Spinelli v. National Football League , 903 F.3d 185 ( 2018 )

17-0673-cv
Spinelli v. National Football League
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2017
Argued: May 1, 2018
Decided: September 11, 2018
No. 17-0673-cv
PAUL SPINELLI, SCOTT BOEHM , PAUL JASIENSKI, GEORGE NEWMAN LOWRANCE,
DAVID STLUKA, DAVID DRAPKIN, THOMAS E. WITTE,
Plaintiffs-Appellants,
— v. —
NATIONAL FOOTBALL LEAGUE, NFL VENTURES, L.P., NFL PRODUCTIONS, L.L.C.,
NFL ENTERPRISES, L.L.C., REPLAY PHOTOS, L.L.C., ASSOCIATED PRESS, NFL
PROPERTIES, LLC, ARIZONA CARDINALS HOLDINGS, INC., ATLANTA FALCONS
FOOTBALL CLUB LLC, BALTIMORE RAVENS LIMITED PARTNERSHIP, BUFFALO BILLS,
INC., PANTHERS FOOTBALL, INC., CHICAGO BEARS FOOTBALL CLUB, INC., CINCINNATI
BENGALS, INC., CLEVELAND BROWNS LLC, DALLAS COWBOYS FOOTBALL CLUB, LTD.,
DENVER BRONCOS FOOTBALL CLUB, DETROIT LIONS, INC., GREEN BAY PACKERS, INC.,
HOUSTON NFL HOLDINGS LP, INDIANAPOLIS COLTS, INC., JACKSONVILLEJAGUARS
LTD., KANSAS CITY CHIEFS FOOTBALL CLUB, INC., MIAMI DOLPHINS, LTD.,
MINNESOTA VIKINGS FOOTBALL CLUB LLC, NEW ENGLAND PATRIOTS, LP, NEW
ORLEANS LOUISIANA SAINTS, LLC, NEW YORK FOOTBALL GIANTS, INC., NEW YORK
JETS FOOTBALL CLUB, INC., OAKLAND RAIDERS LP, PHILADELPHIA EAGLES FOOTBALL
CLUB, INC., PITTSBURGH STEELERS SPORTS, INC., SAN DIEGO CHARGERS FOOTBALL
CO., SAN FRANCISCO FORTY NINERS LTD., FOOTBALL NORTHWEST LLC, RAMS
FOOTBALL CO. LLC, BUCCANEERS LIMITED PARTNERSHIP, TENNESSEE FOOTBALL,
INC., WASHINGTON FOOTBALL INC.,
Defendants-Appellees,
GETTY IMAGES (US), INC.,
Defendant.
B e f o r e:
LYNCH and DRONEY, Circuit Judges, and SESSIONS, District Judge.*
Plaintiffs-Appellants are sports photographers who make a living taking
and licensing photographs of National Football League events. They seek to
recover damages on copyright, contract, and tort theories of liability after
Defendants-Appellees allegedly exploited thousands of Plaintiffs’ photographs
without a license and without compensating Plaintiffs in any way. Plaintiffs also
bring an antitrust challenge, alleging that the NFL and Associated Press
conspired to restrain trade in the market for commercial licenses of NFL event
photographs. The United States District Court for the Southern District of New
York (Robert W. Sweet, J.) dismissed all of the claims at issue here for failure to
state a claim. We AFFIRM IN PART, VACATE IN PART, and REMAND for
further proceedings.
*
Judge William K. Sessions III, of the United States District Court for the District
of Vermont, sitting by designation.
2
KEVIN P. MCCULLOCH (Nathaniel Kleinman, on the brief), The
McCulloch Law Firm PPLC, New York, NY; William P. Ferranti,
The Ferranti Firm LLC, Portland, OR, for Plaintiffs-Appellants.
ANDREW L. DEUTSCH (Tammy Y. Duvdevani, on the brief), DLA Piper
LLP, New York, NY; Jura C. Zibas, Wilson Elser Moskowitz,
Edelman & Dicker LLP, New York, NY, for Defendants-
Appellees Associated Press and Replay Photos, LLC.
JEFFREY A. MISHKIN (Anthony J. Dreyer, Karen Hoffman Lent, Jordan
A. Feirman, on the brief), Skadden, Arps, Slate, Meagher & Flom
LLP, New York, NY, for Defendants-Appellees National Football
League, NFL Ventures, L.P., NFL Productions, L.L.C., NFL
Enterprises, L.L.C., NFL Properties, LLC, Arizona Cardinals
Holdings, Inc., Atlanta Falcons Football Club LLC, Baltimore
Ravens Limited Partnership, Buffalo Bills, Inc., Panthers
Football, Inc., Chicago Bears Football Club, Inc., Cincinnati
Bengals, Inc., Cleveland Browns LLC, Dallas Cowboys Football
Club, Ltd., Denver Broncos Football Club, Detroit Lions, Inc.,
Green Bay Packers, Inc., Houston NFL Holdings LP,
Indianapolis Colts, Inc., JacksonvilleJaguars LTD., Kansas City
Chiefs Football Club, Inc., Miami Dolphins, Ltd., Minnesota
Vikings Football Club LLC, New England Patriots, LP, New
Orleans Louisiana Saints, LLC, New York Football Giants, Inc.,
New York Jets Football Club, Inc., Oakland Raiders LP,
Philadelphia Eagles Football Club, Inc., Pittsburgh Steelers
Sports, Inc., San Diego Chargers Football Co., San Francisco
Forty Niners LTD., Football Northwest LLC, Rams Football Co.
LLC, Buccaneers Limited Partnership, Tennessee Football, Inc.,
and Washington Football Inc.
3
GERARD E. LYNCH, Circuit Judge:
Plaintiffs-Appellants are seven sports photographers who make a living
taking and licensing photographs of NFL events. Defendants-Appellees are the
National Football League, various other league entities, and its 32 constituent
teams (collectively, “the NFL”); the Associated Press (“AP”), which licenses NFL
event photographs for commercial and editorial uses; and Replay Photos, LLC,
which sells NFL photographs through an online store. Through this lawsuit,
Plaintiffs seek to recover damages on copyright, contract, and tort theories of
liability after the NFL and Replay Photos, with AP’s permission, allegedly
exploited thousands of Plaintiffs’ photographs without a license and without
compensating Plaintiffs in any way. Plaintiffs also bring an antitrust challenge,
alleging that the NFL and AP conspired to restrain trade in the market for
commercial licenses of NFL event photographs.
The United States District Court for the Southern District of New York
(Robert W. Sweet, J.) dismissed all of the claims at issue here for failure to state a
4
claim. For the reasons that follow, we AFFIRM IN PART, VACATE IN PART,
and REMAND for further proceedings.
