FOR PUBLICATION



### UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

G R EAT M I ND S , a non-profit organization,

Plaintiff-Appellant ,

v

. O F F I C E D EP O T , IN C ., a Delaware corporation,

D efendant-Appellee. No. 18-55331

D.C. No. 2:17-cv-07435-JFW -E

OPINION

Appeal from

the United States District Court for the Central District of California John F. W alter, District Judge, Presiding Argued and Subm itted Novem ber 8, 2019 Pasadena, California

Filed Decem

ber 27, 2019

Before: Jerom e Farris and M. Margaret McKeown, Circuit Judges, and Virginia M. Kendall, * District Judge.

O pinion by Judge Farris

* The H onorable Virginia M. Kendall, United States District Judge f o r the Northern District of Illinois, sitting by designation.G R EAT M I ND S V

. O F F I C E D EP O T 2

SUMMARY * *

Copyright

The p anel affirm ed the district court’s dism iss a l for failure to state a claim o f a copyright infringe m ent brought by Great Minds, p ublisher of m ath curriculum Eureka Math.

The panel held that defendant Office Depot, Inc., did not becom e a license e o f a Creative Comm ons license, and becom e boun d by its term s, or otherwise infringe Great Minds’ copyright by m aking copies of Eureka Math m aterials for a profit on behalf of school and school district licensees. There was no dispute that the school and school districts licensees’ copying of Great M i n d s’ m aterial was p erm itted under the license. There al s o was no d ispute that, if Office Depot were itself a licensee, c omm ercial copying of Great Minds’ m aterial would f

all outside the scope of the license and infringe Great Minds’ copyright. The panel held that, under California law, the school and school district licensees’ exercise of their rights under the license through the services provided by Office D epot d id not result in Office Depot becom ing a licensee. The p anel further held that the district court did not abuse its d iscretion in denying le av e t o am end the com plaint.

** This summ ary constitutes no part o f the opinion of the court. It h as been prepared by court staff for the convenience of the reader.G R EAT M I ND S V

. O F F I C E D EP O T 3

C OUNSEL Christopher J. Sprigm an (argued), Si mpson Thatcher & Bartlett LLP, New York, N ew Y ork; Jeffrey E. Ostrow, Sim pson Thatcher & Bartlett LLP, Palo Alto, C aliforni a; Rhett O. Millsaps, II, Law Office of R hett O

. M illsaps II, New York, New York; for Plaintiff-Appellant.

Jennife r A. Golinveaux (argued), W inston & Strawn LLP, San F rancisco, California; Diana Hughes Leiden, W inston & Strawn LLP, Los Angeles, California; for De fe ndantAppellee.

Andrew M. Gass (argued) and Elizabeth H. Yandell, Latham & W atkins LLP, San F rancisco, California; Diane M. P eters, Creative Comm ons Corp., Mountain View, California; for Am icus Curiae Creative Comm ons Corporation.

OPINION FARRIS, Circuit Judge: Plaintiff-Appellant Great Minds, publi s h er of m ath curriculum Eureka Math, appeals from the January 18, 2018 dism issal under Fed. R. C iv. P. 12(b)(6) of its copyright infringem ent claim against Office Depot, Inc. in th e Un ited States District Co urt fo r the C entral District of California (W alter, J.). W e AFFIRM. Office Depot did not itself becom e a licensee o f the “Creative Comm ons Attr ibutionN o n C o mm e r c i a l

- S h ar e A l i k e 4

. 0 I n t e rn a t i o n a l P ub l i c License” (and becom e bound by its terms ) or otherwise infringe Great Minds’ copyright by m aking copies o f EurekaG R EAT M I ND S V

. O F F I C E D EP O T 4

M ath m aterials for a profit on b ehalf of school and sch o o l district licensees.

BACKGROUND

Great Minds is an e ducation-based non-profit organization. It created and copyrighted a m ath curriculum called “Eureka Math” for grades PreK-12, which it publishes and sells comm erc i a lly in print form nationwide. It also releases digital files of Eureka Math online for free download to any m em

ber of the p ublic un der a lim ited public copyright license tem

plate p roduced by Creative C omm ons. 1 Under the License, “[e]very recipient of [Eureka Math] autom atically receives an o f

fer from [Great Minds] to exercise the Licensed Rights.” License § 2(a)(5)(A).

