In a February 21, 2014 ruling, Judge Katherine Polk Failla denied in part and granted in part the parties’ cross motions for summary judgment. Plaintiff John Wiley & Sons, Inc. started a declaratory judgment action against DRK Photo for a declaration that Wiley had not infringed DRK’s copyrights in certain stock photographs that DRK had previously licensed to Wiley as the representative for the photographers that originally took the photographs. DRK then counterclaimed for copyright infringement. After the completion of discovery, the parties cross-moved for summary judgment.A threshold issue for DRK’s motion was its standing to assert copyright infringement claims. Judge Failla wrote that under 17 U.S.C. § 501(b), only legal or beneficial owners of a copyright have standing to sue, and that “the Second Circuit enforces Section 501(b) by holding that ‘[t]he Copyright Act authorizes only two types of claimants to sue for copyright infringement: [i] owners of copyrights, and [ii] persons who have been granted exclusive licenses by owners of copyrights.’” After analyzing the Representation Agreements under which DRK acquired the right to license the photographs at issue to Wiley, the Court concluded that the “record provides uncontroverted proof that the Representation Agreements are nonexclusive licenses.” Judge Failla premised her conclusion in part on the fact that “DRK admitted that the Representation Agreements are nonexclusive licenses.” Judge Failla also rejected DRK’s argument that was a beneficial owner of the copyrights at issue because it was entitled to one-half of the licensing revenue, noting that “the cases on which DRK relies in support do not prove otherwise.”
In a related argument, DRK contended that certain assignments to it of the copyrights nevertheless conferred standing. The assignments as issue were essentially made for the sole purpose of allowing DRK to file infringement actions, and required reassignment of the copyrights to the original photographers upon completion of the copyright registration process. The Court accepted Wiley’s argument that the assignments were a “sham,” and noted that the Second Circuit rejected the exact same argument DRK advances in” Eden Toys, Inc. v. Florelee Undergarment Co., Inc., 697 F.2d 27 (2d Cir. 1982). Reasoning that the assignments granted DRK merely the “bare right to sue” for copyright infringement and did not actually confer ownership, Judge Failla rejected the assignments as a basis for DRK’s standing.
The Court further wrote that an “additional basis for denying DRK’s partial summary judgment motion [as to a majority of the infringement claims] is that” those claims “are barred by the [three-year] statute of limitations.” In reaching that conclusion Judge Failla had to decide whether to apply the “injury rule” under which a copyright infringement claim accrues at the time of infringement, i.e., the time of injury, or the “discovery rule” under which “‘a claim for copyright infringement does not accrue until the aggrieved party knows or has reason to know of the injury that forms the basis of the claim.’” Although neither the Supreme Court nor the Second Circuit has addressed the issue, Judge Failla noted that a “‘majority of courts’ in this District now apply the injury rule to infringement claims.” The Court analyzed the existing case law, adopted the majority view of applying the injury rule, and dismissed most of DRK’s infringement claims on the additional ground of being time-barred.
With regard to DRK’s three remaining infringement claims that were not dismissed, Judge Failla granted summary judgment of infringement. The Court noted that it “‘is black-letter law that a claim for copyright infringement lies when a party’s use of copyrighted material exceeds the scope of its license.’” and found that “Wiley has failed to raise any issue of material fact as to whether it exceeded the scope of its license for” these three claims.
Judge Failla used much of the same reasoning in disposing of Wiley’s cross-motion for summary judgment. In particular, the Court ruled that her decision that DRK lacked standing to pursue many of its infringement claims mooted Wiley’s declaratory judgment action of non-infringement, requiring dismissal of those claims.
