Federal District Court Opinions

CATALOGUE CREATIVES, INCORPORATED v. PACIFIC SPIRIT CORPORATION, (Or. 2005) Catalogue Creatives, Incorporated, Plaintiff, v. Pacific Spirit Corporation, et al., Defendants. No. CV 03-966-MO. United States District Court, D. Oregon. August 15, 2005

SUPPLEMENTAL OPINION & ORDER

MICHAEL MOSMAN, District Judge

The facts of this case are set forth in this court’s June
14, 2005 Opinion and Order and are not repeated here. In
that previous order, this court granted plaintiff’s motion
for summary judgment with respect to its infringement claim
against Defendant Pacific Spirit Corp. (“Pacific Spirit”).
With respect to Defendant Mark Kenzer (“Kenzer”), the court
noted that plaintiff had failed to identify the theory of
indirect infringement under which it seeks to hold Kenzer
liable. The court therefore withheld ruling on the
infringement claim against Defendant Kenzer and directed
the parties to submit supplemental briefing addressing
whether Kenzer’s personal supervision of the infringing
activity as Pacific Spirit’s CEO subjected him to
individual liability for indirect infringement.

The parties subsequently submitted supplemental briefing
addressing Kenzer’s individual liability. In addition,
Pacific Spirit filed a motion for reconsideration of the
court’s conclusion that plaintiff could not have granted
Pacific Spirit an implied license in the copyrighted
photographs at issue as a matter of law because plaintiff
did not own the photographs at the time of the alleged
license. As set forth below, the court finds no error in
its previous ruling regarding Page 2 plaintiff’s alleged
license to defendant. In addition, the court finds
plaintiff has shown Defendant Kenzer is individually liable
for contributory infringement. Accordingly, defendant’s
motion for reconsideration (#83) is DENIED, and plaintiff’s
motion for summary judgment (#49) is GRANTED in its
entirety.

I. Motion for Reconsideration

Pursuant to Federal Rules of Civil Procedure 52 and 46,
Defendant Pacific Spirit moves the court to reconsider the
portion of its June 14, 2005, Opinion and Order in which
the court found that:

it is undisputed that plaintiff did not own the
photographs at the time it provided catalog spreads to
Pacific Spirit. Accordingly, plaintiff had no authority to
grant Pacific Spirit a license of any sort in the
photographs themselves, by conduct or otherwise, nor could
it have possessed the requisite intent to do so.

Defendant notes that plaintiff’s complaint alleged that:

Plaintiff authorized Defendants, by means of an oral or
implied sublicense, to use the copyrighted material in
catalogs and internet-based online stores developed and
produced by Plaintiff during those portions of 1998
through 2001 in which the parties had a working
relationship in the production of catalogs and
internet-based online stores for the products of Defendant
PACIFIC SPIRIT. The authorization extended to use by
individuals who were employed by PACIFIC SPIRIT, through
direct employment or by contract, to support the
production by Plaintiff of the catalogs and internet-based
online stores.[fn1]

Defendant argues the court should reconsider its prior
ruling because this allegation constitutes a judicial
admission that plaintiff granted defendant an implied
license to reproduce the photographs and distribute them to
the public. Plaintiff responds that the court should ignore
the Page 3 factual allegations of the complaint (made by
plaintiff’s former counsel) because they constitute an
incorrect statement of the law, and a party’s factual
allegations cannot change or override the law. Plaintiff
argues the court correctly determined that, as a mere
licensee of the photographs at the time of the alleged
sublicense to defendant, plaintiff could not have conveyed
an implied license in the photographs to defendant.

A. Procedure

Defendant brings its motion pursuant to Fed.R.Civ.P. 52.
That rule applies exclusively to “actions tried upon the
facts without a jury,” and provides parties in such actions
a mechanism by which to challenge a court’s findings of
fact. This court’s summary judgment ruling does not
constitute a trial upon the facts, nor did the court make
any findings of fact in its order. To the contrary, the
court determined there was no factual dispute between the
parties that plaintiff did not own the photographs at issue
in this litigation at the time of its alleged grant of an
implied license to defendant. From that undisputed fact,
the court found plaintiff could not have granted defendant
an implied license in the photographs as a matter of law.

Because defendant’s motion challenges the court’s legal
conclusions at summary judgment, the proper basis for
defendant’s motion for reconsideration is Rule 60. Rule
60(b) permits a court to relieve a party from a final order
on the grounds of “mistake, inadvertence, surprise or
excusable neglect.” A party may bring a motion for
reconsideration under Rule 60(b) on the grounds of mistake
not only by a party, but also by the court. Kingvision
Pay-Per-View v. Lake Alice Bar, 168 F.3d 347, 350 (9th Cir.
1999). “Reconsideration is appropriate if the district court
(1) is presented with newly discovered evidence, (2)
committed clear error or the initial decision was
manifestly unjust, or (3) if there is an intervening change
in controlling law.” Page 4 School Dist. No. 1J v. AC&S,
Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).

