United States District Court, N.D. Illinois, Eastern Division
PANORAMIC STOCK IMAGES, LTD., d/b/a PANORAMIC IMAGES, Plaintiff,
McGRAW-HILL GLOBAL EDUCATION HOLDINGS, LLC and Mc-GRAW-HILL SCHOOL EDUCATION HOLDINGS, LLC Defendants.
MEMORANDUM OPINION AND ORDER
REBECCA R. PALLMEYER, District Judge.
In recent years there has been a wave of litigation between stock photography agencies and publishing companies involving alleged copyright infringement by the publishers. This is one such case. Plaintiff Panoramic Stock Images, Ltd. ("Panoramic") is an Illinois business that licenses photographs to publishing companies, including Defendants McGraw-Hill Global Education Holdings, LLC and McGraw-Hill School Education Holdings, LLC (collectively, "McGraw-Hill"). For several years, the parties entered into licensing agreements that permitted McGraw-Hill to make limited use of photographs in which Panoramic holds copyrights. In this lawsuit, Panoramic alleges that McGraw-Hill committed copyright infringement by exceeding the scope of the parties' licensing agreements for various images. ( See Compl. , ¶¶ 12, 28-30.)
Both parties have now moved for partial summary judgment. For the reasons explained here, the court concludes that there are disputes of fact concerning when Panoramic knew or should have known of its claims against McGraw-Hill. McGraw-Hill's motion for summary judgment  on its statute of limitations defense is therefore denied. There are no disputes concerning liability for certain of Panoramic's infringement claims, but McGraw-Hill has affirmative defenses to the damages claims for that infringement. Panoramic's motion for summary judgment  is therefore granted in part and denied in part.
Panoramic is a stock photography agency. It licenses photographs created by various photographers to publishers. McGraw-Hill is a textbook publishing company and licensee of Panoramic. (Pl.'s Stat. of Undisp. Mat. Facts [59-1], ¶¶ 1-2.) Between 1991 and 2012, Panoramic sold McGraw-Hill limited licenses to use Panoramic's photographs in McGraw-Hill's various publications. ( Id. ¶ 7; Compl., Ex. 1 [1-1], Table of Images; Def.'s Stat. of Undisp. Mat. Facts , ¶¶ 6-7.) The business process generally worked as follows: McGraw-Hill's photo editors would review selections of photographs made available by Panoramic and identify images McGraw-Hill wished to use in its publications. McGraw-Hill would then typically send Panoramic a formal invoice request. This request would identify each image requested, list the publications for which an image would be used, and estimate how many times McGraw-Hill would reproduce the image. (Def.'s Stat. of Undisp. Mat. Facts ¶ 7.) McGraw-Hill was unable to determine the precise number of times it would reproduce each image because the textbooks for which McGraw-Hill sought to use the photographs had not yet been published. ( Id. ) The resulting image licensing agreements, reflected in the invoices Panoramic issued and McGraw-Hill paid, limited the number of publications in which McGraw-Hill could reproduce the photographs, limited the geographic distribution area for such publications, and limited the type of media where the photographs could be reproduced. (Pl.'s Stat. of Undisp. Mat. Facts ¶ 8; see generally Douglas Segal Decl. [59-4] (hereinafter "Segal Decl."), ¶ 14 and Ex. 3 [59-9], Licensing Agreements.) The parties agree that McGraw-Hill exceeded the print quantity and distribution limitations for some of Panoramic's photographs and reproduced certain photographs in unauthorized electronic media. (Def.'s Resp. to Pl.'s Stat. of Undisp. Mat. Facts , ¶ 15.) McGraw-Hill acknowledges, further, that it did not request additional invoices from Panoramic when its actual use of the images exceeded the license terms. ( Id. ¶ 12.)
