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Barcroft Media, Ltd. v. Coed Media Group, LLC

United States District Court, S.D. New York

November 2, 2017

BARCROFT MEDIA, LTD. et al., Plaintiffs,
v.
COED MEDIA GROUP, LLC, Defendant.

          OPINION AND ORDER

          JESSE M. FURMAN United States District Judge.

         Plaintiffs in this case - Barcroft Media, Ltd. (“Barcroft”) and FameFlynet, Inc. (“FameFlynet”) - are the purveyors of entertainment-related photojournalism and owners of certain copyrighted celebrity and human interest photographs. Defendant Coed Media Group, LLC (“CMG”), which runs celebrity gossip and entertainment websites, displayed several of Plaintiffs' photographs (the “Images”) on its websites without paying licensing fees or otherwise getting authorization. Plaintiffs now sue for copyright infringement. CMG concedes that Plaintiffs own the copyrights to the Images and that it used the Images without prior permission. Nevertheless, it contends that Plaintiffs waived most of their infringement claims and that, in any event, CMG's display of the Images was fair use.

         Last month, the Court held a one-day bench trial on Plaintiffs' claims and CMG's defenses. In this Opinion and Order, the Court provides its findings of fact and conclusions of law. Ultimately, for the reasons set forth below, the Court finds that CMG's waiver and fair use defenses fall short, entitling Plaintiffs to injunctive relief and actual and statutory damages derived from the reasonable licensing fee CMG would have paid to use the Images.

         BACKGROUND

         Based on the evidence and testimony presented at trial, the Court makes the following findings of fact by way of background. The Court includes additional factual findings in the context of the legal analysis below.

         Plaintiffs provide entertainment-related photojournalism and own the copyrights for various paparazzi photographs and videos of celebrities and “other persons of interest.” (PTX 46 (“Taylor Aff.”) ¶¶ 8, 94). They acquire this content from photographers with whom they have ongoing relationships, in the form of employment agreements, assignment agreements, and work-for-hire agreements, (Taylor Aff. ¶¶ 9-10, 95), and Plaintiffs register new images received from their photographers with the U.S. Copyright Office, (Taylor Aff. ¶¶ 15, 102). Barcroft and FameFlynet employ the same copyright tracking service to register their copyrights; monitor digital uses of their photographs; identify such uses as potential infringements; and collect documentation, including screenshots, of potential infringements. (Taylor Aff. ¶¶ 2-7, 93).

         At issue in this case are twelve images (or sets of images) owned by Plaintiffs and registered with the Copyright Office - namely, the Images.[1] The Images depict actress Salma Hayek (the “Hayek Image”), actress Amanda Bynes (the “Bynes Images”), singer Selena Gomez (the “Gomez Image”), actress Zooey Deschanel (the “Deschanel Image”), and actress Lea Michele (the “Michele Image”). The Images also include a depiction of a man waving a Union Jack in a matching hat and jacket while waiting outside the hospital for the birth of Prince William and Kate Middleton's child (the “Loughrey Image”); and photographs depicting a mother and daughter, the former of whom underwent plastic surgery to resemble the latter (the “Horrocks Images”). It is undisputed that Plaintiffs own all of the Images; that Plaintiffs registered each Image with the Copyright Office; that CMG displayed the Images in whole or in part on its websites; and that CMG did not have Plaintiffs' prior authorization to do so. (See Docket No. 46 (“Def. Opp'n”), at 7 (describing various “issues that are not even disputed”); see also Docket No. 36 (“JPTO”), at 7-12).[2]

         CMG runs several small popular culture, sports, and entertainment websites, which collectively receive roughly four million unique users per month. (JPTO 6-7; DTX 21 (“Coakley Aff.”) ¶ 12). CMG has lost money every year since its inception, with the exception of 2012. (Coakley Aff. ¶ 15). In light of its business model and precarious financial situation, CMG does not license individual images for display on its websites; instead, it predominantly uses image subscription services to populate its websites with photographs. (Coakley Aff. ¶¶ 17-20). Indeed, the Chief Executive Officer of CMG testified that the company “would never pay a substantial fee to license any image for its Websites, which earn little revenue and have consistently been in the red.” (Coakley Aff. ¶ 21). CMG's websites earn money by selling advertising space through online marketplaces. (JPTO 7; Coakley Aff. ¶ 24). CMG takes in approximately $1.50 per thousand visitors to one of its webpages. (Coakley Aff. ¶ 25).

