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ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

PAGE -1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

PROPET USA, INC.,

Plaintiff,

v.

LLOYD SHUGART,

Defendant.

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CASE NO. C06-0186-MAT

ORDER RE: MOTIONS FOR

SUMMARY JUDGMENT

INTRODUCTION AND BACKGROUND

This case involves a dispute between plaintiff Propet USA, Inc., a shoe company, and

defendant Lloyd Shugart, a photographer, over photographic images taken by defendant of and/or

related to plaintiff’s products. For a number of years, working as an independent contractor,

defendant created such images for use in plaintiff’s promotional materials. During this time period,

plaintiff paid defendant over $100,000.00 for his services. (See Dkt. 13, ¶ 9.)

At some point in mid-2005, plaintiff terminated its business relationship with defendant.

At around that same time, defendant discovered and complained about alleged copyright

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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170-73.) Plaintiff subsequently commenced this case seeking declaratory and injunctive relief in

anticipation of a copyright infringement suit by defendant. (Dkt. 7.) Defendant counterclaimed,

asserting copyright infringement, violations of The Digital Millennium Copyright Act (DMCA),

and “Stolen/Lost Photos[.]” (Dkt. 13.)

Now before the Court are two motions for summary judgment. Defendant filed a motion

for partial summary judgment as to the ownership of certain copyrights. (Dkt. 32.) Plaintiff

thereafter filed a motion for summary judgment seeking dismissal of defendant’s counterclaims.

(Dkt. 42.) The parties object to the respective motions. (Dkts. 58, 61, 64-65.) The Court

addresses both of the summary judgment motions below.

DISCUSSION

A. Summary Judgment Standard

Summary judgment is appropriate when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter

of law.” Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving

party is entitled to judgment as a matter of law when the nonmoving party fails to make a sufficient

showing on an essential element of his case with respect to which he has the burden of proof.

Celotex, 477 U.S. at 322-23.

Genuine issues of material fact that preclude summary judgment are “disputes over facts

that might affect the outcome of the suit under the governing law[.]” Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986). In deciding a summary judgment motion, the court must view all

facts and inferences therefrom in the light most favorable to the nonmoving party. See Warren

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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

ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

PAGE -3

v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995). “[A] party opposing a properly supported

motion for summary judgment may not rest upon mere allegation or denials of his pleading, but

must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S.

at 256 (citing Fed. R. Civ. P. 56(e)).

B. Defendant’s Motion for Partial Summary Judgment as to Copyright Ownership

In his motion for partial summary judgment, defendant seeks a determination that he is the

owner of all copyrights in the various photographic images that are the subject of this dispute. He

notes that, pursuant to the Copyright Act, “[a] transfer of copyright ownership, other than by

operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of

the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly

authorized agent.” 17 U.S.C. § 204(a). Acknowledging the absence of any written agreement as

to a transfer of copyright, plaintiff concedes defendant’s copyright ownership. (See Dkt. 42 at 12

and Dkt. 58 at 1.) Accordingly, with respect to this precise issue, the Court finds defendant

entitled to a judgment as a matter of law.

Yet, the Court clarifies that, as argued by plaintiff, such a finding does not establish

defendant’s right to a judgment with respect to his copyright infringement and related claims. As

discussed below, plaintiff asserts an implied, nonexclusive license to utilize the photographic

images at issue. Given this outstanding issue, a grant of partial summary judgment on the issue

of defendant’s copyright ownership does not resolve the parties’ claims.1

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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.

ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

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C. Plaintiff’s Motion for Summary Judgment as to Defendant’s Counterclaims

Plaintiff seeks to dismiss defendant’s counterclaims and requests an order acknowledging

the existence of an implied, nonexclusive license to use any photographs created by defendant

prior to the termination of their business relationship. It describes the terms of that use to include

use during the regular course of advertising its shoes and in conveying the photographs to others

who advertise its shoes and make substantially the same use of the photographs as plaintiff.

Plaintiff first contends that, in handing over photographs for use in its advertising in

exchange for the fees paid, defendant conveyed a nonexclusive license to use the copyrighted

works for their intended purpose. See, e.g., Effects Assoc. Inc. v. Cohen, 908 F.2d 555, 558-59

(9th Cir. 1990) (“. . . Effects created a work at defendant’s request and handed it over, intending

that defendant copy and distribute it. To hold that Effects did not at the same time convey a

license to use the footage in ‘The Stuff’ would mean that plaintiff’s contribution to the film was

‘of minimal value,’ a conclusion that can’t be squared with the fact that Cohen paid Effects almost

$ 56,000 for this footage. Accordingly, we conclude that Effects impliedly granted nonexclusive

licenses to Cohen and his production company to incorporate the special effects footage into ‘The

Stuff’ and to New World Entertainment to distribute the film.”) (internal footnote omitted).