The Lice n s e grants “the individual or entity exercising the Licensed Rights” a “worldwide, r o y a l ty-free, nonsublicensable, non- e x clusive, irrevocable license to

. . . reproduce and Shar e [Eure k a Math], in whole or in part, for NonComm ercial purposes only

. . . .” Li c e nse §§ 1(n), 2(a)(1). The Li c ense defines “Share” to m ean, in pertinent part, “to provide m aterial to the public by any m e ans o r process that requires perm ission under the Licensed Ri g ht s , such as reproduction, public d is p lay, p ublic perform ance, distribution, dissem ination, comm unicatio n , or im

p ortation,

. . .” L icense § 1(l). “NonComm ercial” m eans, in pertinent

1 Creative Com

m ons is a non-profit o rg anization that offers free copyright license tem

plates t o b e used to share and protect creative and academ ic works. See What We Do , C REA TIV E C O M M ON S , (Nov. 17, 2019, 3:23 PM), https : // c reativecommons.org/about/. The License at issue here is available online at https: // c reativecomm ons.org/licenses/by-ncsa/4.0/legalcode.G R EAT M I ND S V

. O F F I C E D EP O T 5
part, “not prim arily intended for or directed to war d s comm ercial advantage or m onetary compensation.” License § 1(k). But § 2(b)(3) of the License reserves Great Minds’ right to collect royalties for commercial uses of Eureka Math:

To the extent possible, the Licensor waives any right to collect royalties from [the l i c e n s e e ] f

o r t h e e x e r c i s e o f [ t h e s e NonComm ercial] Licensed Right s, whether directly or through a collecting society under any voluntary or wa ivable statutory o r com pulsory licensing schem e. In all o th er cases the Licensor exp r essly reserves any right to collect such royalties, including when [Eureka Math] is u s ed other than for NonComm ercial purposes.

If any individual o r e ntity exercising the licensed rights “fail[s] to com

ply with [the L icense], [their] rights under [the License] term inate autom atically.” Lice n s e § 6(a). Great Minds claim s that this applies equally to every individual o r entity th at p o ssesses Eureka Math m aterials, including all “downstreamrecipients.”

Office Depot p rovides copy services on request and behalf of public schools and school districts. It charges a fee fo r those services, and at tim es it m akes copies of Eurek a Math m aterials fo r the schools’ use. It does not sell those copies to the public in Office Depot stores. Great Minds claim s, and Office Depot does n ot dispute, that Office Depot
em ploys field representatives to ad v e r tise its co pying services to schools and school d istricts that use Eureka Math. In 2015,G R EAT M I ND S V

. O F F I C E D EP O T 6

when Great Minds discovered that Office Depot was reproducing Eureka Math on behalf of the schools, the parties entered into a separate licensing agreem ent, whereb y Gr eat Minds perm itted Office De po t to m ake the copies in exchange for royalty p aym ents. After the Eastern District o f Ne w York ruling in Great Minds v. F edEx Office a nd Prin t Servs., Inc. , No. 16- CV-1462 (DRH)(ARL), 2017 WL 744574, at *4 (E.D.N.Y. Feb. 24, 2017), a ff’d, 886 F.3d 91 (2d Cir. 2018), which held that the License could not “be read to preclude a licensee f

rom hiring som eone to m ake copies o f [Eureka Math] so the licensee can use them for a ‘noncomm ercial’ purpose,” Office Depot term inated the royalty agreem ent. 2

As a result, on October 1 1, 2017, Great Minds filed s ui t against Office Depot in d i s trict court, alleging claim s o f copyright infringem ent, 17 U.S.C. §§ 101 et seq. , and breach of contract. Gre at M i n d s d oes not dispute that the school districts’ o wn use and distribution o f Eureka Math m aterials is “NonComm ercial” and perm itted b y the License. Rather, it alleges th at Office Depot was “deliberately and w illfully infrin g ing [Great Minds’ copyrights] b y actively soliciting custom ers f

o r co mm ercial reproduction of Eureka Math,” and “by reproducing and dis tr ibuting Eureka Math for profit
w ithout Great Minds’ auth o rization

. ” Gr eat Min d s asserts th at the “NonComm ercial” restriction in the Lice n s e requires
comm ercial pr i nt shops like Office Depot to “negotiate a

2 The FedEx decision resulte d from a separate suit, w ith virtually identical facts, filed by Gre at Minds against a different copy services
com p any. See FedEx , 2017 W L 744574, at *1–2. In March 2018, the Second Circuit affirm ed the E.D.N.Y. dism issal on agency p ri n ciples. Great M inds v. F edEx Office and Pr i n t S

e rvs

. , I nc. , 886 F.3d 91, 95–96 (2d Cir. 2018).G R EAT M I ND S V

. O F F I C E D EP O T 7
license and pay a royalty to Great Minds if they wish to use or reproduce Eureka Math f or comm ercial purposes— i.e. , for their own profit.”

