by Nancy Wolff, DMLA Counsel
The Third Circuit, in Grant Heilman Photography, Inc. v. McGraw Educ. Holdings, LLC, 2015 WL 1279502 (E.D. Pa. Mar. 20, 2015), upheld the jury’s verdict that McGraw-Hill had not proven that Grant Heilman Photography, Inc. (“GHP”), was on notice as to McGraw-Hill’s unlicensed use of GHP’s photographs in its textbook publications prior to April 18, 2009. As such, GHP was not barred by the Copyright Act’s three-year-statute of limitation, 17 U.S.C. 507(b), from collecting damages for the overrun and unlicensed use of their images prior to April 18, 2009.
17 U.S.C. 507(b) states that a plaintiff cannot bring a civil copyright infringement claims, unless such claims are “commenced within three years after the claim accrued.” Circuits Courts, such as the Second (NY, CT and VT) and Third Circuit (NJ, PA and DE) has adopted the “discovery rule”, under which the three-year “countdown” does not begin to run until the plaintiff discovers, or should have discovered through due diligence, when the infringement took place.
On April 18, 2012, GHP brought a copyright infringement suit against McGraw-Hill citing 2,395 instances of McGraw Hill’s infringing use of GHP photographs between 1995-2011 (only a representative sample of 53 claims were presented to the jury). McGraw-Hill did not deny copyright infringement, but argued that GHP’s copyright infringement claims against McGraw-Hill for unlicensed use of their photographs prior to April 18, 2009—the purported accrual date of GHP’s claims—are barred under the Copyright Act’s three year statute of limitation.
In its review of the jury’s verdict for GHP, the court analyzed whether, as per the discovery rule, the evidence and testimony presented at trial showed that GHP “should have known the basis for [its] claims[, which] depends on whether [it] had sufficient information of possible wrongdoing to place [it] on inquiry notice or to excite storm warnings of culpable activity.” The court admitted that McGraw-Hill had a strong argument that an objectively reasonable copyright holder could recognize that McGraw-Hill’s numerous copyright infringements between1995-2009 were storm warnings “heralding possible greater infringement” by McGraw-Hill. However, in what it called “a very close question”, the court found that other evidence presented at trial indicated that the jury could have found verdict in favor of GHP. Mainly, there was evidence that:
- McGraw-Hill itself was unaware of the extent of its license infringements until 2013, so that a jury could find that GHP could not be on inquiry notice before April 18, 2009;
- McGraw-Hill’s records were not well organized, so that a jury could find that GHP would not have received concrete information even if it had inquired;
- There was an impliedly accepted “course of dealing” between McGraw-Hill and GHP, where McGraw-Hill would use GHP’s photographs without permission, and subsequently invoice GHP for the use;
- When GHP became aware of specific license infringements, it worked with McGraw-Hill towards resolving the issue, so that a jury could find that GHP (i) did not sit on its rights, and (ii) viewed past infringements by McGraw-Hill as officially resolved, and not as “storm warnings of future instability”;
- McGraw-Hill’s print run of its book was confidential, so that a jury could find the GHP, dependent on such information to determine whether McGraw-Hill had overrun its licenses, could not have been on inquiry notice.
This case is a reminder that the industry’s procedures and course of dealings are relevant and that practices once prevalent before electronic licensing may need to be updated by publishers and licensors to ensure accurate licensing. A few years back the then PACA Editorial Relations Committee made great efforts to work with educational publishers on contracts ad practices that would protect the interests for both licensors and publishers in the digital era. Cengage was the most responsive and worked with the association in crafting language and licensing structures that took account the needs of both parties. DMLA remains open to further collaborations with other publishers. Hopefully this decision will reduce the litigation in this area and lead to reasonable resolutions as both publishers and image libraries need to work together to ensure that educational books contain images necessary to illustrate the history, culture and information reflective of our times.
Original article on original jury trial can be found here