Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 1 of 10
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`UNITED STATES DISTRICT COURT
`WESTERN DISTRICT OF WASHINGTON
`AT SEATTLE
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`CASE NO. C06-0186-MAT
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`ORDER RE: MOTIONS FOR
`SUMMARY JUDGMENT
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`PROPET USA, INC.,
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`Plaintiff,
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`v.
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`LLOYD SHUGART,
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`Defendant.
`____________________________________
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`INTRODUCTION AND BACKGROUND
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`This case involves a dispute between plaintiff Propet USA, Inc., a shoe company, and
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`defendant Lloyd Shugart, a photographer, over photographic images taken by defendant of and/or
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`related to plaintiff’s products. For a number of years, working as an independent contractor,
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`defendant created such images for use in plaintiff’s promotional materials. During this time period,
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`plaintiff paid defendant over $100,000.00 for his services. (See Dkt. 13, ¶ 9.)
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`At some point in mid-2005, plaintiff terminated its business relationship with defendant.
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`At around that same time, defendant discovered and complained about alleged copyright
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`infringement by plaintiff. (See Dkt. 43, Ex. B (defendant’s deposition transcript) at 94-98, 118-19,
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 2 of 10
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`170-73.) Plaintiff subsequently commenced this case seeking declaratory and injunctive relief in
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`anticipation of a copyright infringement suit by defendant. (Dkt. 7.) Defendant counterclaimed,
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`asserting copyright infringement, violations of The Digital Millennium Copyright Act (DMCA),
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`and “Stolen/Lost Photos[.]” (Dkt. 13.)
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`Now before the Court are two motions for summary judgment. Defendant filed a motion
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`for partial summary judgment as to the ownership of certain copyrights. (Dkt. 32.) Plaintiff
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`thereafter filed a motion for summary judgment seeking dismissal of defendant’s counterclaims.
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`(Dkt. 42.) The parties object to the respective motions. (Dkts. 58, 61, 64-65.) The Court
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`addresses both of the summary judgment motions below.
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`DISCUSSION
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`A.
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`Summary Judgment Standard
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`Summary judgment is appropriate when “the pleadings, depositions, answers to
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`interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
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`genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter
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`of law.” Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving
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`party is entitled to judgment as a matter of law when the nonmoving party fails to make a sufficient
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`showing on an essential element of his case with respect to which he has the burden of proof.
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`Celotex, 477 U.S. at 322-23.
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`Genuine issues of material fact that preclude summary judgment are “disputes over facts
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`that might affect the outcome of the suit under the governing law[.]” Anderson v. Liberty Lobby,
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`Inc., 477 U.S. 242, 248 (1986). In deciding a summary judgment motion, the court must view all
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`facts and inferences therefrom in the light most favorable to the nonmoving party. See Warren
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 3 of 10
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`v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995). “[A] party opposing a properly supported
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`motion for summary judgment may not rest upon mere allegation or denials of his pleading, but
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`must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S.
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`at 256 (citing Fed. R. Civ. P. 56(e)).
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`B.
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`Defendant’s Motion for Partial Summary Judgment as to Copyright Ownership
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`In his motion for partial summary judgment, defendant seeks a determination that he is the
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`owner of all copyrights in the various photographic images that are the subject of this dispute. He
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`notes that, pursuant to the Copyright Act, “[a] transfer of copyright ownership, other than by
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`operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of
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`the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly
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`authorized agent.” 17 U.S.C. § 204(a). Acknowledging the absence of any written agreement as
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`to a transfer of copyright, plaintiff concedes defendant’s copyright ownership. (See Dkt. 42 at 12
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`and Dkt. 58 at 1.) Accordingly, with respect to this precise issue, the Court finds defendant
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`entitled to a judgment as a matter of law.
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`Yet, the Court clarifies that, as argued by plaintiff, such a finding does not establish
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`defendant’s right to a judgment with respect to his copyright infringement and related claims. As
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`discussed below, plaintiff asserts an implied, nonexclusive license to utilize the photographic
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`images at issue. Given this outstanding issue, a grant of partial summary judgment on the issue
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`of defendant’s copyright ownership does not resolve the parties’ claims.1
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`1 Plaintiff initially questioned whether this Court had subject matter jurisdiction with
`respect to defendant’s copyright infringement counterclaim given a lack of any evidence defendant
`had registered copyrights in the subject photographs prior to filing his counterclaim. See 17
`U.S.C. § 411(a) (“[N]o action for infringement of the copyright in any United States work shall
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 4 of 10
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`C.
