IP Law Daily Appeals court revives sports photographers’ infringement suit against AP and the NFL
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Thursday, September 13, 2018

Appeals court revives sports photographers’ infringement suit against AP and the NFL

By Cheryl Beise, J.D.

The federal district court in Manhattan erred in dismissing copyright infringement claims brought by a group of professional sports photographers against the National Football League (NFL) and its teams, the Associated Press (AP), and Replay Photos, LLC (Replay), the U.S. Court of Appeals in New York City has ruled. The photographers—who had granted licenses for certain uses of their event photos to AP, as the NFL’s exclusive licensing agency—plausibly alleged that AP exceeded the scope of the licenses by granting sublicenses for use of the plaintiffs’ photos to the NFL and Replay, the operator of AP’s NFL Photo Store. The plaintiffs also alleged sufficient facts to support their claims against AP for fraud and breach of the implied covenant of good faith and fair dealing. However, the district court properly dismissed the plaintiffs’ antitrust, breach of fiduciary duty, and unconscionability claims (Spinelli v. NFL Ventures, L.P., September 11, 2018, Lynch, G.).

Beginning in 2003, the NFL began to outsource the licensing of its pooled intellectual property to outside agencies. From 2007 to 2009, Getty Images (US), Inc., served as the NFL’s exclusive licensing agent. From March 2009 to present, AP has served as the NFL’s exclusive licensing agent pursuant to consecutive agreements. The 2009 AP-NFL agreement granted the NFL a broad "complimentary license" for "AP-Owned Photos" of NFL events. The 2012 AP-NFL agreement expanded the complimentary license provision to cover photographs owned by non-AP contributing photographers ("AP-Contributor Photos").

The plaintiffs consisted of seven professional photographers who covered events for the NFL and its teams. The plaintiffs individually entered into "contributor agreements" first with Getty Images and later with AP in order to access NFL events and obtain licenses to the NFL’s intellectual property contained in their photographs. Under the contributor agreements, the plaintiffs retained the copyrights in their photographs, but AP obtained a broad license to use and include the photos in its AP Images stock photo database in exchange for royalty payments for certain uses. In 2009, AP told the photographers that its license agreement with the NFL did not include a complimentary license to use the plaintiffs’ photos and thus the NFL was required to pay for separate use licenses. However, contrary to AP’s representations, the NFL made widespread use of the plaintiffs’ photographs—such as publishing them in NFL promotional and editorial materials, displaying them on NFL websites, and licensing and selling them through online photo stores—without paying for a separate license. AP also entered an agreement with Replay to operate AP’s "NFL Photo Store" and fulfill customer orders for the plaintiffs’ photographs—again without compensating the plaintiffs. The plaintiffs also alleged that AP later pressured then to accept amendments to the contributor agreements to grant complimentary licenses to the NFL. The plaintiffs refused.

In 2013, the plaintiffs filed suit against the NFL, AP, Getty Images, and Replay. In March 2015, the district court dismissed the plaintiffs’ claims against the NFL, AP, and Replay for failure to state a claim and ordered the claims against Getty to proceed to arbitration. In July 2016, the court dismissed a second amended complaint filed by the plaintiffs, which included claims for direct, vicarious, and contributory copyright infringement, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, unconscionability, fraud, and violation of Sections 1 and 3 the Sherman Act. The district court concluded that most of the plaintiffs’ claims were barred by the broad licenses the defendants had granted to AP. The plaintiffs appealed.

Copyright infringement claims. The district court dismissed the plaintiffs’ claims for copyright infringement against AP because AP acted within its rights under the broad contributor agreements. The court also found that NFL’s failure to pay royalties under its valid license agreement with AP did not amount to copyright infringement.

On appeal, the defendants conceded that the NFL and Replay used the plaintiffs’ photographs in ways that, absent a valid license, would be infringing. Thus, the plaintiffs’ infringement claims centered on the validity of the defendants’ license defenses. The plaintiffs argued that the district court erred in dismissing their copyright claims because: (1) The NFL never obtained a license for use of the plaintiffs’ photographs during the 2009–2012 period and AP was barred from granting the NFL a "retroactive" use license; (2) AP had no authority under the 2012 contributor agreements to grant complimentary licenses to the NFL for use of the plaintiffs’ photos for the 2012–2015 period; and (3) certain other uses of the plaintiffs’ images were not authorized by the licenses given to AP. The Second Circuit largely agreed with the plaintiffs.

