HarperCollins Publishers LLC v. Open Road Integrated Media, LLP
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MEMORANDUM AND ORDER
Plaintiff HarperCollins Publishers LLC (âHarperCollinsâ) brings this action against defendant Open Road Integrated Media, LLP (âOpen Roadâ), alleging will
BACKGROUND
I. Factual Allegations
The present dispute arises out of a publishing agreement (hereafter the âcontractâ or the âagreementâ) executed on April 13, 1971 by the author Jean George and the publishing house Harper & Row, plaintiffs predecessor in interest, which, broadly speaking, gave plaintiff the right it) publish Georgeâs childrenâs novel Julie of the Wolves,
By the 1971 contract, Ms. George conveyed publishing rights to HarperCollins to publish Julie of the Wolves in exchange for a $2,000 advance and royalty payments of between ten and fifteen percent, de
The contract contains several clauses critical to the outcome of this suit. Paragraph 1 of the agreement grants to Har-perCollins âthe exclusive right to publishâ Julie of the Wolves âin book formâ in the English language and within specified territory. Contract ¶ 1. In addition to this broad grant language, the contract provided in a paragraph entitled âDisposition of Subsidiary Rightsâ that â[i]t is understood and agreed that the Publisher shall have the exclusive right to sell, lease or make other disposition of the subsidiary rights in which he has an interest under the terms of clause (subject to the âconsultationâ provision in 7f) 19 and 20.â Contract ¶23.
Paragraph 20, in turn, makes the following provision:
Anything to the contrary herein notwithstanding, the Publisher shall grant no license without the prior written consent of the Author with respect to the following rights in the work: use thereof in storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now known or hereafter invented and ephemeral screen flashing or reproduction thereof, whether by print-out, phot[o] reproduction or photo copy, including punch cards, microfilm, magnetic tapes or like processes attaining similar results, and net proceeds thereof shall be divided 50% to the Author and 50% to the Publisher. However, such license shall not be deemed keeping the work in print once the work has gone out of print in all editions.â (emphasis added)
This clause was inserted at the request of Ms. Georgeâs literary agency, Curtis Brown, which negotiated the contract on the authorâs behalf. PI. R. 56.1 ¶ 38; Def. R. 56.1 ¶ 28. The language of Paragraph 20 was drafted by Curtis Brown in 1967 and was apparently standard in contracts negotiated by Curtis Brown with American publishers. PI. R. 56.1 ¶ 39. In fact, identical language was included in at least six contracts between Ms. George and Harper & Row that predate the operative contract in the instant matter. PI. Opp. at 7-8; Def. R. 56.1 ¶ 31; Boni Decl. Ex. 19-24. In eight subsequent contracts between Ms. George and HarperCollins, the words âand/orâ were deleted, such that the relevant language read âuse thereof in storage and retrieval systems, whether through computer, mechanical, or other electronic means now known or hereafter invented....â Def. Mem. at 4, n. 1; Def. R. 56.1 ¶ 32; Boni Decl. Ex. 26, 28-32.
In addition to these critical clauses, the contract also contained other paragraphs pertinent to this action, including Paragraph 19, which gave the Publisher the right âto reprint the said Work in whole or in part in the form of excerpts, digests and selections in one or more issues of a newspaper, magazine, book or anthology,â with revenues generally divided evenly between author and publisher. Contract ¶ 19. The contract also contained a âReserved Rightsâ clause that reserved to the author â[a]ll rights in the Work now existing, or which may hereafter come into existence, not specifically herein granted,â including motion picture rights. Contract ¶ 14. The contract provided for a New York choice of law. Contract ¶ 27.
The events immediately precipitating this lawsuit began in 2010, nearly forty years after the execution of the operative contract, at which point the publishing world featured an e-book market. E-book technology enables the full text of a book to be presented in digital form, to be read on a computer or portable electronic device, such as a dedicated e-book reader, a smart phone, or a pad/tablet. PI. R. 56.1 ¶¶ 44^15; Def. R. 56.1 ¶15. Defendant Open Road is an e-book publisher and multimedia content company established in 2009. Def. R. 56.1 ¶ 2.
