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John Wiley & Sons, Inc. v. DRK Photo

United States Court of Appeals, Second Circuit

February 16, 2018

John Wiley & Sons, Inc., Plaintiff-Appellee,
v.
DRK Photo, Defendant-Appellant.

          Argued: February 1, 2016

         In this copyright case, DRK, a purported assignee of photographers' rights to sue for infringement, seeks statutory damages from Wiley, a licensee, for exceeding its licensed use of certain photographs as to which DRK non-exclusively represents the photographers. Invoking our precedent in Eden Toys v. Florelee Undergarment, Co., 697 F.2d 27 (2d Cir. 1982), the District Court granted summary judgment to Wiley, concluding in part that DRK lacked statutory standing to sue Wiley for copyright infringement. Consistent with Eden Toys, we too conclude as a matter of law that the Copyright Act does not permit prosecution of infringement suits by assignees of the bare right to sue that are not and have never been a legal or beneficial owner of an exclusive right under copyright. In addition, because we also conclude that DRK is not and has never been the holder of an exclusive right in the photographs, we AFFIRM the judgment of the District Court.

          Robert Penchina, Levine Sullivan Koch & Schulz, LLP, New York, NY, for Plaintiff-Appellee.

          Maurice Harmon, Harmon & Seidman, LLC, (Christopher Seidman and Gregory N. Albright, on the brief), Grand Junction, CO, for Defendant-Appellant.

          Before: Parker, Chin, and Carney, Circuit Judges.

          Susan L. Carney, Circuit Judge.

         In this copyright case, DRK Photo ("DRK"), an Arizona sole proprietorship and a non-exclusive agent of numerous photographers, attempts to assert infringement claims against John Wiley & Sons, Inc. ("Wiley"), a licensee of the photographers' images, for exceeding the scope of its licenses. DRK's rights with respect to the infringement claims rest on agreements between it and the photographers. These purport to assign to DRK the right to sue on accrued causes of action. The parties dispute whether they also convey any exclusive right under a copyright. The District Court granted summary judgment for Wiley, concluding that DRK did not have statutory standing under the Copyright Act, 17 U.S.C. §§ 101 et seq., to sue Wiley for infringement. On appeal, the primary question presented is whether the Act permits DRK, as a putative assignee of the bare right to sue for infringement, and who neither has, nor has ever had, an exclusive right under copyright in any of these photographs, may pursue an infringement claim against Wiley. Like the District Court, we conclude that it may not.

         The text of the statute directs this result. In relevant part, the Act provides that "[t]he legal or beneficial owner of an exclusive right under a copyright is entitled . . . to institute an action for any infringement of that particular right while he or she is the owner of it." 17 U.S.C. § 501(b). An assignee of the bare right to sue who does not hold, and has never held, an exclusive right under a copyright, is not such an owner. The statute nowhere provides that such an assignee may sue, and we think, in view of its designation of who may sue, that the omission signals that Congress did not so intend.

         Supplementing that reading, the District Court here (Failla, J.) interpreted our 1982 decision in Eden Toys, Inc. v. Florelee Undergarment, Co., 697 F.2d 27 (2d Cir. 1982), as requiring that any conveyance of the right to sue for infringement carry with it also an exclusive right under the copyright if it is to be effective as a basis for an infringement suit. John Wiley & Sons, Inc. v. DRK Photo, 998 F.Supp.2d 262, 280 (S.D.N.Y. 2014). We think the import of our decision in Eden Toys may not be quite so conclusive on this score as the District Court understood, but if not necessarily controlling, it is at least strongly supportive of our textual reading here.

         Because we also concur with the District Court that the agreements between DRK and the photographers that it represented as a non-exclusive agent do not convey such an exclusive right, nor did DRK hold such a right when Wiley is alleged to have committed the infringing acts, we AFFIRM that court's entry of summary judgment in Wiley's favor.

         BACKGROUND

         The factual background of this case is largely undisputed.[1]

         DRK Photo is operated by Daniel Krasemann. It maintains a collection of stock photographs available for licensing, for a fee, by various users, including textbook publishers such as John Wiley & Son. Wiley, based in New York, is a global company that focuses on publishing educational materials for undergraduate and graduate students.

         The parties' relationship began in 1992, when DRK first licensed Wiley to reproduce certain images for use in its educational materials. A typical DRK license granted to Wiley a one-time, non-exclusive right to use specified images not to exceed a certain number of copies, usually numbering in the tens of thousands. The cost to Wiley of a license typically ranged from approximately $80 to $500. DRK appears to have been generally open to amending a license after issuance to cover uses in larger production runs than originally authorized.