         Between 2014 and March 2016, CMG posted each of the Images on its websites. Cropped versions of the Hayek and Michele Images were both posted as rectangular banner photographs at the top of webpages, called “Daily Dumps, ” linking to celebrity gossip articles on other websites; the Images were edited to include text referencing the “Daily Dump” and to feature the CMG website's logo. (PTX 28; PTX 30). A thumbnail version of the Hayek Image also appeared in its entirety in the link roundup below the banner image. (PTX 28). The Bynes Images were used in their entirety in conjunction with an article on a CMG website titled “Amanda Bynes is Alive and Well in Mexico (and in a bikini) [Photos], ” which commented on the actress's appearance and sought “to demonstrate her improved health after a stint in rehab and turbulent behavior on social media.” (Def. PFOF ¶¶ 34, 37; see also PTX 29; DTX 22 (“Jackson Aff.”) ¶ 30-31). The Gomez Image was cropped to exclude the subject's lower legs and was included in a gallery of twenty-five images showcasing a “risqué” fashion trend described by CMG as “Underbutt Fever.” (Def. PFOF ¶ 29; PTX 31; Jackson Aff. ¶ 23). The Deschanel Image appeared at the bottom of an article titled “Zooey Deschanel Reveals Her Sea Animal-Inspired Baby Name.” (PTX 34). Finally, the Loughrey and Horrocks Images were used to accompany CMG articles titled “These Grown Ass People Waiting For the Royal Baby Are Actually Psychotic” and “Mom Shells Out $57k To Look Like Daughter's Twin and It's Creepier Than it Sounds, ” respectively. (PTX 32, 33).

         In May 2015, CMG received a cease-and-desist letter from FameFlynet regarding CMG's use of several of the Images, including the Hayek, Bynes, and Gomez Images. (Jackson Aff. ¶ 15-16; DTX 4). CMG's then-President, Bryant Jackson, contacted FameFlynet's head of sales, Justin Smith, to discuss the letter, (Trial Tr. 84-85, 93), and the parties began negotiating a subscription package pursuant to which CMG would continue nonexclusively using certain FameFlynet photographs for a monthly fee, (Jackson Aff. ¶ 18; DTX 5). Jackson testified that, in their first conversation following CMG's receipt of the cease-and-desist letter, Smith told him “not to worry” about the FameFlynet Images depicted in the letter. (Jackson Aff. ¶ 17). The proposed subscription arrangement, however, was never consummated. (Jackson Aff. ¶ 19). CMG subsequently deleted the Images included in the cease-and-desist letter, as well as other licensed and unlicensed content, from its websites in August 2015. (Jackson Aff. ¶ 20). More than one year later, on September 29, 2016, Plaintiffs filed the instant action.

         DISCUSSION

         There is no dispute that CMG used Plaintiffs' validly copyrighted Images in whole or in substantial part, and without authorization, thus establishing a prima facie case of copyright infringement. See Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991) (“To establish infringement, two elements must be proven: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.”). Instead, CMG defends its use of the Images - or, more precisely, of all but one of the Images, as it concedes liability with respect to the Deschanel Image, (see Def. PFOF ¶ 59) - on either or both of two grounds: first, that Plaintiffs waived any infringement claim with respect to six of the Images and, second, that CMG's use of all of the Images was fair use under Section 106 of the Copyright Act. The Court will address each defense in turn.

