Court Opinion

ID: 4468056
Source: CourtListenerOpinion
Date Created: 2019-12-27 18:00:34.222648+00
Date Added: 2024-06-11T15:03:36.116848
License: Public Domain

FOR PUBLICATION

    UNITED STATES COURT OF APPEALS
         FOR THE NINTH CIRCUIT

 GREAT MINDS, a non-profit                       No. 18-55331
 organization,
            Plaintiff-Appellant,                  D.C. No.
                                            2:17-cv-07435-JFW-E
                  v.

 OFFICE DEPOT, INC., a                             OPINION
 Delaware corporation,
          Defendant-Appellee.

         Appeal from the United States District Court
            for the Central District of California
          John F. Walter, District Judge, Presiding

           Argued and Submitted November 8, 2019
                    Pasadena, California

                     Filed December 27, 2019

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

                       Opinion by Judge Farris

    *
      The Honorable Virginia M. Kendall, United States District Judge for
the Northern District of Illinois, sitting by designation.
2                GREAT MINDS V. OFFICE DEPOT

                            SUMMARY**

                              Copyright

    The panel affirmed the district court’s dismissal for
failure to state a claim of a copyright infringement brought
by Great Minds, publisher of math curriculum Eureka Math.

    The panel held that defendant Office Depot, Inc., did not
become a licensee of a Creative Commons license, and
become bound by its terms, or otherwise infringe Great
Minds’ copyright by making copies of Eureka Math materials
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 Minds’ material was permitted
under the license. There also was no dispute that, if Office
Depot were itself a licensee, commercial copying of Great
Minds’ material would fall 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 Depot did not result in Office Depot
becoming a licensee. The panel further held that the district
court did not abuse its discretion in denying leave to amend
the complaint.

    **
       This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
             GREAT MINDS V. OFFICE DEPOT                  3

                       COUNSEL

Christopher J. Sprigman (argued), Simpson Thatcher &
Bartlett LLP, New York, New York; Jeffrey E. Ostrow,
Simpson Thatcher & Bartlett LLP, Palo Alto, California;
Rhett O. Millsaps, II, Law Office of Rhett O. Millsaps II,
New York, New York; for Plaintiff-Appellant.

Jennifer A. Golinveaux (argued), Winston & Strawn LLP,
San Francisco, California; Diana Hughes Leiden, Winston &
Strawn LLP, Los Angeles, California; for Defendant-
Appellee.

Andrew M. Gass (argued) and Elizabeth H. Yandell, Latham
& Watkins LLP, San Francisco, California; Diane M. Peters,
Creative Commons Corp., Mountain View, California; for
Amicus Curiae Creative Commons Corporation.

                         OPINION

FARRIS, Circuit Judge:

    Plaintiff-Appellant Great Minds, publisher of math
curriculum Eureka Math, appeals from the January 18, 2018
dismissal under Fed. R. Civ. P. 12(b)(6) of its copyright
infringement claim against Office Depot, Inc. in the United
States District Court for the Central District of California
(Walter, J.). We AFFIRM. Office Depot did not itself
become a licensee of the “Creative Commons Attribution-
NonCommercial-ShareAlike 4.0 International Public
License” (and become bound by its terms) or otherwise
infringe Great Minds’ copyright by making copies of Eureka
4               GREAT MINDS V. OFFICE DEPOT

Math materials for a profit on behalf of school and school
district licensees.

                         BACKGROUND

    Great Minds is an education-based non-profit
organization. It created and copyrighted a math curriculum
called “Eureka Math” for grades PreK-12, which it publishes
and sells commercially in print form nationwide. It also
releases digital files of Eureka Math online for free download
to any member of the public under a limited public copyright
license template produced by Creative Commons.1 Under the
License, “[e]very recipient of [Eureka Math] automatically
receives an offer from [Great Minds] to exercise the Licensed
Rights.” License § 2(a)(5)(A).

     The License grants “the individual or entity exercising
the Licensed Rights” a “worldwide, royalty-free, non-
sublicensable, non-exclusive, irrevocable license to . . .
reproduce and Share [Eureka Math], in whole or in part, for
NonCommercial purposes only . . . .” License §§ 1(n),
2(a)(1). The License defines “Share” to mean, in pertinent
part, “to provide material to the public by any means or
process that requires permission under the Licensed Rights,
such as reproduction, public display, public performance,
distribution, dissemination, communication, or importation,
. . .” License § 1(l). “NonCommercial” means, in pertinent

    1
       Creative Commons is a non-profit organization that offers free
copyright license templates to be used to share and protect creative and
academic works. See What We Do, CREATIVE COMMONS, (Nov. 17, 2019,
3:23 PM), https://creativecommons.org/about/. The License at issue
here is available online at https://creativecommons.org/licenses/by-nc-
sa/4.0/legalcode.
              GREAT MINDS V. OFFICE DEPOT                     5

part, “not primarily intended for or directed towards
commercial advantage or monetary 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
        licensee] for the exercise of [these
        NonCommercial] Licensed Rights, whether
        directly or through a collecting society under
        any voluntary or waivable statutory or
        compulsory licensing scheme. In all other
        cases the Licensor expressly reserves any
        right to collect such royalties, including when
        [Eureka Math] is used other than for
        NonCommercial purposes.

