Case Name: Spinelli v. National Football League – Second Circuit
Date of Opinion: September 11, 2018
Opinion By: Judge Lynch
Beginning in 2009, the Associated Press (AP) has been the exclusive licensing agent for National Football League (NFL) league and team intellectual property, including photographs containing NFL logos and other intellectual property. Under the original 2009 licensing agreement, AP had broad authority to distribute commercial licenses for photographs containing NFL intellectual property. Plaintiffs, seven independent photographers, entered into “contributor agreements” with the AP to obtain access to NFL events and licenses for the intellectual property contained in photographs taken at NFL events. In essence, under the contributor agreements, the photographers retained ownership of the photographs and the right to sue for infringement, but granted the AP broad license to use and license the use of the photographs. In return, plaintiffs were to be paid royalties for certain uses.
The 2009 licensing agreement between the AP and the NFL included a broad complimentary license to the NFL for “AP-Owned Photos,” but did not grant to the NFL the same broad license for photographs owned by non-AP contributing photographers. A renewed licensing agreement executed in 2012, however, purported to amend the complimentary license granted to the NFL to include the right “to make Editorial use and/or marketing and charitable uses of . . . ‘AP-Contributor’ Photos’” in addition to AP-Owned Photos.
Thereafter, in October 2013, the seven non-AP contributing sports photographers brought suit in the United States District Court for the Southern District of New York against the AP, the NFL and NFL-affiliated teams, and Replay Photos, which sells NFL-related photographs online. Plaintiffs alleged that the NFL and Replay Photos had been extensively using their photographs in promotional and commercial materials without compensating them, and that the AP unlawfully granted the NFL a complimentary license with respect to photographs owned by them in the 2012 renewed licensing agreement without their knowledge or consent. After the defendants successfully moved to dismiss, plaintiffs amended their complaint asserting claims for copyright infringement, breach of implied covenant of faith and fair dealing, unconscionability, fraud, and Sherman Act violations. Defendants again moved to dismiss and the District Court ultimately dismissed all of the claims.
On plaintiffs’ appeal, the United States Court of Appeals for the Second Circuit vacated the dismissal of several of the claims. As to the NFL’s use of the photographs in the 2009-2012 period, the Second Circuit found that plaintiffs’ adequately pleaded that they held a valid copyright and the right to sue for infringement, that the AP had not granted the NFL a complimentary license to the photographers’ works for that period as the NFL knew, and that the AP could not grant the right retroactively in 2012 to excuse any infringement. As for the 2012-2015 uses of the works, the court found that plaintiffs’ allegations raised at least a plausible inference that the contributor agreements limited the AP’s ability to grant a complimentary license to the NFL or otherwise sublicense the photographs to third parties in ways that would create an exception to the minimum royalty requirement. The court likewise found that the plaintiffs had alleged sufficient facts to successfully state a copyright infringement claim against Replay Photos because, under the agreement’s plain terms, the AP sublicense to Replay did not cover plaintiff’s photographs. The court also found that plaintiffs successfully pleaded secondary liability claims against the NFL with respect to Replay’s infringement because the NFL was alleged to have earned substantial revenue from the use of plaintiffs’ photographs on Replay’s website.
The Second Circuit went on to vacate dismissal of plaintiffs’ claim for breach of the implied covenant of good faith and fair dealing, finding plaintiffs plausibly alleged that the complimentary license being relied on by the defendants “at least implicitly prohibit[ed] AP” from licensing plaintiffs’ photographs in a manner that yielded great benefits to the AP but little value to plaintiffs. The court further held that plaintiffs’ amended complaint adequately stated a claim for fraud because, should plaintiffs’ contract-based claims fail, plaintiffs could allege fraud based upon the allegation that AP’s representative told plaintiffs AP would not grant a complimentary license to the NFL for plaintiffs’ photographs despite knowing that the AP did, in fact, intend to permit the NFL such access.
The Second Circuit did uphold the dismissal of plaintiffs’ secondary liability claims pertaining to violations of plaintiffs’ copyrights by visitors of the NFL websites due to plaintiffs’ failure to specify instances in which visitors to the website violated their copyrights. The court also upheld the dismissal of plaintiffs’ breach of fiduciary duty claims, due to the “arms-length” nature of the transaction and the explicit contractual disclaimers of fiduciary duty in the contributor agreements, and found plaintiffs had failed to state a claim for unconscionability, having ratified the contributor agreements with knowledge of the terms objected to instead of promptly repudiating them. Lastly, the court dismissed claims of antitrust violations for plaintiffs’ failure to allege anticompetitive behavior by defendants.
To read the full opinion, please visit: http://www.ca2.uscourts.gov/decisions/isysquery/c1f70778-01ed-491b-a749-043f50bd9fa5/3/doc/17-673_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/c1f70778-01ed-491b-a749-043f50bd9fa5/3/hilite/
Summary Prepared By: Matla Garica Chavolla