In 2010, Open Road approached Ms. Georgeâs literary agent Curtis Brown with a proposal to publish an e-book edition of Julie of the Wolves in exchange for a 50% royalty to Ms. George. PI. R. 56.1 ¶ 80; Def. R. 56.1 ¶ 65. Preferring initially to pursue an e-book publication with her longtime publisher HarperCollins, Ms. George authorized her agent to contact HarperCollins and suggest the e-book publication, with the proviso that HarperCol-lins match Open Roadâs 50% royalty offer. Def. R. 56.1 ¶ 67. HarperCollins expressed interest in electronic publication; however, they counter-offered only a 25% royalty. PI. R. 56.1 ¶ 84; Def. R. 56.1 ¶ 69. Dissatisfied with that offer and expressing her belief that she â not HarperCollinsâ owned the e-book rights, Ms. George instead contracted in April 2011 with Open Road to publish Julie of the Wolves as an e-book. Def. R. 56.1 ¶¶ 70, 74. Before doing so, Ms. George entered an agreement with Open Road, by which the electronic publisher agreed to indemnify .Ms. George in the event HarperCollins asserted a claim against the author. PI. R. 56.1 ¶ 85. Open Road subsequently distributed Julie of the Wolves as an e-book via a number of distribution channels; between October 2011 and March 2012, approximately 1,600 such e-book copies were sold. PI. R. 56.1 ¶¶ 86, 88.
Plaintiff HarperCollins filed suit against Open Road on December 23, 2011, alleging willful copyright infringement in violation of 17 U.S.C. § 106 and seeking injunctive relief, statutory or actual damages at its election, and the recovery of Open Roadâs profits and HarperCollinsâ costs. Compl. ¶¶ 31-34. Defendant answered on February 16, 2012 and discovery followed. After briefing of the instant cross-motions was completed, oral argument was held on January 30, 2014.
II. Standard of Review
A motion for summary judgment is appropriately granted when 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). In this context, â[a] fact is âmaterialâ when it might affect the outcome of the suit under governing law,â and â[a]n issue of fact is âgenuineâ if the evidence is such that a reasonable jury could return a verdict for the non-moving party.â McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir.2007) (internal quotation marks and citations omitted). âIn assessing the record to determine whether there is [such] a genuine issue [of material fact] to be tried, we are required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.â Gorzynski v. JetBlue Airways Corp., 596 F.3d 93, 101 (2d Cir.2010) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). On a motion for summary judgment, â[t]he moving party bears the initial burden of demonstrating âthe absence of a genuine issue of material fact.â â F.D.I.C. v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir.2010) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).
Where that burden is carried, the non-moving party âmust come forward with specific evidence demonstrating the existence of a genuine dispute of material fact.â Id. (citing Anderson, 477 U.S. at 249, 106 S.Ct. 2505). To defeat a motion for summary judgment, the non-moving party âmust do more than simply show that there is some metaphysical doubt as to the material facts.â Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). âIf the evidence is merely color-able, or is not significantly probative, summary judgment may be granted.â Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (internal citations omitted). The non-moving party âmay not rely on conclusory allegations or unsubstantiated speculation.â Brown v. Eli Lilly and Co., 654 F.3d 347, 358 (2d Cir.2011) (internal quotation marks and citations omitted); see also BellSouth Telecomms., Inc. v. W.R. Grace & Co., 77 F.3d 603, 615 (2d Cir.1996) (it is insufficient for a party opposing summary judgment âmerely to assert a conclusion without supplying supporting arguments or factsâ) (internal citations and quotation marks omitted).
When cross-motions for summary judgment are made, as here, the standard is the same as that for individual motions for summary judgment. Morales v. Quintet Entmât, Inc., 249 F.3d 115, 121 (2d Cir.2001). Each motion must be considered independently of the other and, when evaluating each, the court must consider the facts in the light most favorable to the non-moving party. Id.
