Great Minds v. Office Depot, Inc.

• Decision Date: 27 December 2019
• Docket Number: No. 18-55331,18-55331
• Parties: GREAT MINDS, a non-profit organization, Plaintiff-Appellant, v. OFFICE DEPOT, INC., a Delaware corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

945 F.3d 1106

GREAT MINDS, a non-profit organization, Plaintiff-Appellant,

v.OFFICE DEPOT, INC., a Delaware corporation, Defendant-Appellee.

No. 18-55331

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 8, 2019 Pasadena, California

Filed December 27, 2019

Christopher J. Sprigman (argued), Simpson Thatcher & Bartlett LLP, New York, New York; Jeffrey E. Ostrow, Simpson Thatcher & Bartlett LLP, Palo Alto, California; Rhett O. Millsaps, II, Law Office of Rhett O. Millsaps II, New York, New York; for Plaintiff-Appellant.

Jennifer A. Golinveaux (argued), Winston & Strawn LLP, San Francisco, California; Diana Hughes Leiden, Winston & Strawn LLP, Los Angeles, California; for Defendant-Appellee.

Andrew M. Gass (argued) and Elizabeth H. Yandell, Latham & Watkins LLP, San Francisco, California; Diane M. Peters, Creative Commons Corp., Mountain View, California; for Amicus Curiae Creative Commons Corporation.

Before: Jerome Farris and M. Margaret McKeown, Circuit Judges, and Virginia M. Kendall,^* District Judge.

FARRIS, Circuit Judge:

Plaintiff-Appellant Great Minds, publisher of math curriculum Eureka Math, appeals from the January 18, 2018 dismissal under Fed. R. Civ. P. 12(b)(6) of its copyright infringement claim against Office Depot, Inc. in the United States District Court for the Central District of California (Walter, J.). We AFFIRM. Office Depot did not itself become a licensee of the "Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International Public License" (and become bound by its terms) or otherwise infringe Great Minds' copyright by making copies of Eureka Math materials for a profit on behalf of school and school district licensees.

BACKGROUND

Great Minds is an education-based non-profit organization. It created and copyrighted a math curriculum called "Eureka Math" for grades PreK-12, which it publishes and sells commercially in print form nationwide. It also releases digital files of Eureka Math online for free download to any member of the public under a limited public copyright license template produced by Creative Commons.¹ Under the License, "[e]very recipient of [Eureka Math] automatically receives an offer from [Great Minds] to exercise the Licensed Rights." License § 2(a)(5)(A).

The License grants "the individual or entity exercising the Licensed Rights" a "worldwide, royalty-free, non-sublicensable, non-exclusive, irrevocable license to ... reproduce and Share [Eureka Math], in whole or in part, for NonCommercial purposes only ...." License §§ 1(n), 2(a)(1). The License defines "Share" to mean, in pertinent part, "to provide material to the public by any means or process that requires permission under the Licensed Rights, such as reproduction, public display, public performance, distribution, dissemination, communication, or importation, ..." License § 1(l). "NonCommercial" means, in pertinent part, "not primarily intended for or directed towards commercial advantage or monetary compensation." License § 1(k).

But § 2(b)(3) of the License reserves Great Minds' right to collect royalties for commercial uses of Eureka Math:

To the extent possible, the Licensor waives any right to collect royalties from [the licensee] for the exercise of [these NonCommercial] Licensed Rights, whether directly or through a collecting society under any voluntary or waivable statutory or compulsory licensing scheme. In all other cases the Licensor expressly reserves any right to collect such royalties, including when [Eureka Math] is used other than for NonCommercial purposes.

If any individual or entity exercising the licensed rights "fail[s] to comply with [the License], [their] rights under [the License] terminate automatically." License § 6(a). Great Minds claims that this applies equally to every individual or entity that possesses Eureka Math materials, including all "downstream recipients."

Office Depot provides copy services on request and behalf of public schools and school districts. It charges a fee for those services, and at times it makes copies of Eureka Math materials for the schools' use. It does not sell those copies to the public in Office Depot stores. Great Minds claims, and Office Depot does not dispute, that Office Depot employs field representatives to advertise its copying services to schools and school districts that use Eureka Math. In 2015, when Great Minds discovered that Office Depot was reproducing Eureka Math on behalf of the schools, the parties entered into a separate licensing agreement, whereby Great Minds permitted Office Depot to make the copies in exchange for royalty payments. After the Eastern District of New York ruling in Great Minds v. FedEx Office and Print Servs., Inc. , No. 16-CV-1462 (DRH)(ARL), 2017 WL 744574, at *4 (E.D.N.Y. Feb. 24, 2017), aff'd , 886 F.3d 91 (2d Cir. 2018), which held that the License could not "be read to preclude a licensee from hiring someone to make copies of [Eureka Math] so the licensee can use them for a ‘noncommercial’ purpose," Office Depot terminated the royalty agreement.²