On Decem

ber 6, 2017, Office Depot file d a m otion to dism iss the copyright infringem ent claim , wh i c h the district court granted without leave to am end. Great Minds v. Office Depot, Inc. , No. CV 17-7435-JFW (EX), 2018 WL 4945643, at *4–5 (C.D. Cal. Jan. 1 8 , 2018). The court found that the License did not prohibit the school districts from em ploying third parties like Office Depot to m ake copies of the Eureka Math curriculumon their behalf. Id. This appeal followed.

DISCUSSION

I. MOTION TO DISMISS

W e review the district court’s Rule 1 2(b)(6) dism issal de
novo

. UMG Recordings, In c. v

. S h elter C a p ital Partners LLC, 718 F.3d 1006, 1014 (9th Cir. 2013). To survive a m o tion to dism iss, “a com

plaint m ust contain sufficient factual m atter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” As h c roft v. Iqbal , 556 U.S. 662, 678 (2009) ( qu o ti n g Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007)). If the Court fi n ds that the plaintiff did not allege sufficient facts “to raise a right to relief above the speculative level” and sup p o rt a cognizable legal theory, it m ay dism iss the com plaint as a m atter of law. Twombly , 550 U.S. at 555. At this stage, the Court m

ust take all well-pleaded allegations of m aterial fact as true and construe them i n the light m ost favorable to the non-m oving p arty. Malibu Textiles, Inc. v. Label Lane Int’l, Inc. , 922 F.3d 946, 951 (9th Cir. 2019).G R EAT M I ND S V

. O F F I C E D EP O T 8

A v alid claim f

or copyright infr i n gem ent requires “(1) o wnership of a val i d c o p yright, and (2) copying o f constituent elem ents of the work that are original. ” Fe ist Publ’ns, Inc. v. R ural Tel. Serv. Co. , 499 U. S. 340, 361 (1991 ) (citing Harper & Row Publishers, Inc. v. Nation Enters. , 471 U.S. 539, 5 48 (1985)). T he claim fa ils if the challenged use of the work f alls within the scope of a valid l i ce nse. See S.O.S., Inc. v. Payday, Inc. , 886 F.2d 1 0 8 1 , 1087–88 (9th Cir. 1989). A copyri g ht license “m ust be construed in accordance with the purposes underlying federal copyright law.” Id. at 1088 (citing Co h en v. Paramount Pictures Corp. , 845 F.2d 851, 854 (9th Cir. 1988)). Federal courts “rely on state law to provide the canons of contractual construction, but only to the extent such rules do not interfere with federal c op yr ight law or p olicy.” Id. (citing Fantastic Fakes, Inc. v. Pickwick Int’l, Inc. , 661 F.2d 479, 4 82–83 (5th Cir. 1981)).
Here, the parties a g r e e th at California law applies to the construction of the License. Great Minds , 2018 WL 4945643, at *4 n.7. “Under California law, the interpretation of contract language is a question of law.” Atel F in. Corp. v. Quaker Coal Co. , 321 F .3d 924, 9 25–26 (9th Cir. 2003). “[T]he term s of a contract m

ust be construed in a m anner that take s into account the context of the language and is consistent with the contrac t a s a whole.” Actuate Corp. v. Int’l Bus. Machs. Corp. , No. C-09-05892 JCS, 2010 WL 1 340519, at * 5 (N.D. Cal. Apr. 5 , 2 010) (citations om itted); Cal. Civ. Code § 1641.

