IP Law Daily Procter & Gamble, Walmart must face photographer’s copyright claims over product packaging
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Thursday, January 21, 2021

Procter & Gamble, Walmart must face photographer’s copyright claims over product packaging

By Thomas Long, J.D.

A jury could find that the defendants exceeded the scope of license agreements via their use of the photographer’s images, and that they were subject to actual damages and disgorgement of profits.

A photographer who accused Procter & Gamble Co. and Walmart Inc. of displaying and distributing 12 of her photos on packaging and advertisements without consent, approval, or license can go forward with direct copyright infringement claims against the companies, the federal district court in Cincinnati has decided. Factual issues precluded summary judgment as to whether the photographer contractually assigned all of her rights in the photos to a nonparty design firm, which in turn transferred the rights to Procter & Gamble. P&G also could be contributorily liable for direct infringement by retailers, including Walmart. The photographer could seek disgorgement of the defendants’ profits related to their infringing acts, as well as actual damages, but she could only receive damages sustained during the three-year period before filing suit (Navarro v. Procter & Gamble Co., January 19, 2021, Cole, D.).

2007 Master Services Agreement. In 2007, P&G and product package design firm Libby Perszyk Kathman Holdings, Inc. (LPK; a non-party to this suit) entered into a Master Services Agreement ("the 2007 MSA") governing all of the design work that LPK did for P&G. The companies had a relationship dating back to the 1950s. The 2007 MSA described the type of design services that LPK would provide to P&G and specifically addressed intellectual property rights, with LPK warranting that P&G’s use LPK’s services would not infringe any copyrights. The MSA also provided that P&G would own all copyrights in work provided by LPK, on a "work made for hire" basis.

LPK’s relationship with Navarro. LPK retained plaintiff Annette Navarro for a non-P&G-related project in September 2007; Navarro photographed LPK’s employees for LPK’s internal use. Navarro signed a Supplier Agreement, which, among other things, provided that Navarro was assigning to LPK "in perpetuity throughout the world" all intellectual property rights in any creative work she did for LPK. It also gave LPK the right to transfer those IP rights to its "clients," who were not specially named in the agreement.

Rebranding projects. In late-2009 to early-2010, P&G commissioned LPK to update the product packaging for several products in P&G’s Olay line, and LPK engaged Navarro to take photos for the project. Ultimately, packaging redesigns for several different P&G product lines were produced that used 12 of Navarro’s photos. After LPG paid Navarro and transferred the packaging designs to P&G, P&G began using the designs for packaging, advertising, coupons, and online promotion.

Usage rights dispute. A dispute over usage rights for Navarro’s photos broke out almost immediately, relating to international usage and additional fees owed to Navarro. P&G allegedly failed to provide full payment to LPK and Navarro for its use of the images abroad.

Infringement allegations. In June 2015, Navarro contacted P&G regarding its use of the photographs and product packaging. According to Navarro, P&G continued using the photos long after the transfer of rights to them had expired. After a dispute arose between Navarro and P&G over the amount owed for the usages, P&G paid the models in the pictures, but not Navarro. In October 2015, Navarro began registering her copyrights in the images, eventually obtaining certificates of registration for all 12. In June 2017, Navarro filed suit against P&G for copyright infringement, and later added Walmart as a defendant. Navarro’s lawsuit sought actual damages and a disgorgement of the defendants’ profits relating to the infringement.

Both P&G and Walmart disputed Navarro’s allegations as to liability and damages. P&G specifically defended against Navarro’s copyright claims by asserting that it held a worldwide license in perpetuity as a result of the 2007 Supplier Agreement, which it said transferred Navarro’s rights to LPK, and the 2007 MSA, which in turn transferred those same rights from LPK to P&G.

Summary judgment motions. The parties cross-moved for summary judgment. P&G and Walmart argued that neither was liable for copyright infringement because Navarro had no standing to sue them after assigning her rights under the 2007 Supplier Agreement. They also contended that LPK and Navarro were joint authors in the final package designs, and that LPK thus was lawfully entitled to license P&G to use the joint work. P&G also contended that indirect infringement claims against it should fail because it did not have the right to supervise retailers’ sales or advertising and did not contribute to any direct infringement by those retailers. P&G and Walmart also sought summary judgment on various aspects of damages, either in whole or in part.

