Opinion ID: 4533496
Heading Depth: 2
Heading Rank: 1

Heading: Sohm’s Arguments on Appeal

Text: 1. The District Court Misconstrued Sohm’s Claims as Contract Claims Rather Than Copyright Infringement Claims Sohm alleged that Scholastic committed copyright infringement by exceeding the print-run limitations contained in the license documents. The district court, however, found that the license provisions were contractual covenants, and thus that his claims sounded only in breach of contract. Sohm maintains that the court “erred in its condition / covenant analysis, ignoring clear language of condition in the [license] documents.” Sohm’s Br. at 13. He contends that the district court misconstrued unmistakable language of conditions 12 precedent, and therefore that he properly brought claims sounding in copyright infringement, not breach of contract. We agree. “Generally, ‘if the licensee’s improper conduct constitutes a breach of a covenant undertaken by the licensee and if such covenant constitutes an enforceable contractual obligation, then the licensor will have a cause of action for breach of contract,’ not copyright infringement.” Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998) (brackets and alteration omitted) (quoting 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 10.15[A]). “However, ‘if the nature of a licensee’s violation consists of a failure to satisfy a condition to the license, it follows that the rights dependent upon satisfaction of such condition have not been effectively licensed, and therefore, any use by the licensee is without authority from the licensor and may therefore, constitute an infringement of copyright.’” Id. at 237 (brackets and alteration omitted) (quoting 3 Nimmer on Copyright § 10.15[A]). Under New York law, a covenant is “a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made.” Merritt Hill Vineyards Inc. v. Windy Heights Vineyard, Inc., 61 N.Y.2d 106, 112 (1984) (citation omitted). A 13 condition precedent, on the other hand, is “an act or event . . . which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises.” Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685, 690 (1995) (citation omitted). “New York respects a presumption that terms of a contract are covenants rather than conditions,” Graham, 144 F.3d at 237, and “[c]onditions precedent are not readily assumed,” Bank of N.Y. Mellon Tr. Co. v. Morgan Stanley Mortg. Capital, Inc., 821 F.3d 297, 305 (2d Cir. 2016). Nevertheless, though conditions precedent must be “expressed in unmistakable language,” id. at 305 (quoting Oppenheimer, 86 N.Y.2d at 691), “specific, talismanic words are not required,” id. “[L]inguistic conventions of condition—such as ‘if,’ ‘on condition that,’ ‘provided that,’ ‘in the event that,’ and ‘subject to[]’”—can “make plain” a condition precedent. Id. at 305–06. “It is . . . for the court to decide, as a matter of law, whether a condition precedent . . . exists under the terms of a contract.” Powlus v. Chelsey Direct, LLC, No. 09-cv-10461, 2011 WL 135822, at  (S.D.N.Y. Jan. 10, 2011). “[I]f ‘a license is limited in scope and the licensee acts outside the scope, the licensor can bring an action for copyright infringement.’” BroadVision, Inc. v. Med. 14 Protective Co., No. 08-cv-1478, 2010 WL 5158129, at  (S.D.N.Y. Nov. 23, 2010) (quoting Jacobsen v. Katzer, 535 F.3d 1373, 1380 (Fed. Cir. 2008)). Here, the PVAs, invoices, and documents incorporated therein constitute the license agreements between Scholastic and Corbis. See App’x at 164 (“Along with the Corbis invoice, these terms constitute a binding agreement (‘Agreement’) between you and Corbis Corporation.”); id. at 176 (“‘Agreement’ means, collectively, the terms and conditions (i) herein, (ii) in the Invoice(s) and (iii) in the Specific Content Web Page(s) applicable to the Content licensed hereunder, all of which are incorporated into this Agreement by this reference.”). These license agreements granting Scholastic the right to copy Sohm’s photos contain unmistakable language of conditions precedent, and therefore Sohm properly pleaded claims of copyright infringement. The Terms and Conditions incorporated into and attached to the 2004 PVA state that “[a]ny license granted by Corbis is conditioned upon (i) your meeting all conditions and restrictions imposed by Corbis, and (ii) Corbis’ receipt of full payment by you for such use as invoiced by Corbis.” Id. at 164. The Terms further state that “[u]nless otherwise specified in a separate writing signed by Corbis, your reproduction of Images is limited to (i) internal evaluation or comps, or (ii) the specific use 15 described in your invoice, which together with these terms shall constitute the full license granted.” Id. The Terms also explain that “[e]xcept as specified in the Corbis invoice, Images obtained from Corbis are licensed on a non-transferable, one-time, non-exclusive basis, and are strictly limited to the use, medium, time period, print