Plaintiff maintains that defendant’s invoices and its own cancelled checks make up the sole reliable

evidence of contract and do not, in any way, reflect the imposition of any limits on the use of the

photographs. Plaintiff also points to defendant’s testimony as supporting the contention that it

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ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

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could use defendant’s photography in any way that benefitted itself. (See Dkt. 43, Ex. B at 16-

17.)

In response, defendant maintains his exclusive license over the photographic images at

issue. See, e.g., Fosson v. Palace (Waterland), Ltd., 78 F.3d 1448, 1455 (9th Cir. 1996) (noting

that the decision in Effects Assoc. Inc., 908 F.2d 555, does not control the issue of whether the

terms of an express license had been breached and could give rise to an infringement suit; “[O]nce

a non-breaching party to an express copyright license obtains and exercises a right of rescission

by virtue of a material breach of the agreement, any further distribution of the copyrighted material

would constitute infringement.”); S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir.

1989) (“A licensee infringes the owner’s copyright if its use exceeds the scope of its license.”) In

support, he points to a “film delivery memo” he contends accompanied all of his copyrighted

images and expressly limited plaintiff’s use of the images, as well as a seal on all film delivery

packages that asserted his exclusive rights and indicated that plaintiff’s use and license was subject

to all terms of the film delivery memo. (See Dkt. 63 at ¶¶ 5, 8 and Ex. A.) Among other terms,

the film delivery memo indicated a two-year duration of the license to use the images. (Id., Ex.

A.) Defendant also points to digital images delivered to plaintiff on CD, noting that the CD

envelopes bore a seal, that his copyright was reflected on the face of every CD and upon

downloading, and that each digital image contained an embedded copyright image, meaning the

copyright notice would show whenever an image was loaded onto a page or photo editing

software. (Id., ¶¶ 9-10.)

Plaintiff denies any knowledge of the film delivery memos or seals, noting that defendant

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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.)

ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

PAGE -6

produced only stand-alone copies of the memo and seal.2

 However, defendant’s former counsel

attests to the fact that attorneys for plaintiff returned a box containing film negatives which had

a broken seal and attaches a photograph of the box with the broken seal to his declaration. (Dkt.

62, ¶¶ 2-5 and Ex. A (the seal reads: “Notice: All file or images contained herein are the exclusive

property of Lloyd Shugart, to which Lloyd Shugart retains and holds all rights under copyright

laws. Client use and license is subject to all terms of the FILM DELEVERY [stet] MEMO.

Terms shall be deemed accepted by Client as acknowledged by written approval and/or the use

of the photographs provided by Photographer.”)) Additionally, defendant avers that, after a

scanning company noticed the digital copyright image and an employee of plaintiff called for a

“release” authorizing it to scan images, he advised the employee to use the film delivery memo as

the release. (Dkt. 63, ¶ 12.) He further maintains that, upon picking up a box of the scanned

images from plaintiff’s offices, he found that the box contained a copy of the film delivery memo

in an envelope from the scanning company, as well as several envelopes with broken seals. (Id.,

¶ 13.)

Given the above, it is clear that genuine issues of material fact preclude a grant of summary

judgment as to defendant’s counterclaims based on plaintiff’s assertion of an implied, nonexclusive

license. The Court also agrees with defendant that the testimony relied on by plaintiff in support

of its implied, nonexclusive license appears to have been taken out of context. That is, in testifying

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ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

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that plaintiff had the right to use the images to benefit itself, defendant referred specifically to a

contract he alleged he entered into in 2000 with CPF marketing, an advertising and graphic design

firm that performed contract work for plaintiff. (Dkt. 45 at 12-17.) He also repeatedly noted that

the terms of that contract called for a two-year period of limited use. ( Id.) Accordingly, this

testimony does not support a grant of summary judgment.

Plaintiff next offers an alternative argument. That is, even assuming both that defendant

delivered the film delivery memo to plaintiff and that plaintiff agreed to the terms of the memo

simply by using the photographic images, plaintiff argues that the memo’s terms are unreasonable

and unenforceable. Plaintiff compares the memo as an attempt to bind it to contract terms in the

same way consumers are bound by “shrink wrap” or “click wrap” agreements when purchasing

software. See, e.g., ProCD v. Zeidenberg, 86 F.3d 1447, 1452-53 (7th Cir. 1996) (shrink wrap

licenses may impose restrictions upon a consumer opening and installing software); M. A.