III. Principles of Contract Interpretation in the Copyright Context
To maintain an action for copyright infringement, plaintiff must establish two elements: â(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.â Kwan v. Schlein, 634 F.3d 224, 229 (2d Cir.2011) (quoting Feist Publâns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991)). In the case sub judice, the parties dispute only the first element&emdash;that is, whether HarperCollinsâ uncontested publication rights to Julie of the Wolves encompass the exclusive right to publish and license e-book versions of the work. See Pl. Mem. at 11-12; Def. Mem at 7. Copy
Pursuant to New York law, the interpretation of an unambiguous contract is a question of law to be addressed by the Court. See Provident Loan Socây of N.Y. v. 190 E. 72nd St. Corp., 78 A.D.3d 501, 911 N.Y.S.2d 308, 309 (1st Depât 2010). So too is the determination of whether a contract provision is in fact ambiguous. Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 178 (2d Cir.2004) (quoting W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162, 565 N.Y.S.2d 440, 566 N.E.2d 639 (1990)). A contract is ambiguous only if âthe provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.â Goldman Sachs Grp., Inc. v. Almah LLC, 85 A.D.3d 424, 924 N.Y.S.2d 87, 90 (1st Depât 2011) (internal citation and quotation marks omitted); see also Broder v. Cablevision Sys. Corp., 418 F.3d 187, 197 (2d Cir.2005) (â[A]mbiguity exists where a contract term could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and ... is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.â (internal citation and quotation marks omitted)).
In determining the meaning of a contract, this Court will âlook to all corners of the document rather than view sentences or clauses in isolation.â Intâl Klafter Co. v. Contâl Cas. Co., 869 F.2d 96, 99 (2d Cir.1989) (internal quotation marks omitted); see also Kass v. Kass, 91 N.Y.2d 554, 566, 673 N.Y.S.2d 350, 696 N.E.2d 174 (1998). â[W]hen parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms.â W.W.W. Assocs., Inc., 77 N.Y.2d at 162, 565 N.Y.S.2d 440, 566 N.E.2d 639. In other words, our âprimary objective is to give effect to the intent of the parties as revealed by the language they chose to use.â Bolt Elec., Inc. v. City of New York, 223 F.3d 146, 150 (2d Cir.2000).
IV. Néw Use Precedent
In accord with these principles of contract construction, the Second Circuitâs ânew useâ precedent sets forth a procedure for evaluating, whether a contract covers later-developed technology. This Court is guided by several leading cases, including Bartsch v. Meiro-Goldwyn-Mayer, Inc., 391 F.2d 150 (2d Cir.1968), Bourne v. Walt Disney Co., 68 F.3d 621 (2d Cir.1995), and Boosey & Hawkes Music Publishers, Ltd. v. Walt Disney Co., 145 F.3d 481 (2d Cir.1998), all of which arise in the context of the motion picture industry. Bartsch posed the question of whether an earlier grant of motion picture rights to a play also comprised the right to broadcast that movie on television 28 years later. Bourne and Boosey considered whether the holder of a license to use a piece of music in a motion picture also had the right to use the music in distribution of the movie via videocassette over forty years later. In these three cases, all of which evaluated contracts pursuant to New York law, the initial grant language was found to encompass the later-developed new use.
In construing the scope of the contractual grant, the Court must apply âneutral principles of contract interpretationâ and avoid any âdefault rule in favor of copyright licensees or any default rule whatsoever.â Id. As the Second Circuit instructs, â[i]f the contract is more reasonably read to convey one meaning, the party benefitted by that reading should be able to rely on it; the party seeking exception or deviation from the meaning reasonably conveyed by the words of the contract should bear the burden of negotiating for language that would express the limitation or deviation.â Id.
Indeed, in new use cases, the words of the contract may take on even greater significance than in a standard contract action in which the Court could review contemporaneous extrinsic evidence to elucidate the intent of the parties. Partly, this is because âmany years after formation of the contract, it may well be impossible to consult the principals or retrieve documentary evidence to ascertain the partiesâ intent, if any, with respebt to new uses.â Id. at 488. Bartsch describes the problem more bluntly: âWith Bartsch dead, his grantors apparently so, and the Warner Brothers lawyer understandably having no recollection of the negotiation, any effort to reconstruct what the parties actually intended nearly forty years ago is doomed to failure.â 391 F.2d at 155.
Moreover, by their very nature, new use cases create a significant obstacle to the use of extrinsic evidence. An inquiry into the partiesâ intent âis not likely to be helpful when the subject of the inquiry is something the parties were not thinking about.â Boosey, 145 F.3d at 487-88. Likewise, extrinsic evidence of the partiesâ course of dealing or industry practice is likely irrelevant, âbecause the use in question was, by hypothesis, new, and could not have been the subject of prior negotiations or established practice.â Id. at 488.