There is n o dispute that the sc h o ol and school district licensees’ copying of Great Minds’ m aterial is p erm itted under the L icense. Ther e a l s o seem s to b e n o dispute that if Office Depot were itself a licensee, comm ercial copying o f Great Minds’ m aterial would fall outside the sco p e o f theG R EAT M I ND S V

. O F F I C E D EP O T 9

License and infringe Great Minds’ copyr i g ht. The issue we consider then is whethe r the school and school district licensees’ exercise of the ir r i ghts under the License through the services provided by Office Depot results in Office Depot becom ing a licensee. W e hold that it does not. A li c ensee’s hiring of a third-party copy service to repro du c e licensed
m aterial strictly for the licensee’s own perm itted use does not turn that third party into a licensee that is bound to the License term s. S

ee Gr e a t Minds v. FedEx Office and Print Servs., Inc. , 886 F. 3 d 9 1 , 96 (2d Cir. 2 018) (“Great Minds’ li censees m ay rely on non-employee agents in carrying out perm itted uses without converting those agents into independent licensees.” ) ; Automation by Design, Inc. v. Raybestos Prods. Co. , 463 F .3d 749, 761 (7th Cir. 2 006) (affirm ing summ ary judgm ent for b oth licens e e and third p arty); Storage Tech. Corp. v. Custom Hardware Eng’ g & Consulting, In c

. , 4 21 F.3d 1307, 1315 (Fed. Cir. 2 005) (independent rep a i r com

pany that copied protected work on behalf of its custom ers-licensees was not liable for copyright infringem ent); Hoga n Sys., Inc. v. C ybersource Int’l, Inc. , 158 F.3d 319, 324 (5th Cir. 1998) (third-party contractor was “sheltered un der” the licensee’s rights); Marconi Wireless Tel. Co. of Am. v

. Simon , 227 F. 906, 9 10 (S.D.N.Y. 1915), aff’d, 231 F. 1021 (2d Cir. 1916), reversed on other grounds , 246 U.S. 46 (19 1 8 ) (third-party contractor was “not an infringer because he [was] supplying lawful goods to a lawful licensee”). See also Raym ond T. Nimm er & Je ff C. Todd, 1 Modern Licensing Law § 6:28 (2018) (sim ilarly describing the consensus in courts). 3

3 Even though Great Minds did not bring a suit against the l i censees, we also note that decisions that h ave addressed whether the licensee violates the term s of the license by hiring th i rd p arties to exercise the licensed rights are instructive. Those cases held, and we agree, that hiringG R EAT M I ND S V

. O F F I C E D EP O T 10
Und e r Great Minds’ reading of the License, third party contractors like O ffice Depot are “downstream recipients” o f Eureka Math as contem

p lated in § 2(a)(5)(A) of the License,
m eaning they “autom atically receive[] an offer fr o m [Great Minds] to exercise the Licensed Rights,” they a c c e p t that offer the m om ent the copy store em ployee presses “copy” on a m achine, and th ey becom e bound to the term s of the License. Office Depot is not a downstream recipient. That Office Depot em

ployed field representatives to advertise the availability of copying services for schools and s chool di s tr i c t s that u se Eureka Math does not confer a licensee status o n Office Depot. Its activities rem ain within the am bit of the schools and school districts’ license.

Great Minds also contends that the “volitional” elem ent, i.e. , which entity’s em p loyee doe s th e copying, is determ inative i n this case. 4 But that argum ent produces the

a third party to exercise t he licensee’s ri g h t s do es not convert that third party into an independent l icensee. See, e.g. , Estate of Hevia v. Portrio Corp. , 602 F.3d 34, 44–45 (1st Cir. 20 10) (“When

. . . there is n o indication that a license-granting copyright o wner has restricted the licensee’s ability to use third parties in im plem enting the licens e , th e license is generally construed to allow such d elegation.”); Automation by Design , 463 F.3d at 757–58 (licensee’s d ecision to hi re a th i rd party “to
m anufa c ture parts for i t” did not violate the license); Intel Corp. v. Advanced Micro Devices, Inc. , No. C-90-20237-WAI, 1994 W L 5 94041, at *2–3 (N.D. Cal. Oct. 20, 1994).