Navarro sought summary judgment on only some of her claims regarding the packaging of certain products, alleging that P&G and Walmart exceeded temporal, geographic, and usage restrictions Navarro placed on those images in a variety of combinations. Her arguments hinged on her claim that she did not assign all of her rights in all of her photographs to LPK in perpetuity for unlimited use, but instead that usage restrictions set forth in her invoices controlled, and that P&G exceeded those limits.

Transfer of rights. There was an issue of material fact as to whether Navarro assigned all her rights to LPK in the 2007 Supplier Agreement, according to the court. Paragraph five of the Supplier Agreement stated that Navarro agreed to "transfer and assign to LPK in perpetuity throughout the world all intellectual property rights and all other rights that Supplier [Navarro and Navarro LLC], its employees and agents may ever have in the Creations." The word "Creations" was defined to mean "[a]ll creative ideas, designs, illustrations, developments, inventions originated or developed by [Navarro and Navarro LLC], its employees and agents for LPK." The parties disagreed as to whether that included the photos that Navarro took for P&G’s various Olay products. Navarro’s argument that photographs were excluded from "Creations" by the agreement’s definition of that term. In the court’s view, although the definition did not include "photographs," the agreement did not explicitly state that the list of media was exhaustive, and Navarro had been engaged only to provide photographs.

Applying Ohio law, the court held that the parol evidence rule did not bar Navarro (or any other party) from introducing extrinsic evidence as to the parties’ intended meaning of the term because P&G was a "stranger" to the contract. The court rejected P&G’s attempts to invoke the parol evidence rule under agency, third-party beneficiary, and privity theories. Navarro submitted evidence—such as emails and testimony of an LPK employee—suggesting that, when she signed the Supplier Agreement, she did not intend for the agreement to assign her rights to LPK, or to cover any photographs besides the ones for LPK’s internal photoshoot. She also asserted that the parties’ post-Supplier Agreement conduct indicated that the agreement was not a complete assignment of her rights, arguing that her invoices for photos taken for the Olay line were themselves limited licenses, which would not be needed if the Supplier Agreement operated as a complete assignment. However, the court noted, other extrinsic evidence pointed in the opposite direction, suggesting that LPK did not understand the invoices to be licenses, but merely a means for it to make payments required under the Supplier Agreement. Accordingly, the court denied summary judgment as to the argument that Navarro assigned all her rights to LPK in the 2007 Supplier Agreement.

Joint authorship. There also was a factual issue as to whether Navarro and LPK intended to be joint authors of the packaging materials. According to the court, something more than the intention that each party’s work be merged into a unitary whole was necessary to show the requisite intent to be joint authors—that is, joint owners of the works. The court explained that they "must each have an intent to have shared ownership or shared interest in the outcome of their collaborative efforts." P&G and Walmart did not meet their burden in showing that, based on the evidence in the record, a reasonable jury would have to find that joint ownership was intended. A reasonably factfinder could determine that Navarro contributed her photos pursuant to a specific license under which she was selling particular usage rights. Moreover, said the court, LPK’s testimony was "ambivalent at best" as to whether LPK even considered its contribution to count as "authorship," let alone that it intended to be a "joint author" with Navarro. Therefore, summary judgment on this issue was denied.

The court also determined that because there was a factual issue as to whether LPK owned a copyright interest, either by assignment or as a joint author, it would be premature to grant summary judgment on Navarro’s direct infringement claim against Walmart.

Indirect infringement. The court denied summary judgment on Navarro’s contributory infringement claim, but it granted summary judgment to P&G on Navarro’s vicarious liability claim. Navarro asserted that P&G was liable for infringing activities undertaken by retailers (including Walmart and unnamed third parties) who sold P&G products that included her images on the product packaging. First, the court decided that there was an issue of material fact as to whether P&G intentionally contributed to the allegedly infringing activities by third-party retailers. At issue was the "intent" requirement. In the court’s view, Navarro’s allegation that P&G received notice of the alleged infringement as early as 2015 and yet continued to sell product to several retailers, including Walmart, could support a finding that P&G had the requisite state of mind to be contributorily liable. Conversely, though, a jury also could conclude that P&G justifiably believed that LPK had acquired all of Navarro’s rights through the Master Services Agreement. Undisputed facts showed, however, that P&G did not have sufficient control over the retailers to give rise to vicarious liability, the court held.

