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From Intellectual Property Law Daily, April 5, 2019

Sublicensee did not infringe photographer’s copyright; photo attribution was not condition precedent

By Robert B. Barnett Jr., J.D.

The sublicensee’s failure to include attribution on the reused images may have been a breach of the license agreement, but it was not copyright infringement.

A photographer’s infringement suit under the Copyright Act against a distributor that sublicensed the right to reuse the photos has been dismissed in its entirety by the federal district court in Boston because the alleged infringement—a failure to include attribution on the reused photos—was a covenant in the sublicense rather than a condition precedent. That is, it might have been a breach of contract but it was not copyright infringement. The court also concluded, apparently in a case of first impression, that an implied sublicense from a licensee to a sublicensee, with no contact between the licensor and the sublicensee, is legally permissible (Photographic Illustrators Corp. v. Orgill, Inc., April 4, 2019, Saris, P.).

Photographic Illustrators Corporation (PIC), a Massachusetts-based commercial photographer, took photographs of lighting products on assignment from Osram Sylvania, Inc. (OSI) a lighting products manufacturer. The licensing agreement between PIC and OSI gave OSI the right to use the images, and it gave OSI the right to sublicense the photos with two conditions: the sublicense could not be for a fee and the sublicensed photos had to include the attribution that PIC had taken the photo. OSI permitted several distributors of its products to reuse the photos. No formal contracts or agreements were involved; the distributors simply asked for the photos and OSI gave them to the distributors. Several distributors of OSI’s product used the photos in their online and print marketing materials, but without attribution. Although PIC ultimately sued all of the distributors who failed to use attribution, this suit involves just one, Orgill, Inc.

PIC’s original suit against Orgill asserted claims under the Copyright Act, the Digital Millennium Copyright Act, and the Lanham Act. The court granted summary judgment to Orgill on the Digital Millennium Copyright Act and the Lanham Act claims, but not on the Copyright Act claim, ruling that factual questions remained on whether Orgill had violated the Act by failing to include attribution on the photos. The court then agreed to stay the proceedings pending a decision in an arbitration case that OSI initiated pursuant to an arbitration clause in the licensing agreement, which involved OSI, PIC, and seven distributors but not Orgill. When the arbitration award went against PIC, Orgill renewed its motion for summary judgment, arguing issue preclusion from the arbitration award. PIC then filed its own motion for summary judgment, arguing that Orgill infringed its copyright as a matter of law because it failed to include attribution.

Issue preclusion. The arbitrator had ruled that the attribution requirement in the licensing agreement was a covenant of the contract, not a condition precedent to using the image. The arbitrator then ruled that OSI breached the contract by failing to include attribution but it did not commit copyright infringement. The arbitrator also ruled that OSI had the right to impliedly sublicense use of the images to its distributors. As a result, they did not commit copyright infringement either. As for issue preclusion in this proceeding, the court noted that arbitration awards generally have the same preclusive effect as judicial judgments. Furthermore, issue preclusion may be used against a plaintiff by someone not a party to the original action as long as the issues are the same and the plaintiff had a full and fair opportunity for judicial resolution of the same issue.

Copyright infringement. Orgill’s defense was that it had received an implied sublicense from OSI to use the images. PIC argued that (1) no sublicense existed and (2) an implied sublicense was a legal impossibility. The first argument had no merit because of issue preclusion, that is, the arbitrator had already determined that the sublicense existed. As for the second argument, about legal impossibility, which the arbitrator did not address, the court, calling it a "novel question," noted that "no other court has directly addressed whether an implied sublicense is possible under these circumstances." The key factor, as with any implied contract, was intent. In this case, the court concluded, the parties’ intent was to create an implied contract. An unpublished Oregon case had concluded that an implied sublicensee was a legal impossibility but, in that case the original license was also implied. As a result, the court determined that while it might be true that an implied sublicense is legally impossible where the original license was also implied, the result was different here where the original license was expressly conferred, including a provision permitting sublicenses. Given that intent was the key element, the court said, the fact that the sublicensee and the licensor never met was not dispositive. The parties intended to create an implied sublicense, and that was what they did.

Covenant or condition. The burden then shifted to PIC to show that Orgill’s use exceeded the scope of the sublicense. In its earlier denial of the summary judgment motion, the court had ruled that factual questions remained about whether Orgill violated the agreement by failing to include attribution. The intervening arbitration award found that the attribution requirement was a covenant rather than a condition precedent. The court, however, permitted PIC to raise the argument again because the agreements that OSI had with the distributors in the arbitration case were different from the one that it had with Orgill, and Orgill was not a party to the arbitration. In any event, the court came to the same conclusion on Orgill’s agreement as the arbitrator came to in the arbitration on the other agreements: the attribution requirement was a covenant of the contract rather than a condition precedent that had to occur before the license could go into effect. As a result, even if Orgill used the images without attribution, it was not liable for copyright infringement. The court, therefore, granted Orgill’s summary judgment motion on the remaining Copyright Act claim.

Approval images. PIC made one final novel argument that Orgill exceeded the scope of the sublicense. It argued that Orgill used approval images (images that were not in final form), which was beyond the scope of Orgill’s sublicense because the original licensing agreement did not permit their use. Whatever the merits of that argument, the court refused to consider it because PIC never disclosed this new theory during discovery. In response to an interrogatory, PIC listed its theories of the case but did not include this one. Given that PIC had an ongoing obligation to supplement its answers as the facts changed, its failure to reveal the theory in any pleadings or discovery for four years was fatal. As a result, the court also denied PIC’s summary judgment motion.

This case is No. 1:14-cv-11818-PBS.

Attorneys: Craig R. Smith (Lando & Anastasi, LLP) and Charles E. Fowler, Jr. (McKool Smith, PC) for Photographic Illustrators Corp. James F. Radke (Murtha Cullina LLP) for Orgill, Inc.

Companies: Photographic Illustrators Corp.; Orgill, Inc.

MainStory: TopStory Copyright MassachusettsNews

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