BACKGROUND
I. The Relationships Between the Parties
Beginning in 2003, the NFL began to outsource the licensing of its pooled
intellectual property (e.g., league and team logos) to outside agencies. From 2007
to 2009, Getty Images (US), Inc., served as the NFL’s exclusive licensing agent.1
From March 2009 to present, the NFL’s exclusive licensing agent has been AP.
The agreement that the NFL reached with AP in 2009 (the “2009 AP-NFL
agreement”) was relatively straightforward. As relevant here, AP became the
exclusive agent for and distributor of commercial licenses for photographs that
contain NFL intellectual property, and guaranteed the NFL a share of the royalty
revenue that it received. AP also granted the NFL a broad complimentary license
for “AP-Owned Photos” of NFL events, i.e., photos for which AP owned the
1
Getty was named a defendant in this case, but the district court granted its
motion to compel arbitration. No claim against Getty is before us on appeal, and
references to “Defendants” in this opinion exclude Getty.
5
copyright. It did not grant such a license for “AP-Contributor Photos,” i.e., photos
that AP had the right to license, but in which a photographer not employed by
AP owned the copyright.
AP and the NFL entered a renewed agreement in April 2012 (the “2012 AP-
NFL agreement”). Although the structure of the AP-NFL relationship remained
largely the same, the new agreement departed from the prior agreement in at
least one significant way: it expanded the complimentary license granted to the
NFL to cover photographs owned by non-AP contributing photographers. The
new license provision provided as follows:
AP grants the NFL Entities . . . the right (for no
additional payment or fee) to make Editorial use and/or
marketing and charitable uses of AP-Owned Photos,
Pre-Existing AP-Owned Photos and AP-Contributor
Photos . . . . [The] Scope of Use may include . . . NFL or
Member Club driven marketing initiatives, NFL or
Member Club publishing, catalog or entertainment
projects (including, but not limited to magazines, game
programs, DVDs, and books whether produced by NFL
Entities or in conjunction with third parties) . . . press
releases, media guides, game tickets, Member Club
season ticket brochures, Member Club wall décor, and
the NFL and Member Club websites,
profootballhof.com and any other NFL or Member Club
owned or controlled website or mobile offerings. . . . AP
has or will promptly secure the rights from AP
Contributors for the NFL Entities royalty-free use of AP-
6
Contributor Photos within the Scope of Use as of April
1, 2009 . . . .
C.J.A. 74–75.2
Because photographs of NFL events inevitably contain NFL trademarks,
commercial exploitation of such photos requires a license from the NFL. In
serving as the exclusive licensing agent for the NFL marks, AP became the
gateway to the commercial NFL photography market for professional sports
photographers like Plaintiffs who wish to shoot NFL events.
Plaintiffs, therefore, entered into “contributor agreements” with AP in
order to secure access to NFL events and obtain licenses for the intellectual
property contained in the photographs taken at those events. Under their
2
The abbreviation “C.J.A.” refers to the parties’ Confidential Joint Appendix,
which was filed under seal. The materials quoted from or referenced to the C.J.A.
in this opinion concern contractual language that is integral to the dispute that is
the subject of this opinion. We see no justification for sealing those materials that
would outweigh the public’s right of access to judicial documents necessary to
understand the basis for court rulings, and accordingly, the portions of the C.J.A.
referenced in this opinion are, to that extent, unsealed. In addition, it is hereby
ORDERED that the parties consult on whether and to what extent other portions
of the C.J.A. and Defendants’ unredacted briefs should remain under seal. The
C.J.A. and the unredacted briefs will be unsealed 28 days after issuance of this
opinion absent a properly supported motion to keep specific portions of the
materials under seal.
7
contributor agreements, Plaintiffs agreed to provide their “Best Cut Photos” from
each of the events they covered, and AP agreed to use commercially reasonably
efforts to accept as many of Plaintiffs’ photographs as possible for inclusion in its
stock photo database. Plaintiffs retained “all right, title and interest in and to”
each of the photographs accepted by AP, as well as the right to sue for
infringement, J.A. 923, 925, but granted AP a broad license as follows:
Photographer hereby provides to AP a perpetual,
irrevocable, transferable, worldwide, right and license
to reproduce, edit, translate the caption of, prepare
derivative works of, publicly perform, publicly display,
load into computer memory, cache, store and otherwise
use the Final Photos and to transfer or sublicense these
rights to other entities. With respect to NFL Event
Photos taken at NFL Events for which AP directly or
indirectly arranges for Photographer to obtain a
credential, the foregoing rights shall be exclusive for so
long as the NFL (or one of its affiliates) confers to AP (or
one of its affiliates) the exclusive rights to operate as an
NFL commercial use licensing agent, and nonexclusive
thereafter. With respect to all other Event Photos and
the Archival Event Photos, the foregoing rights shall be
non-exclusive. AP shall present the Final Photos
through AP’s image database currently known as “AP
Images” (the “AP Images Platform”) and other image
databases at AP’s discretion.
8
J.A. 923.3
In turn, AP agreed to pay royalties for certain uses of Plaintiffs’ works. The
provision covering royalties reads as follows:
In exchange for the license granted in Section 4, AP shall
provide to Photographer on qualifying Event Photo
Sales (as defined below), the greater of (a) a royalty
equal to the Applicable Percentage (as defined in
Section 5.2) of Net Revenue (as defined below), and (b) a
royalty equal [to] twenty-five dollars ($25.00) per Final
Photo (each of (a) and (b), “Royalties”). . . . For purposes
of this agreement, “Event Photo Sales” shall mean only
the a la carte sale of licenses for Event Photos through
AP’s online database service, currently known as “AP
Images.” A la carte sales shall mean the sale of licenses
for individual photos for which a per-image price is
established. No Royalties or other compensation shall
be due to Photographer for the downloading of
“preview” or “thumbnail” or other promotional or
browse-quality images. For the purposes of this
Agreement, “Net Revenue” shall mean all cash actually
collected by AP from the sale of copies of a particular
Event Photo, less sales commission. . . . It is understood
that AP may offer the Event Photos for a la carte sale at
a bulk rate, which may require allocation of revenues
across photographic images from photographic images
from various photographers downloaded and/or made
available to third party licensees. In the event that Event
3
There are some differences among the individual Plaintiffs’ contributor
agreements. Because those differences are largely immaterial, we principally
quote from only one such agreement, but note differences among the agreements
when relevant.