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`Plaintiff’s Motion for Summary Judgment as to Defendant’s Counterclaims
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`Plaintiff seeks to dismiss defendant’s counterclaims and requests an order acknowledging
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`the existence of an implied, nonexclusive license to use any photographs created by defendant
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`prior to the termination of their business relationship. It describes the terms of that use to include
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`use during the regular course of advertising its shoes and in conveying the photographs to others
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`who advertise its shoes and make substantially the same use of the photographs as plaintiff.
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`Plaintiff first contends that, in handing over photographs for use in its advertising in
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`exchange for the fees paid, defendant conveyed a nonexclusive license to use the copyrighted
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`works for their intended purpose. See, e.g., Effects Assoc. Inc. v. Cohen, 908 F.2d 555, 558-59
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`(9th Cir. 1990) (“. . . Effects created a work at defendant’s request and handed it over, intending
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`that defendant copy and distribute it. To hold that Effects did not at the same time convey a
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`license to use the footage in ‘The Stuff’ would mean that plaintiff’s contribution to the film was
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`‘of minimal value,’ a conclusion that can’t be squared with the fact that Cohen paid Effects almost
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`$ 56,000 for this footage. Accordingly, we conclude that Effects impliedly granted nonexclusive
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`licenses to Cohen and his production company to incorporate the special effects footage into ‘The
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`Stuff’ and to New World Entertainment to distribute the film.”) (internal footnote omitted).
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`Plaintiff maintains that defendant’s invoices and its own cancelled checks make up the sole reliable
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`evidence of contract and do not, in any way, reflect the imposition of any limits on the use of the
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`photographs. Plaintiff also points to defendant’s testimony as supporting the contention that it
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`be instituted until preregistration or registration of the copyright claim has been made in
`accordance with this title.”) However, defendant subsequently revealed evidence of copyright
`registrations effective April 10, 2006, prior to the April 21, 2006 filing of his counterclaims. (See
`Dkt. 63, ¶ 16 and Ex. B.) Accordingly, plaintiff’s subject matter jurisdiction argument lacks merit.
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 5 of 10
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`could use defendant’s photography in any way that benefitted itself. (See Dkt. 43, Ex. B at 16-
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`17.)
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`In response, defendant maintains his exclusive license over the photographic images at
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`issue. See, e.g., Fosson v. Palace (Waterland), Ltd., 78 F.3d 1448, 1455 (9th Cir. 1996) (noting
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`that the decision in Effects Assoc. Inc., 908 F.2d 555, does not control the issue of whether the
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`terms of an express license had been breached and could give rise to an infringement suit; “[O]nce
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`a non-breaching party to an express copyright license obtains and exercises a right of rescission
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`by virtue of a material breach of the agreement, any further distribution of the copyrighted material
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`would constitute infringement.”); S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir.
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`1989) (“A licensee infringes the owner’s copyright if its use exceeds the scope of its license.”) In
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`support, he points to a “film delivery memo” he contends accompanied all of his copyrighted
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`images and expressly limited plaintiff’s use of the images, as well as a seal on all film delivery
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`packages that asserted his exclusive rights and indicated that plaintiff’s use and license was subject
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`to all terms of the film delivery memo. (See Dkt. 63 at ¶¶ 5, 8 and Ex. A.) Among other terms,
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`the film delivery memo indicated a two-year duration of the license to use the images. (Id., Ex.
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`A.) Defendant also points to digital images delivered to plaintiff on CD, noting that the CD
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`envelopes bore a seal, that his copyright was reflected on the face of every CD and upon
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`downloading, and that each digital image contained an embedded copyright image, meaning the
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`copyright notice would show whenever an image was loaded onto a page or photo editing
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`software. (Id., ¶¶ 9-10.)
