Copyright Infringement
License
Creative Commons License
Contract Drafting
California Law Applies Here to the Construction
of the License
Third-Party Liability for Infringement?
A licensee’s hiring of a third-party copy
service to reproduce licensed material strictly for the licensee’s own
permitted use does not turn that third party into a licensee that is bound to
the License terms.
Independent repair company that copied protected
work on behalf of its customers-licensees was not liable for copyright
infringement.
However, the License itself could provide a
basis to distinguish between permitted copies made by a licensee’s own
employees (e.g., school teachers or staff) versus those made by a third-party
contractor. Here it is not so.
The panel affirmed the district court’s dismissal
for failure to state a claim of a copyright infringement brought by Great
Minds, publisher of math curriculum Eureka Math.
The panel held that defendant Office Depot,
Inc., did not become a licensee of a Creative Commons license, and become bound
by its terms, or otherwise infringe Great Minds’ copyright by making copies of
Eureka Math materials for a profit on behalf of school and school district
licensees. There was no dispute that the school and school districts licensees’
copying of Great Minds’ material was permitted under the license. There also
was no dispute that, if Office Depot were itself a licensee, commercial copying
of Great Minds’ material would fall outside the scope of the license and
infringe Great Minds’ copyright. The panel held that, under California law, the
school and school district licensees’ exercise of their rights under the
license through the services provided by Office Depot did not result in Office
Depot becoming a licensee. The panel further held that the district court did
not abuse its discretion in denying leave to amend the complaint.
Great Minds is an education-based non-profit
organization. It created and copyrighted a math curriculum called “Eureka Math”
for grades PreK-12, which it publishes and sells commercially in print form
nationwide. It also releases digital files of Eureka Math online for free
download to any member of the public under a limited public copyright license
template produced by Creative Commons. Under the License, “every recipient of
[Eureka Math] automatically receives an offer from [Great Minds] to exercise
the Licensed Rights.” License § 2(a)(5)(A).
(Creative Commons is a non-profit organization
that offers free copyright license templates to be used to share and protect
creative and academic works. See What We Do, CREATIVE COMMONS, (Nov. 17, 2019,
3:23 PM), https://creativecommons.org/about/. The License at issue here is
available online at https://creativecommons.org/licenses/by-nc-
sa/4.0/legalcode).
The License grants “the individual or entity
exercising the Licensed Rights” a “worldwide, royalty-free, non- sublicensable,
non-exclusive, irrevocable license to . . . reproduce and Share [Eureka Math],
in whole or in part, for NonCommercial purposes only . . . .” License §§ 1(n),
2(a)(1). The License defines “Share” to mean, in pertinent part, “to provide
material to the public by any means or process that requires permission under
the Licensed Rights, such as reproduction, public display, public performance,
distribution, dissemination, communication, or importation, . . .” License §
1(l). “NonCommercial” means, in pertinent part, “not primarily intended for or
directed towards commercial advantage or monetary compensation.” License §
1(k).
But § 2(b)(3) of the License reserves Great Minds’
right to collect royalties for commercial uses of Eureka Math (…).
To the extent possible, the Licensor waives any right to collect
royalties from [the licensee] for the exercise of [these NonCommercial]
Licensed Rights, whether directly or through a collecting society under any
voluntary or waivable statutory or compulsory licensing scheme. In all other
cases the Licensor expressly reserves any right to collect such royalties,
including when [Eureka Math] is used other than for NonCommercial purposes. Office Depot provides copy services on request and behalf of public schools and school districts. It charges a fee for those services, and at times it makes copies of Eureka Math materials for the schools’ use. It does not sell those copies to the public in Office Depot stores. Great Minds claims, and Office Depot does not dispute, that Office Depot employs field representatives to advertise its copying services to schools and school districts that use Eureka Math.
When Great Minds discovered that Office Depot was reproducing Eureka Math on behalf of the schools, the parties entered into a separate licensing agreement, whereby Great Minds permitted Office Depot to make the copies in exchange for royalty payments. After the Eastern District of New York ruling in Great Minds v. FedEx Office and Print Servs., Inc., No. 16-CV-1462 (DRH)(ARL), 2017 WL 744574, at *4 (E.D.N.Y. Feb. 24, 2017), aff’d, 886 F.3d 91 (2d Cir. 2018), which held that the License could not “be read to preclude a licensee from hiring someone to make copies of [Eureka Math] so the licensee can use them for a ‘noncommercial’ purpose,” Office Depot terminated the royalty agreement.
As a result, on October 11, 2017, Great Minds filed suit against Office Depot in district court, alleging claims of copyright infringement, 17 U.S.C. §§ 101 et seq., and breach of contract. Great Minds does not dispute that the school districts’ own use and distribution of Eureka Math materials is “NonCommercial” and permitted by the License. Rather, it alleges that Office Depot was “deliberately and willfully infringing [Great Minds’ copyrights] by actively soliciting customers for commercial reproduction of Eureka Math,” and “by reproducing and distributing Eureka Math for profit without Great Minds’ authorization.” Great Minds asserts that the “NonCommercial” restriction in the License requires commercial print shops like Office Depot to “negotiate a license and pay a royalty to Great Minds if they wish to use or reproduce Eureka Math for commercial purposes—i.e., for their own profit.”
