Channing Bete Co. v. Greenberg

• Decision Date: 05 January 2022
• Docket Number: 3:19-cv-30032-MGM
• Court: U.S. District Court — District of Massachusetts
• Parties: CHANNING BETE COMPANY, INC., Plaintiff, v. MARK T. GREENBERG and PATHS EDUCATION WORLDWIDE, LLC Defendants. MARK T. GREENBERG and PATHS EDUCATION WORLDWIDE, LLC, Defendants and Third-Party Plaintiffs v. PATHS PROGRAM HOLDING, LLC AZ, PATHS PROGRAM, LLC AZ, LEARNINGSEL, LLC AZ, PATHS PROGRAM HOLDING, LLC MA, and LEARNINGSEL, LLC NJ, Third-Party Defendants.

CHANNING BETE COMPANY, INC., Plaintiff,
v.
MARK T. GREENBERG and PATHS EDUCATION WORLDWIDE, LLC Defendants.

MARK T. GREENBERG and PATHS EDUCATION WORLDWIDE, LLC, Defendants and Third-Party Plaintiffs
v.
PATHS PROGRAM HOLDING, LLC AZ, PATHS PROGRAM, LLC AZ, LEARNINGSEL, LLC AZ, PATHS PROGRAM HOLDING, LLC MA, and LEARNINGSEL, LLC NJ, Third-Party Defendants.

No. 3:19-cv-30032-MGM

United States District Court, D. Massachusetts

January 5, 2022

MEMORANDUM AND ORDER REGARDING THIRD-PARTY PLAINTIFF MARK T. GREENBERG'S MOTION FOR LEAVE TO FILE A SECOND AMENDED THIRD-PARTY COMPLAINT (Dkt. No. 127)

KATHERINE A. ROBERTSON U.S. MAGISTRATE JUDGE

I. Introduction

Third-party plaintiff Mark T. Greenberg, Ph.D. ("Dr. Greenberg") developed and copyrighted the PATHS curriculum for the social and emotional development of children. Dr. Greenberg granted the Channing Bete Co., Inc. n/k/a CBC Wind-up, Inc. (hereinafter, "CBC") eight exclusive licenses to publish and distribute various iterations of the PATHS curriculum ("PATHS Licenses"). In his first amended complaint ("FAC"), Dr. Greenberg brought suit

1

against third-party defendants PATHS Program Holding, LLC (AZ), PATHS Program, LLC (AZ), LearningSEL, LLC (AZ), PATHS Program Holding, LLC (MA), and LearningSEL, LLC (NJ) (collectively, "PPH") alleging copyright infringement based on CBC's transfer of the PATHS Licenses to PPH without his consent. Dr. Greenberg now moves to amend the FAC following settlement with CBC that resolved the legality of its transfers of the PATHS Licenses to PPH (Dkt. No. 127). The case is referred to the undersigned for pretrial management (Dkt. No. 111). For the reasons that follow, Dr. Greenberg's motion is ALLOWED in its entirety.

II. Background

A. Facts Alleged in the Proposed Second Amended Complaint^[1]

Dr. Greenberg is a developmental psychologist who is a renowned expert on the social and emotional development of children (Dkt. No. 127-1 ¶¶ 52-61). According to the proposed second amended complaint ("PSAC"), Dr. Greenberg is the joint author and owner of approximately thirty-two PATHS curriculum copyrighted works (hereinafter, "PATHS Curriculum Copyrighted Works") (Dkt. No. 127-1 ¶¶ 19-50, 101).

1. The Licenses Granted by Dr. Greenberg and Dr. Carol Kusche

Because PPH alleges that amendment of the complaint would be futile, the facts of the Second Amended Complaint are recited in the light most favorable to Dr. Greenberg, the non-moving party. See Libby v. Park, Marion & Vernon Sts. Operating Co., 278 F.Supp.3d 501, 504-05 (D. Mass. 2017).

