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From Intellectual Property Law Daily, June 11, 2014

Agreements with photographers did not give stock photo agency standing to sue for copyright infringement

By Thomas Long, J.D.

Stock photo agency DRK Photo lacked standing to sue textbook publisher McGraw-Hill for infringing DRK’s copyright by exceeding the scope of license restrictions pertaining to certain photographs or failing to obtain permission to use the photos, the federal district court in Phoenix has ruled (DRK Photo v. The McGraw-Hill Companies, Inc., June 10, 2014, Rosenblatt, P.). DRK lacked exclusive ownership of the photos at issue.

DRK executed agreements with photographers under which the photographers granted DRK the right to include certain of the photographers’ works in DRK’s collection of stock photos. DRK then offered to license those images to publishers, such as McGraw-Hill. With respect to the photos at issue in this case, DRK entered into Representation Agreements pursuant to which DRK would serve at the photographers’ agent with respect to the sale or leasing of the photos.

In 2008, DRK initiated a program to register copyrights for the photos in its collection. DRK asked photographers to sign a form agreement (“Assignment Agreement”) granting DRK the right to assert copyright infringement claims for those photos.

McGraw-Hill contended that neither of these agreements conferred standing to sue upon DRK, with regard to 978 of 1,120 asserted images taken by photographers for whom DRK was acting as a nonexclusive agent. McGraw-Hill also argued that DRK was collaterally estopped from asserting that it had standing because the identical issue was litigated in an earlier case between DRK and another publisher, and the court in that case ruled against DRK on standing.

Collateral estoppel. In John Wiley & Sons, Inc. v. DRK Photo (S.D.N.Y. February 21, 2014) (“Wiley”), DRK brought copyright infringement claims against publisher John Wiley & Sons. The court in that case determined that the Representation Agreements between DRK and the photographers did not transfer exclusive rights to DRK. Transfer of ownership of an exclusive right cannot be transferred by a nonexclusive license. The court in Wiley also rejected DRK’s argument that it had standing as a “beneficial owner” of the photos because the Representation Agreements entitled it to one-half of the proceeds under the license. The Representation Agreements made it clear that DRK was a nonexclusive licensing agent for the photographers. In that capacity, having never owned the copyrights, DRK did not have standing to bring a copyright infringement action, the court explained.

The court in Wiley also decided that the Assignment Agreements failed to confer standing to DRK by authorizing DRK to sue or by transferring ownership in the photos. The Copyright Act does not permit rights holders to choose third parties to bring suit on their behalf. The Assignment Agreements were no more than disguised assignments of the bare right to sue, the court reasoned.

Nonetheless, the court in the current case determined that the judgment in Wiley did not preclude DRK from suing McGraw-Hill. There was a question as to whether the judgment was final for collateral estoppel purposes. The Ninth Circuit in St. Paul Fire & Marine Ins. v. F.H., 55 F.3d 1420 (9th Cir. 1995) held that an adverse partial summary judgment ruling in a case that settled prior to entry of final judgment did not collaterally estop the plaintiff from re-litigating the same issue. This holding strongly suggested that partial summary judgment orders were not sufficiently firm to have a preclusive effect on future proceedings, the court said.

Standing. Even without according the Wiley decision preclusive effect, the court in the current case was persuaded by the analysis in Wiley and in other cases that had found similar assignment agreements insufficient to confer standing. These cases established that DRK was neither a legal nor beneficial owner of the copyrights in the photos.

Neither the Representation Agreements nor the Assignment Agreements transferred legal ownership to DRK. The Representation Agreements were nonexclusive licenses and did not grant DRK any exclusive rights. The Assignment Agreements, in substance and effect, conveyed nothing to DRK but the “bare right to sue.”

Nor was DRK a beneficial owner of the photos. The definition of “beneficial owner” was limited to an individual who had legal title and parted with it in exchange for royalties. In this case, DRK never owned the copyrights and therefore could not be a beneficial owner with standing to sue.

The court granted partial summary judgment in McGraw-Hill’s favor with regard to standing.

The case is No. CV 12-8093-PCT-PGR.

Attorneys: Amanda L. Bruss (Harmon & Seidman LLC) for DRK Photo. Michael Beylkin (Levine Sullivan Koch & Schulz LLP) for McGraw-Hill Global Education Holdings LLC and McGraw-Hill School Education Holdings LLC.

Companies: DRK Photo; McGraw-Hill Global Education Holdings LLC; McGraw-Hill School Education Holdings LLC

MainStory: TopStory Copyright ArizonaNews

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