Photo finish: allegedly unauthorized (c) sublicensing isn’t false designation of origin

Photographic Illustrators Corp. v. Orgill, Inc., 2015 WL 4572296, No. 14-11818 (D. Mass. July 29, 2015)
PIC specializes in commercial photography.  It took photos of lighting fixtures manufactured by nonparty OSI.  Defendants Orgill and Farm & City Supply distribute OSI products.  PIC sued them for copyright infringement; violation of the DMCA’s CMI provision, §1202, and false designation of origin/false advertising.  Here the court kicks out everything but some copyright infringement claims.
PIC licensed OSI to use photos of OSI products, with a non-exclusive, worldwide license to use, sublicense, and permit use, except that OSI couldn’t sublicense images “in exchange for valuable consideration such as a fee (e.g., as stock photography).” The licensing agreement also provided: “To 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.”
Orgill is a wholesale distributor for OSI, and used product images from “e-mail, Dropbox, OSI’s external website, or OSI’s internal web server.” Whether Orgill knew about PIC’s license to OSI was disputed.  OSI conducted twice-yearly reviews of its product images for five years and never challenged the way OSI images appeared.  After PIC sued, OSI and Orgill executed a confirmatory copyright sublicense agreement, effective nunc pro tunc as of June 1, 2006.  The sublicensing agreement also included a provision obligating Orgill 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.”  It further covenanted not to remove any copyright notice before distributing images.
Farm & City Supply is one of Orgill’s dealers: Orgill uses an ecommerce platform that creates an online store, which dealers then brand and publish with their own names.  To do so, dealers pay a flat $750 setup fee and a monthly fee. Dealers can get pictures from the platform, including the PIC images, but it’s disputed whether these fees cover those pictures.  Orgill also has a product information library on an FTP server, from which dealers may download product images and other data after receiving a secure login.  There’s no additional fee for using the server. Farm & City got the images at issue both from the FTP server and the ecommerce platform.
For a time, Farm & City placed a watermark reading “farmandcitysupply” across the images appearing on its eBay storefront.
Defendants bore their burden of showing that OSI impliedly licensed Orgill’s use of the images, given their longstanding business practices and OSI’s repeated twice-yearly review of Orgill’s catalogues.  The remaining question was whether Orgill’s use of the challenged images exceeded the scope of that license, because OSI couldn’t give Orgill more rights than OSI itself had.  The PIC-OSI license barred sublicensing in exchange for valuable consideration, and required attribution “[t]o the extent reasonably possible and practical.” 
Disputed questions about the fee and attribution precluded summary judgment on infringement. As to the fee, the fact that Orgill provided free FTP access “does not diminish the fact that those images were available in another forum only following an initial payment.” Orgill argued that the fee it charged didn’t depend on how many images customers downloaded, or whether they downloaded images at all, but the fact that Farm & City paid the fee to get a bundle that included the images precluded summary judgment.  (I’m not entirely clear what legal standard the factfinder is supposed to use to resolve the dispute.)
As for attribution, defendants argued that it would not have been “reasonably possible and practical” to include attribution on the images, because Orgill typically “crop[s]” product images “for tighter fit.”  The court wasn’t impressed.  Since the lawsuit, Orgill includes some attribution on OSI images in the form of a “sidenote or footnote for images appearing on websites and in catalogs.” “While it may not be practical for the defendants to include PIC’s full-sized copyright notice, PIC need not demonstrate as much to defeat a motion for summary judgment.” It was enough to show that there was no attribution, but that defendants “have apparently been able to include at least some attribution since learning of PIC’s copyright interest in the images.”  There were also factual issues about whether Orgill knew of PIC’s existence and its copyright interest in the images before the lawsuit, which also precluded Orgill’s innocent infringement defense. [I assume further proceedings will address whether this breach of the license actually results in infringement, or just breach.]