2

In the early 1980s, Drs. Greenberg and Carol Kusche co-authored the original PATHS curriculum (Dkt. No. 127-1 ¶ 62). On May 14, 1993, Drs. Greenberg and Kusche granted Development Research and Programs, Inc. ("DRP") an exclusive license to publish and distribute the PATHS Curriculum Kit, which included parts of the PATHS curriculum, and a future license to publish and distribute the PATHS curriculum developed by Drs. Greenberg and Kusche for after-school programs and daycare providers ("the PATHS Kit License") (Dkt. No. 127-1 ¶ 64; Dkt. No. 134-1 at 2-4). In return for the PATHS Kit License, DRP agreed to pay Dr. Greenberg royalties based on "the gross revenue from the sales of the PATHS Curriculum Kit" (Dkt. No. 127-1 ¶ 66; Dkt. No. 134-1 ¶ 3).

DRP merged into CBC on December 31, 2001 (Dkt. No. 127-1 ¶¶ 67, 95). On November 16, 2004, Drs. Greenberg and Kusche amended the PATHS Kit License by granting CBC the exclusive license to translate the parent components of the PATHS Kit License into Spanish and to publish and distribute the translated material ("PATHS Kit Spanish License") (Dkt. No. 127-1 ¶¶ 68, 106; Dkt. No. 134-2 ¶ 1). The other terms of the PATHS Kit License were to remain in full force and effect unless CBC provided the components free of charge (Dkt. No. 127-1 ¶ 69; Dkt. No. 134-2 ¶¶ 2, 3). In that event, CBC would not pay royalties based on gross sales (Dkt. No. 127-1 ¶ 69; Dkt. No. 134-2 ¶ 2).

On April 24, 2006, the second amendment to the PATHS Kit License granted CBC the "co-exclusive (with the Authors) right to grant permission to third parties to translate, publish, and distribute" the PATHS Curriculum in any foreign language ("PATHS Kit Translation License") (Dkt. No. 127-1 ¶¶ 70, 107; Dkt. No. 134-3 ¶ 1). The PATHS Kit Translation License required the licensee to pay Dr. Greenberg royalties as calculated under the terms of PATHS Kit

3

License unless CBC charged a third party a flat fee for permission to translate and distribute the curriculum (Dkt. No. 127-1 ¶72; Dkt. No. 134-3 ¶ 2).

On September 21, 2009, Dr. Greenberg, Dr. Kusche, and CBC executed a third amendment to the PATHS Kit License (Dkt. No. 134-4 at 2-5). The third amendment stated that the PATHS® [Kit] License granted CBC "the exclusive right to publish and distribute any modifications to PATHS®" (Dkt. No. 127-1 ¶ 73; Dkt. No. 134-4 at 2). By the third amendment, Drs. Greenberg and Kusche granted CBC "a perpetual and worldwide license to use, modify, reproduce and prepare derivative works of the PATHS® curriculum for purposes of creating 'grade level' versions of the PATHS® curriculum" ("Grades 1-3 PATHS License") (Dkt. No. 127-1 ¶¶ 73, 111; Dkt. No. 134-4 ¶ 1). CBC would pay Dr. Greenberg royalties based on "gross revenue from the sales of the Grades 1-3 PATHS curriculum and materials" (Dkt. No. 127-1 ¶ 74; Dkt. No. 134-4 ¶ 10). The third amendment further specified that "[e]xcept as specifically modified by this Third Amendment, all terms of the PATHS® [Kit] License and its subsequent amendments including [Dr. Kusche's] and [Dr. Greenberg's] grant of a perpetual license to publish and distribute modified versions of the PATHS® curriculum to [CBC], and their promises not to compete with [CBC], shall remain in full force and effect and shall apply to [the Grades 1-3 PATHS License]" (Dkt. No. 127-1 ¶ 75; Dkt. No. 134-4 ¶ 16).

The fourth amendment to the PATHS Kit License, which was executed on November 8, 2010, granted CBC "a perpetual and worldwide license to use, modify, reproduce and prepare derivative works of the PATHS® curriculum for purposes of creating" fourth and fifth grade level versions of the PATHS curriculum ("the Grades 4 and 5 PATHS License") (Dkt. No. 127-1 ¶¶ 76, 111; Dkt. No. 134-5 ¶ 1). The license provided the formula for the payment of royalties to Dr. Greenberg based on "gross revenue from the sales" and contained the same language as the

4

third amendment concerning the "full force and effect" of the PATHS Kit License (Dkt. No. 127-1 ¶¶ 77, 78; Dkt. No. 134-5 ¶¶ 11, 16).