If any individual or entity exercising the licensed rights
“fail[s] to comply with [the License], [their] rights under [the
License] terminate automatically.” License § 6(a). Great
Minds claims that this applies equally to every individual or
entity that possesses Eureka Math materials, including all
“downstream recipients.”

    Office Depot provides copy services on request and
behalf of public schools and school districts. It charges a fee
for those services, and at times it makes copies of Eureka
Math materials for the schools’ use. It does not sell those
copies to the public in Office Depot stores. Great Minds
claims, and Office Depot does not dispute, that Office Depot
employs field representatives to advertise its copying services
to schools and school districts that use Eureka Math. In 2015,
6               GREAT MINDS V. OFFICE DEPOT

when Great Minds discovered that Office Depot was
reproducing Eureka Math on behalf of the schools, the parties
entered into a separate licensing agreement, whereby Great
Minds permitted Office Depot to make the copies in
exchange for royalty payments. After the Eastern District of
New York ruling in Great Minds v. FedEx Office and Print
Servs., Inc., No. 16-CV-1462 (DRH)(ARL), 2017 WL
744574, at *4 (E.D.N.Y. Feb. 24, 2017), aff’d, 886 F.3d 91
(2d Cir. 2018), which held that the License could not “be read
to preclude a licensee from hiring someone to make copies of
[Eureka Math] so the licensee can use them for a
‘noncommercial’ purpose,” Office Depot terminated the
royalty agreement.2

     As a result, on October 11, 2017, Great Minds filed suit
against Office Depot in district court, alleging claims of
copyright infringement, 17 U.S.C. §§ 101 et seq., and breach
of contract. Great Minds does not dispute that the school
districts’ own use and distribution of Eureka Math materials
is “NonCommercial” and permitted by the License. Rather,
it alleges that Office Depot was “deliberately and willfully
infringing [Great Minds’ copyrights] by actively soliciting
customers for commercial reproduction of Eureka Math,” and
“by reproducing and distributing Eureka Math for profit
without Great Minds’ authorization.” Great Minds asserts that
the “NonCommercial” restriction in the License requires
commercial print shops like Office Depot to “negotiate a

    2
      The FedEx decision resulted from a separate suit, with virtually
identical facts, filed by Great Minds against a different copy services
company. See FedEx, 2017 WL 744574, at *1–2. In March 2018, the
Second Circuit affirmed the E.D.N.Y. dismissal on agency principles.
Great Minds v. FedEx Office and Print Servs., Inc., 886 F.3d 91, 95–96
(2d Cir. 2018).
               GREAT MINDS V. OFFICE DEPOT                      7

license and pay a royalty to Great Minds if they wish to use
or reproduce Eureka Math for commercial purposes—i.e., for
their own profit.”

    On December 6, 2017, Office Depot filed a motion to
dismiss the copyright infringement claim, which the district
court granted without leave to amend. Great Minds v. Office
Depot, Inc., No. CV 17-7435-JFW (EX), 2018 WL 4945643,
at *4–5 (C.D. Cal. Jan. 18, 2018). The court found that the
License did not prohibit the school districts from employing
third parties like Office Depot to make copies of the Eureka
Math curriculum on their behalf. Id. This appeal followed.

                        DISCUSSION

    I. MOTION TO DISMISS

    We review the district court’s Rule 12(b)(6) dismissal de
novo. UMG Recordings, Inc. v. Shelter Capital Partners LLC,
718 F.3d 1006, 1014 (9th Cir. 2013). To survive a motion to
dismiss, “a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on
its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). If the Court finds that the plaintiff did not allege
sufficient facts “to raise a right to relief above the speculative
level” and support a cognizable legal theory, it may dismiss
the complaint as a matter of law. Twombly, 550 U.S. at 555.
At this stage, the Court must take all well-pleaded allegations
of material fact as true and construe them in the light most
favorable to the non-moving party. Malibu Textiles, Inc. v.
Label Lane Int’l, Inc., 922 F.3d 946, 951 (9th Cir. 2019).
8             GREAT MINDS V. OFFICE DEPOT