run, placement, size of image, territory, and any other restrictions indicated in the invoice.” Id. The invoices, in turn, specified the quantity and uses that were licensed. E.g., id. at 127. The Terms also explicitly warned that “[u]nauthorized use of these Images constitutes copyright infringement and shall entitle Corbis to exercise all rights and remedies under applicable copyright law.” Id. at 164. The Terms and Conditions incorporated into and attached to the 2008 PVA contain similar language, stating that “[a]ny and all licenses granted by Corbis are conditioned upon (i) Your compliance with all provisions of this Agreement, and (ii) Corbis’ receipt of full payment by You as identified in the applicable invoice.” Id. at 175. The Terms also state that “[e]xcept where specifically permitted on the Invoice for the applicable Content, You may not distribute, publish, display, or otherwise use in any way, the Rights Managed Content.” Id. 16 These provisions are replete with the conditional language of conditions precedent – “unless,” “conditioned upon,” “except where specifically permitted” – thereby directly refuting the conclusion that the license agreements created only contractual covenants, the violation of which sounds in breach of contract. Sohm asserts that Scholastic exceeded print-run limitations contained in the invoices forming part of the license agreements, and thus he properly pleads that Scholastic has violated a restriction upon which the license is conditioned. We are not alone in reaching this conclusion. In Kashi v. McGraw-Hill Global Education Holdings, No. 17-cv-1818, 2018 WL 5262733 (E.D. Pa. Oct. 23, 2018), the district court, interpreting similar license agreements to those at issue here and applying New York law, reasoned that “the language of [the PVAs], along with the invoices, create[s] a condition in unmistakable terms,” id. at . “[T]hus, by exceeding the uses authorized by the invoices, Defendants violated a condition of their license agreements with Corbis,” thereby entitling plaintiff to assert copyright infringement claims. Id. Rejecting an interpretation of the license agreements that would render provisions mere delineations of acceptable and unacceptable behavior, the court found that such an analysis would render it “virtually impossible to limit the scope of the license.” Id. at . Rather, the license 17 agreements’ language “clearly stated that authorization to use a photo was conditioned upon an invoice granting permissions and upon receipt of payment,” and thus “put unauthorized use in excess of the quantities permitted by the invoices beyond the scope of the Agreements.” Id. Overuse of the photos, therefore, “implicates a condition, not a covenant, and . . . any alleged breaches sound in copyright infringement, not breach of contract.” Id. at . Numerous other courts have agreed when confronted with similar circumstances. See, e.g., Menzel v. Scholastic, Inc., No. 17-cv-5499, 2019 WL 6896145, at –9 (N.D. Cal. Dec. 18, 2019); Krist v. Pearson Educ., Inc., No. 16-cv-6178, 2019 WL 6467355, at –8 (E.D. Pa. Dec. 2, 2019); Krist v. Scholastic, Inc., 415 F. Supp. 3d 514, 533–36 (E.D. Pa. 2019); Harrington v. McGraw-Hill Glob. Educ. Holdings, LLC, No. 17-cv-2960, 2019 WL 1317752 (D. Colo. Mar. 22, 2019); Pac. Stock, Inc. v. Pearson Educ., Inc., 927 F. Supp. 2d 991 (D. Haw. 2013). In Harrington, the district court interpreted substantially identical Corbis agreements to those at issue here and agreed with the Kashi court that “the parties’ agreement expressly provided that unauthorized use of the images would constitute copyright infringement,” and that use in excess of the print-run limitations was unauthorized use. 2019 WL 1317752, at . The court emphasized the same language in the parties’ agreements 18 and rejected course of conduct evidence as insufficient to convert the case from one of copyright infringement to one of breach of contract. Id. In Pacific Stock, the court reached a similar conclusion, finding that print-run limitations in the context of a comparable PVA scheme “define the scope of the license; they are not simply covenants enforceable only through a breach of contract action.” 927 F. Supp. 2d at 998. We conclude that the language is clear on the face of the license agreements: the print-run limitations were conditions precedent, the violation of which gave rise to claims for copyright infringement. Sohm thus properly pleaded copyright infringement. Accordingly, we reverse the grant of partial summary judgment to Scholastic on this basis. 