9
Photo(s) are licensed on an a la carte basis with other
photographs at a bulk rate, the net revenue received by
AP shall be apportioned on an equal pro-rata basis
across all photos included in the a la carte bulk rate, for
purposes of determining the applicable Royalties for
each Event Photo. AP shall not use Photographer’s
Event Photos in any discounted subscription plan it
sells to its customers. Photographer shall be entitled to
no compensation for licensing or use of the Event
Photos in any of AP’s own publicity or advertising
materials.
. . . [T]he “Applicable Percentage” shall mean (a) forty
percent (40%) for NFL Event Photos taken by
Photographer that are licensed for commercial use by
AP (or its affiliates) pursuant to Section 4, (b) fifty
percent (50%) for NFL Event Photos taken by
Photographer that are licensed for editorial use by AP
(or its affiliates) pursuant to Section 4, (c) forty percent
(40%) for Event Photos (excluding NFL Event Photos)
and Archival Event Photos that are licensed for
commercial use by AP (or its affiliates) pursuant to
Section 4, and (d) fifty percent (50%) for Event Photos
(excluding NFL Event Photos) and Archival Event
Photos that are licensed for editorial use by AP (or its
affiliates) pursuant to Section 4.
J.A. 923–24. Certain of the contributor agreements do not include a minimum
payment amount on Event Photo Sales, making the royalty simply a percentage
of the cash collected on qualifying sales.
II. The Dispute Over Complimentary Licenses
10
Ever since Plaintiffs executed their contributor agreements, things have not
gone as Plaintiffs expected. The NFL has made widespread use of Plaintiffs’
photographs — publishing them in NFL promotional and editorial materials,
licensing and selling them through online photo stores, displaying them on NFL
websites, and even turning a photograph of quarterback Aaron Rodgers into a
multi-story poster promoting Super Bowl XLV — all without paying anything to
Plaintiffs. According to Plaintiffs, the NFL has committed thousands of
individual acts of copyright infringement.
The NFL has long demonstrated interest in using Plaintiffs’ photographs
for free. In 2007, Getty, hoping to secure an extension of its existing contract with
the NFL, requested that Plaintiffs allow Getty to grant “trial” licenses that would
allow the NFL to make certain complementary uses of photographs from the
2007-2008 football season for a three-month period. Plaintiffs agreed to those
short-term trial licenses, but later rejected Getty’s request that the licenses be
expanded and extended.
Given their experience with Getty, Plaintiffs raised the issue of NFL access
to contributor photos with AP after AP signed its 2009 contract with the NFL.
Before Plaintiffs signed their contributor agreements, AP represented that its
11
agreement with the NFL “did not include a complimentary license to use
contributor photos and thus the NFL was required, like any other customer, to
purchase separate licenses in order to obtain rights to use contributor photos.”
J.A. 112. Plaintiffs offered to allow the NFL to make complimentary use of their
photos in exchange for additional consideration from AP, but AP was
uninterested in such an arrangement. It explained that it “did not want or require
any exception to [the] minimum royalty requirement [in the contributor
agreements] because it intended to charge the NFL for any use of contributor
photographs in order to offset the complimentary use of AP’s wholly-owned
photos that AP already had agreed to.” J.A. 113.
Relying on those representations, and pressured by AP’s threats that if
they didn’t sign the agreement as-is they’d lose access to all 2009 NFL events, five
of the Plaintiffs signed contributor agreements in August 2009. The other two
Plaintiffs signed contributor agreements in 2011 and 2012.
In January 2012, having become aware that the NFL was making extensive
use of their photos without paying any royalties, Plaintiffs contacted the NFL.
The NFL responded that their 2009 contract with AP included an express license
permitting the NFL to make complimentary use of any NFL-related photos
12
licensed by AP, including Plaintiffs’. (As the actual text of the 2009 AP-NFL
agreement makes clear, that representation was false.)
Plaintiffs then contacted AP, which explained that the NFL was insisting
on a complimentary license to all contributor content. AP denied that it had
issued such a license. What’s more, AP told Plaintiffs that negotiations with the
NFL over renewal of the agreement between the NFL and AP were being held up
by the fact that AP did not have authority under the contributor agreements to
issue complimentary licenses for contributing photographers’ works. For that
reason, AP requested that Plaintiffs agree to “contract amendments that would
permit AP to grant the NFL limited but complimentary uses of Plaintiffs’ photo
collections,” and requested Plaintiffs’ input on the scope of a license to which all
parties could agree. J.A. 122. In their discussions with AP, Plaintiffs made clear
that they considered NFL’s current uses to be infringing; AP did not express a
different view, and even “confirmed that all of the NFL’s uses of Plaintiffs’
photos from April 2009 until April 2012 were unlicensed.” J.A. 124.
Unbeknownst to Plaintiffs, however, AP had already entered into the 2012
AP-NFL agreement before any of the discussions with Plaintiffs over contract
amendments took place. In other words, AP had already granted a
13
complimentary license to the NFL before it sought amendments to its contracts
with Plaintiffs that would permit AP to do so. Eventually, AP told Plaintiffs that
complimentary usage rights for contributor photos “were built into the [2012 AP-
NFL agreement] and were a non-negotiable mandatory element.” J.A. 124.
Plaintiffs were told they could either accept amendments to their contributor
agreements so as to permit AP to grant complimentary licenses to the NFL, or
they could opt out of their agreements and no longer shoot NFL events.
Plaintiffs did not accede to AP’s demands. And though AP’s “opt in or opt
out” offer might suggest that the contributor agreements in place did not allow
complimentary licenses, the NFL allegedly continues to use Plaintiffs’
photographs to this day without paying royalties. J.A. 124.
A similar issue arose with respect to Replay Photos, which, together with
AP, sells copies of NFL-related photographs through an online “NFL Photo
Store,” located at www.nflphotostore.nfl.com. Soon after Plaintiffs approached
AP in 2012 about the NFL’s alleged infringement, AP requested that Plaintiffs
agree to a substantially reduced royalty rate for licenses to Replay. AP presented
Plaintiffs with a proposed amendment to their contributor agreements setting
forth the reduced royalty rate in November 2012. Plaintiffs uniformly rejected it.
14
Replay went ahead and sold posters, canvases, and other copies of Plaintiffs’
photographs anyway, and neither Replay nor AP has ever paid anything to
Plaintiffs in return.
III. Procedural History
Plaintiffs filed this lawsuit in October 2013 and amended their pleading
after Defendants moved to dismiss. Defendants renewed their motions; the
district court granted them, but gave Plaintiffs the opportunity to replead.