    A valid claim for copyright infringement requires
“(1) ownership of a valid copyright, and (2) copying of
constituent elements of the work that are original.” Feist
Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361
(1991) (citing Harper & Row Publishers, Inc. v. Nation
Enters., 471 U.S. 539, 548 (1985)). The claim fails if the
challenged use of the work falls within the scope of a valid
license. See S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081,
1087–88 (9th Cir. 1989). A copyright license “must be
construed in accordance with the purposes underlying federal
copyright law.” Id. at 1088 (citing Cohen 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 copyright law or policy.” Id. (citing Fantastic
Fakes, Inc. v. Pickwick Int’l, Inc., 661 F.2d 479, 482–83 (5th
Cir. 1981)).

    Here, the parties agree that 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 Fin. Corp. v. Quaker
Coal Co., 321 F.3d 924, 925–26 (9th Cir. 2003). “[T]he terms
of a contract must be construed in a manner that takes into
account the context of the language and is consistent with the
contract as a whole.” Actuate Corp. v. Int’l Bus. Machs.
Corp., No. C-09-05892 JCS, 2010 WL 1340519, at *5 (N.D.
Cal. Apr. 5, 2010) (citations omitted); Cal. Civ. Code § 1641.

    There is no dispute that the school and school district
licensees’ copying of Great Minds’ material is permitted
under the License. There also seems to be no dispute that if
Office Depot were itself a licensee, commercial copying of
Great Minds’ material would fall outside the scope of the
                 GREAT MINDS V. OFFICE DEPOT                              9

License and infringe Great Minds’ copyright. The issue we
consider then is whether the school and school district
licensees’ exercise of their rights under the License through
the services provided by Office Depot results in Office Depot
becoming a licensee. We hold that it does not. A licensee’s
hiring of a third-party copy service to reproduce licensed
material strictly for the licensee’s own permitted use does not
turn that third party into a licensee that is bound to the
License terms. See Great Minds v. FedEx Office and Print
Servs., Inc., 886 F.3d 91, 96 (2d Cir. 2018) (“Great Minds’
licensees may rely on non-employee agents in carrying out
permitted uses without converting those agents into
independent licensees.”); Automation by Design, Inc. v.
Raybestos Prods. Co., 463 F.3d 749, 761 (7th Cir. 2006)
(affirming summary judgment for both licensee and third
party); Storage Tech. Corp. v. Custom Hardware Eng’g &
Consulting, Inc., 421 F.3d 1307, 1315 (Fed. Cir. 2005)
(independent repair company that copied protected work on
behalf of its customers-licensees was not liable for copyright
infringement); Hogan Sys., Inc. v. Cybersource Int’l, Inc.,
158 F.3d 319, 324 (5th Cir. 1998) (third-party contractor was
“sheltered under” the licensee’s rights); Marconi Wireless
Tel. Co. of Am. v. Simon, 227 F. 906, 910 (S.D.N.Y. 1915),
aff’d, 231 F. 1021 (2d Cir. 1916), reversed on other grounds,
246 U.S. 46 (1918) (third-party contractor was “not an
infringer because he [was] supplying lawful goods to a lawful
licensee”). See also Raymond T. Nimmer & Jeff C. Todd,
1 Modern Licensing Law § 6:28 (2018) (similarly describing
the consensus in courts).3

    3
      Even though Great Minds did not bring a suit against the licensees,
we also note that decisions that have addressed whether the licensee
violates the terms of the license by hiring third parties to exercise the
licensed rights are instructive. Those cases held, and we agree, that hiring
10               GREAT MINDS V. OFFICE DEPOT

    Under Great Minds’ reading of the License, third party
contractors like Office Depot are “downstream recipients” of
Eureka Math as contemplated in § 2(a)(5)(A) of the License,
meaning they “automatically receive[] an offer from [Great
Minds] to exercise the Licensed Rights,” they accept that
offer the moment the copy store employee presses “copy” on
a machine, and they become bound to the terms of the
License. Office Depot is not a downstream recipient. That
Office Depot employed field representatives to advertise the
availability of copying services for schools and school
districts that use Eureka Math does not confer a licensee
status on Office Depot. Its activities remain within the ambit
of the schools and school districts’ license.