Actual damages—time limitations. Turning to the parties’ contentions on damages, the court held that under the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, Inc. (2014), Navarro’s actual damages were limited to the three years prior to the date that she filed suit. While Petrella did not explicitly abrogate the discovery rule (and the Court expressly stated in a later case that it had not decided the issue), the Court arguably adopted a three-year lookback period for damages in copyright infringement cases. "[I]t would appear that Petrella functionally overrules the discovery rule, even if the Petrella Court in footnote four declines to do so explicitly," the district court said. In addition, many other lower courts had limited damages to those occurring within the three years prior to suit, even though they stopped short of holding that Petrella established an occurrence rule for the accrual of a copyright cause of action. Therefore, the court granted the defendants summary judgment as to any damages that occurred prior to that date.

Profits disgorgement. The court next decided that the defendants did not show that Navarro’s request for profits-based damages failed for lack of a "reasonable relationship" between the photographs and the defendants’ revenues. According to the defendants, Navarro had "not introduced any non-speculative evidence of a causal relationship between Defendants’ alleged infringing uses of Navarro’s photographs and the profits earned from sales of the products at issue." The court disagreed, pointing out that Sixth Circuit precedent held that a copyright owner need only show that the gross revenue number was relevant to the infringing activity. "Under this relatively lax standard," the court said, "Navarro has produced enough evidence here to show that Defendants’ gross revenues, at least as to some of the products at issue …, are ‘reasonably related’ to the photographs at issue." According to the court, the physical presence of Navarro’s photographs on the product packaging at issue was itself enough to support a "reasonable relationship" between the photographs and the sales of the products. The court denied the defendants’ summary judgment on the general question of whether Navarro may seek disgorgement of profits as a remedy.

However, the court held that the defendants were entitled to summary judgment as to some, but not all, of Navarro’s profits claims. The defendants asked for summary judgment regarding the sale of (1) "additional products" (which did not feature Navarro’s photographs on the packaging, and were only advertised in a circular alongside images of packages that did feature her photos); (2) P&G’s ProX and Regenerist products; (3) products sold during the alleged license periods; and (4) products sold as a result of "legacy assisted sales." The court agreed that there was no reasonable relationship between the defendants’ revenues from "additional products" and the alleged infringement. The court also agreed that undisputed evidence showed that there was an implied license for use of the photographs, subject to certain restrictions, for in-store use. However, the court said that it lacked sufficient evidence to determine whether the retail stores’ endcaps complied with those restrictions, and thus denied summary judgment as to the second category. "As for the other two categories, Navarro has offered enough evidence to allow her to present her claims to a jury," the court said.

Affirmative defenses. Navarro sought summary judgment on 28 affirmative defenses raised by P&G, 19 of which overlapped with Walmart’s defenses. In their response, however, the defendants meaningfully disputed summary judgment as to only six defenses, namely (1) joint authorship; (2) statute of limitations; (3) extraterritoriality; (4) implied license; (5) failure to mitigate damages; and (6) assignment. They therefore waived the other defenses, the court held. With respect to the "failure to mitigate" defense, the court deemed that Navarro had waived her argument by raising it only in a cursory manner and failing to develop it. The court also held that the extraterritoriality defense did not fail as a matter of law because it was unclear whether domestic acts of infringement were "directly linked" to infringements abroad, which otherwise would not be subject to the reach of the Copyright Act. The court ruled that the defendants failed to raise a factual issue as to whether Navarro granted them an implied license and therefore granted her summary judgment on that defense. Next, the court determined that there was an issue of material fact as to whether Navarro and LPK intended to be joint authors with respect to the product packaging, but that, as a matter of law, they were not joint authors of the photographs themselves. Finally, the court held that Navarro was entitled to summary judgment on the statute of limitations defense because no fact in the record supported a finding that she delayed suing for more than three years after becoming aware of the alleged infringement of her images. According to the court, Navarro’s claims were viable as long as she discovered the acts of infringement on which she was suing within three years of the date that she filed suit, and the facts showed that she filed suit well within that time frame with respect to P&G. Navarro also complied with the statute of limitations as to any act of Walmart’s infringement that she first discovered within three years prior to the date on which she filed suit.

This case is No. 1:17-cv-00406-DRC.

Attorneys: John Charles Greiner (Graydon Head & Ritchey LLP) for Annette Navarro and Navarro Photography, LLC. Brian Scott Sullivan (Dinsmore & Shohl LLP) and Benjamin C. Mizer (Jones Day) for Procter & Gamble Co. and Walmart Inc.

Companies: Navarro Photography, LLC; Procter & Gamble Co.; Walmart Inc.

MainStory: TopStory Copyright OhioNews GCNNews

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