Plaintiffs then filed a second amended complaint, asserting the claims that are
relevant here: copyright infringement, breach of the implied covenant of good
faith and fair dealing, breach of fiduciary duty, unconscionability, fraud, and
violation of sections 1 and 3 of the Sherman Act. Defendants again moved to
dismiss. The district court, largely relying on the reasoning set forth in its
decision dismissing the first amended complaint, granted the motions as to all of
Plaintiffs’ claims in the second amended complaint except the claim of
15
unconscionability; it later reconsidered and dismissed the unconscionability
claim as well. This appeal followed.
DISCUSSION
We review de novo a district court’s decision to grant a motion under
Federal Rule of Civil Procedure 12(b)(6). City of Pontiac Gen. Employees’ Ret. Sys. v.
MBIA, Inc., 637 F.3d 169, 173 (2d Cir. 2011).
On appeal, Plaintiffs argue that the district court erred in dismissing their
claims for copyright infringement, breach of implied covenant of good faith and
fair dealing, breach of fiduciary duty, unconscionability, fraud, and violation of
the antitrust laws. We consider each in turn.
I. Copyright Infringement
Plaintiffs first challenge the district court’s dismissal of their various
copyright infringement claims.
To state a claim for copyright infringement, a plaintiff must allege “both (1)
ownership of a valid copyright and (2) infringement of the copyright by the
defendant.” Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 109 (2d Cir. 2001). A
valid license to use the copyrighted work “immunizes the licensee from a charge
16
of copyright infringement, provided that the licensee uses the copyright as
agreed with the licensor.” Davis v. Blige, 505 F.3d 90, 100 (2d Cir. 2007). The
existence of a license is an affirmative defense, placing upon the party claiming a
license “the burden of coming forward with evidence” of one. Bourne v. Walt
Disney Co., 68 F.3d 621, 631 (2d Cir. 1995). By contrast, “[w]here only the scope of
the license is at issue,” it is the copyright owner’s burden to show that the
defendant’s use of a work was unauthorized. Id. Disputes involving the scope of
a license present courts with a question of contract. Id.
A person “infringes contributorily by intentionally inducing or
encouraging direct infringement, and infringes vicariously by profiting from
direct infringement while declining to exercise a right to stop or limit it.”
Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005)
(internal citation omitted). Without a showing of a direct copyright infringement,
secondary liability cannot be maintained. Id. at 930; Faulkner v. Nat'l Geographic
Enterprises Inc., 409 F.3d 26, 40 (2d Cir. 2005).
Here, Defendants do not dispute that Plaintiffs have valid copyrights in the
photographs in question or that, subject to a few exceptions discussed below, the
17
NFL and Replay used Plaintiffs’ photographs in ways that, absent a valid license,
would be considered infringing.4 Therefore, the principal dispute is over
Defendants’ various license defenses. Plaintiffs claim that Defendants are liable
for copyright infringement on the theories that (i) AP was barred under Davis v.
Blige, 505 F.3d at 104, from granting the NFL a retroactive license for the
2009–2012 period (i.e., before the 2012 AP-NFL agreement expressly granted the
NFL a sublicense to Plaintiffs’ photographs); (ii) AP had no authority under the
contributor agreements to grant complimentary licenses for the 2012–2015 period
(i.e, the period during which the 2012 AP-NFL agreement was in place); and (iii)
in any event, certain of Defendants’ uses of Plaintiffs’ images were not covered
by the licenses purportedly given and received. We agree with Plaintiffs’
contentions in part.
A. 2009–2012 Uses
4
Although AP argues that dismissal of the vicarious and contributory
infringement claims against it should be affirmed because Plaintiffs do not
plausibly plead direct copyright infringement by the NFL and Replay Photos, AP
does not contend that even if Plaintiffs plausibly allege direct infringement
against the other Defendants, the complaint nonetheless fails to state a claim for
secondary liability against AP. For this reason, insofar as we determine that the
direct infringement claims are plausibly alleged, we vacate the dismissal of the
secondary liability claims against AP.
18
The only express license purporting to cover the NFL’s uses of Plaintiffs’
photographs before the 2012 AP-NFL agreement was reached is contained in that
very agreement. Plaintiffs argue that our decision in Davis v. Blige barred AP
from granting such a retroactive license, defeating any license defense that the
NFL might have for the 2009–2012 period.
In Davis, plaintiff Sharice Davis claimed that she and a third party, Bruce
Chambliss, were co-authors of compositions used in two songs recorded by Mary
J. Blige. 505 F.3d at 94. Davis sued Blige, Bruce Miller, who co-wrote the two
allegedly infringing songs, and others involved in the songs’ production. Id.
While litigation was ongoing, Chambliss transferred his ownership interest in the
disputed compositions to Miller “effective as of the date” that the compositions
were created. Id. at 96. The defendants then moved for summary judgment on the
ground that the “written transfer agreements conveyed the copyrights [to Miller]
retroactively,” and because a copyright holder cannot sue a co-owner for
infringement, Davis’s suit was “barred against [the new owner Miller] and those
to whom [he] had licensed the disputed compositions (including Blige and the
other defendants).” Id. at 96–97.
The district court agreed, but this Court did not. Our decision vacating the
19
grant of summary judgment rested on two key principles: that the “right to
prosecute an accrued cause of action for infringement is . . . an incident of
copyright ownership,” and that a co-owner “may not convey more than he
owns.” Id. at 99. One co-owner’s retroactive license or assignment to another
party was thus invalid because it “would — if given legal effect — erase the
unauthorized use from history with the result that [the other] co-owner’s right to
sue for infringement, which accrues when the infringement first occurs, is
extinguished.” Id. at 103.
The status of the parties here may differ slightly from those in Davis, but
the reasoning of Davis leads inescapably to the same conclusion. Before the 2012
AP-NFL agreement was executed, Plaintiffs had the right to sue the NFL for
copyright infringement, and if the retroactive license AP granted in 2012 were
effective, AP would have extinguished that right. Doing so was impermissible,
irrespective of whether AP had the authority to issue a prospective license to the
NFL starting in 2009. See id. at 100 (recognizing that a copyright owner, like
Chambliss, “may grant a non-exclusive license to use the work unilaterally,”
which would permit uses that a co-owner may not have approved of and would
prevent the co-owner from claiming infringement, but holding that the existence
20
of that authority does not allow the copyright owner to achieve the same result
retroactively).
