StockFood Am., Inc. v. Pearson Educ., Inc.

STOCKFOOD AMERICA, INC., Plaintiff

v.PEARSON EDUCATION, INC., Defendant

No. 2:12-cv-124-JAW

UNITED STATES DISTRICT COURT DISTRICT OF MAINE

Dated: November 29, 2012

MEMORANDUM DECISION AND ORDER ON MOTION TO AMEND

In this copyright infringement action, plaintiff StockFood America, Inc. ("StockFood") moves to file a second amended complaint removing unknown "John Doe" printer defendants and adding claims for vicarious and contributory infringement. See Plaintiff's Motion for Leave To File Second Amended Complaint ("Motion") (ECF No. 29) at 1. Defendant Pearson Education, Inc. ("Pearson") opposes the Motion insofar as it seeks to add the two new copyright infringement claims on the grounds that (i) the addition of those claims would be futile, (ii) the court lacks subject matter jurisdiction over the claims, and (iii) StockFood unduly delayed in seeking to add those claims, prejudicing Pearson. See Defendant's Opposition to Plaintiff's Motion for Leave To File Second Amended Complaint ("Opposition") (ECF No. 31) at 1-2. For the reasons that follow, I grant the Motion to allow the deletion of the "John Doe" defendants and the addition of the contributory infringement claim, and otherwise deny it.

I. Applicable Legal Standards

Pursuant to Federal Rule of Civil Procedure 15(a)(2), "[t]he court should freely give leave [to amend a pleading] when justice so requires." Fed. R. Civ. P. 15(a)(2). Leave to amend should be granted in the absence of reasons "such as undue delay, bad faith or dilatory motive onthe part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. . . . ." Foman v. Davis, 371 U.S. 178, 182 (1962).

The First Circuit has explained:

A motion to amend a complaint will be treated differently depending on its timing and the context in which it is filed. . . . As a case progresses, and the issues are joined, the burden on a plaintiff seeking to amend a complaint becomes more exacting. Scheduling orders, for example, typically establish a cut-off date for amendments (as was apparently the case here). Once a scheduling order is in place, the liberal default rule is replaced by the more demanding "good cause" standard of Fed. R. Civ. P. 16(b). This standard focuses on the diligence (or lack thereof) of the moving party more than it does on any prejudice to the party-opponent. Where the motion to amend is filed after the opposing party has timely moved for summary judgment, a plaintiff is required to show "substantial and convincing evidence" to justify a belated attempt to amend a complaint.

Steir v. Girl Scouts of the USA, 383 F.3d 7, 11-12 (1st Cir. 2004) (citations, internal quotation marks, and footnotes omitted).

The scheduling order in this case established a cut-off date of September 19, 2012, for the filing of motions to amend. See ECF No. 27. The Motion was filed on that date. See Motion. Hence, the liberal default rule applies.

II. Discussion

I group Pearson's objections to StockFood's motion to amend under two broad headings - futility (including a purported lack of subject matter jurisdiction over the new copyright infringement claims) and delay/prejudice.

A. Futility

1. Applicable Legal Standards

An amendment is futile when "the complaint, as amended, would fail to state a claim upon which relief could be granted." Glassman v. Computervision Corp., 90 F.3d 617, 623 (1st Cir. 1996). "In assessing futility, the district court must apply the standard which applies to motions to dismiss under [Federal Rule of Civil Procedure] 12(b)(6)." Adorno v. Crowley Towing & Trans. Co., 443 F.3d 122, 126 (1st Cir. 2006).

The Supreme Court has stated:

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level.

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and internal punctuation omitted). This standard requires the pleading of "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

In ruling on a motion to dismiss under Rule 12(b)(6), a court assumes the truth of all of the well-pleaded facts in the complaint and draws all reasonable inferences in favor of the plaintiff. Román-Oliveras v. Puerto Rico Elec. Power Auth., 655 F.3d 43, 45 (1st Cir. 2011).