NFL’s uses during the 2009–2012 period. The defendants argued that the 2012 AP-NFL agreement effected a retroactive license for the NFL’s use of the plaintiffs’ images for the 2009-2012 period. However, in Davis v. Blige, 505 F.3d 90, 103 (2d Cir. 2007), the Second Circuit held that a co-owner’s retroactive license or assignment to another party was invalid because it "would—if given legal effect—erase the unauthorized use from history with the result that [the other] co-owner’s right to sue for infringement, which accrues when the infringement first occurs, is extinguished." The facts of this case were analogous to Davis, according to the court. Before execution of the 2012 AP-NFL agreement, the plaintiffs clearly had the right to sue the NFL for copyright infringement for unauthorized uses of their photos and AP could not extinguish that right retroactively.

Alternatively, the defendants contended that AP impliedly licensed the NFL’s 2009–2012 uses through its conduct. This argument fell short because the defendants failed to raise it before the district court. However, even if they had timely asserted an implied license theory, it would have failed as a basis for dismissing the plaintiffs’ claims at the pleading stage. The plaintiffs’ allegations plausibly supported an inference that before the 2012 AP-NFL agreement was signed, AP had not granted the NFL a complimentary license to the plaintiffs’ works, and the NFL knew it. "In effect, the complaint plausibly alleges that Defendants’ claim of an implied license is simply a post-hoc rationalization meant to excuse the NFL’s infringing uses," the court said. The dismissal of the plaintiffs’ infringement claims against the NFL and AP insofar as they concerned the NFL’s uses during the 2009–2012 period was vacated.

NFL’s uses during the 2012-2015 period. The 2012 AP-NFL agreement expressly authorized the NFL to use contributor photographs without paying royalties. The plaintiffs nevertheless contended that the complimentary license was invalid because AP was not permitted to grant such a license under the terms of the contributor agreements.

The appeals court found that the district court erred in resolving this issue in favor of the defendants on a motion to dismiss because the plaintiffs sufficiently alleged that the terms of the contract were ambiguous. For example, the "qualifying Event Photo Sales" provision could be plausibly interpreted as imposing a royalty obligation on AP and limiting the ways in which AP could sublicense the plaintiffs’ photographs to third parties. In addition, extrinsic evidence could be introduced to resolve any ambiguity in the contributor contracts. The extrinsic evidence put forth by the plaintiffs, including statements by AP, added further credence to their interpretation. Finally, the court observed that the defendants’ interpretation would permit AP to license all of the plaintiffs’ photographs to anyone, not just the NFL, and avoid paying royalties to the plaintiffs, so long as the third party compensated AP on something other than a per-image basis. "This seems manifestly at odds with what the parties intended," the court said.

Finally, the court noted that because the plaintiffs claimed that AP acted outside the scope of its license, they properly alleged copyright infringement, not breach of contract, against AP. Similarly, if the sublicense AP issued to the NFL was invalid, the plaintiffs alleged viable copyright infringement claims against the NFL. Accordingly, the district’s dismissal of the infringement claims relating to the NFL’s 2012–2015 uses was vacated.

NFL’s uses after March 2015. The plaintiffs argued that the NFL had no license to use the plaintiffs’ photographs after March 31, 2015, when the 2012 AP-NFL agreement expired by its own terms. The court agreed that the plaintiffs could pursue infringement claims in connection with these uses for the same reason that its claims against the NFL’s 2012-2015 uses were allowed to proceed.

Replay’s uses. The plaintiffs maintained that the district court erred in dismissing their infringement claims relating to online photo sales by Replay. According to the plaintiffs, AP asked them to agree to license those sales at a reduced royalty rate, and when the plaintiffs declined, Replay nevertheless sold the plaintiffs’ works without permission. The defendants responded that AP’s license was "broad enough to include Replay’s use of Plaintiffs’ photos." AP’s argument failed not only because the plaintiffs plausibly alleged that AP had no authority to grant complimentary licenses in the first place, but also because the agreement purportedly containing the "sublicense by AP" did not, in fact, allow for Replay’s complimentary use of the plaintiffs’ photographs. Under the plain language of the agreement, AP granted Replay a license for two types of photographs: those owned by AP and those owned by an NFL team. Because AP did not own the copyrights in the plaintiffs’ photographs, Replay’s license defense failed. The district court’s dismissal of the plaintiffs’ infringement claims against Replay was vacated.