         A. Waiver

         CMG argues, first, that FameFlynet waived its infringement claims with respect to the Hayek, Bynes, and Gomez Images. Under New York law, which the parties agree governs for these purposes, “a claim of waiver requires proof of an ‘intentional relinquishment of a known right with both knowledge of its existence and an intention to relinquish it.'” Capitol Records, Inc. v. Naxos of Am., Inc., 372 F.3d 471, 482 (2d Cir. 2004) (quoting Airco Alloys Division, Airco Inc. v. Niagara Mohawk Power Corp., 430 N.Y.S.2d 179, 187 (N.Y.App.Div. 1980)); see also Johnson v. Zerbst, 304 U.S. 458, 464 (1938). It is well established, moreover, that “the law disfavors agreements intended to absolve a party from the consequences of its wrongdoing.” Joao v. Cenuco, Inc., 376 F.Supp.2d 380, 382-83 (S.D.N.Y. 2005). Accordingly, “releases and covenants not to sue are subject to the ‘closest of judicial scrutiny' to determine the intent of the parties.” Id.; see also Golden Pac. Bancorp v. FDIC, 273 F.3d 509, 515 (2d Cir. 2001) (“A release will not be given effect unless it contains an explicit, unequivocal statement of a present promise to release a party from liability.” (internal quotation marks and brackets omitted)); cf. Schneider v. Revici, 817 F.2d 987, 993 (2d Cir. 1987) (“New York requires that a covenant not to sue must be strictly construed against the party asserting it. Moreover, its wording must be clear and unequivocal.” (internal quotation marks and ellipsis omitted)).

         Measured against these standards, CMG's argument that FameFlynet waived its infringement claims is meritless. Its argument relies solely on Smith's alleged statement to Jackson that CMG was “not to worry” about the Images referenced in the May 2015 cease-and-desist letter. But even assuming arguendo that Smith otherwise had authority to waive FameFlynet's rights, that stray comment cannot be construed as a knowing waiver for several reasons. First, by Jackson's own admission, Smith did not know about the cease-and-desist letter, (Trial Tr. 93), let alone its contents, so it cannot be said that he intentionally relinquished a right “with . . . knowledge of its existence.” Capitol Records, 372 F.3d at 482. Second, Smith gave no explicit indication that he intended to release CMG from liability for infringement. See, e.g. Golden Pac. Bancorp, 273 F.3d at 515. And third, the totality of circumstances makes clear that Smith had no such intention. Most notably, following the “not to worry” comment, he and Jackson made efforts to broker a licensing agreement pursuant to which CMG would pay for the use of FameFlynet's Images going forward - negotiations that would have been unnecessary had FameFlynet already waived its infringement claims. See Joao, 376 F.Supp.2d at 384 (“No one would seriously entertain the possibility of taking a license if infringement claims had already been released.”). In short, the evidence does not support CMG's claim of waiver.

         In the alternative, CMG's waiver claim might be better understood as a claim that FameFlynet granted CMG an implied nonexclusive license to use the Hayek, Bynes, and Gomez Images. See, e.g., Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998) (“A copyright owner who grants a nonexclusive license to use his copyrighted material waives his right to sue the licensee for copyright infringement.”). But CMG did not plead the existence of a license as an affirmative defense, and thus waived any such claim. See id.; see also Bourne v. Walt Disney Co., 68 F.3d 621, 631 (2d Cir. 1995) (“[T]he possession of a license by an accused infringer traditionally has been characterized as a matter of affirmative defense.”). And, in any event, the defense would fail on the merits, as it requires proof, at a minimum, “of a meeting of the minds between the licensor and licensee such that it is fair to infer that the licensor intended to grant a nonexclusive license.” Assoc. Press v. Meltwater U.S. Holdings, Inc., 931 F.Supp.2d 537, 562 (S.D.N.Y. 2013). “There can be no meeting of the minds . . . where essential material terms are missing.” Vian v. Carey, No. 92-CV-0485 (MBM), 1993 WL 138837, at *3 (S.D.N.Y. Apr. 23, 1993) (Mukasey, J.). And where, as here, the alleged licensing agreement is oral, “the agreement between the parties must be definite and explicit so their intention may be ascertained to a reasonable degree of certainty.” Id. at *2 (quoting Candid Prods., Inc. v. Int'l Skating Union, 530 F.Supp. 1330, 1333 (S.D.N.Y. 1982) (declining to find an oral nonexclusive licensing agreement given the absence of any evidence that the defendant “ever intended . . . to enter into a complex commercial licensing agreement”)); see also, e.g., SmithKline Beecham Consumer Healthcare, L.P. v. Watson Pharm., Inc., 211 F.3d 21, 25 (2d Cir. 2000) (“Courts have found implied licenses only in ‘narrow' circumstances . . . .”).