4 The Second Circuit effectively dism issed this “volition” argum e nt
on appeal in FedEx as irrelevant

. See 886 F. 3 d at 97 (“The relevant question here,

. . . is not whether [the third party] engage d i n volitional conduct when it photocopied the Materials at the school districts’ r equest, but whether t

he L icense permits school districts to request those copies at all. W e conclud e th at i t d oes,

. . .”). W e agree. Great Minds’ citation o f volition cases is not instructive. Th o s e cases h eld that a party m ay be liable for copyright i n fri n g e m ent only if the infringing activity wasG R EAT M I ND S V

. O F F I C E D EP O T 11 following absurd results: (1) a teacher m ay copy Eureka Math
on an Office Depot-owned copy m achine for a f ee in-store, but cannot hand the m aterials to an Office Depot em ployee to be copied; (2) a school m ay pay a copy m achin e p rovider a m onthly fee to keep a m achine on site to copy Eureka Math, but cannot pay Offi c e Depot em ployees to m ake the sam e copies; and (3) a school m ay perm it teachers to copy Eureka Math on school-owned or leased m achines, but cannot pay a high school student to m ake the sam e copies.

Great Minds’ interpretation canno t b e correct. The License itsel f p r o vides no basis to d istinguish between perm itted copies of Eureka Math m ade by a l i c ensee’s o wn em ployees ( e.g. , school teachers or staff) versus those m ade by a third-party contractor ( e.g. , Office Depot em ployees). W e decline to read such a distinction into the License.

Under the License, a non-comm ercial l i c ensee m ay hire
a th ird-party contractor, including those working for
comm ercial gain, to help im plem ent the License at the direction o f the licensee and in furtherance of the licensee’s
own licensed rights. The License extends to all em ployees o f the schools and school districts and shelters Office De p ot’s
comm ercial copying of Eureka Math on their b ehalf. Holding differently would prevent prop er non-comm ercial licensees from using relatively c o mm o n m eans of reproduction to share, engage with, and exercise their rights to the lic e n sed

volitional c o n du c t. They do not say t he converse—as Great Minds suggests—that with v olition, a defendant is liable for co p yright infringem ent. See, e.g. , Perfect 10, Inc. v. Giganews, Inc. , 847 F.3d 657, 666 (9th Cir. 2017); Cartoon Network LP, LLLP v. CSC Holding s , I n c. , 536 F.3d 121, 131 (2d Cir. 2008); Religious Tech. Center v. Netcom OnLine Commc’n Serv., Inc. , 907 F. Supp. 1361, 1370 (N.D. Cal. 1995).G R EAT M I ND S V

. O F F I C E D EP O T 12

work in a way that would contravene the intent of the License and underm ine its utility. W e conclude that the licensees’ contract with Office Depot to exercise the licensees’ rights under the License does not im p ose an independent liability on Office Depot. As a result, Great Minds has failed to s tate a plausible claim to relief on its copyright infringem ent claim

. II. LEAVE TO AMEND

W e review a district court’s denial of leave to am end for abuse of discretion. Design Data Co r p. v

. Unigate Enters., Inc. , 847 F.3d 1169, 1 172 (9th Cir. 2017). Dism issal without leave to am end is proper if it is clear that “allegation of other facts consistent with the challen g e d p leading could not possibly cure the deficiency.” Montz v. Pil g rim Films & Te levision, Inc. , 649 F.3d 975, 984 n.3 (9th Cir. 201 1 ) (internal quotations om itted). The district court denied leave to am end becaus e it s i nterpretation of the License was a question of law and “perm itting Great Minds to am end would be an exercise in futility.” Great Minds , 2018 WL 4945643, at *5 n.8 (citi ng Rutman Wine Co. v. E. & J. Gallo Winery , 829 F.2d 729, 738 (9th Cir. 1987)). W e agree.
Great Minds argues that the d i strict court failed to consider relevant extrinsic evidence showing that the License is reasonably susceptible to Great Minds’ own interpretation. See United States v. King Features En tm’ t, Inc. , 843 F.2d 394, 398 (9th Cir. 1988) (citing B robeck, Phleger & Harrison
v. Telex C

o rp. , 602 F.2d 86 6 , 8 71 (9th C ir. 1979), cert. denied, 444 U.S. 981 (1979)). But Great Minds alleged no such extrin s i c evidence in its com plaint. On appeal, it n ow offers three new pieces of evidence: a survey publi s h e d by Creative Comm ons an d two third-party websites. N one o f that evidence is relevant to the ultim ate issue o n appeal:G R EAT M I ND S V

. O F F I C E D EP O T 13

whether Office Depot’s co mme r cial reproduction of Eureka Math on behalf and at the direction o f proper non-comm ercial licensees converted Office Depot into a licensee. The district court did not abuse its discretion in denying leave to am end.

AFFIRMED.