For its part, the NFL alternatively argued that was not secondarily liable for Replay’s infringement because the complaint asserted no secondary liability claims against the NFL and it did not allege that the NFL was involved in the operation of the NFL Photo Store. The appeals court, however, declined to affirm dismissal of the secondary liability claim relating to Replay "on the formalistic ground" that the NFL asserted.

Uses on NFL website. The appeals court found that the plaintiffs failed to allege sufficient facts to support their claim that the NFL was liable for secondary infringement for "encouraging and facilitating unlicensed copying and distribution of Plaintiffs’ photos by visitors to [NFL] websites." The plaintiffs did not identify any instances in which users of NFL websites violated the plaintiffs’ copyrights. Without any allegation of direct infringement, there was nothing for which to hold the NFL secondarily liable, the court said. Dismissal of the plaintiffs’ claims relating to uses on the NFL websites was affirmed.

Removal of CMI. The plaintiffs similarly failed to allege facts to support their claim that the NFL was liable for the removal of copyright management information (CMI). The complaint did not identify any instance in which CMI was removed, nor did it even specify what CMI was at issue or how it was altered or removed, the court noted. These claims were dismissed.

Contract and tort claims. The plaintiffs next asserted that the district court erred in dismissing a series of claims that would be viable alternatives should it later be determined that the terms of the contributor agreements do not prohibit AP from granting complimentary licenses. The appeals court agreed that the plaintiffs stated claims for fraud and breach of the implied covenant of good faith and fair dealing, but concurred in the district court’s dismissal of the plaintiffs’ claims for breach of fiduciary duty and unconscionability.

The breach of fiduciary duty claim failed because the plaintiffs did not allege the requisite fiduciary relationship. The unconscionability claim failed for the reason cited by the district court. The district court initially found that the contributor agreements were unconscionable and voidable, but later concluded that the plaintiffs has ratified the agreements by continuing to perform under them and accepting benefits. The plaintiffs’ assertion of "financial pressure or unequal bargaining power" did not constitute duress excusing their failure to rescind the contributor agreements.

The court, however, found that the complaint plausibly alleged that AP deprived the plaintiffs of "the fruits of" the contributor agreements and the complaint adequately asserted that the agreements, if not expressly, at least implicitly prohibited AP from licensing or selling the plaintiffs’ photographs in a way that benefitted AP but not the plaintiffs. Regarding fraud, the court explained that should it ultimately be determined that neither the express nor the implied terms of the contributor agreements prohibited AP’s conduct, a separate claim for fraud could still lie, given the plaintiffs’ allegations regarding AP’s representations.

Antitrust claims. The appeals court affirmed dismissal of the plaintiffs’ Sherman Act claims. The plaintiffs alleged that the NFL and its teams, by pooling and collectively licensing their intellectual property, formed a horizontal conspiracy, which they operated in conjunction with AP as their exclusive licensing agent, in order to "control the commercial market for professional football-related stock photography." Because the NFL’s decision to jointly license its intellectual property was not per se illegal, the plaintiffs’ claims were subject to a rule of reason analysis, which required them to demonstrate that the challenged agreement was unreasonable and anticompetitive. The district court properly found that the photographers failed to allege an anticompetitive effect in the relevant market. The photographers offered no data or facts to support their conclusory allegation that prices paid by consumers of commercial licenses of NFL event photographs had increased due to reduced output of stock photography for NFL events.

This case is No. 17-0673.

Attorneys: Kevin P. McCulloch and Nathaniel Kleinman (The McCulloch Law Firm PPLC) and William P. Ferranti (The Ferranti Firm LLC) for plaintiffs-appellants. Andrew L. Deutsch and Tammy Y. Duvdevani (DLA Piper LLP) and Jura C. Zibas (Wilson Elser Moskowitz Edelman & Dicker LLP) for Associated Press and Replay Photos, LLC. Jeffrey A. Mishkin and Anthony J. Dreyer (Skadden, Arps, Slate, Meagher & Flom LLP) for National Football League, NFL Ventures, L.P., Buffalo Bills, Inc. and Arizona Cardinals Holdings, Inc.

Companies: National Football League; NFL Ventures, L.P.; Associated Press

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