         Suffice it to say, Smith's alleged “not to worry” comment does not establish that there was a “meeting of the minds” between the companies to license the use of the Images. Indeed, the subsequent attempt by the parties to negotiate a subscription arrangement reveals that both sides believed it was necessary for CMG to pay for a license to continue using FameFlynet's copyrighted content. Furthermore, Smith's statement included none of the “essential material terms” necessary for a nonexclusive licensing agreement, and “the necessary consideration for the contract [was] wholly lacking.” Vian, 1993 WL 138837, at *3. Finally, CMG's decision to remove the Images from its websites after its negotiations with FameFlynet fell through belies any notion that CMG believed it had an implied nonexclusive license to continue using the Images. At most, Smith's statement could be construed as an agreement to agree or an agreement to negotiate - neither of which is enforceable under New York law. See Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 417 N.E.2d 541, 543 (N.Y. 1981) (“[I]t is rightfully well settled in the common law of contracts in this State that a mere agreement to agree, in which a material term is left for future negotiations, is unenforceable.”). Accordingly, to the extent CMG argues the existence of an implied license, that argument also fails.

         B. Fair Use

         The Court turns, then, to CMG's other defense: fair use. See, e.g., Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590 (1994) (holding that fair use is an affirmative defense). Section 106 of the Copyright Act grants the owner of a copyrighted work “exclusive rights” over the copyrighted work, including the rights “to reproduce the copyrighted work, ” “to prepare derivative works based upon the copyrighted work, ” and “to distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” 17 U.S.C. § 106; see also Arista Records, LLC v. Doe 3, 604 F.3d 110, 117 (2d Cir. 2010) (“The owner of a copyright has the exclusive right to - or to license others to - reproduce, perform publicly, display publicly, prepare derivative works of, and distribute copies of, his copyrighted work.”). These protections are designed to further the essential purpose of copyright law: the promotion of “not simply individual interests, but - in the words of the Constitution - ‘the progress of science and useful arts' for the benefit of society as a whole.” TCA Television Corp. v. McCollum, 839 F.3d 168, 177 (2d Cir. 2016), cert. denied, 137 S.Ct. 2175 (2017). “Anyone who violates any of the exclusive rights of [a] copyright owner” is liable for infringement. 17 U.S.C. § 501(a).

         Nevertheless, and “consistent with this public purpose, ” TCA Television, 839 F.3d at 178, copyright protection does not “accord[] the copyright owner complete control over all possible uses of his work, ” Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 432 (1984). In particular, “[a]ny individual may reproduce a copyrighted work for a ‘fair use, '” and such use does not infringe upon the owner's copyright. Id. at 433; see also 17 U.S.C. § 107. Fair use “is an equitable rule of reason, which permits courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which that law is designed to foster.” Stewart v. Abend, 495 U.S. 207, 236 (1990) (citation omitted) (internal quotation marks omitted). Its origins lie in the common law, but it is now codified in Section 107 of the Copyright Act, which provides in relevant part as follows:

[T]he fair use of a copyrighted work, including such use by reproduction in copies . . ., for purposes such as criticism, comment, news reporting, teaching . . ., scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any ...

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