By Thomas Long, J.D.
Stock photo agency DRK Photo lacked standing to sue textbook publisher McGraw-Hill for infringing copyrights by exceeding the scope of license restrictions pertaining to certain photographs or failing to obtain permission to use the photos, the U.S. Court of Appeals in San Francisco has held. DRK, a nonexclusive licensing agent for the photographs at issue, failed to demonstrate any adequate ownership interest in the copyrights to confer standing. DRK lacked standing as a legal owner because its representation agreements with the photographers did not grant the plaintiff an exclusive license to authorize use of the photographs. In addition, DRK’s assignment agreements with the photographers did not confer standing because they merely transferred the right to sue on accrued claims. Finally, DRK lacked standing as a beneficial owner of the copyrights. A decision of the federal district court in Phoenix was affirmed (DRK Photo v. McGraw-Hill Global Education Holdings, LLC, September 12, 2017, Hawkins, M.).
DRK executed agreements with photographers under which the photographers granted DRK the right to include certain of the photographers’ works in DRK’s collection of stock photos. DRK then offered to license those images to publishers, such as McGraw-Hill. With respect to the photos at issue in this case, DRK entered into Representation Agreements pursuant to which DRK would serve at the photographers’ nonexclusive agent with respect to the sale or leasing of the photos. In 2008, DRK initiated a program to register copyrights for the photos in its collection. DRK asked photographers to sign a form agreement ("Assignment Agreement") granting DRK the right to assert copyright infringement claims for those photos.
In May 2012, DRK sued McGraw-Hill, asserting claims for copyright infringement premised on allegations that McGraw-Hill exceeded the scope of its licenses with DRK by printing and distributing more textbooks containing licensed images than authorized. McGraw-Hill contended that neither of the agreements conferred standing to sue upon DRK, with regard to 978 of 1,120 asserted infringing uses of approximately 636 photos taken by photographers for whom DRK was acting as a nonexclusive agent. The district court granted McGraw-Hill’s motion for summary judgment, and DRK appealed to the Ninth Circuit.
Standing to sue. Section 501(b) of the Copyright Act stated, "The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the [registration] requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it." DRK contended that it had standing either as a legal owner or as a beneficial owner of the copyrights.
Legal ownership. Neither the Representation Agreements nor the Assignment Agreements supported DRK’s claim of legal ownership, the court determined. The Representation Agreements lacked any language stating that DRK, and only DRK, would have the power to authorize third parties to reproduce, distribute, and display the photos; therefore, they did not constitute exclusive agreements that could confer standing to DRK. In the absence of any limitation on the photographers’ right to contract with other licensing agents, they constituted nonexclusive licenses and did not render DRK a legal owner for purposes of standing.
The Assignment Agreements were nothing more than invalid attempts to transfer the bare right to sue, according to the court. The purported transfer of legal title coupled with the transfer of accrued claims did not confer standing when the transaction, in substance and effect, merely transferred a bare right to sue. The alleged acts of infringement occurred prior to the execution of the Assignment Agreements, and DRK conceded that following the execution of the Assignment Agreements, photographers who were parties to nonexclusive Representation Agreements could continue to market and sell the covered photographs themselves and through other means under the terms of the Representation Agreements. The photographers did not pay royalties or fees of any kind to DRK following execution of the Assignment Agreements. This course of dealing demonstrated that each party retained the rights it had under the nonexclusive Representation Agreements, the court said. That is, the photographers kept the exclusive rights to the photos, and DRK retained a nonexclusive license to authorize their use.
Beneficial ownership. The Copyright Act did not define the term "beneficial owner." In the court’s view, it was not necessary in this case to explore the full extent of who may qualify as a beneficial owner of copyright because DRK supported its arguments solely by pointing to the Representation Agreements and the Assignment Agreements. However, the court said, under those agreements DRK was a nonexclusive licensing agent and an assignee of accrued causes of action. To hold that DRK was a beneficial owner simply on the very bases that it could not be deemed the legal owner would effectively negate the court’s prior holdings and make portions of Section 501(b) superfluous. Therefore, the court held that DRK failed to demonstrate that it was a beneficial owner.
The case is No. 15-15106.
Attorneys: Maurice Harmon (Harmon & Seidman LLC) for DRK Photo. Christopher Perry Beall (Levine Sullivan Koch & Schulz, LLP) for McGraw-Hill Global Education Holdings, LLC and McGraw-Hill School Education Holdings, LLC.
Companies: McGraw-Hill Global Education Holdings, LLC; DRK Photo; McGraw-Hill School Education Holdings, LLC
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