On innocent infringement, Orgill submitted evidence that it had never heard of PIC until the onset of this lawsuit and that, at all relevant times, it believed its use of the images was licensed.  But Orgill’s testimony contradicted the terms of the sublicensing agreement, which purportedly codified the terms of a pre-existing agreement between Orgill and OSI, and which included a covenant to include “a copyright notice indicating PIC as the copyright owner of the Images.” [Comment: Yikes!  The confirmatory sublicense leaves Orgill worse off than it was with just an implied license!]  “Orgill cannot have its lightbulb and eat it, too – either it always knew that PIC existed and that there were certain limitations on its use of the images, or else Orgill did not then, and does not now, know of any such limitations.”  [Well, presumably it knows now.  I understand that the confirmatory sublicense was poorly drafted, but let’s get real—isn’t the most likely scenario that Orgill didn’t know that PIC existed, but believed that OSI had the right to allow it to use the OSI images, whatever their ultimate source?]
Farm & City, however, prevailed on its innocent infringement defense, limiting its potential liability for statutory damages:
Farm & City submitted undisputed evidence that it did not know PIC existed until this lawsuit was filed, that it obtained all of the images at issue from Orgill free of copyright markings, and that Orgill never advised it of any limitations on its use of the images. Moreover, since Farm & City was not party to the sublicensing agreement between OSI and Orgill, there is no indication whatsoever that it might have been aware of its duty to attribute the images to PIC.
PIC also alleged violation of §1202’s prohibition on the provision of false CMI. Farm & City allegedly violated 1202(a) by adding a watermark reading “farmandcitysupply” to some images for use in its eBay storefront. Further, PIC claimed that both defendants removed or altered PIC’s CMI in violation of § 1202(b) before distributing the images.
Farm & City prevailed as a matter of law.  “Farm & City prevails as a matter of law on this issue. To be liable for adding false CMI under § 1202(a), a defendant must intend to ‘induce, enable, facilitate, or conceal infringement.’”  Undisputed testimony explained that the watermark “allows whoever is buying the product to know that they’re buying it from Farm & City Supply,” thus helping to “differentiate yourself from other sellers” and “increase your sales and make money.”  PIC argued that this amounted to a claim of authorship of the photos, but even if so, “Farm & City did not intend to “induce, enable, facilitate, or conceal infringement,” since it did not know of PIC’s existence until this lawsuit was filed and was unaware that it had any attribution obligations.”
Nor did PIC submit evidence to support its claim of CMI removal.  There was no evidence that either defendant ever received images withCMI; rather, the record indicated the contrary.  PIC said that its photographer put PIC attribution with every image he gave to OSI, thus justifying the inference that the defendants removed the CMI. “Given the existence of a third party that has not been deposed and is otherwise absent from the case, it would be too speculative to infer that Orgill removed CMI,” and even more so with Farm & City.
PIC also alleged that Farm & City violated §43(a) by putting the “farmandcitysupply” watermark on the images, constituting false designation of origin and false advertising.
False designation of origin: No.  Dastar.  (I hope the court awards fees.  But it might not, because there are a few cases out there that egregiously misread Dastarand allow similar claims to proceed past a motion to dismiss, even though the pixels/bytes produced by Farm & City were not the pixels/bytes/images produced by PIC, which would be required for true reverse passing off under DastarDastar directs our attention to the entity that produced the copy at issue (here Farm & City, at least with the assistance of eBay), and not to the entity that produced the initial creative work subsequently multiplied in copies.)  PIC argued that, by adding the watermark without otherwise changing the images, Farm & City engaged in mere repackaging of the images and thus in reverse passing off.  The court, despite its jarring willingness to entertain PIC’s argument, ultimately disagreed.  Dastar says that “origin of goods” refers to “the producer of the tangible goods that are offered for sale.” Nothing in Dastar “suggests that the Lanham Act provides a cause of action even where the misrepresentation in question did not concern the source of a tangible good for sale to the public.” 
The tangible good for sale here is OSI’s lightbulbs.  As Dastarheld, “[t]he consumer who buys a branded product does not automatically assume that the brand-name company is the same entity that came up with the idea for the product, or designed the product – and typically does not care whether it is. The words of the Lanham Act should not be stretched to cover matters that are typically of no consequence to consumers.”  Similarly, customers on eBay want to buy lightbulbs, and aren’t interested in the author of the product images. “There is no record evidence that any consumer believed that Farm & City’s watermark indicated ownership of the photographs that depicted the lightbulbs.”
False advertising: the court also joined the consensus that plaintiffs can’t save a Dastar-barred §43(a)(1)(A) merely by repleading the same facts under §43(a)(1)(B).   Authorship does not constitute part of the “nature, characteristics, or qualities” of a good for sale.
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