As an alternative to their failed retroactive-license argument, Defendants
contend that AP impliedly licensed the NFL’s 2009–2012 uses through its
conduct, making reliance on the express retroactive license unnecessary. That
argument comes up short as well.5
The argument fails at the threshold because Defendants did not advance
their implied-license theory before the district court. The “well-established
general rule [is] that an appellate court will not consider an issue raised for the
first time on appeal.” Mhany Mgmt., Inc. v. Cnty. of Nassau, 819 F.3d 581, 615 (2d
Cir. 2016) (internal quotation marks omitted). Although we have “discretion to
entertain new arguments where necessary to avoid a manifest injustice or where
the argument presents a question of law and there is no need for additional fact-
finding, the circumstances normally do not militate in favor of an exercise of
discretion to address new arguments on appeal where those arguments were
available to the parties below and they proffer no reason for their failure to raise
5
Even if Defendants’ implied-license defense were to succeed, Defendants would
still need to confront Plaintiffs’ argument, discussed in detail below, that the
contributor agreements barred AP from issuing any complimentary licenses.
21
the arguments below.” Id. (internal quotation marks and citations omitted).
Defendants urge us to exercise our discretion here, but fail to explain why they
raise their new theory for the first time on appeal, even though the license issue
was extensively briefed below, and the new theory concerns an affirmative
defense, which Defendants have had the burden of raising since the beginning of
this suit. Moreover, the implied-license theory inherently turns on the specific
facts of AP’s behavior, making it a poor candidate for appellate review in the first
instance.
Even if it were properly raised, we would find that Defendants’ argument
fails as a basis for dismissal of Plaintiffs’ claims at the pleading stage. Because the
existence of a license is an affirmative defense, Bourne, 68 F.3d at 631, it is a
permissible basis for dismissal only “where the facts necessary to establish the
defense are evident on the face of the complaint,” Kelly-Brown v. Winfrey, 717 F.3d
295, 308 (2d Cir. 2013). To root the defense in the complaint, Defendants rely on
Plaintiffs’ allegations that AP “allowed” the NFL to use Plaintiffs’ photographs,
which they argue are “legally equivalent to an admission that AP exercised its
broad right to sublicense under the Contributor Agreements . . . from 2009
onwards.” AP Brief 27–28; see also NFL Brief 18. But Defendants omit the
22
oppositional clause from Plaintiffs’ allegations: “[d]espite the lack of any license to
use Plaintiffs’ photos, the NFL did use (and AP did allow the NFL to use)
Plaintiffs’ photos extensively [between 2009 and 2012] and did so with AP’s full
knowledge.” J.A. 121 (emphasis added).
Other allegations are even more plainly inconsistent with the notion that,
starting in 2009, AP had already impliedly licensed the NFL to use Plaintiffs’
photographs. For instance, in 2012, Plaintiffs contacted the NFL about the alleged
infringing uses, and the NFL falsely told them that the 2009 AP-NFL agreement
“included an express license that allowed complimentary use of” Plaintiffs’
photographs. J.A. 122. Shortly thereafter, AP told Plaintiffs that the NFL, in
response to Plaintiffs’ inquiries, “was insisting on a license to use AP’s
contributor content on a complimentary basis,” and the fact that AP “did not
[yet] have the authority to grant such a license” was holding up AP’s
negotiations with the NFL. J.A. 122. When Plaintiffs resisted, AP represented that
the 2012 AP-NFL agreement required that AP allow the NFL to use contributor
content for free, and that if Plaintiffs did not agree to allow such complimentary
use, they should not sign AP’s proposed amendments to the contributor
agreements.
23
These allegations plausibly support an inference that before the 2012 AP-
NFL agreement was signed, AP had not granted the NFL a complimentary
license to Plaintiffs’ works, and the NFL knew it. In effect, the complaint
plausibly alleges that Defendants’ claim of an implied license is simply a post-
hoc rationalization meant to excuse the NFL’s infringing uses should the 2012
retroactive license be deemed invalid. We thus cannot conclude that AP’s alleged
failure to act on the NFL’s infringing uses — particularly where AP had no
authority under the contributor agreements to pursue infringement claims —
means that, as a matter of law, AP gave the NFL an implied license.
Accordingly, we vacate the dismissal of Plaintiffs’ infringement claims
against the NFL and AP insofar as they concern the NFL’s infringing uses during
the 2009–2012 period.
B. 2012–2015 Uses
Once the 2012 AP-NFL agreement expressly authorized the NFL to use
contributor photographs without paying royalties, the assessment of the NFL’s
alleged infringement changes in Defendant’s. Plaintiffs nevertheless contend that
the complimentary license was invalid because AP was not permitted to grant
such a license under the terms of the contributor agreements.
24
Under New York law, “if a contract is straightforward and unambiguous,
its interpretation presents a question of law for the court to be made without
resort to extrinsic evidence.” Postlewaite v. McGraw-Hill, Inc., 411 F.3d 63, 67 (2d
Cir. 2005) (internal quotation marks omitted). But if “the intent of the parties
can[not] be ascertained from the face of their agreement,” the contract is
ambiguous and its interpretation presents a question of fact. Id. (internal
quotation marks omitted).
The parties disagree about the correct interpretation of the contributor
agreements. Defendants argue that the agreements require payment of royalties
only on “qualifying Event Photo Sales,” which are defined as “a la carte sale[s] of
licenses for Event Photos through AP’s online database service”; “a la carte
sales,” in turn, “mean the sale[s] of licenses for individual photos for which a per-
image price is established.”6 J.A. 923. Because the agreements define “sales” by
reference to an established “per-image price,” and because the AP gave Plaintiffs
photographs away for free, the complimentary licenses were not “qualifying
6
It is possible to license photos from the AP image library at a “bulk rate,” but
that, in effect, just means the per-image prices is set differently, and royalties are
determined based on a pro-rata share of the revenue received for “all photos
included in the a la carte bulk rate” set. J.A. 923–24.
25
Event Photo Sales” triggering a royalty obligation. Therefore, Defendants
continue, because the “Event Photo Sales” clause did not require a royalty
payment, we are left with the broad licenses that Plaintiffs granted to AP, which
do not limit AP’s ability to issue complimentary licenses to use Plaintiffs’ works.
If those were the only two contract terms in play, we might agree with
Defendants. But we must give “effect and meaning . . . to every term of [a]
contract” and strive “to harmonize all of its terms.” India.Com, Inc. v. Dalal, 412
F.3d 315, 323 (2d Cir. 2005) (brackets omitted); see also Terwilliger v. Terwilliger, 206
F.3d 240, 245 (2d Cir. 2000) (“[T]he entire contract must be considered, and all
parts of it reconciled, if possible, in order to avoid an inconsistency.”).
Interpretations “that render provisions of a contract superfluous” are particularly
disfavored. Int’l Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76, 86 (2d
Cir. 2002).