On December 6, 2017, Office Depot filed a motion to dismiss the copyright infringement claim, which the district court granted without leave to amend. Great Minds v. Office Depot, Inc., No. CV 17-7435-JFW (EX), 2018 WL 4945643, at *4–5 (C.D. Cal. Jan. 18, 2018). The court found that the License did not prohibit the school districts from employing third parties like Office Depot to make copies of the Eureka Math curriculum on their behalf. Id. This appeal followed.
A valid claim for copyright infringement requires (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.
The claim fails if the challenged use of the work falls within the scope of a valid license.
A copyright license “must be construed in accordance with the purposes underlying federal copyright law.” (citing Cohen v. Paramount Pictures Corp., 845 F.2d 851, 854 (9th Cir. 1988)). Federal courts “rely on state law to provide the canons of contractual construction, but only to the extent such rules do not interfere with federal copyright law or policy.” Id. (citing Fantastic Fakes, Inc. v. Pickwick Int’l, Inc., 661 F.2d 479, 482–83 (5th Cir. 1981)).
Here, the parties agree that California law applies to the construction of the License. Great Minds, 2018 WL 4945643, at *4 n.7. “Under California law, the interpretation of contract language is a question of law.” Atel Fin. Corp. v. Quaker Coal Co., 321 F.3d 924, 925–26 (9th Cir. 2003). “The terms of a contract must be construed in a manner that takes into account the context of the language and is consistent with the contract as a whole.” Actuate Corp. v. Int’l Bus. Machs. Corp., No. C-09-05892 JCS, 2010 WL 1340519, at *5 (N.D. Cal. Apr. 5, 2010); Cal. Civ. Code § 1641.
There is no dispute that the school and school district licensees’ copying of Great Minds’ material is permitted under the License. There also seems to be no dispute that if Office Depot were itself a licensee, commercial copying of Great Minds’ material would fall outside the scope of the License and infringe Great Minds’ copyright. The issue we consider then is whether the school and school district licensees’ exercise of their rights under the License through the services provided by Office Depot results in Office Depot becoming a licensee. We hold that it does not. A licensee’s hiring of a third-party copy service to reproduce licensed material strictly for the licensee’s own permitted use does not turn that third party into a licensee that is bound to the License terms. See Great Minds v. FedEx Office and Print Servs., Inc., 886 F.3d 91, 96 (2d Cir. 2018) (“Great Minds’ licensees may rely on non-employee agents in carrying out permitted uses without converting those agents into independent licensees.”); Automation by Design, Inc. v. Raybestos Prods. Co., 463 F.3d 749, 761 (7th Cir. 2006) (affirming summary judgment for both licensee and third party); Storage Tech. Corp. v. Custom Hardware Eng’g & Consulting, Inc., 421 F.3d 1307, 1315 (Fed. Cir. 2005) (independent repair company that copied protected work on behalf of its customers-licensees was not liable for copyright infringement); Hogan Sys., Inc. v. Cybersource Int’l, Inc., 158 F.3d 319, 324 (5th Cir. 1998) (third-party contractor was “sheltered under” the licensee’s rights); Marconi Wireless Tel. Co. of Am. v. Simon, 227 F. 906, 910 (S.D.N.Y. 1915), aff’d, 231 F. 1021 (2d Cir. 1916), reversed on other grounds, 246 U.S. 46 (1918) (third-party contractor was “not an infringer because he [was] supplying lawful goods to a lawful licensee”). See also Raymond T. Nimmer & Jeff C. Todd, 1 Modern Licensing Law § 6:28 (2018) (similarly describing the consensus in courts).
Under Great Minds’ reading of the License, third party contractors like Office Depot are “downstream recipients” of Eureka Math as contemplated in § 2(a)(5)(A) of the License, meaning they “automatically receive an offer from Great Minds to exercise the Licensed Rights,” they accept that offer the moment the copy store employee presses “copy” on a machine, and they become bound to the terms of the License. Office Depot is not a downstream recipient. That Office Depot employed field representatives to advertise the availability of copying services for schools and school districts that use Eureka Math does not confer a licensee status on Office Depot. Its activities remain within the ambit of the schools and school districts’ license.
Great Minds’ interpretation cannot be correct. The License itself provides no basis to distinguish between permitted copies of Eureka Math made by a licensee’s own employees (e.g., school teachers or staff) versus those made by a third-party contractor (e.g., Office Depot employees). We decline to read such a distinction into the License.
Under the License, a non-commercial licensee may hire a third-party contractor, including those working for commercial gain, to help implement the License at the direction of the licensee and in furtherance of the licensee’s own licensed rights. The License extends to all employees of the schools and school districts and shelters Office Depot’s commercial copying of Eureka Math on their behalf. Holding differently would prevent proper non-commercial licensees from using relatively common means of reproduction to share, engage with, and exercise their rights to the licensed work in a way that would contravene the intent of the License and undermine its utility. We conclude that the licensees’ contract with Office Depot to exercise the licensees’ rights under the License does not impose an independent liability on Office Depot. As a result, Great Minds has failed to state a plausible claim to relief on its copyright infringement claim.
Secondary authority: Raymond T. Nimmer &
Jeff C. Todd, Modern Licensing Law § 6:28 (2018).
(U.S. Court of Appeals for the Ninth Circuit,
December 27, 2019, Great Minds, v. Office Depot, Inc., Docket No. 18-55331, For
Publication)
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