Thus, the leading cases discussed here placed primary emphasis on the contractual language. They also considered the âforeseeabilityâ of the new use at the time of contracting, and found, respectively, that âfuture possibilities of television were recognized by knowledgeable people in the entertainment and motion picture industries,â Bartsch, 391 F.2d at 154; that âhome viewing of motion pictures was within the contemplation of persons in the motion picture industry,â Bourne, 68 F.3d at 630; and that âa nascent market for home viewingâ existed at the time of contracting. Boosey, 145 F.3d at 486. Notably, however, and contrary to defendantâs contention, the case law did not explicitly treat âforeseeabilityâ of the new use at the time of contract as a sine qua non. Instead, whether foreseeability is required remains an open question. See Boosey, 145 F.3d at 486 (whether âa new-use license hinges on the foreseeability of the new channels of-distribution at the time of contracting [was] a question left open in Bartsch â).
As an initial matter, we note that the parties have filed cross-motions for summary judgment. We agree with counselâs assessment that this action is well-suited to resolution upon summary judgment.
Based on a plain reading of the contractual language, we hold that the 1971 contract grants HarperCollins the exclusive right to license third parties to publish e-book versions of Julie of the Wolves. This determination follows from the contract as a whole, and chiefly from Paragraphs 1, 20 and 23.
A. Paragraph 1
Paragraph 1 conveyed to HarperCollins âthe exclusive right to publish [Julie of the Wolves ] ... in book form.â Relying heavily on prior precedent from this district, Open Road argues that this language cannot possibly extend to e-book publication rights. See Random House, Inc. v. Rosetta Books LLC, 150 F.Supp.2d 613, 620 (S.D.N.Y.2001); Def. Mem. at 11-15. However, the operative contract here differs significantly from its counterpart in Rosetta Books, which was held to be limited to paper book publication. In the instant case, the governing grant conveys the right âto publish ... in book form,â whereas in Rosetta Books, the grant was one âto print, publish and sell.â Id. As was explicitly argued in the earlier case, the inclusion of the word âprintâ has a limiting effect and a strong connotation of paper copy. Id.; Rich Deck Ex. 46 at 14. The word âprintâ is absent from the 1971 contract governing here, thereby distinguishing the case at bar from Rosetta Books.
Nonetheless, given that we must interpret the contract as a whole, we need not reach the issue of whether Paragraph 1 standing alone is sufficient to convey e-book publication rights. See Intâl Klafter Co. v. Cont'l Cas. Co., 869 F.2d 96, 99 (2d Cir.1989). With that precept in mind, we turn next to evaluate Paragraph 20, which, by explicitly granting HarperCollins certain rights associated with use by âelectronic means,â created a critical distinction from Rosetta Books, whose contract made no mention of electronic exploitation at all.
B. Paragraph 20
Paragraph 20, supported by the grant provision in Paragraph 23, enables Har-perCollins to issue licenses, subject to the authorâs permission, to use the work in âin storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now known or hereafter invented.â This language, encompassing as it does the forward-looking reference to technologies ânow known or hereafter invented,â is sufficiently broad to draw within its ambit e-book publication. Although no commercial market for e-books existed at the time of its drafting, e-book technology comprises a later-invented version of the very âcomputer, computer-stored, mechanical or other electronic meansâ provided by Paragraph 20.
In light of precedent indicating that broad grant language will extend to later-invented uses, e-book publication âmay reasonably be said to fall within the medium as described in the license.â Bartsch, 391 F.2d at 155. Our conclusion that e-books constitute a permissible new use follows both from the expansive contractual language and from the lens through
When considered in comparison to contracts in similar cases, the contractual language here is as broad as that previously found to be sufficient to encompass a later-developed new use. The Bourne contract conveyed the âright to record such music mechanically in any and all other motion pictures to be produced_â 68 F.3d at 624. In Boosey, the grant language provided rights âto record [the composition] in any manner, medium or formâ for use âin [a] motion picture.â 145 F.3d at 486. In Bartsch, the contract granted the right âto copyright, vend, license and exhibit such motion picture photoplays throughout the world; together with the further sole and exclusive rights by mechanical and/or electrical means to record, reproduce and transmit soundâ â a conveyance that appears rather similar in scope to Ms. Georgeâs grant to HarperCollins of the âexclusive right to publish [Julie of the Wolves ] in book form.â 391 F.2d at 151; Contract ¶ 1. Notably, none of the contracts in Bartsch, Bourne, or Boosey included any reference to rights in future technologies that exists in the contract here.