Defendants’ interpretation would do just that. The contributor agreements
recognize two exceptions to AP’s obligation to pay royalties that would be
superfluous if AP could avoid all royalty obligations to Plaintiffs so long as it
does not sell Plaintiffs’ photographs on a per-image basis. One exception
provides that Plaintiffs are “entitled to no compensation for licensing or use of
26
the Event Photos in any of AP’s own publicity or advertising materials.” J.A. 924.
The other provides that no royalties are due “for the downloading of ‘preview’ or
‘thumbnail’ or other promotional or browse-quality images.” J.A. 923. Neither
AP’s own use of photos in advertising nor website visitors’ downloading of
thumbnail or preview photographs would seem to ever involve the sale of
Plaintiffs’ photos, making the two clauses unnecessary exceptions to royalty
requirements that, under Defendants’ interpretation, would already not apply.
Beyond making it challenging to harmonize the various terms of the
contributor agreements, Defendants’ interpretation is also difficult to reconcile
with the overall structure of the agreement, under which Plaintiffs grant AP
broad rights in their photographs so that AP can license the photographs to third
parties for the mutual benefit of both AP and the photographers. Yet,
Defendants’ interpretation would permit AP to license all of Plaintiffs’
photographs to anyone, not just the NFL, and avoid paying royalties to Plaintiffs,
so long as the third party compensated AP on something other than a per-image
basis. This seems manifestly at odds with what the parties intended. See Kass v.
Kass, 91 N.Y.2d 554, 566 (1998) (“[C]ourts should examine the entire contract and
consider the relation of the parties and the circumstances under which it was
27
executed. Particular words should be considered, not as if isolated from the
context, but in [] light of the obligation as a whole and the intention of the parties
as manifested thereby.”) (internal quotation marks omitted).
“Complimentary” license, moreover, is a misnomer. AP certainly
benefitted financially from the relationship it had with the NFL, and according to
the complaint, the NFL insisted on an unlimited license to use contributor
photographs as a non-negotiable term of the 2012 AP-NFL agreement. That
license was only complimentary in the sense that the NFL did not pay each and
every time it used one of Plaintiffs’ photographs. But in the integrated
negotiation over the terms of its relationship with the NFL, AP did receive value
in return for the license it granted, and its interpretation of the contributor
agreements simply allowed it to avoid sharing the wealth with Plaintiffs.
For these reasons, we find the contract ambiguous and recognize a
plausible interpretation under which the “qualifying Event Photo Sales”
provision not only imposes a royalty obligation on AP, but also limits the ways in
which AP can sublicense Plaintiffs’ photographs to third parties. And once that
ambiguity is recognized, allowing extrinsic evidence to be used “to ascertain the
meaning intended by the parties during the formation of the contract,” Alexander
28
& Alexander Servs., Inc. v. These Certain Underwriters at Lloyd’s, London, 136 F.3d 82,
86 (2d Cir. 1998), the case for Plaintiffs’ interpretation is even stronger. As
Plaintiffs’ tell it, the issue of complimentary licenses came up during contract
negotiations, and Plaintiffs even offered to allow for such licenses in exchange for
additional consideration. AP rejected that offer, explaining that it “did not want
or require any exception to [the contributor agreements’] minimum royalty
requirement because it intended to charge the NFL for any use of contributor
photographs in order to offset the complimentary use of AP’s wholly-owned
photos that AP already had agreed to.” J.A. 113. If a fact-finder ultimately credits
(as we must for purposes of a motion to dismiss) Plaintiffs’ assertions that
Plaintiffs and AP specifically negotiated over Plaintiffs’ willingness to grant the
NFL a complimentary license for their photographs, and that Plaintiffs rejected
the proposal, Defendants’ technical interpretation of contract terms that do not
directly address the issue of complimentary licenses would be difficult to sustain.
Discovery and trial will shine greater light on whether the extrinsic
evidence actually weighs in Plaintiffs’ favor, but at this stage of the case,
Plaintiffs have plausibly alleged that AP’s complimentary license to the NFL was
not permitted by the contributor agreements.
29
It is a separate question, however, whether AP simply violated a
contractual promise to pay royalties (a claim for breach of contract) or whether its
complimentary license to NFL exceeded the scope of its sublicensing authority (a
claim for copyright infringement). If the former, AP would be liable for breach of
contract, but the NFL’s license would be valid and the NFL would not be liable
for copyright infringement. If the latter, the complimentary license itself would
be invalid, and Plaintiffs would have a claim for copyright infringement against
AP for impermissibly distributing Plaintiffs’ photographs and against the NFL
for its various displays and reproductions of the photographs. See 17 U.S.C. § 106.
Typically, a copyright owner who licenses his work to another “waives his
right to sue the licensee for copyright infringement.” Graham v. James, 144 F.3d
229, 236 (2d Cir. 1998). But that rule holds true only where the defendant licensee
“uses the copyright as agreed with the licensor.” Davis, 505 F.3d at 100; see also 3
Nimmer on Copyright § 10.15 (2018) (“More generally, when a license is limited
in scope, exploitation of the copyrighted work outside the specific limits
constitutes infringement.”).
For example, we have held that where an agreement permitted the licensee
to distribute a computer program on CD-ROMs and required the licensee to pay
30
the licensor $1,000 for each new CD-ROM release and $1 dollar for each copy
sold, the licensee’s failure to pay the applicable royalties on its CD-ROM sales
constituted a breach of contract, not copyright infringement. Graham, 144 F.3d at
235–36. By contrast, where an agreement licensed CBS’s use of a journalist’s
videos and photographs in its own programming, but did not allow CBS to
sublicense the journalist’s materials, CBS’s sublicenses to other companies
exposed CBS to liability for copyright infringement. Fioranelli v. CBS Broad. Inc.,
232 F. Supp. 3d 531, 537 (S.D.N.Y. 2017); see also Kamakazi Music Corp. v. Robbins
Music Corp., 684 F.2d 228, 230 (2d Cir. 1982) (claim was for copyright
infringement, not breach of contract, where defendant published sheet music one
month after license to publish expired); Gilliam v. Am. Broad. Companies, Inc., 538
F.2d 14, 21 (2d Cir. 1976) (same where defendant made revisions to Monty
Python television program, and thus script, where license permitted script
revisions only if approved by Monty Python); Leutwyler v. Royal Hashemite Court
of Jordan, 184 F. Supp. 2d 303, 307 (S.D.N.Y. 2001) (same where defendant
published photographs outside the territory permitted by the license agreement).
