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 with
CMI; 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 Dastar
and 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 Dastar
held, “[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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