By specifically providing for anticipated electronic means that might be âhereafter invented,â the 1971 contractâs grant language becomes greater in breadth, at least with respect to new uses, than the analogous contracts in Second Circuit new use precedent, which were themselves found sufficiently broad to encompass an electronic new use. Interpreting similar forward-looking contractual language in a new use context, another court in this district drew the same conclusion. See Reinhardt v. Wal-Mart Stores, Inc., 547 F.Supp.2d 346, 354-55 (S.D.N.Y.2008). In Reinhardt, a 1984 recording agreement wherein ârecordsâ were defined as âall forms of reproduction including pre-re-corded tapes and discs and electronic video recordings, now or hereafter knownâ was construed to authorize later-invented digital and internet-enabled uses. Id. (emphasis added). Relying, as we do here, on the Second Circuit standards set forth in Boo-sey, the district court in Reinhardt explained that â[t]he phrase ânow or hereafter known,â when referring to forms of reproduction, reveals that future technologies are covered by the agreementâ and that the language âcreates an expansive rather than a restrictive conveyance of rights.â Id. at 354. The language of Paragraph 20 â ânow known or hereafter inventedâ â tracks its analog in Reinhardt rather closely and results in a similarly expansive conveyance of rights with regard to future technologies.
Indeed, apparently recognizing the breadth of the language in Paragraph 20, Open Roadâs briefing largely ignored it. Instead, Open Road attempted to redirect the Courtâs attention to Paragraph 1 and to the Rosetta Books precedent, which, as discussed above, did not directly address the issues present here. To the extent that Open Road did grapple with the implications of Paragraph 20, its strategy has been to attempt to rewrite the provision. Specifically, Open Road entreats the Court to disregard the âand/orâ language, thereby converting the latter clause from an
Defendantâs request to rewrite the contract is at variance with the generally-applied âheavy presumption that a deliberately prepared and executed written instrument manifest[s] the true intention of the parties,â and is further unsupported by the âcorrespondingly high order of evidence [that] is required to overcome that presumption ... showing] in no uncertain terms, not only that mistake or fraud exists, but exactly what was really agreed upon between the parties.â Chimart Assocs. v. Paul, 66 N.Y.2d 570, 498 N.Y.S.2d 344, 489 N.E.2d 231, 234 (1986) (internal quotations and citations omitted). The case law is clear that âthe burden of justifying a departure from the most reasonable reading of the contract should fall on the party advocating the departure.â Boosey, 145 F.3d at 488. Notwithstanding its arguments to the contrary, Open Road has failed to carry that burden. Def. Opp. at 8-14. The request is particularly unwarranted in a new use context, where, given the age of the contract at issue, extrinsic evidence is scarce and thus âthe parties or assignees of the contract should be entitled to rely on the words of the contract.â Id.
Also undermining defendantâs argument is the plain fact that the language of Paragraph 20 was inserted verbatim into the contract at the request of Ms. Georgeâs agent, a circumstance that defendant tries in vain to reconcile with its litigation position. PL Opp. at 8; Def. Opp. at 13-14. As a matter of neutral contract interpretation, âNew York follows the well established contra proferentem principle â which requires that equivocal contract provisions are generally to be construed against the drafter.â McCarthy v. Am. Intâl Grp., Inc., 283 F.3d 121, 124 (2d Cir.2002). Here, we need not even resort to the use of contra proferentem, because the âand/orâ language is not, in the context of this contract, equivocal.
Finally, it is worth noting that, even if the Court were to adopt Open Roadâs deletion of the âand/orâ conjunctive, it is far from clear that this revision would support Open Roadâs overall position. Given the record before us, this Court finds it plausible that Paragraph 20âs âstorage and retrieval and information systemsâ could, pursuant to new use precedent, encompass todayâs e-book technology. Nevertheless, having found no basis for removing the âand/orâ language, we deem it unnecessary to undertake this inquiry or adjudicate the merits of the copious, competing expert material presented on the precise definitional scope of âstorage and retrieval and information systems.â
C. Other Contract-Based Arguments
In addition to the arguments discussed supra, Open Road makes three other arguments involving interpretation of the contractual language, which the Court has considered and found unpersuasive. First,
Secondly, Open Road argues that Paragraph 20 is missing an essential contractual term&emdash;to wit, a royalty rate&emdash;rendering it unenforceable for lack of t