         DRK does not directly employ photographers. Instead, it enters into "Representation Agreements" in which photographers grant to DRK, for a share of the licensing proceeds, the rights to include images in its collection and to license those images to third parties for a fee. The Representation Agreements relevant here establish non-exclusive agency relationships, in that they allow the photographers to enter into similar arrangements with other agents as well. In relevant part, the DRK non-exclusive license typically provides, "I desire that you [DRK] act as my agent with respect to the sale or leasing of the photographs or transparencies which I have delivered to you and shall deliver to you in the future." J.A. 294. DRK executed most of the Representation Agreements of concern here in the 1980s and '90s.

         In 2008, DRK undertook what it called a "copyright registration program." J.A. 205. As part of the program, DRK asked its photographers to execute a single-page document entitled "Copyright Assignment, Registration, and Accrued Causes of Action Agreement" (the "Assignment Agreement"). Id. at 205; see also, e.g., id. at 411. DRK explained in contemporaneous correspondence with the photographers that the Assignment Agreements were "necessary as DRK Photo is initiating a copyright registration program with the United States Copyright Office to officially register many of the images in its collection." Id. at 205. DRK further explained that, "with a Certificate of Registration in hand (prior to a copyright infringement) we will be in a much stronger position with much more leverage for settling copyright infringement claims." Id. at 205. "[W]ith this Agreement, " it advised, "we receive the authorization necessary to initiate and settle copyright infringement claims brought against would be infringers of DRK Photo Images." Id. at 205.[2]

         The Assignment Agreements contain two pertinent provisions. The first, the "Granting Clause, " provides in relevant part:

The undersigned photographer, the sole owner of the copyrights in the undersigned's images ("the Images") selected by [DRK] and included in DRK's collection, hereby grants to DRK all copyrights and complete legal title in the Images. DRK agrees to reassign all copyrights and complete legal title back to the undersigned immediately upon completion of the registration of the Images . . . and resolution of infringement claims brought by DRK relating to the Images.

J.A. 411. The second, the "Right-to-Sue Clause, " provides in relevant part:

The undersigned agrees and fully transfers [to DRK] all right, title and interest in any accrued or later accrued claims, causes of action, choses in action-which is the personal right to bring a case-or lawsuits, brought to enforce copyrights in the Images . . . .

Id. The agreements further call for DRK to divide any recovery obtained from infringement lawsuits evenly with the affected photographer.

         Approximately one hundred photographers eventually executed Assignment Agreements with DRK. And, between 2009 and 2010, DRK registered the covered images in its collection with the United States Copyright Office. The related Certificates of Registration denote the relevant photographer as the "author" and DRK as the "copyright claimant." Id. at 342-43.

         In Augus t 2011, Wiley filed the instant action for declaratory judgment in the United States District Court for the Southern District of New York, alleging that DRK threatened to bring infringement lawsuits against it for exceeding the usage limits set in its licenses. Wiley sought a declaration exonerating it from liability related to 316 particular instances of alleged infringement in which it used images in DRK's collection. (Some images were subject to multiple instances of alleged infringement. DRK Photo, 998 F.Supp.2d at 271. Like the District Court, we use "instances" to refer to an image's use, and not to a distinct image. Id.) DRK counterclaimed, alleging that Wiley engaged in copyright infringement in 295 of those instances. Of those, 45 involved images for which DRK was the "sole and exclusive" agent of the photographer; the remaining 250 were subject to agreements of the non-exclusive type just described. Special App. 80-82.

         The parties each moved for summary judgment. DRK prevailed with respect to images subject to its exclusive representation agreements, and Wiley does not appeal that judgment here. DRK Photo, 998 F.Supp.2d at 286-88. But, as to the images for which DRK was a non-exclusive agent, the District Court granted summary judgment to Wiley and dismissed DRK's infringement claims. It reasoned, first, that because the Representation Agreements did not render DRK the sole and exclusive agent of the photographers, section 501 of the Act did not permit DRK to prosecute the claim. Id. at 275-84. Second, the court found that the Assignment Agreements, too, fell short of providing DRK an adequate basis to sue Wiley because they conveyed nothing more than the right to sue for infringement. Id. at 280. Pointing to the statutory origins of copyright and our Court's decision in Eden Toys, Inc. v. Florelee Undergarment Co., the District Court explained that the photographers could not "authorize[] DRK [merely] to bring suit on their behalf." Id. (citing Eden Toys, Inc. v. Florelee Undergarment Co., 697 F.2d 27, 32 n.3 (2d Cir. 1982), superseded by rule on other grounds as recognized in Fed. Treas. Enterp. Sojuzplodoimport v. SPI Spirits Ltd., 726 F.3d 62, 84 (2d Cir. 2013)). Pointing also to a line of Ninth Circuit cases beginning with its decision en banc in Silvers v. Sony Pictures Entertainment, Inc., 402 F.3d 881 (9th Cir. 2005), the court ruled that "disguised assignments of the bare right to sue . . . cannot confer [statutory] standing." DRK Photo, 998 F.Supp.2d at 284 (internal quotation marks omitted).