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`Plaintiff denies any knowledge of the film delivery memos or seals, noting that defendant
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 6 of 10
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`produced only stand-alone copies of the memo and seal.2 However, defendant’s former counsel
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`attests to the fact that attorneys for plaintiff returned a box containing film negatives which had
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`a broken seal and attaches a photograph of the box with the broken seal to his declaration. (Dkt.
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`62, ¶¶ 2-5 and Ex. A (the seal reads: “Notice: All file or images contained herein are the exclusive
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`property of Lloyd Shugart, to which Lloyd Shugart retains and holds all rights under copyright
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`laws. Client use and license is subject to all terms of the FILM DELEVERY [stet] MEMO.
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`Terms shall be deemed accepted by Client as acknowledged by written approval and/or the use
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`of the photographs provided by Photographer.”)) Additionally, defendant avers that, after a
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`scanning company noticed the digital copyright image and an employee of plaintiff called for a
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`“release” authorizing it to scan images, he advised the employee to use the film delivery memo as
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`the release. (Dkt. 63, ¶ 12.) He further maintains that, upon picking up a box of the scanned
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`images from plaintiff’s offices, he found that the box contained a copy of the film delivery memo
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`in an envelope from the scanning company, as well as several envelopes with broken seals. (Id.,
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`¶ 13.)
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`Given the above, it is clear that genuine issues of material fact preclude a grant of summary
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`judgment as to defendant’s counterclaims based on plaintiff’s assertion of an implied, nonexclusive
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`license. The Court also agrees with defendant that the testimony relied on by plaintiff in support
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`of its implied, nonexclusive license appears to have been taken out of context. That is, in testifying
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`2 Plaintiff conceded he does not have a copy of each film delivery memo he allegedly sent
`with each invoice, explaining: “No. It was a standard invoice that I printed out, and I had a file
`of film delivery memos that every time I printed an invoice I grabbed the film delivery memo, stuck
`it in the envelope and mailed it.” (Dkt. 47 at 161.)
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 7 of 10
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`that plaintiff had the right to use the images to benefit itself, defendant referred specifically to a
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`contract he alleged he entered into in 2000 with CPF marketing, an advertising and graphic design
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`firm that performed contract work for plaintiff. (Dkt. 45 at 12-17.) He also repeatedly noted that
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`the terms of that contract called for a two-year period of limited use. (
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`Id.) Accordingly, this
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`testimony does not support a grant of summary judgment.
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`Plaintiff next offers an alternative argument. That is, even assuming both that defendant
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`delivered the film delivery memo to plaintiff and that plaintiff agreed to the terms of the memo
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`simply by using the photographic images, plaintiff argues that the memo’s terms are unreasonable
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`and unenforceable. Plaintiff compares the memo as an attempt to bind it to contract terms in the
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`same way consumers are bound by “shrink wrap” or “click wrap” agreements when purchasing
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`software. See, e.g., ProCD v. Zeidenberg, 86 F.3d 1447, 1452-53 (7th Cir. 1996) (shrink wrap
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`licenses may impose restrictions upon a consumer opening and installing software); M. A.
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`Mortenson Co. v. Timberline Software Corp., 93 Wash. App. 819, 830, 970 P.2d 803 (Wash. Ct.
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`App. 1999) (noting Seventh Circuit “allow[ed] a vendor to propose that a sale contract be formed
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`not when the product is requested or the money is paid but after the customer has inspected the
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`item and the terms.”; finding this reasoning persuasive and noting similarities: “Timberline’s
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`license agreement, included with the software, is fairly standard and contains an accept-or-return
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`provision.”) (relying on ProCD, 86 F.3d 1447, and Hill v. Gateway 2000, Inc., 105 F.3d 1147,
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`1150 (7th Cir. 1997)), aff’d at 140 Wash. 2d 568, 998 P.2d 305 (Wash. 2000). It notes that some
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`courts have refused to enforce such agreements. See, e.g., Specht v. Netscape Communs. Corp.,
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`150 F. Supp. 2d 585, 595 (S.D.N.Y. 2001) (“Netscape argues that the mere act of downloading
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`indicates assent. However, downloading is hardly an unambiguous indication of assent. The
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 8 of 10
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`primary purpose of downloading is to obtain a product, not to assent to an agreement. In contrast,
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`clicking on an icon stating ‘I assent’ has no meaning or purpose other than to indicate such assent.