B. Merits

Defendant argues the allegation in plaintiff’s complaint
that plaintiff granted Pacific Spirit an “implied
sublicense” to use the copyrighted material constitutes a
judicial admission, binding upon both plaintiff and the
court. Plaintiff responds that its own factual allegations,
while unfortunate, cannot change or otherwise override the
law. The judicial admissions doctrine is limited to
admissions of fact and does not extend to questions of law.
See, e.g., Am. Title Ins. Co. v. Lacelaw Corp., 861 F.2d
224, 226-27 (9th Cir. 1988); New Amsterdam Cas. Co. v.
Waller, 323 F.2d 20, 24 (4th Cir. 1963) (“the doctrine of
judicial admissions has never been applied to counsel’s
statement of his conception of the legal theory of the
case”), cert. denied, 376 U.S. 963 (1964). In the instant
case, plaintiff’s allegation is factual only to the extent
it represents a legal possibility. In other words, if an
implied licensee has legal authority to grant implied
sublicenses, then plaintiff’s allegation that it did so is
binding upon plaintiff and the court. However, implied
licenses are recognized only in under narrow circumstances,
and defendant has offered no case law supporting the
proposition that the recipient of an implied license may
grant an implied sublicense by its conduct. Absent such
authority, this court declines to expand the “narrow”
circumstances under which a party may grant an implied
license to use copyrighted materials. Effects Associates,
Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990). The
allegations in plaintiff’s complaint therefore state a
legal impossibility which does not bind the court, and
which cannot form the basis of the court’s legal holding.

Defendant argues that if the court accepts plaintiff’s
current contention — i.e., that plaintiff did not
have authority to grant defendant a sublicense to use the
photographs — then the entire Page 5 agreement
under which defendant paid plaintiff for use of the
photographs in its catalogs constituted a fraud. Whether
that is so depends upon whether the works plaintiff
transferred to defendant were (as plaintiff claims) the
completed catalog spreads or (as defendant claims) the
photographs themselves. The June 14, 2005, Opinion stated
that “[t]his dispute would constitute a material fact issue
sufficient to preclude summary judgment but for the fact
that it is undisputed that plaintiff did not own the
photographs at the time it provided catalog spreads to
[Defendant],” such that plaintiff could not have granted
defendant a license in the photographs themselves. The
court’s conclusion that plaintiff could not have granted
defendant a license in the photographs themselves as a
matter of law leaves open the possibility that plaintiff
granted defendant a license to use the catalog
spreads.[fn2] Accordingly, defendant’s argument that the
court’s conclusion would render the contract between the
parties fraudulent is without merit. Page 6

In sum, while the legal conclusions alleged in plaintiff’s
complaint contradict the court’s ruling, there is no
statutory or case law authority to support expanding the
narrow circumstances under which a party may grant an
implied license to use copyrighted materials. Effects
Associates, Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir.
1990). Because the court finds no error in its prior
ruling, Defendant Pacific Spirit’s Motion for
Reconsideration (#83) is DENIED.

II. Individual liability for Defendant Kenzer

The Ninth Circuit recognizes two doctrines of indirect
copyright liability:

One who, with knowledge of the infringing activity,
induces, causes or materially contributes to the
infringing conduct of another may be liable as a
“contributory” copyright infringer. . . . A defendant is
vicariously liable for copyright infringement if he enjoys
a direct financial benefit from another’s infringing
activity and has the right and ability to supervise the
infringing activity.[fn3]

In its supplemental briefing, plaintiff argues Kenzer is
liable under both theories of liability. Kenzer’s only
response is that plaintiff’s allegation that Kenzer draws a
salary from Pacific Spirit, without more, is insufficient
to establish that he enjoyed “a direct financial benefit”
from Pacific Spirit’s infringing activity, as required to
establish vicarious liability. However, Kenzer offers no
argument challenging plaintiff’s claim that Kenzer is
liable for contributory infringement. To hold a defendant
liable for contributory infringement, it is not necessary
to establish that the defendant enjoyed a direct financial
benefit from the infringing activity of another. Rather, it
is enough that a defendant “induces, causes or materially
contributes to the infringing conduct of another.” Id.
Thus, because it is undisputed that Kenzer personally
induced and caused Pacific Spirit’s infringement, Kenzer is
liable for contributory infringement. Plaintiff’s motion
for Page 7 summary judgment (#49) is therefore GRANTED in
its entirety.

IT IS SO ORDERED.

[fn1] Complaint at § 19.

[fn2] The possibility that plaintiff could have granted
defendant a license to reproduce and distribute its catalog
spreads without thereby granting defendant a license to use
the photographs themselves is affirmed by the Copyright Act
as well as case law. Section 202 of the Copyright Act
provides that:

Ownership of a copyright, or of any of the exclusive
rights under a copyright, is distinct from ownership of
any material object in which the work is embodied . . .
Transfer of ownership of any material object . . . does
not of itself convey any rights in the copyrighted work
embodied in the object.

Similarly the “first sale” doctrine, although not directly
applicable to the current action, “permits the sale of a
material object in which the copyright is embodied without
transferring ownership of the copyright.” Design Options,
Inc. v. Bellepointe, Inc., 940 F.Supp. 86, 91 (S.D.N.Y.
1996); 17 U.S.C. § 109(a). In Design Options,
BellePointe enlisted Design Options to create sweater
designs and to manufacture sweaters bearing those designs
for BellePointe to sell. The parties never discussed
copyright or ownership rights in the styles, and Design
Options never registered for copyrights in the designs
until after initiating its lawsuit. Design Options brought
suit after learning that BellePointe had copied many of the
styles Design Options had created for BellePointe and had
arranged for the sweaters to be manufactured in other
factories without Design Options’ authorization. The court
rejected BellePointe’s argument that it had acquired rights
in the sweater designs by purchasing the sweaters bearing
those designs.

[fn3] Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir.
2003) (internal citations omitted; emphasis in original).
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