2. The Licenses Granted by Drs. Greenberg, Kusche, Celene Domitrovich, and Rebecca Cortes

Drs. Greenberg, Kusche, Domitrovich, and Cortes collaborated to develop the PATHS curriculum for preschool students (Dkt. No. 127-1 ¶ 79). On July 1, 2004, they granted CBC "the exclusive license to publish and distribute the PATHS preschool curriculum including but not limited to the PATHS Preschool Curriculum Kit, as shown in Exhibit A or as subsequently modified by Authors, such rights to apply both nationally and internationally in perpetuity" ("PATHS Preschool License") (Dkt. No. 127-1 ¶ 80; Dkt. No. 134-6 at 2). The license provided for the calculation of royalty payments to Dr. Greenberg based on a percentage of "the gross revenue from sales of the PATHS Preschool Curriculum Kit" (Dkt. No. 127-1 ¶ 82; Dkt. No. 134-6 ¶ 2).

On November 16, 2004, Drs. Greenberg, Kusche, Domitrovich, and Cortes, and CBC amended the PATHS Preschool License to permit CBC to translate into Spanish, publish, and distribute the PATHS Preschool parents' components (the "PATHS Preschool Spanish Translation License") (Dkt. No. 127-1 ¶¶ 83, 108; Dkt. No. 134-7 ¶ 1). All other terms of the PATHS Preschool License were to remain in full force and effect unless CBC did not charge its customers for the parents' components (Dkt. No. 127-1 ¶ 84; Dkt. No. 134-7 ¶¶ 2, 3). If that occurred, CBC would not pay royalties (Dkt. No. 127-1 ¶ 84; Dkt. No. 134-7 ¶ 2).

By the second amendment to the PATHS Preschool License, which was executed on April 24, 2006, Drs. Greenberg, Kusche, Domitrovich, and Cortes granted CBC "the co-exclusive (with the Authors) right to grant permission to third parties to translate, publish and distribute the PATHS Preschool curriculum, . . . in any foreign language both nationally and

5

internationally and in perpetuity" (the "PATHS Preschool Translation License") (Dkt. No. 127-1 ¶¶ 86, 109; Dkt. No. 134-8 ¶ 1). The other provisions of the PATHS Preschool License were to remain in full force and effect, including the calculation of royalty payments to Dr. Greenberg (Dkt. No. 127-1 ¶¶ 87, 88; Dkt. No. 134-8 ¶¶ 2, 3).

3. CBC's Transfer of the PATHS Licenses to PPH

On May 30, 2019, CBC assigned its rights in the PATHS Licenses to PATHS Program Holding, LLC MA ("PPH MA") (Dkt. No. 127-1 ¶ 92). The next day, CBC transferred its membership interest in PPH MA to LearningSEL, LLC N.J. ("LSEL NJ") (Dkt. No. 127-1 ¶ 93). Anna-Lisa Mackey was the manager of LSEL N.J. (Dkt. No. 127-1 ¶ 6). According to the records of the Massachusetts Secretary of State, Jonathan Bete and Michael Bete were removed as the managers of PPH MA and Ms. Mackey was appointed as the sole manager (Dkt. No. 127-1 ¶ 96). PATHS Program LLC AZ ("PP AZ") was formed in June 2019 with an Arizona address and with Ms. Mackey as its member and manager (Dkt. No. 127-1 ¶¶ 3, 94). On January 1, 2020, PATHS Program Holding LLC ("PPH AZ") and LearningSEL, LLC AZ ("LSEL AZ") were incorporated in Arizona (Dkt. No. 127-1 ¶¶ 97, 98). Ms. Mackey is listed as the sole manager and member of both entities (Dkt. No. 127-1 ¶¶ 2, 4, 97, 98). According to the complaint, PPH MA was dissolved in January 2020 (Dkt. No. 127-1 ¶ 99). The allegations in the PSAC are based on PPH's alleged actions after it acquired the PATHS Licenses to...