Mortenson Co. v. Timberline Software Corp., 93 Wash. App. 819, 830, 970 P.2d 803 (Wash. Ct.

App. 1999) (noting Seventh Circuit “allow[ed] a vendor to propose that a sale contract be formed

not when the product is requested or the money is paid but after the customer has inspected the

item and the terms.”; finding this reasoning persuasive and noting similarities: “Timberline’s

license agreement, included with the software, is fairly standard and contains an accept-or-return

provision.”) (relying on ProCD, 86 F.3d 1447, and Hill v. Gateway 2000, Inc., 105 F.3d 1147,

1150 (7th Cir. 1997)), aff’d at 140 Wash. 2d 568, 998 P.2d 305 (Wash. 2000). It notes that some

courts have refused to enforce such agreements. See, e.g., Specht v. Netscape Communs. Corp.,

150 F. Supp. 2d 585, 595 (S.D.N.Y. 2001) (“Netscape argues that the mere act of downloading

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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primary purpose of downloading is to obtain a product, not to assent to an agreement. In contrast,

clicking on an icon stating ‘I assent’ has no meaning or purpose other than to indicate such assent.

Netscape’s failure to require users of SmartDownload to indicate assent to its license as a

precondition to downloading and using its software is fatal to its argument that a contract has been

formed. Furthermore, unlike the user of Netscape Navigator or other click-wrap or shrink-wrap

licensees, the individual obtaining SmartDownload is not made aware that he is entering into a

contract.”), aff’d at 306 F.3d 17 (2d Cir. 2002). See also generally M.A. Mortenson Co., 93

Wash. App. at 829 (“In ProCD, the Seventh Circuit held that shrink-wrap licenses accompanying

off-the-shelf computer software are enforceable unless their terms are objectionable under general

contract law.”)

Plaintiff proffers a variety of reasons why defendant cannot enforce his film delivery memo

like a conventional shrink wrap agreement, including the fact that this case does not involve a

typical consumer transaction. However, for this same reason, the Court questions whether the

case law proffered by plaintiff – involving software license agreements – is on point. This

question is admittedly complicated by defendant’s failure to offer any argument in opposition to

plaintiff’s shrink wrap analogy and related arguments. Although not rejecting the possible viability

of plaintiff’s arguments, the Court is unable to find plaintiff entitled to a judgment as a matter of

law. Moreover, the Court notes that the arguments may simply be premature due to the fact that

discovery in this matter has not yet concluded. (See Dkt. 54 (setting discovery deadline of May

16, 2007.))

Nor does the Court find sufficient grounds for granting summary judgment based on

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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damage is premature given the ongoing discovery in this matter. Second, genuine issues of

material fact appear to prevent dismissal of defendant’s remaining counterclaims. For example,

plaintiff’s argument as to defendant’s DMCA claim entails questions about the film delivery memo,

which, as stated above, raises a disputed issue of material fact. As such, the Court concludes that

plaintiff also fails to establish its entitlement to a judgment as a matter of law with respect to

plaintiff’s remaining counterclaims. However, again, the Court acknowledges that plaintiff’s

arguments with respect to these claims may simply be premature due to the fact that discovery in

this matter has not yet concluded.

Finally, the Court addresses an argument raised by defendant with respect to the request

for injunctive relief in plaintiff’s complaint. In its complaint, plaintiff sought injunctive relief: (1)

prohibiting defendant from selling or offering for sale any of the photographs subject to this suit;

(2) prohibiting defendant from transferring any right, title, or interest in the photographs to third

parties without advance written approval; and (3) prohibiting defendant from threatening plaintiff’s

customers with copyright infringement relating to their use of the photographs. (See Dkt. 1 at 5.)

Defendant argues that, given his copyright ownership, these demands violate one or more of his

rights under the Copyright Act. See 17 U.S.C. § 106 (“Exclusive rights in copyrighted works.”)

In response, plaintiff concedes that defendant has the right to sell or license his copyrighted works,

but notes that it has not moved for summary judgment as to its own complaint and maintains its

continued right of use. Therefore, while it does seem that plaintiff concedes that at least its first

two requests for injunctive relief should be denied, as noted by plaintiff, this issue is not yet

properly before the Court.

/ / /

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ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

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CONCLUSION

For the reasons described above, defendant’s motion for partial summary judgment on the

issue of his copyright ownership is GRANTED and plaintiff’s motion for summary judgment as

to defendant’s counterclaims is DENIED.

DATED this 3rd day of May, 2007.

A

Mary Alice Theiler

United States Magistrate Judge

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