         DRK timely appealed the court's grant of summary judgment to Wiley on these claims. On appeal, DRK urges us to conclude that, even with respect to its non-exclusive agency relationships, its Representation and Assignment Agreements sufficed to support its suit against Wiley under the Act and that it is therefore entitled to recover statutory damages for Wiley's allegedly infringing uses.

         DISCUSSION

         We review de novo a district court's grant of summary judgment, resolving all factual ambiguities and drawing all reasonable factual inferences in favor of the nonmoving party. Davis v. Blige, 505 F.3d 90, 97 (2d Cir. 2007).

         DRK offers two theories in support of its position that the Act authorizes it to sue Wiley for copyright infringement. First, pointing to the Assignment Agreements' transfer to it of the photographers' rights to sue for infringement, DRK contends that it may bring any action for infringement that the photographers might have pursued. Second, it argues that even if the Copyright Act does not permit suit by an assignee that is not and has never been a legal or beneficial owner of the copyrighted work, the Assignment and Representation Agreements make it sufficiently such an owner to allow it, under the Act, to institute suit.

         I. If it is merely an assignee of the right to sue for infringement, can DRK prosecute a copyright infringement action?

         DRK first argues that it is entitled to sue Wiley for infringement of the photographs under the Right-to-Sue Clause of the Assignment Agreements. As we have noted, that clause states that the photographers "fully transfer[] [to DRK] all right, title and interest in any accrued or later accrued claims, causes of action, choses in action . . . or lawsuits, brought to enforce copyrights in the Images." J.A. 411. Wiley accepts that DRK and the photographers may have intended in this clause to convey to DRK the right to sue for infringement. It nevertheless contends that a purported assignment of that right, standing alone, is inadequate to allow DRK to assert a claim under section 501(b) of the Act.

         Section 501(b) provides in part that "[t]he legal or beneficial owner of an exclusive right under a copyright is entitled . . . to institute an action for any infringement of that particular right committed while he or she is the owner of it." 17 U.S.C. § 501(b). None dispute that the "exclusive right[s] under a copyright" to which section 501(b) refers are those six "[e]xclusive rights in copyrighted works" enumerated in section 106 of the Act: the right to reproduce the work, prepare derivative works, distribute the work to the public, perform the work, display the work, and perform the work by means of digital transmission. 17 U.S.C. § 106.[3]

         Wiley contends and DRK disputes that, in our decisions in Eden Toys and ABKCO Music, Inc. v. Harrisongs Music, Ltd., 944 F.2d 971 (2d Cir. 1991), we definitively interpreted section 501(b) to preclude suit under the Act by assignees of the bare right to sue that have never held exclusive ownership rights. As discussed below, we are not convinced that these cases compel the conclusion that Wiley claims. We therefore return to the statutory text to determine whether, as DRK submits, it may sue under section 501(b). We address these arguments in turn.

         A. Eden Toys and ABKCO

         We first consider whether these decisions compel dismissal of DRK's infringement action for want of statutory standing.[4] The District Court agreed with Wiley that they do. See DRK Photo, 998 F.Supp.2d at 280. We think, on balance, that neither is dispositive.

         First, our decision in Eden Toys is fairly susceptible to more than one reading on this score. In Eden Toys, Paddington and Company, Limited ("Paddington"), the owner of the copyright in the fictional character Paddington Bear, executed a license with Eden Toys, Inc. ("Eden") that made Eden (1) an exclusive licensee for some uses of the primary copyright, and (2) an owner of Eden's derivative works in the copyright. The license granted Eden "the right, at its option, . . . to institute appropriate legal action against [an] infringer [of the primary copyright], " but only in the event that the copyright owner, Paddington, "elect[ed] to take no legal action." Eden Toys, 697 F.2d at 30 n. 2. Our Court concluded that Eden could state a cause of action for infringement of its own derivative works and licensed uses, id. at 33-37, but not for infringing uses of the primary Paddington Bear copyright, as to which the licensor Paddington retained the right to sue, id. at 32-33. In a footnote, we stated that the Copyright Act does not permit "holders of rights under copyrights to choose third parties to bring suits on their behalf." Id. at 32 n.3. We noted in brief explanation that "while F[ed]. R. Civ. P. 17(a) ordinarily permits the real party in interest to ratify a suit brought by another party, the Copyright Law is quite specific in stating that only the 'owner of an exclusive right under a copyright' may bring suit." Id. (internal citations omitted) (quoting 17 U.S.C. § 501(b)). It is on this language that Wiley's stare decisis argument rests.