The parties dispute when Panoramic first learned that McGraw-Hill was violating the terms of the parties' licensing agreements. McGraw-Hill believes Panoramic "knew of the basis for its claims" against the publisher as early as November 2009. (Def.'s Stat. of Undisp. Mat. Facts ¶ 17.) According to McGraw-Hill, "[a]t some point before November 12, 2009, Douglas Segal [Panoramic's President] read a magazine article about unauthorized use of stock agencies' photographs by publishers.'" ( Id. ) The article referred to ongoing litigation between other stock agencies and publishing companies. ( Id. ) On November 12, 2009, an attorney involved with such litigation, Christopher Seidman of Harmon & Seidman, P.C., sent an e-mail message to Mr. Segal, thanking him for contacting Mr. Seidman's office "to discuss the status of litigation by visual art licensors against textbook publishers." (Pl.'s Resp. to Def.'s Stat. of Undisp. Mat. Facts ¶ 18.) In the message, Mr. Seidman also "welcome[d] [Panoramic] as a client, " referred to a prior discussion of "systemic copyright infringement" with Mr. Segal, and requested that Mr. Segal compile spreadsheets of the invoices that Panoramic had sent to various textbook publishers over the years, including McGraw-Hill. ( Id. ) These invoices contained the license terms for each image; the spreadsheets reflecting the terms of each invoice were intended to document the extent of infringement of Panoramic's images by various publishers. Panoramic asserts, however, that at the time of this correspondence it did not know of any specific titles, publications, or publishers that were allegedly infringing its copyrights. ( Id. ¶ 17.) Indeed, Panoramic maintains that it "did not become aware of any issues with any specific publisher's use of its photographs" until October 2012, when an employee of a different publisher, John Wiley & Sons, Inc., contacted Panoramic to request permission to use Panoramic's images beyond the parties' original license terms. (Pl.'s Resp. to Def.'s Stat. of Undisp. Mat. Facts ¶ 17.) The John Wiley employee told Mr. Segal that there were "several images" that "needed updating rights-wise." (Segal Decl., Ex. 5 [59-5]). The employee noted that at least one image had a "print run overage" and also that John Wiley & Sons was seeking media and digital rights for another image. ( Id. ) This communication presumably prompted Mr. Segal to review McGraw-Hill's licenses in more detail to account for specific infringing activity.
Panoramic filed the current lawsuit on December 11, 2012. Panoramic originally asserted 276 claims for copyright infringement and contributory copyright infringement and listed 170 images by 64 photographers whose copyrights McGraw-Hill allegedly infringed. ( See Compl., Ex. 1, Table of Images.) For one reason or another, many claims in the original Complaint have been withdrawn; 82 remain for resolution. ( See Johnson First Decl. [59-2], ¶ 4, Ex. 1 [62-1], Table of Images; Def.'s Reply to Pl.'s Resp. to Def.'s Stat. of Undisp. Mat. Facts , ¶ 10.)
I. Standard of Review
Summary judgment is appropriate where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). In considering a summary judgment motion, the court construes the evidence and all reasonable inferences in the light most favorable to the nonmoving party. O'Connor v. DePaul Univ., 123 F.3d 665, 669 (7th Cir.1997). The court will grant summary judgment against a party that does not produce evidence that would allow a reasonable jury to find in its favor on a material question. McGrath v. Gillis, 44 F.3d 567, 569 (7th Cir.1995). In this case, where both sides seek summary judgment, the court evaluates each motion by viewing all evidence and drawing all reasonable inferences in favor of the party opposing the motion. See F.T.C. v. Cleverlink Trading Ltd., 519 F.Supp.2d 784, 792 (N.D. Ill. 2007).
The court proceeds as follows. First, the court determines whether Panoramic's claims are barred by the Copyright Act's statute of limitations. Second, the court discusses whether summary judgment is appropriate on the issue of McGraw-Hill's liability for Panoramic's 82 copyright infringement claims. Lastly, the court decides which of McGraw-Hill's affirmative defenses are viable as a matter of law.
II. Copyright Act Statute of Limitations
A. Whether the Injury Rule or Discovery Rule Applies to Determine Whether Panoramic's Claims Are Timely
The Copyright Act provides that "[n]o civil action shall be maintained under the [Act] unless it is commenced within three years after the claim accrued." 17 U.S.C. § 507(b). Panoramic filed this suit on December 11, 2012. Absent tolling, the Act bars claims that accrued before December 11, 2009. This circuit applies the "discovery rule, " which tolls the accrual date for the copyright statute of limitations until "the plaintiff learns, or should as a reasonable person have learned, that the defendant was violating ...