The question here is more difficult than in the cases above because
Plaintiffs’ complaint is that they did not receive royalties for the NFL’s use of
31
their photographs (typically, a claim sounding in contract), but the interpretation
of the contributor agreements that favors Plaintiffs provides not that the
complimentary license to the NFL was a qualifying “Event Photo Sale” triggering
the agreements’ royalty provisions, but rather that AP was prohibited from
sublicensing Plaintiffs’ photographs in ways that would not qualify as “Event
Photo Sales.” In other words, if the ambiguous contributor agreements mean
what Plaintiffs say, then the license Plaintiffs gave to AP does not permit the
complimentary sublicense that AP gave to the NFL. Because Plaintiffs are
claiming that AP acted outside the scope of its license, they properly claim
copyright infringement, not breach of contract.7
Similarly, if the sublicense AP issued to the NFL is invalid, Plaintiffs have
alleged a viable copyright claim against the NFL. It may seem unfair to hold a
7
We in no way suggest that a plaintiff can proceed on a copyright infringement
claim simply by repackaging a claim for royalties as a claim that the alleged
infringer exceeded the scope of a licensing agreement. In most cases, a sale or
sublicense triggers a clearly applicable royalty obligation in a licensing
agreement, and the remedy is a contractual one for payment of the specific
royalty amount that the agreement provides. That is not the case here. AP gave
the NFL unfettered access to all of Plaintiffs’ photographs, and the contributor
agreements, which detail only how royalties are calculated for transactions for
which a “per-image price” is established, J.A. 923, do not spell out what Plaintiffs
would be owed if breach of contract damages were awarded.
32
sublicensee liable for copyright infringement for using a work for which the
sublicensee thought it had received a valid license. But it is without question that
the sublicensor “may not convey more than he owns,” Davis, 505 F.3d at 99, and
if a sublicensor has no right to issue a particular license, the sublicensee cannot
acquire rights in copyrighted works simply because the sublicensor did so
anyway. See Gilliam, 538 F.2d at 21 (“If the broadcast of an edited version of the
Monty Python program infringed the group’s copyright in the script,
[sublicensee] ABC may obtain no solace from the fact that editing was permitted
in the agreements between [sublicensees and the sublicensor]. . . . Since a grantor
may not convey greater rights than it owns, [the sublicensor’s] permission to
allow [ABC] to edit appears to have been a nullity.”).8
Accordingly, the district court erred in dismissing the infringement claims
relating to the NFL’s 2012–2015 uses.
C. Other Uses
A few other claims of infringement require resolution.
8
A sublicensor in AP’s position may be secondarily (and thus jointly) liable for
the sublicensee’s infringing uses, however, and the sublicensee may have
contractual claims against the sublicensor as well. Such potential claims might
allow the NFL to limit or obtain compensation for any recovery by Plaintiffs
against it.
33
First, Plaintiffs argue that the district court erred in dismissing their
infringement claims relating to online photo sales by Replay. According to
Plaintiffs, AP requested that Plaintiffs agree to license those sales at a reduced
royalty rate, and when Plaintiffs declined, Replay nevertheless sold Plaintiffs’
works without permission.
Defendants’ principal response is that Replay obtained a “sublicense by
AP” that was “broad enough to include Replay’s use of Plaintiffs’ photos.” Br. for
Defendants-Appellees The Associated Press and Replay Photos, LLC (“AP Br.”)
39. That argument fails not only because, as we have held above, Plaintiffs have
plausibly alleged that AP had no authority to grant complimentary licenses in the
first place, but also because the agreement purportedly containing the
“sublicense by AP” does not, in fact, allow for Replay’s complimentary use of
Plaintiffs’ photographs. AP’s agreement with Replay grants Replay “a license
(regarding the photographs owned by AP) and a sublicense (regarding the
photographs licensed by AP from the [NFL teams]) to market, display and sell
the AP Photographs during the Term as part of Licensed Products offered for sale
by Replay.” C.J.A. 5. The separately listed definition of “AP Photographs,” in
turn, provides that
34
“AP Photographs” means all photographs provided by
AP to REPLAY for the purpose of creating Licensed
Products to be offered for sale on the NFL Photo Store
or a Team Photo Store. “AP Photographs” include those
photographs for which AP owns the copyright and
possesses the photograph artifact, as well as those
photographs for which [an NFL team] owns the
copyright and possesses the photograph artifact and
which are licensed to AP under a written license
agreement between AP and the applicable [NFL team].
C.J.A. 2.
Under the plain language of the agreement, AP granted Replay a license
for two types of photographs: those owned by AP and those owned by an NFL
team. Because AP did not own the copyrights in Plaintiffs’ photographs at issue
here, Replay’s license defense fails.
The NFL alternatively argues that it cannot be held secondarily liable for
Replay’s infringement because the complaint asserts no secondary liability claims
against the NFL and does not allege that the NFL is involved in the operation of
the NFL Photo Store.
The NFL is correct that the complaint includes specific causes of action for
“vicarious copyright infringement” and “contributory copyright infringement,”
which are asserted only against AP, and that the cause of action for “copyright
35
infringement” alleges only that AP “infringed Plaintiffs’ copyrights by offering
copies of Plaintiffs’ photos for sale through its ‘NFL Photo Store’ that it operates
jointly with Defendant Replay Photos.” J.A. 152–54. Elsewhere in the complaint,
however, Plaintiffs allege that the NFL has “earned substantial revenue
through . . . licensing or selling (including through the NFL Photo Store and Replay
Photos) copies of photographs owned exclusively by Plaintiffs,” and the NFL
Photo Store’s website (nflphotostore.nfl.com) is contained within the NFL’s own
site. J.A. 127, 131. Moreover, the agreement between Replay and AP envisions
that the NFL will be involved in the design of the online store, and gives the NFL
“quality control approval” rights over the NFL Photo Store and the products sold
therein. C.J.A. 16.
We decline to affirm dismissal of the secondary liability claim relating to
Replay on the formalistic ground that the NFL asserts, and, in light of the
allegations and supporting documentation noted above, we conclude that the
complaint contains sufficient allegations to allow that claim to survive a motion
to dismiss.
Second, Plaintiffs argue that the NFL is liable for secondary infringement
for “encouraging and facilitating unlicensed copying and distribution of
36
Plaintiffs’ photos by visitors to [NFL] websites.” Appellants’ Br. 58. But Plaintiffs
do not allege any instances in which visitors to NFL websites violated Plaintiffs’
copyrights — for example, by publishing one of Plaintiffs’ photographs on
another website — and without any allegation of direct infringement, there is
nothing for which to hold the NFL secondarily liable. Dismissal of this particular
claim of secondary infringement was proper.
