Frerck v. Pearson Education, Inc.

Citations: 63 F. Supp. 3d 882; 2014 WL 3906466; 2014 U.S. Dist. LEXIS 111562Docket: No. 11 CV 5319

Court: District Court, N.D. Illinois; August 11, 2014; Federal District Court

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Plaintiff Robert Frerck, a professional photographer, alleges that defendant Pearson Education infringed his copyrights by publishing and distributing his photographs beyond their agreements and used some without permission. Frerck also claims that Pearson Education defrauded him by downplaying its plans for licensing certain photographs to reduce costs. Frerck seeks partial summary judgment on specific infringement claims, while Pearson Education requests partial summary judgment regarding the fraud claims. Both motions are granted.

The legal standard for summary judgment requires the moving party to demonstrate no genuine dispute exists regarding any material fact. A nonmoving party must present more than mere metaphysical doubt about material facts and provide significantly probative evidence to oppose summary judgment. In cases with cross-motions, all facts are construed in favor of the nonmoving party.

Frerck engaged in selling stock photographs for nonexclusive use and had a longstanding business relationship with Pearson Education since 1992. When Pearson wished to publish Frerck's photographs, it sent a written "billing request" detailing the photographs and their intended publications. There is a dispute over whether these requests included the maximum number of copies Pearson intended to publish or merely estimates. Frerck's response to these requests included invoices with limitations on print quantities and geographic distribution. The parties dispute the nature of these invoices: Pearson sees them as acknowledgments of requests and payment requests, while Frerck views them as defining the entirety of the licensing agreement with specific rights. Frerck also contends that Pearson was aware that its demand for the photographs would exceed the requested licenses at the time of the billing requests.

The plaintiff initiated legal action in July 2011 after nearly 20 years of disputes. The Amended Complaint presents two categories of claims: 3,582 copyright infringement claims under 17 U.S.C. § 501, where the plaintiff acknowledges that the defendant held a valid nonexclusive license but alleges infringement due to excessive reproduction and broad distribution, as well as instances of unauthorized publication. The second category consists of 12 common-law fraud claims under Illinois law, asserting that the defendant misrepresented reproduction quantities and distribution areas, leading the plaintiff to charge a lower fee based on those misrepresentations. 

The plaintiff has filed for partial summary judgment on certain copyright claims, asserting no material facts are in dispute, while the defendant contests this, citing four areas of contention: affirmative defenses, statute of limitations, laches, and implied license. Specifically, the defendant argues that the plaintiff's summary judgment motion fails to address all affirmative defenses, referencing two cases that support this position. However, the analysis leans towards the view that defendants should clarify their defenses in their opposition briefs. 

Regarding the statute of limitations, the defendant contends that a dispute exists over whether the plaintiff's claims are time-barred. Under 17 U.S.C. § 507(b), copyright infringement claims must be brought within three years of accrual, which follows the 'discovery rule' in the Seventh Circuit—claims accrue when the plaintiff learns or should have learned of the infringement. Since the plaintiff filed on August 5, 2011, any claims arising before August 5, 2008, are potentially barred.

In July 2008, Julie Orr, the Manager of Image Permissions for the defendant, informed the plaintiff that the defendant had exceeded the print run for several products in the Realidades series. Orr later clarified that there was no overrun on two specific 'Levels' within that series. The plaintiff granted a retroactive license to cover the overrun that did occur. Although the plaintiff did not inquire about potential overruns on other products, Orr indicated she would have disclosed such information had she been asked. The defendant claims this creates a genuine factual dispute regarding whether a reasonable person in the plaintiff's position would have investigated further. However, it was determined that no reasonable jury could conclude the plaintiff should have suspected copyright infringement, as Orr's communications were proactive and clear, indicating no wrongdoing.

Regarding the defense of laches, the defendant argued that the plaintiff's delay in filing suit raised a factual issue. For laches to apply, the defendant must show unreasonable lack of diligence by the plaintiff and resulting prejudice. The court found that the plaintiff did not exhibit such lack of diligence, and the defendant presented no evidence of having changed its position due to the delay, merely stating it "could have" replaced the plaintiff's photographs, which was deemed insufficient.

Finally, the defendant contended that an implied license existed due to the parties' conduct. An implied license, recognized as an affirmative defense to copyright infringement, requires specific conditions to be met. The court found no evidence that the defendant requested the creation of the plaintiff's photographs, leading to the conclusion that the defendant's argument for an implied license was unsubstantiated under existing Seventh Circuit precedent.

Defendant asserts that implied licenses can exist beyond the work-for-hire context established in Shaver, referencing the Ninth Circuit’s ruling in Falcon Enterprises, where an implied license was found based on the parties’ conduct. In Falcon, the court identified key factors: frequent informal interactions, the nature of images provided (second rights), the absence of refusals to grant nonexclusive licenses, and the payment structure for published images. However, the court in this case distinguishes the relationship between the parties, noting that it involved a formal protocol where defendant issued billing requests and received limited licenses through invoices, requiring payment prior to publication. While there were a few exceptions, these did not constitute a consistent course of conduct as in Falcon. The court emphasizes that the mere fact that plaintiff never refused a license does not imply that defendant could use the photographs beyond the granted terms. Additionally, defendant's references to two district court cases that recognized genuine issues regarding implied licenses do not apply here, as there is no evidence of plaintiff ratifying a non-standard licensing approach. In conclusion, even applying a "meeting of the minds" test, the evidence indicates that both parties understood the need to adhere to the defined licensing terms.

