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Photographic Illustrators Corporation v. Orgill, Inc.

United States District Court, D. Massachusetts

April 4, 2019

PHOTOGRAPHIC ILLUSTRATORS CORPORATION, Plaintiff,
v.
ORGILL, INC., Defendant.

          MEMORANDUM AND ORDER

          PATTI B. SARIS CHIEF UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         This copyright dispute involves photographs of lighting products, like light bulbs. Plaintiff Photographic Illustrators Corporation (“PIC”), a Massachusetts company specializing in commercial photography, licensed photographs to Osram Sylvania, Inc. (“OSI”) of lighting products that OSI manufactures and sells. Defendant Orgill, Inc. is a distributor of OSI products and uses some of these images in its online and print marketing materials. PIC brought claims against Orgill under the Copyright Act, the Digital Millennium Copyright Act (“DMCA”), and the Lanham Act based on Orgill's use of its photographs. In 2015, the Court granted summary judgment to Orgill on the DMCA and Lanham Act claims but denied Orgill's request for summary judgment on the copyright infringement claim. See Photographic Illustrators Corp. v. Orgill, Inc., 118 F.Supp.3d 398 (D. Mass. 2015) (PIC). The case was then stayed pending resolution of an arbitration involving PIC, OSI, and other distributors of OSI products. In November 2017, the arbitrator issued an award resolving all of the claims in the arbitration.

         Orgill has now renewed its motion for summary judgment on the copyright infringement claim. Orgill asserts that it received a sublicense that authorized its use of PIC's images and argues that the arbitrator's award precludes PIC from contesting this defense. PIC has also moved for summary judgment, contending that Orgill did not receive a sublicense, its use of approval images falls outside its sublicense, and its sublicense is conditioned on including attribution to PIC on the images, which Orgill did not do.

         After hearing, the Court DENIES PIC's motion for summary judgment (Docket No. 172) and ALLOWS Orgill's motion for summary judgment (Docket No. 167).

         FACTUAL BACKGROUND

         The following facts are undisputed except where otherwise stated. The Court assumes familiarity with the background of the case from the prior summary judgment opinion. See PIC, 118 F.Supp.3d at 400-02.

         I. PIC's Copyright License with OSI

         This case concerns photographic images that Paul Picone, a photographer for PIC, took of OSI's lighting products. PIC provided OSI with these images to use in sales and marketing. To this end, PIC had a licensing agreement with OSI (the “PIC-OSI Agreement”), which gave OSI “a non-exclusive, worldwide license in and to all the Images and the copyrights thereto to freely Use, sub-license Use, and permit Use, in its sole and absolute discretion, in perpetuity, anywhere in the world.” Dkt. No. 173-11 ¶ 9. According to the terms of the PIC-OSI Agreement, “Use” is to be given the “great possible interpretation, ” and includes, but is not limited to, the right to “copy, edit, modify, prepare derivative works, reproduce, transmit, display, broadcast, print, publish, use in connection with any media . . ., and store in a database.” Id. ¶ 2(d). The licensing agreement barred OSI from “sub-licens[ing] images in exchange for valuable consideration such as a fee (e.g., as stock photography)” (the “fee provision”). Id. ¶ 9. It also provided that, “[t]o the extent reasonably possible and practical, OSI shall . . . include a copyright notice indicating PIC as the copyright owner and/or include proper attribution indicating Paul Picone as the photographer for Images Used by OSI” (the “attribution requirement”). Id. ¶ 10(b).

         II. OSI's Copyright Sublicense Agreement with Orgill

          Orgill, a wholesale distributor for OSI, maintains a network of retail dealers who sell hardware, home improvement supplies, and building materials. Orgill's inventory includes almost one thousand OSI products, and Orgill uses images from OSI in its electronic and paper catalogues. It also makes images from OSI available for its dealers to use in advertising OSI products. Orgill has used thirty-four images for which PIC holds the copyright. Before this lawsuit began, Orgill did not have direct contact with PIC.

         On July 23, 2014, after PIC filed this lawsuit, OSI and Orgill executed a Confirmatory Copyright Sublicense Agreement (the “Confirmatory Sublicense”), effective nunc pro tunc as of June 1, 2006. Under the Confirmatory Sublicense, OSI “confirm[ed] that it previously granted permission to Orgill to Use and to sublicense the right to Use the Images to its dealers.” Dkt No. 56-13 ¶ 2, at 5. Its definition of “Use” is materially identical to the definition in the PIC-OSI Agreement. Id. ¶ 1(E), at 5. The Confirmatory Sublicense further states that “Orgill covenants to include (and instruct its sublicensees/dealers to include), to the extent reasonably possible and practical with respect to size, prominence, aesthetics, and Use, a copyright notice indicating PIC as the copyright owner of the Images.” Id. ¶ 3(B), at 6.

         PROCEDURAL HISTORY

         On April 11, 2014, PIC filed suit against Orgill and Farm & City, Inc., one of Orgill's dealers, in connection with their use of PIC's images of OSI products. PIC alleged copyright infringement under 17 U.S.C. § 501 (Count I); mishandling of copyright management information under the DMCA (Count II); and false designation of origin and false advertising under the Lanham Act (Count III). PIC sought permanent injunctive relief against any further infringement, the recall and destruction of all infringing copies of its images, and payment of actual damages, attorney's fees, and costs. PIC did not sue OSI, and the Court denied OSI's motion to intervene.[1]

         Orgill moved for summary judgment on all counts in February 2015. In its memorandum and order issued on July 29, 2015, the Court granted Orgill summary judgment on PIC's DMCA and Lanham Act claims. See PIC, 118 F.Supp.3d at 406-11. With regard to the copyright claim, the Court first held that Orgill received an implied sublicense from OSI to use PIC's images. Id. at 403. Orgill obtained the images from OSI's representatives and external website, and OSI gave Orgill implied permission to use the images to sell its products. Id. OSI also reviewed Orgill's catalogues twice a year and never objected to its use of the images. Id.

