adaptation rights,
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`including access to all of the content in the publications. See Proposed Complaint ¶ 33.
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`5 Pearson cites two cases for the proposition that merely supplying means to accomplish infringing activity cannot
`give rise to the imposition of liability for contributory infringement. See Opposition at 5 (citing Capitol Records,
`Inc. v. Foster, No. Civ. 04-1569-W, 2007 WL 1028532 (W.D. Okla. Feb. 6, 2007); Newborn v. Yahoo!, Inc., 391
`F. Supp.2d 181 (D.D.C. 2005)). Both cases are distinguishable. In Capitol Records, the complaint was “devoid of
`any suggestion that [the defendant] knew third parties were using her account to infringe the plaintiffs’ copyrights or
`that she substantially participated in any infringing activities.” Capitol Records, 2007 WL 1028532, at *3. In
`Newborn, the complaint contained “brief, conclusory statements, which are accompanied by no factual support,” and
`did not allege that “the defendants’ activities were anything more than the mere operation of the website
`businesses.” Newborn, 391 F. Supp.2d at 189 (citation and internal quotation marks omitted).
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 12 of 17 PageID #: 520
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`However, StockFood relies on a “formulaic recitation of the elements of a cause of
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`action[,]” Twombly, 550 U.S. at 555, with respect to the second element, alleging that “[u]pon
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`information and belief, Pearson had the right and ability to supervise the Third Parties’ use of the
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`Photographs[,]” Proposed Complaint ¶ 31. StockFood alleges no facts that would allow the
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`court to conclude that this was the case. It asserts merely that some of the Third Parties were
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`subsidiary companies, divisions, or affiliates of Pearson, see id. ¶ 24, and that Pearson licensed
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`translation rights to them, see id. ¶ 27. In the absence of further detail regarding the nature of the
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`relationship between Pearson and its affiliates or subsidiaries or the terms of the licensing
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`agreements at issue, one cannot draw a reasonable inference that Pearson had the right and
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`ability to supervise any of the Third Parties’ infringing activities. See, e.g., Pegasus, 2008 WL
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`5099691, at *2 (“A parent corporation cannot be held liable for the infringement of its subsidiary
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`unless there is a substantial and continuing connection between the infringing acts of the parent
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`and subsidiary.”) (citation and internal quotation marks omitted).
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`Thus, the Motion must be denied with respect to the addition of a claim for vicarious
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`copyright infringement against Pearson.
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`b. Asserted Lack of Subject Matter Jurisdiction
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`Pearson next argues that StockFood’s bid to add the new claims is futile on another basis:
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`that the court would lack subject matter jurisdiction over them because they are premised on
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`direct infringements that allegedly occurred outside of the United States. See Opposition at 7-8.
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`StockFood rejoins that its claims are subject to a well-established exception to the general rule
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`that the Copyright Act does not apply to extraterritorial infringements. See Motion at 3; Reply at
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`7.
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 13 of 17 PageID #: 521
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`As a threshold matter, according to my research, courts have split on the matter of
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`whether extraterritorial infringement implicates a court’s subject matter jurisdiction; the better
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`view, adopted by the United States Court of Appeals for the Federal Circuit, is that it does not.
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`See Litecubes, 523 F.3d at 1362, 1368 (following the “readily administrable bright line rule” set
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`forth in Arbaugh v. Y & H Corp., 546 U.S. 500 (2006), that “when Congress does not rank a
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`statutory limitation on coverage as jurisdictional, courts should treat the restriction as non-
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`jurisdictional in character”; holding that, because “[t]here is no indication that Congress intended
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`the extraterritorial limitations on the scope of the Copyright Act to limit the subject matter
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`jurisdiction of the federal courts[,] . . . the issue is properly treated as an element of the claim
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`which must be proven before relief can be granted, not a question of subject matter jurisdiction”)
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`(citation and internal quotation marks omitted); Luar Music Corp. v. Universal Music Grp., Inc.,
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`861 F. Supp.2d 30, 39 n.5 (D.P.R. 2012) (noting split; following Litecubes approach).
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`Therefore, even assuming arguendo that the new claims implicate solely extraterritorial
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`infringement, that does not deprive the court of subject matter jurisdiction.
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`In any event, I agree with StockFood that it has pleaded sufficient factual matter to state a
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`claim with respect to the “predicate act” exception. See, e.g., Tire Eng’g & Distrib., LLC v.