As a result, on October 11, 2017, Great Minds filed suit against Office Depot in district court, alleging claims of copyright infringement, 17 U.S.C. §§ 101 et seq. , and breach of contract. Great Minds does not dispute that the school districts' own use and distribution of Eureka Math materials is "NonCommercial" and permitted by the License. Rather, it alleges that Office Depot was "deliberately and willfully infringing [Great Minds' copyrights] by actively soliciting customers for commercial reproduction of Eureka Math," and "by reproducing and distributing Eureka Math for profit without Great Minds' authorization." Great Minds asserts that the "NonCommercial" restriction in the License requires commercial print shops like Office Depot to "negotiate a license and pay a royalty to Great Minds if they wish to use or reproduce Eureka Math for commercial purposes—i.e. , for their own profit."

On December 6, 2017, Office Depot filed a motion to dismiss the copyright infringement claim, which the district court granted without leave to amend. Great Minds v. Office Depot, Inc. , No. CV 17-7435-JFW (EX), 2018 WL 4945643, at *4–5 (C.D. Cal. Jan. 18, 2018). The court found that the License did not prohibit the school districts from employing third parties like Office Depot to make copies of the Eureka Math curriculum on their behalf. Id. This appeal followed.

DISCUSSION

I. MOTION TO DISMISS

We review the district court's Rule 12(b)(6) dismissal de novo . UMG Recordings, Inc. v. Shelter Capital Partners LLC , 718 F.3d 1006, 1014 (9th Cir. 2013). To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). If the Court finds that the plaintiff did not allege sufficient facts "to raise a right to relief above the speculative level" and support a cognizable legal theory, it may dismiss the complaint as a matter of law. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. At this stage, the Court must take all well-pleaded allegations of material fact as true and construe them in the light most favorable to the non-moving party.

Malibu Textiles, Inc. v. Label Lane Int'l, Inc. , 922 F.3d 946, 951 (9th Cir. 2019).

A valid claim for copyright infringement requires "(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original." Feist Publ'ns, Inc. v. Rural Tel. Serv. Co. , 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991) (citing Harper & Row Publishers, Inc. v. Nation Enters. , 471 U.S. 539, 548, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985) ). The claim fails if the challenged use of the work falls within the scope of a valid license. See S.O.S., Inc. v. Payday, Inc. , 886 F.2d 1081, 1087–88 (9th Cir. 1989). A copyright license "must be construed in accordance with the purposes underlying federal copyright law." Id. at 1088 (citing Cohen v. Paramount Pictures Corp. , 845 F.2d 851, 854 (9th Cir. 1988) ). Federal courts "rely on state law to provide the canons of contractual construction, but only to the extent such rules do not interfere with federal copyright law or policy." Id. (citing Fantastic Fakes, Inc. v. Pickwick Int'l, Inc. , 661 F.2d 479, 482–83 (5th Cir. 1981) ).

Here, the parties agree that California law applies to the construction of the License. Great Minds , 2018 WL 4945643, at *4 n.7. "Under California law, the interpretation of contract language is a question of law." Atel Fin. Corp. v. Quaker Coal Co. , 321 F.3d 924, 925–26 (9th Cir. 2003). "[T]he terms of a contract must be construed in a manner that takes into account the context of the language and is consistent with the contract as a whole." Actuate Corp. v. Int'l Bus. Machs. Corp. , No. C-09-05892 JCS, 2010 WL 1340519, at *5 (N.D. Cal. Apr. 5, 2010) (citations omitted); Cal. Civ. Code § 1641.

There is no dispute that the school and school district licensees' copying of Great Minds' material is permitted under the License. There also seems to be no dispute that if Office Depot were itself a licensee, commercial copying of Great Minds' material would fall outside the scope of the License and infringe Great Minds' copyright. The issue we consider then is whether the school and school district licensees' exercise of their rights under the License through the services provided by Office Depot results in Office Depot becoming a licensee. We hold that it does not. A licensee's hiring of a third-party copy service to reproduce licensed material strictly for the licensee's own permitted use does not turn that third party into a licensee that is bound to the License terms. See Great Minds v. Fedex Office and Print Servs., Inc. , 886 F.3d 91, 96 (2d Cir. 2018) ("Great Minds' licensees...