         Orgill argued that the Confirmatory Sublicense gave it greater rights to use the images than the PIC-OSI Agreement gave to OSI. The Court determined that the PIC-OSI Agreement “provide[d] the benchmark” for evaluating the lawfulness of Orgill's conduct because OSI could not sublicense rights to Orgill that went beyond the rights it licensed from PIC. Id. at 403-04. The Court then decided that PIC provided sufficient evidence to raise a genuine dispute as to whether Orgill infringed its copyrights. In particular, PIC put forth evidence that Orgill sublicensed the images for a fee to Farm & City and failed to include any attribution on the images before the lawsuit, which violated the fee provision and attribution requirement of the PIC-OSI Agreement. See id. at 404-05. Orgill argued that, even if it did infringe PIC's copyrights, it did not do so knowingly, but the Court found that the references to PIC in the Confirmatory Sublicense gave Orgill sufficient notice that PIC held the copyrights to the images. See id. at 405-06. Accordingly, the Court denied Orgill's motion for summary judgment on the copyright infringement claim. Id. at 406.

         On January 26, 2016, pursuant to the arbitration clause within the PIC-OSI Agreement, OSI commenced an arbitration against PIC. OSI brought claims stemming from PIC's initiation of over thirty copyright lawsuits against OSI's customers, such as this suit against Orgill. PIC asserted counterclaims against OSI in the arbitration, including for copyright infringement for violating the fee provision and attribution requirement in the PIC-OSI Agreement. In October 2016, seven of the customers PIC sued for copyright infringement (but not Orgill) agreed to consolidate their lawsuits into the arbitration. At the request of both PIC and Orgill, the Court stayed this lawsuit in November 2016 pending resolution of the arbitration.

         On November 20, 2017, the arbitrator issued a Partial Final Award that resolved all of the claims in the arbitration. As relevant here, the arbitrator found that the fee provision and attribution requirement were only covenants of the contract, not conditions on OSI's license to use the images. Accordingly, because covenants are only enforceable via contract law, OSI breached the PIC-OSI Agreement by violating the attribution requirement but did not commit copyright infringement. The arbitrator also determined that the PIC-OSI Agreement permitted OSI to impliedly sublicense use of the images to its customers, which it had done for the seven customers that were parties to the arbitration. He therefore found that those customers also were not infringing PIC's copyrights by using its images.

         On February 21, 2018, Orgill filed a renewed motion for summary judgment in this case. Orgill contends that the arbitrator conclusively determined that the attribution requirement is not a condition on its sublicense and thus cannot support a copyright infringement claim. In response, PIC filed its own motion for summary judgment. PIC argues that the Partial Final Award does not preclude its copyright infringement claim against Orgill, which was not a party to the arbitration. PIC also contends that Orgill's sublicense defense fails a matter of law because: 1) Orgill cannot prove that it had an implied sublicense to use the images; 2) the Confirmatory Sublicense made Orgill's sublicense conditional on the attribution requirement even though it was not a condition in the PIC-OSI Agreement; and 3) Orgill's use of approval images exceeded the scope of its sublicense.

         DISCUSSION

         I. Standard of Review

          Summary judgment is appropriate when there is “no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine issue exists where the evidence “is such that a reasonable jury could resolve the point in the favor of the non-moving party.” Rivera-Rivera v. Medina & Medina, Inc., 898 F.3d 77, 87 (1st Cir. 2018) (quoting Cherkaoui v. City of Quincy, 877 F.3d 14, 23-24 (1st Cir. 2017)). A material fact is one with the “potential of changing a case's outcome.” Doe v. Trs. of Bos. Coll., 892 F.3d 67, 79 (1st Cir. 2018). “The court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in [its] favor.” Carlson v. Univ. of New Eng., 899 F.3d 36, 43 (1st Cir. 2018). When the parties cross-move for summary judgment, the court must evaluate each motion “separately, drawing inferences against each movant in turn.” Lawless v. Steward Health Care Sys., LLC, 894 F.3d 9, 21 (1st Cir. 2018) (quoting EEOC v. Steamship Clerks Union, 48 F.3d 594, 603 n.8 (1st Cir. 1995)).

         The burden on a summary judgment motion first falls on the movant to identify “the portions of the pleadings, depositions, answers to interrogatories, admissions, and affidavits, if any, that demonstrate the absence of any genuine issue of material fact.” Irobe v. U.S. Dep't of Agric., 890 F.3d 371, 377 (1st Cir. 2018) (quoting Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010)). If the movant meets this “modest threshold, ” the burden shifts to non-movant to “point to materials of evidentiary quality” to demonstrate that the trier of fact could reasonably resolve the issue in its favor. Id. The court must deny summary judgment if the non-movant “adduces competent evidence demonstrating the existence of a genuine dispute about a material fact.” Theriault v. Genesis HealthCare LLC, 890 F.3d 342, 348 (1st Cir. 2018).

         II. Legal Standard

         A. Issue Preclusion

         Under the doctrine of issue preclusion (or collateral estoppel), a party cannot relitigate factual or legal issues that were adjudicated in an earlier action if “(1) the issues raised in the two actions are the same; (2) the issue was actually litigated in the earlier action; (3) the issue was determined by a valid and binding final judgment; and (4) the determination of the issue was necessary to that judgment.” Manganella v. Evanston Ins. Co., 700 F.3d 585, 591 (1st Cir. 2012). Issue preclusion applies not only to the “ultimate ...


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