         Competing views of the Eden Toys footnote have emerged since we decided the case more than thirty years ago. Some have read the opinion as merely precluding prosecution of an infringement suit by a copyright holder's agent, and offering nothing of substance about the legitimacy of suit based on only an outright assignment. See Silvers, 402 F.3d at 910 (Bea, J., dissenting); 3 Melville Nimmer & David Nimmer, Nimmer on Copyright § 12.02[C]. Because Eden Toys' license permitted it to sue only subject to a condition-that is, only when the copyright holder elected to forgo its own (primary) right to sue-Eden Toys can be read to hold that a license in the form presented there is insufficient to convey a cause of action for all infringements of the copyright. In other words, as to infringements of the original copyrighted work, Eden held a mere secondary right to sue, and under the Copyright Act, that assignment was insufficient to allow Eden Toys to sue for infringement. See Eden Toys, 697 F.2d at 32 n.3. As some have observed, this reading of the opinion leaves open "[t]he more difficult question . . . whether the assignee of solely an accrued claim and no other copyright interest has standing to sue." 3 Nimmer & Nimmer § 12.02[C].

         On the other hand, some have read Eden Toys as precluding infringement actions like DRK's. See DRK Photo, 998 F.Supp.2d at 280. This reading, too, has been endorsed by commentators. See 6 William Patry, Patry on Copyright § 21:5 (citing Eden Toys for proposition that "section 501(b) does not permit the copyright owner to retain the copyright, but convey the mere right to sue"). And this was the reading adopted by the Ninth Circuit majority in Silvers. In fact, the Silvers majority drew partial support for its decision by characterizing it as maintaining consistency with the law of our Circuit. 402 F.3d at 889-90 ("We think it important to parallel the Second Circuit . . . ."). We appreciate the consideration it gave to our prior decision and to the need for a uniform regime.

         We need not resolve here which is the better reading of this Eden Toys footnote, however, because, as we explain below, we simply read the text of the Copyright Act to preclude infringement suits by assignees of merely the right to sue who do not hold and have not yet held any of the listed exclusive rights. Eden Toys at least supports our decision, and no reading of Eden Toys prevents us now from adopting that view.

         Second, our decision in ABKCO does not directly address whether the Copyright Act permits suit by a mere assignee of the right to sue. In ABKCO, we evaluated the basis for ABKCO's 1980 settlement with George Harrison for his allegedly infringing use of the song "He's So Fine." See ABKCO, 944 F.2d at 980-81. ABKCO acquired exclusive rights in the song in 1978, when it purchased the copyright together with "any and all rights assertable under copyright against the Infringing Composition . . . which may have heretofore arisen or which may hereafter arise." Id. at 980. That acquisition occurred eight years after the claims accrued in 1970 and four years after the district court had found liability on the claims at issue. See id. at 975.

         We decided that ABKCO's rights in the 1980 settlement were based on the owner's transfer to ABKCO of accrued claims for infringement, and not simply on ABKCO's concurrent ownership of exclusive rights under the copyright in "He's So Fine." Id. at 981. We explained, "[A] copyright owner can assign its copyright but, if the accrued causes of action are not expressly included in the assignment, the assignee will not be able to prosecute them." Id. at 980. We further noted that "the Copyright Act does not permit copyright holders to choose third parties to bring suits on their behalf." Id. In the event that accrued claims are not expressly included in the assignment, "the assignor retains the right to bring actions accruing during its ownership of the right, even if the actions are brought subsequent to the assignment." Id. ABKCO, we concluded, was entitled to participate in the 1980 settlement because it had obtained the right to sue for past infringement. Id. at 981.

         We acknowledge that some of the language in ABKCO seems in tension with the text of section 501(b). But that language must be understood in the context of the complex factual and procedural history of that case. In ABKCO, we treated ownership of accrued claims for infringement as assets separate from ownership of an exclusive right, in the sense that assignment of the latter did not necessarily imply assignment of the former. Because ABKCO possessed both the exclusive right allegedly infringed and the accrued claim for infringement (as to which liability had already been adjudicated), that decision did not necessarily resolve the question whether one assigned merely the right to sue for infringement and who has never held any of the exclusive rights listed in section 106 has statutory standing to sue.

         In light of the ambiguity of these decisions on this question, we return to the text of the Copyright Act to determine afresh whether it allows such plaintiffs to pursue infringement suits.

         B. Whether the Copyright Act permits suit by mere assignees of the bare right to sue

         Our analysis begins with the statutory language. See In re Ames Dep't Stores, Inc., 582 F.3d 422, 427 (2d Cir. 2009) ("Statutory interpretation always begins with the plain language of the statute . . . ." (internal quotation marks omitted)). Section 501(b) provides:

The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it. The court may require such owner to serve written notice of the action with a copy of the complaint upon any person shown, by the records of the Copyright Office or otherwise, to have or claim an interest in the copyright, and shall require that such notice be served upon any person whose interest is likely to be affected by a decision in the ...

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