     Great Minds also contends that the “volitional” element,
i.e., which entity’s employee does the copying, is
determinative in this case.4 But that argument produces the

a third party to exercise the licensee’s rights does not convert that third
party into an independent licensee. See, e.g., Estate of Hevia v. Portrio
Corp., 602 F.3d 34, 44–45 (1st Cir. 2010) (“When . . . there is no
indication that a license-granting copyright owner has restricted the
licensee’s ability to use third parties in implementing the license, the
license is generally construed to allow such delegation.”); Automation by
Design, 463 F.3d at 757–58 (licensee’s decision to hire a third party “to
manufacture parts for it” did not violate the license); Intel Corp. v.
Advanced Micro Devices, Inc., No. C-90-20237-WAI, 1994 WL 594041,
at *2–3 (N.D. Cal. Oct. 20, 1994).
     4
       The Second Circuit effectively dismissed this “volition” argument
on appeal in FedEx as irrelevant. See 886 F.3d at 97 (“The relevant
question here, . . . is not whether [the third party] engaged in volitional
conduct when it photocopied the Materials at the school districts’ request,
but whether the License permits school districts to request those copies at
all. We conclude that it does, . . .”). We agree. Great Minds’ citation of
volition cases is not instructive. Those cases held that a party may be
liable for copyright infringement only if the infringing activity was
                 GREAT MINDS V. OFFICE DEPOT                          11

following absurd results: (1) a teacher may copy Eureka Math
on an Office Depot-owned copy machine for a fee in-store,
but cannot hand the materials to an Office Depot employee to
be copied; (2) a school may pay a copy machine provider a
monthly fee to keep a machine on site to copy Eureka Math,
but cannot pay Office Depot employees to make the same
copies; and (3) a school may permit teachers to copy Eureka
Math on school-owned or leased machines, but cannot pay a
high school student to make the same copies.

   Great Minds’ interpretation cannot be correct. The
License itself provides no basis to distinguish between
permitted copies of Eureka Math made by a licensee’s own
employees (e.g., school teachers or staff) versus those made
by a third-party contractor (e.g., Office Depot employees).
We decline to read such a distinction into the License.

    Under the License, a non-commercial licensee may hire
a third-party contractor, including those working for
commercial gain, to help implement the License at the
direction of the licensee and in furtherance of the licensee’s
own licensed rights. The License extends to all employees of
the schools and school districts and shelters Office Depot’s
commercial copying of Eureka Math on their behalf. Holding
differently would prevent proper non-commercial licensees
from using relatively common means of reproduction to
share, engage with, and exercise their rights to the licensed

volitional conduct. They do not say the converse—as Great Minds
suggests—that with volition, a defendant is liable for copyright
infringement. See, e.g., Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657,
666 (9th Cir. 2017); Cartoon Network LP, LLLP v. CSC Holdings, Inc.,
536 F.3d 121, 131 (2d Cir. 2008); Religious Tech. Center v. Netcom On-
Line Commc’n Serv., Inc., 907 F. Supp. 1361, 1370 (N.D. Cal. 1995).
12             GREAT MINDS V. OFFICE DEPOT

work in a way that would contravene the intent of the License
and undermine its utility. We conclude that the licensees’
contract with Office Depot to exercise the licensees’ rights
under the License does not impose an independent liability on
Office Depot. As a result, Great Minds has failed to state a
plausible claim to relief on its copyright infringement claim.

     II. LEAVE TO AMEND

    We review a district court’s denial of leave to amend for
abuse of discretion. Design Data Corp. v. Unigate Enters.,
Inc., 847 F.3d 1169, 1172 (9th Cir. 2017). Dismissal without
leave to amend is proper if it is clear that “allegation of other
facts consistent with the challenged pleading could not
possibly cure the deficiency.” Montz v. Pilgrim Films &
Television, Inc., 649 F.3d 975, 984 n.3 (9th Cir. 2011)
(internal quotations omitted). The district court denied leave
to amend because its interpretation of the License was a
question of law and “permitting Great Minds to amend would
be an exercise in futility.” Great Minds, 2018 WL 4945643,
at *5 n.8 (citing Rutman Wine Co. v. E. & J. Gallo Winery,
829 F.2d 729, 738 (9th Cir. 1987)). We agree.

     Great Minds argues that the district 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 Entm’t, Inc., 843 F.2d
394, 398 (9th Cir. 1988) (citing Brobeck, Phleger & Harrison
v. Telex Corp., 602 F.2d 866, 871 (9th Cir. 1979), cert.
denied, 444 U.S. 981 (1979)). But Great Minds alleged no
such extrinsic evidence in its complaint. On appeal, it now
offers three new pieces of evidence: a survey published by
Creative Commons and two third-party websites. None of
that evidence is relevant to the ultimate issue on appeal:
              GREAT MINDS V. OFFICE DEPOT                  13

whether Office Depot’s commercial reproduction of Eureka
Math on behalf and at the direction of proper non-commercial
licensees converted Office Depot into a licensee. The district
court did not abuse its discretion in denying leave to amend.

   AFFIRMED.