Smith v. Barnesandnoble.com, LLC

• Decision Date: 06 October 2016
• Docket Number: August Term, 2015,Docket No. 15–3508
• Citation: 839 F.3d 163,120 U.S.P.Q.2d 1316
• Parties: Cheryl Smith, Plaintiff–Appellant, v. Barnesandnoble.com, LLC,Defendant–Appellee.
• Court: U.S. Court of Appeals — Second Circuit

839 F.3d 163

120 U.S.P.Q.2d 1316

Cheryl Smith, Plaintiff–Appellant,

v.Barnesandnoble.com, LLC,¹ Defendant–Appellee.

Docket No. 15–3508

August Term, 2015

United States Court of Appeals, Second Circuit.

Argued: May 20, 2016

Decided: October 6, 2016

Carlos A. Leyva, Digital Business Law Group, P.A., Largo, FL, for Appellant .

ELIZABETH ROGERS BRANNEN, Stris & Maher LLP, Los Angeles, CA (with Peter K. Stris, Brendan S. Maher, Dana Berkowitz, and Victor O'Connell on the brief), for Appellee .

Before: KEARSE, WINTER, and JACOBS, Circuit Judges.

DENNIS JACOBS

, Circuit Judge:

Plaintiff Cheryl Smith appeals from the judgment of the United States District Court for the Southern District of New York (Carter, J.), dismissing her complaint on summary judgment. Smith alleged direct and contributory copyright infringement by defendant Barnesandnoble.com, LLC (“Barnes & Noble” or “defendant”). The defendant, under license, uploads books and book samples to digital “lockers” that the defendant maintains for its individual customers. When the license granted by Smith was terminated, the defendant did not delete a sample of Smith's book. Because the allegedly infringing conduct was authorized by the contracts at issue, we affirm the district court.

BACKGROUND

The plaintiff is the widow of Louis K. Smith, who authored and copyrighted a book entitled The Hardscrabble Zone(“Hardscrabble”). In 2009, Mr. Smith contracted with Smashwords, Inc. (“Smashwords”), an online ebook distributor, to market his book. One relevant term of the agreement provided:

6d. Promotional Rights. Smashwords shall have the right to distribute samples of the Work in any form of media, including printed media, in order to promote (a) the author or author's Work and/or (b) the Smashwords service. These samples will be licensed for free, non-commercial use, duplication and sharing, and will comply with the sample percentage authorized by the Author.

App'x at 28. The agreement contemplated robust rights in digital samples: it recognized that “uninhibited sampling and sharing” had the potential to “dramatically increase” an author's “total audience and sales opportunities.” App'x at 30. At the same time, the contract provided that end-users who acquired a “free work” (defined to include “sample works”) had a license to “duplicate, share and reproduce” the sample, but only for “non-commercial purposes” and only “during the time the price is set at zero.” App'x at 29. While these arrangements contemplate that a customer's right to share and duplicate a free sample could be terminated, the agreement did not provide that a customer's right to use a validly obtained sample (or the entire work) would terminate, even if the entire distribution agreement was canceled.² The agreement gave notice that “Smashwords does not publish works containing digital rights management schemes that limit the customer's ability to consume Author's Work as they see fit.” App'x at 30.

In accordance with this contract (and with Mr. Smith's permission), Smashwords provided Hardscrabble for sale and sampling to its retail partners, including Barnes & Noble, which listed the book for sale on bn.com and made free samples available.

Apparently disappointed with the sales figures (none were sold), Mr. Smith terminated his agreement with Smashwords in October 2011. Despite the termination, the book erroneously remained listed by Barnes & Noble on bn.com. The book was de-listed on April 20, 2012, and the dispositive issue is whether any customers acquired a sample while it was listed without a distribution agreement in place. Prior to termination of the agreement, a single customer of Barnes & Noble acquired a digital sample of Mr. Smith's book. No other customer bought a copy or obtained a sample, before or after the distribution agreement was cancelled.

The sample was stored through Barnes & Noble's digital locker system. When a Barnes & Noble customer downloads a free sample (or purchases an ebook) the content is stored through a digital locker associated with the customer's account. The system, effectively the user's bookshelf for digital products, is cloud-based. Cloud computing uses remote servers and networks for data storage which may be accessed using web-enabled devices, such as computers, tablets, or smart phones.

There is no dispute that the single customer's initial access to the sample was authorized under the contract and occurred before the agreement was terminated. After Mr. Smith cancelled the agreement with Smashwords, that same customer twice accessed the sample in his or her cloud-based account. Those two instances of access form the basis of the plaintiff's claim that Barnes & Noble infringed the copyright. There is no record evidence that any other customer accessed a sample after the agreement was cancelled; and there is no record evidence that any person ever purchased the entire work from Barnes & Noble. The plaintiff's theory of liability is that Barnes & Noble was no longer permitted to provide its customers with access to the sample after the agreement was terminated.

DISCUSSION

I

We review a grant of summary judgment de novo. Authors Guild, Inc. v. HathiTrust, 755 F.3d 87, 93–94 (2d Cir. 2014)

. The moving party bears the burden to demonstrate the absence of any genuine issues of material fact; and we “view the evidence in the light most favorable to the party opposing summary judgment, [ ] draw all reasonable inferences in favor of that party, and [ ] eschew credibility assessments.” Amnesty Am. v. Town of W. Hartford, 361 F.3d 113, 122 (2d Cir. 2004) (internal quotation marks omitted).

The district court granted summary judgment on the basis that the conduct at issue did not amount to direct or contributory infringement under Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121, 131–33 (2d Cir. 2008)

, and the Sony–Betamax rule, see Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 442, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). We decline to decide the infringement issue in the novel context of cloud storage, particularly given the sparse facts of the case. Instead we affirm on an alternative ground. See Name.Space, Inc. v. Network Solutions, Inc., 202 F.3d 573, 584 (2d Cir. 2000) ; Shumway v. United Parcel Serv., Inc., 118 F.3d 60, 63 (2d Cir. 1997) (“It is beyond cavil that an appellate court may affirm the judgment of the district court on any ground appearing in the record.”).

We conclude that the conduct at issue was authorized by the relevant contracts between the parties. See Revson v. Cinque & Cinque, P.C., 221 F.3d 59, 66 (2d Cir. 2000)

(“Under New York law, the meaning of a contract that is unambiguous is a question of law for the court to decide.”).

II

A claim of direct copyright infringement requires proof that (1) the plaintiff had a valid copyright in the work, and (2) the defendant infringed the copyright by violating one of the exclusive rights that 17 U.S.C. § 106

bestows upon the copyright holder. Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 260 (2d Cir. 2005). There is no dispute in this case that the plaintiff has a valid copyright, but the plaintiff must also be able to demonstrate that the copying was unauthorized. See Laureyssens v. Idea Grp., Inc., 964 F.2d 131, 139 (2d Cir. 1992)

. Where, as here, the existence of the license is undisputed, and the only contested issue is its scope, the copyright owner bears the burden of proving that the defendant's conduct was unauthorized under the license. See Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998) ; Bourne v. Walt Disney Co., 68 F.3d 621, 631 (2d Cir. 1995).

The plaintiff had a distribution agreement that explicitly permitted the distribution of samples as promotional material. The plaintiff concedes that digital sampling as a method of distribution was permitted under the...