2. The District Court Properly Applied the Elements of Copyright Infringement to Sohm’s Claims Sohm next contends that the district court (1) misstated the elements of a claim for copyright infringement and (2) misallocated to Sohm the burden of proving that Scholastic’s use fell outside the scope of the license. He first maintains that the court’s version of the elements of a prima facie case – “(i) ownership of a valid copyright; and (ii) unauthorized copying of the copyrighted work,” Sohm, 2018 WL 1605214, at  – erroneously included the term “unauthorized.” Instead, 19 Sohm urges that the proper formulation of the second element is “copying of constituent elements of the work that are original.” Sohm’s Br. at 40 (quoting Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991)). He further asserts that the district court’s version of the elements of a copyright infringement case as applied in a license case, as opposed to a substantial similarity case, created an “impossible burden” in light of Scholastic’s claim that “it retained no records of its original licensing.” Id. at 41. According to Sohm, it was inappropriate to place on him the burden of showing that Scholastic’s use exceeded its license because there was “no legitimate scope of license issue” where Scholastic exceeded the print runs on the face of the invoices. Id. at 42. He argues that Scholastic “ha[d] the burden of coming forward with proof that it had a license for the uses at issue.” Id. at 43. Sohm’s arguments on these points fail. The district court neither erroneously misstated the elements of a claim for copyright infringement nor improperly shifted the burden of proof to Sohm to demonstrate that Scholastic exceeded the scope of its license. We therefore affirm. “In a copyright infringement case, the plaintiff must show: (i) ownership of a valid copyright; and (ii) unauthorized copying of the copyrighted work.” 20 Jorgensen, 351 F.3d at 51. The existence of a license to engage in the challenged copying, however, is “an affirmative defense to a claim of copyright infringement . . . that the alleged infringer must plead and prove.” Yamashita v. Scholastic Inc., 936 F.3d 98, 104 (2d Cir. 2019); see also Bourne v. Walt Disney Co., 68 F.3d 621, 630–31 (2d Cir. 1995). Nevertheless, “when the contested issue is the scope of a license, rather than the existence of one, the copyright owner bears the burden of proving that the defendant’s copying was unauthorized under the license and the license need not be pleaded as an affirmative defense.” Graham, 144 F.3d at 236; see also Yamashita, 936 F.3d at 105 (“Applying these principles in the context of initial pleadings, when the existence of a license is not in question, a copyright holder must plausibly allege that the defendant exceeded the particular terms of the license.”). Here, the district court’s recitation of the elements of a copyright infringement claim was correct in both form and substance. As Graham demonstrates, in cases involving licenses, we have interpreted “unauthorized” use to mean use outside of the license. 144 F.3d at 236 (requiring copyright holder to demonstrate that “defendant’s copying was unauthorized under the license”); Bourne, 68 F.3d at 631. 21 In addition, the district court properly required Sohm to demonstrate use outside the scope of the license. Because Sohm pleaded in his complaint that licenses exist – a fact that Scholastic admits – Sohm bore the burden of proving that Scholastic’s copying was unauthorized, a burden he failed to satisfy. Sohm’s attempts to avoid this burden by recasting the relevant inquiry as one of the existence of a license or of the proper formulation of the elements of a copyright infringement claim are unavailing in the face of these clear principles. The district court properly framed the question as whether Scholastic had exceeded the scope of existing licenses, and therefore properly placed the burden of demonstrating unauthorized copying on Sohm. Accordingly, the court did not err in reciting the elements of a copyright infringement claim nor in requiring Sohm to demonstrate use outside the scope of the license. 3. Sohm Offered Sufficient Proof of Infringement to Survive Summary Judgment on the Steam Engine Photo Sohm avers that the district court erroneously granted partial summary judgment to Scholastic on his claim at Row 4 of Exhibit 5 to the First Amended Complaint, concerning a photo of a steam engine in Scholastic’s publication Wheels. We agree. 22 Sohm proffered evidence that Scholastic obtained a limited license from The Image Works to print 40,000 copies of Sohm’s image in Wheels, but actually printed 195,500 copies. Scholastic did not dispute this evidence nor include this claim in the group of claims for which it sought summary judgment on the basis that the evidence did not show infringement. Consequently, the district court’s dismissal of this claim appears to have been inadvertent. Scholastic “agrees that it did not seek dismissal of this claim under any theory agreed with by the District Court,” and thus does not oppose Sohm’s request that this dismissal be reversed. Scholastic’s Br. at 3 n.1. Accordingly, we reverse the district court’s grant of partial summary judgment to Scholastic on Sohm’s claim of copyright infringement corresponding to the image at Row 4 of Exhibit 5 to the First Amended Complaint.