By Frank D’Angelo and Sara Slavin, of Loeb & Loeb LLP
The United States Court of Appeals for the Second Circuit has reinstated professional photographers’ copyright infringement claim alleging that National Football League and Associated Press exploited thousands of NFL event photographs without authorization or payment. But the panel affirmed dismissal of photographers’ claims that NFL and AP violated antitrust law in doing so.
The Associated Press and National Football League entered into an agreement in 2009 under which the AP became the exclusive agent for and distributor of commercial licenses for photographs containing NFL intellectual property. In exchange, AP guaranteed the NFL a share of the royalty revenue it received in connection with those photographs. AP also granted the NFL a broad complimentary license for photos of NFL events for which AP owned the copyright, but not for photos that AP did not own. Because of its position as exclusive licensing agent, AP served as the gatekeeper for professional sports photographers who wished to shoot NFL events. Starting in 2009, plaintiffs, seven professional sports photographers, entered into “contributor agreements” with AP in which they provided AP with a broad license to use their NFL photographs, in exchange for certain royalty payments. Plaintiffs, however, retained “all rights, title and interest in and to” each of the photographs utilized by AP, as well as the right to sue for infringement.
After signing those contributor agreements, plaintiffs became aware that the NFL was making widespread use of their photographs without paying royalties. Unbeknownst to plaintiffs, in April 2012, when AP and the NFL renewed their agreement, AP expanded the NFL’s complimentary license to cover photographs owned by contributing photographers. When plaintiffs confronted AP about this issue, AP told plaintiffs that they could either permit AP to grant complimentary licenses to the NFL or opt out of their contributor agreements and no longer shoot NFL events.
Plaintiffs sued AP and the NFL in 2013 for copyright infringement, breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, fraud, and unconscionability, alleging that defendants exploited thousands of plaintiffs’ photographs without a license and without proper compensation to plaintiffs. Plaintiffs also asserted claims under the Sherman Act, alleging that defendants conspired to restrain trade in the market for commercial licenses of NFL event photographs. Defendants moved to dismiss plaintiffs’ claims, and the district court granted the motion in its entirety. On appeal, however, the Second Circuit reversed the dismissal of plaintiffs’ copyright infringement claims in substantial part, as well as plaintiffs’ contract and fraud claims, but affirmed the dismissal of the remaining claims.
The central question the court examined was whether defendants’ various license defenses barred plaintiffs’ infringement claims, as plaintiffs undoubtedly possessed valid copyrights in the photographs in question and the NFL undoubtedly used them. The court analyzed defendants’ license defenses across two time periods — 2009 to 2012, prior to AP granting the NFL a complimentary sublicense to exploit plaintiffs’ photographs, and 2012 to 2015, following the grant of such a license.
As to the 2009-2012 time period, the court rejected defendants’ license defense. It held that defendants were barred from arguing that AP granted the NFL a retroactive license for this period in 2012 because “[b]efore the 2012 AP-NFL agreement was executed, Plaintiffs had the right to sue the NFL for copyright infringement, and if the retroactive license AP granted in 2012 were effective, AP would have [impermissibly] extinguished that right.” The court also rejected defendants’ arguments that AP, through its conduct, had impliedly licensed the NFL’s exploitation of the photographs from 2009 to 2012, because plaintiffs’ allegations “plausibly support an inference that before the 2012 AP-NFL agreement was signed, AP had not granted the NFL a complimentary license to Plaintiffs’ works, and the NFL knew it.” For example, plaintiffs alleged that in 2012, AP told them that the NFL was insisting on a license to use AP’s contributor content on a complimentary basis, and the fact that AP did not yet have authority to grant such a license was delaying negotiation of the new AP-NFL agreement.
As to the 2012-2015 period, the court agreed with plaintiffs that the contributor agreements were, at minimum, ambiguous as to whether AP was permitted to grant the NFL a complimentary license to use contributor photographs without paying royalties. According to the court, “[d]iscovery and trial will shine greater light on whether the extrinsic evidence actually weighs in Plaintiffs’ favor, but at this stage of the case, Plaintiffs have plausibly alleged that AP’s complimentary license to the NFL was not permitted by the contributor agreements.”
The Second Circuit also concluded that the district court erred in dismissing plaintiffs’ claims for breach of the implied covenant of good faith and fair dealing. The court found that plaintiffs plausibly alleged that the contributor agreements at least implicitly prohibited AP from licensing or selling plaintiffs’ photographs “in a way that benefits AP, but yields little to no value for Plaintiffs,” thereby depriving plaintiffs of the fruits of their bargain. It thus rejected defendants’ argument that implying this right on behalf of plaintiffs contravened defendants’ express rights under the contributor agreements.
The court further found that plaintiffs adequately pleaded a claim for fraud on the theory that AP falsely told plaintiffs it would not grant the NFL complimentary access to their photographs so as to induce plaintiffs to sign their contributor agreements. The court explained that if it was ultimately determined, after discovery, that the contributor agreements’ express or implied terms did not prohibit AP’s alleged conduct, plaintiffs would have a nonduplicative claim for fraud; otherwise, the court opined, “AP will, at most, have done nothing more than falsely promise to abide by the terms of the contributor agreements.”
On the other hand, the court affirmed the dismissal of plaintiffs’ breach of fiduciary duty and unconscionability claims. Not only did the relationship between plaintiffs and AP “arise from arm’s-length agreements,” the court opined, but those agreements also expressly disclaimed that they gave rise to a fiduciary-like relationship. As to the claim that the contributor agreements were unconscionable, the court held that plaintiffs’ allegations indicated they had ratified those agreements by performing and accepting the benefits thereof and were not, as they argued, acting under duress.
Finally, the court affirmed dismissal of the antitrust claims, holding plaintiffs did not plausibly allege an adverse effect on competition in the market for commercial licenses for NFL event photographs — as opposed to the market for the photographs themselves. Nonetheless, the court noted that the NFL was not immune from antitrust scrutiny and could be vulnerable to such claims in the event that similarly situated photographers were to define the relevant market differently.