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`Netscape’s failure to require users of SmartDownload to indicate assent to its license as a
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`precondition to downloading and using its software is fatal to its argument that a contract has been
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`formed. Furthermore, unlike the user of Netscape Navigator or other click-wrap or shrink-wrap
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`licensees, the individual obtaining SmartDownload is not made aware that he is entering into a
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`contract.”), aff’d at 306 F.3d 17 (2d Cir. 2002). See also generally M.A. Mortenson Co., 93
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`Wash. App. at 829 (“In ProCD, the Seventh Circuit held that shrink-wrap licenses accompanying
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`off-the-shelf computer software are enforceable unless their terms are objectionable under general
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`contract law.”)
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`Plaintiff proffers a variety of reasons why defendant cannot enforce his film delivery memo
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`like a conventional shrink wrap agreement, including the fact that this case does not involve a
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`typical consumer transaction. However, for this same reason, the Court questions whether the
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`case law proffered by plaintiff – involving software license agreements – is on point. This
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`question is admittedly complicated by defendant’s failure to offer any argument in opposition to
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`plaintiff’s shrink wrap analogy and related arguments. Although not rejecting the possible viability
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`of plaintiff’s arguments, the Court is unable to find plaintiff entitled to a judgment as a matter of
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`law. Moreover, the Court notes that the arguments may simply be premature due to the fact that
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`discovery in this matter has not yet concluded. (See Dkt. 54 (setting discovery deadline of May
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`16, 2007.))
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`Nor does the Court find sufficient grounds for granting summary judgment based on
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`plaintiff’s remaining arguments. First, plaintiff’s assertion that defendant lacks evidence of actual
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 9 of 10
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`damage is premature given the ongoing discovery in this matter. Second, genuine issues of
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`material fact appear to prevent dismissal of defendant’s remaining counterclaims. For example,
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`plaintiff’s argument as to defendant’s DMCA claim entails questions about the film delivery memo,
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`which, as stated above, raises a disputed issue of material fact. As such, the Court concludes that
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`plaintiff also fails to establish its entitlement to a judgment as a matter of law with respect to
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`plaintiff’s remaining counterclaims. However, again, the Court acknowledges that plaintiff’s
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`arguments with respect to these claims may simply be premature due to the fact that discovery in
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`this matter has not yet concluded.
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`Finally, the Court addresses an argument raised by defendant with respect to the request
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`for injunctive relief in plaintiff’s complaint. In its complaint, plaintiff sought injunctive relief: (1)
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`prohibiting defendant from selling or offering for sale any of the photographs subject to this suit;
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`(2) prohibiting defendant from transferring any right, title, or interest in the photographs to third
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`parties without advance written approval; and (3) prohibiting defendant from threatening plaintiff’s
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`customers with copyright infringement relating to their use of the photographs. (See Dkt. 1 at 5.)
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`Defendant argues that, given his copyright ownership, these demands violate one or more of his
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`rights under the Copyright Act. See 17 U.S.C. § 106 (“Exclusive rights in copyrighted works.”)
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`In response, plaintiff concedes that defendant has the right to sell or license his copyrighted works,
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`but notes that it has not moved for summary judgment as to its own complaint and maintains its
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`continued right of use. Therefore, while it does seem that plaintiff concedes that at least its first
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`two requests for injunctive relief should be denied, as noted by plaintiff, this issue is not yet
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`properly before the Court.
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`/ / /
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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`Case 2:06-cv-00186-MAT Document 66 Filed 05/03/07 Page 10 of 10
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`CONCLUSION
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`For the reasons described above, defendant’s motion for partial summary judgment on the
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`issue of his copyright ownership is GRANTED and plaintiff’s motion for summary judgment as
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`to defendant’s counterclaims is DENIED.
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`AM
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`ary Alice Theiler
`United States Magistrate Judge
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`DATED this 3rd day of May, 2007.
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`ORDER RE: MOTIONS FOR SUMMARY JUDGMENT
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