2. Factual Background

The proposed second amended complaint contains the following relevant factual allegations.¹

1. StockFood, a Maine corporation with its principal place of business in Kennebunk, Maine, is a stock photography agency that licenses photographs for distribution throughout the United States. [Proposed] Second Amended Complaint and Demand for Jury Trial ("Proposed Complaint") (ECF No. 30) ¶ 5. Pearson, a Delaware corporation, is a publisher of educational textbooks, which it sells and distributes via employees and agents in Maine and throughout the United States. Id. ¶ 6.

2. Prior to the commencement of this action, the copyright holders granted StockFood co-ownership of the copyrights to the photographic images depicted in Exhibit A to the Proposed Complaint ("Photographs"). Id. ¶ 7; Exh. A (ECF No. 30-1) thereto.²

3. Between 1989 and 2009, StockFood sold Pearson limited licenses to use copies of the Photographs in numerous educational publications. Proposed Complaint ¶ 9. The licenses were expressly limited by number of copies, distribution area, language, duration, and/or media, as set forth in Exhibit A. Id.; Exh. A thereto.

4. On May 3, 2010, and January 13, 2011, Julie Orr, Image Manager, Rights and Permissions, for Pearson's Curriculum Group, testified that Pearson published photographs in its textbooks in some instances without obtaining any permission and, in other instances, hadprinted in excess of license limitations. Proposed Complaint ¶ 16; Exh. B (ECF No. 30-2) thereto.

5. On March 15, 2012, StockFood requested that Pearson provide it with complete information regarding Pearson's unauthorized uses of the Photographs. Proposed Complaint ¶ 18; Exh. D (ECF No. 30-4) thereto. Pearson did not timely respond to StockFood's request and, when it belatedly responded, it declined to provide most of the requested information. Proposed Complaint ¶ 18.

6. Upon information and belief, Pearson used the Photographs without any permission in some of the publications identified in Exhibit A and in additional publications. Id. ¶ 20. Because Pearson alone knows these wholly unauthorized uses, StockFood cannot further identify them without discovery. Id.

7. Upon information and belief, Pearson reproduced and distributed the Photographs without StockFood's permission to other entities, subsidiary companies, divisions, affiliates, and/or third parties ("Third Parties"). Id. ¶ 24. Upon information and belief, the reproductions and distribution took place in the United States. Id.

8. Upon information and belief, the Third Parties then translated the publications at issue into additional languages or published them in local adaptations or reprints and included the Photographs in these publications without StockFood's permission. Id. ¶ 25. Upon information and belief, the Third Parties' unauthorized use of the Photographs occurred in whole or in part in the United States. Id. ¶ 26.

9. Upon information and belief, when Pearson licenses translation rights to Third Parties, it transmits the electronic file for the Third Party's use. Id. ¶ 27. Upon information and belief, Pearson permits Third Parties to distribute its books in new territories without changingthe content, to translate its books into new languages, and to adapt its books for distribution in additional territories. Id. ¶ 28.

10. Upon information and belief, Pearson (i) knew when it reproduced and distributed the Photographs that the Third Parties would reproduce and distribute them without StockFood's authorization and (ii) knew that the Third parties were in fact reproducing and distributing them without StockFood's authorization. Id. ¶¶ 29-30. Upon information and belief, Pearson had the right and ability to supervise the Third Parties' use of the Photographs. Id. ¶ 31.

11. Upon information and belief, Pearson directly profited from its reproduction and distribution of the Photographs to the Third Parties. Id. ¶ 33. Documents that Pearson produced in discovery in this action show that these Third Parties pay Pearson a percentage of their sales of these products for translation or adaptation rights, including access to all of the content in the publications. Id.

3. Discussion

a. Asserted Pleading Deficiencies

The Supreme Court has explained:

One infringes contributorily by intentionally inducing or encouraging direct infringement and infringes vicariously by profiting from direct infringement while declining to exercise a right to stop or limit it. Although the Copyright Act does not expressly render anyone liable for infringement committed by another, these doctrines of secondary liability emerged from common law principles and are well established in the law.

Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930-31 (2005) (citations, internal punctuation, and footnote omitted). "Absent an actionable claim for direct copyright infringement, the claims for contributory or vicarious infringement must also fail." Greenspan v. Random House, Inc., 859 F. Supp.2d 206, 219 (D. Mass. 2012), aff'd, 2012 WL 5188792 (1st Cir. 2012).

Pearson first argues,...