Orr testified that it was her standard practice to obtain permission before using images, and that if the defendant exceeded a license limit, it effectively had no permission to use the photograph. Additionally, she stated that the defendant was required to seek additional permissions if print quantities exceeded those licensed. The plaintiff expressed that he trusted the defendant would adhere to these license limits or seek renewals as necessary. The case does not meet the narrow definition of implied license as per the Seventh Circuit, and even under broader interpretations from other courts, the defendant has not shown a genuine factual dispute regarding this defense.

To establish copyright infringement, a plaintiff must prove ownership of a valid copyright and that original elements of the work were copied. If a license is granted, the second element is met by demonstrating that the license was limited and exceeded. The plaintiff provided evidence of creating the photographs and holds copyright to them, while the defendant does not dispute their creation, although it does not acknowledge the validity of the copyright or the existence of a Certificate of Copyright Registration. The plaintiff has satisfied the ownership requirement for the images in question.

The plaintiff utilized business records obtained during discovery to argue that the defendant exceeded the license scope. Reports indicated that the defendant printed and distributed more copies and in more countries than the license permitted. The plaintiff affirmed, under penalty of perjury, that he reviewed the publications and confirmed the inclusion of his photographs. The defendant countered that the plaintiff's evidence was insufficient and labeled his declaration as "conclusory." Furthermore, the defendant noted the absence of six publications related to 25 claims, complicating verification of whether the photographs were published. The defendant also questioned the relevance of the Global Rights Data Warehouse evidence, citing potential last-minute editorial changes that could alter image usage.

Plaintiff asserts his position by providing scans of the disputed publications, including six that were previously missing. He clarifies that he did not share these six publications with the defendant because he either returned them to resellers or accessed them at a public library. The evidence presented by plaintiff establishes that no genuine dispute exists regarding defendant's overreach of the licenses, as the defendant’s records confirm that the publications were produced and distributed beyond the agreed limits. Plaintiff provided a declaration affirming he reviewed each publication and confirmed the inclusion of his photographs. In contrast, the defendant's evidence does not substantiate a genuine dispute of material fact, failing to demonstrate that any of plaintiff’s photographs were removed during editorial changes or through the alleged 'replacement process.' The evidence submitted by the defendant is deemed insufficiently probative. While reasonable inferences favor the defendant, it is unreasonable to conclude from their testimony that plaintiff’s photographs were removed. Consequently, it is determined that the overall record does not support a verdict for the defendant, indicating no genuine issue for trial exists.

For the motion regarding common-law fraud under Illinois law, five elements must be established: a false statement of material fact, knowledge of its falsehood by the defendant, intent to induce reliance by the plaintiff, reliance by the plaintiff on the statement, and resulting damages. The plaintiff claims the defendant fraudulently represented the extent of usage of his photographs to lower license fees. The details of the misrepresentations, including who made them and their content, are documented in exhibits within the plaintiff’s Amended Complaint, specifically in billing requests and invoices from the defendant. The only identified individuals responsible for the alleged misrepresentations are the defendant’s image permission coordinators.

Plaintiff aims to establish that 'Pearson' had knowledge or acted with reckless indifference regarding the printing of more copies than were requested, supported by internal forecasts indicating prior sales exceeded current requests. The plaintiff asserts that false representations were made by the image permission coordinators, but has only deposed one, Julie Orr, without addressing her alleged misrepresentation. Moreover, there is no evidence detailing the coordinators' daily responsibilities or linking any specific higher-up to a coordinator's misrepresentation. Consequently, the plaintiff relies on the theory of collective corporate intent to substantiate fraud claims, which is disputed by the parties who reference Seventh Circuit cases concerning pleading standards under the Private Securities Litigation Reform Act, although the plaintiff's claims arise under Illinois common law. The court notes that Illinois law requires an individual assessment of an agent's conduct within their employment scope, as established in Wilson v. Edward Hospital. The plaintiff has not demonstrated a genuine dispute of material fact regarding fraud, lacking evidence to connect the coordinators' actions to any wrongful intent. While some company members believed more copies would be printed than requested, there is no direct or circumstantial evidence linking specific individuals to specific requests. Thus, no reasonable jury could find fraud was committed by 'Pearson.' The court grants the plaintiff's motion for partial summary judgment on specific claims while denying the defendant's motion. The plaintiff sought liability judgment for 439 copyright infringement claims but only identified 347 in the relevant exhibit, and has withdrawn claims from lines 80, 96, 166, and 347, leading to a total of 343 claims. The court also addresses the nature of defendant’s defenses, differentiating between affirmative defenses and argumentative denials. Finally, the court disagrees with the defendant’s stance on the application of the discovery rule regarding copyright claims.

The Supreme Court in Petrella did not address the 'discovery rule' adopted by nine Courts of Appeals, which commences the statute of limitations when a plaintiff discovers or should have discovered the injury. As a result, the author will adhere to Seventh Circuit precedent and apply the discovery rule. None of the Realidades claims are relevant to the plaintiff's summary judgment motion. The defendant's argument is inadequate because it fails to provide sufficient evidence to determine which of the plaintiff's 343 claims may be barred by the statute of limitations. Specifically, the defendant has not identified the date of the first publication or distribution of the allegedly infringing works. The statute of limitations is an affirmative defense, placing the burden of proof on the defendant to establish essential elements of their case. One publication, Realidades Levels A, B, 2, involves a retroactive license granted by the plaintiff to the defendant. This situation contrasts with the case of Pacific Stock, Inc. v. Pearson Education, Inc., where questions about the actual use of images precluded summary judgment. In Pacific Stock, no party had reviewed the textbooks to confirm the inclusion of the images, leading the court to deny the plaintiff's motion for summary judgment due to a lack of sufficient evidence. Other decisions mentioned do not have binding or persuasive authority in this case.