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`Shandong Linglong Rubber Co., 682 F.3d 292, 306 (4th Cir. 2012) (“As a general matter, the
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`Copyright Act is considered to have no extraterritorial reach. But courts have recognized a
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`fundamental exception: when the type of infringement permits further reproduction abroad, a
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`plaintiff may collect damages flowing from the foreign conduct.”) (citations and internal
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`quotation marks omitted). StockFood alleges an infringement in the United States – Pearson’s
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`unauthorized copying of the Photographs for distribution to the Third Parties – that permitted
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`further infringement (unauthorized copying and distribution) abroad. See Proposed Complaint
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 14 of 17 PageID #: 522
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`¶¶ 24-30. These allegations, taken as true for purposes of the Motion, suffice to trigger the
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`predicate exception. See, e.g., Stolle Mach. Co. v. RAM Precision Indus., No. 3:10-cv-155, 2011
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`WL 6293323, at *13 (S.D. Ohio Dec. 15, 2011) (“In this case, it was the initial unauthorized
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`copying that occurred in the United States that allowed the subsequent infringement overseas.”).
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`B. Asserted Undue Delay and Prejudice
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`Pearson finally contends that the court should deny the Motion on the grounds of
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`StockFood’s undue delay in seeking to add the new claims and the resulting prejudice to
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`Pearson. See Opposition at 8-10. StockFood argues that it filed the Motion expeditiously based
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`on documents produced in discovery and that there is no discernible prejudice to Pearson. See
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`Motion at 4-5; Reply at 1-2. StockFood has the better argument.
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`StockFood filed the instant Motion on September 19, 2012, the deadline for filing
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`motions to amend, which was two-and-a-half months prior to the close of discovery on
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`December 5, 2012. See ECF No. 27. Pearson argues that StockFood nonetheless demonstrated
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`undue delay, bad faith, and a lack of due diligence because (i) StockFood has known since at
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`least 1998 that Pearson’s foreign affiliates have been using StockFood’s images and, (ii) as of
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`September 19, 2012, StockFood’s counsel had been in possession of the relevant Pearson
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`documents for more than two months in this case and more than a year in other cases in which
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`other plaintiffs have filed similar copyright actions against Pearson. See Opposition at 8-9 & n.2.
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`Pearson argues that, “[t]o the extent that the information was subject to protective orders in those
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`other cases, Plaintiff’s counsel could have, as it did in other instances, sought permission to use
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`the information outside of those cases or it could have sought expedited production of the
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`information here, but Plaintiff’s counsel did neither.” Id. at 9 n.2.
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 15 of 17 PageID #: 523
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`StockFood rejoins that, (i) although it previously knew about alleged infringements
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`relating to foreign affiliates’ licensed uses of its images in translations, it did not know until
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`recently that Pearson was copying and transmitting its images to third parties without any license
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`at all, see Reply at 4 n.14, (ii) it did not receive discovery in this case bearing on the new claims
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`until July 2012 and, even then, Pearson refused to respond to discovery requests aimed at
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`eliciting more detailed information regarding third-party usage no grounds that it was irrelevant
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`to the claims at issue, see id. at 3 & 5 n.22, and (iii) while Pearson has produced other, more
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`detailed documents in parallel copyright infringement cases against it, those documents were
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`labeled “confidential” and were subject to a protective order prohibiting StockFood’s counsel
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`from using them in other cases, see id. at 5.
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`StockFood explains that, as of the time of the filing of its reply brief (October 24, 2012),
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`it had not as yet moved to compel the production of responsive documents because it had
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`engaged in two “meet and confers” with Pearson over these discovery disputes on September 21,
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`2012, and October 16, 2012, and Pearson had promised to complete its production by late
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`October. See id. at 5 n.22. It also points out that, upon being presented with a draft version of
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`the Proposed Complaint, Pearson protested the inclusion therein of information from documents
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`and deposition transcripts that were designated confidential under protective orders entered in
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`this and other cases. See id. at 5-6; Exh. 3 (ECF No. 32-3) thereto.
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`In these circumstances, StockFood displayed neither undue delay, bad faith, nor a lack of
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`due diligence when it filed the instant Motion on September 19, 2012. See Bean v. Pearson
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`Educ., Inc., No. CV 11-8030-PCT-PGR, 2012 WL 1716021, at *1 (D. Ariz. May 15, 2012)
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`(finding that plaintiffs timely raised new fraud claims when critical documents had been received
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`on a rolling basis from January 2012 to the present).
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`Case 2:12-cv-00124-JAW Document 40 Filed 11/29/12 Page 16 of 17 PageID #: 524
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`Nor, in any event, does Pearson demonstrate that it would suffer prejudice as a result of
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`the allowance of the amendment. See Taliaferro v. City of Kansas City