Third, Plaintiffs argue that the NFL is liable for the removal of copyright
management information (“CMI”). See 17 U.S.C. § 1202(b). The complaint
contains only passing reference to CMI, alleging that NFL.com photo galleries
allow visitors to “access large resolution copies of Plaintiffs’ photos without
appropriate copyright management information” and that the NFL “has removed
the copyright management information from Plaintiffs’ photos.” J.A. 129. The
complaint does not actually identify any instance in which CMI was removed or
even make clear what specific type of CMI is at issue. The portion of the
complaint that mentions CMI refers to an exhibit that includes NFL.com
screenshots, and one photograph therein is attributed only to AP, not an
individual photographer. But the complaint does not allege that the depicted
photograph originally contained, say, a gutter credit with an author name, let
37
alone who the author is (or even whether he is one of the Plaintiffs). Nor do
Plaintiffs describe the information removed from Plaintiffs’ photographs
elsewhere in the complaint either. The conclusory allegation to the effect of “CMI
was removed” will not suffice. Dismissal of Plaintiffs’ CMI claim should
therefore be affirmed.
Finally, Plaintiffs argue that the NFL had no license to use Plaintiffs’
photographs after March 31, 2015, when the 2012 AP-NFL agreement expired by
its own terms. Defendants’ only response is that “before that expiration, AP and
the NFL entered into the Interim Agreement, which incorporates the terms
(including AP’s sublicense to the NFL) of” the 2012 agreement. AP Br. 39. Our
determination that Plaintiffs have adequately alleged that the contributor
agreements do not permit such a license moots Defendants’ response, and for the
reasons discussed above, Plaintiffs’ infringement claims against the NFL and AP
relating to the NFL’s post-March 2015 uses should not have been dismissed.
II. Alternative Contract and Tort Theories of Liability
Plaintiffs next argue that the district court was wrong to dismiss a series of
claims that would be viable alternatives should it be determined on summary
judgment or by a jury that the express terms of the contributor agreements do not
38
prohibit AP from granting complimentary licenses. We agree that Plaintiffs have
stated a claim for breach of the implied covenant of good faith and fair dealing
and fraud, but concur in the district court’s dismissal of Plaintiffs’ claims for
breach of fiduciary duty and unconscionability.
A. Breach of the Implied Covenant of Good Faith and Fair Dealing
Plaintiffs first contend that even if the contributor agreements do not
expressly prohibit granting complimentary licenses, they have plausibly alleged
that AP breached the implied covenant of good faith and fair dealing in doing so.
Under New York law, “implicit in every contract is a covenant of good
faith and fair dealing . . . which encompasses any promises that a reasonable
promisee would understand to be included.” New York Univ. v. Cont’l Ins. Co., 87
N.Y.2d 308, 318 (1995) (internal citation omitted). “[N]either party to a contract
shall do anything [that] has the effect of destroying or injuring the right of the
other party to receive the fruits of the contract,” or to violate the party’s
“presumed intentions or reasonable expectations.” M/A–COM Sec. Corp. v.
Galesi, 904 F.2d 134, 136 (2d Cir. 1990) (citations omitted). “Where the contract
contemplates the exercise of discretion, this pledge includes a promise not to act
39
arbitrarily or irrationally in exercising that discretion.” Fishoff v. Coty Inc., 634
F.3d 647, 653 (2d Cir. 2011) (internal quotation marks omitted).
The allegations Plaintiffs make in support of their claim are significant.
According to the complaint, AP secretly granted the NFL a license for
complimentary and unfettered use of thousands of Plaintiffs’ photographs, and
in doing so sought (unsuccessfully) to excuse thousands of completed acts of
copyright infringement. The going-forward license that the 2012 AP-NFL
agreement contained deprived Plaintiffs of a significant revenue stream, yet
implicitly yielded financial benefit for AP — albeit not on a per-image basis.
On those facts, Plaintiffs have plausibly alleged that AP deprived Plaintiffs
of “the fruits of” the contributor agreements, Fishoff, 634 F.3d at 653, and we have
little difficulty holding that the complaint adequately asserts that the agreements,
if not expressly, at least implicitly prohibit AP from licensing or selling Plaintiffs’
photographs in a way that benefits AP, but yields little to no value for Plaintiffs.
Because Plaintiffs have plausibly alleged that the complimentary license does
exactly that, Plaintiffs have stated a claim for breach of the implied covenant of
good faith and faith dealing.
40
AP has two responses. First, it argues that the district court properly
dismissed the breach of the implied covenant claim as duplicative, noting that
New York law “‘does not recognize a separate cause of action for breach of the
implied covenant of good faith and fair dealing when a breach of contract claim,
based upon the same facts, is also pled.’” AP Br. 54, quoting Harris v. Provident
Life & Accident Ins. Co., 310 F.3d 73, 81 (2d Cir. 2002). But AP takes the notion of
duplicative claims too far. As Harris itself recognized, “parties to an express
contract are bound by an implied duty of good faith, but breach of that duty is
merely a breach of the underlying contract.” 310 F.3d at 80 (internal quotation
marks omitted). A party certainly cannot succeed on claims for both breach of an
express contract term and breach of the implied covenant based on the same
facts, but where, as here, there is a dispute over the meaning of the contract’s
express terms, there is no reason to bar a plaintiff from pursuing both types of
claims in the alternative. Cf. Reilly v. Natwest Markets Grp. Inc., 181 F.3d 253, 263
(2d Cir. 1999) (plaintiff may seek damages on alternative — and “mutually
exclusive” — theories of breach of contract and quantum meruit where “there is a
dispute over the existence, scope, or enforceability of the putative contract”).
41
Second, AP argues that “the implied covenant cannot be used to impose a
contractual duty on a party that would be inconsistent with a right the party
holds under the express terms of the contract.” AP Br. 54. As with the concept of
duplicative claim, AP understands the notion of “inconsistent” duties too
broadly. It cannot be that anytime a contract is silent on a specific right, implying
a term limiting that hypothetical right is inconsistent with the “express terms of
the contract.” If that were the case, the very concept of implied terms would
collapse. Instead, we must ask whether a proposed implied term defeats a right
that a party actually bargained for — in other words, whether the implied term
that might preserve the fruits of the contract for one party spoils the fruits for
another.
Here, the contributor agreements do not explicitly state that AP has the
right to give Plaintiffs’ photographs away for free. Rather, one section of the
agreements describes a broad license granted to AP; the following section
attempts to account for the scenarios in which Plaintiffs get paid for sublicenses
and explicitly identifies the scenarios where AP can use or license contributor
photographs without triggering a royalty obligation. And in general, a principal
(and obvious) aim of the agreements is for AP to license Plaintiffs’ photographs
42
and earn royalties for both AP and Plaintiffs in return. We thus reject the
argument that by limiting AP’s ability to structure its sublicenses so as to receive
benefits itself, but evade the payment obligations triggered by “a la carte” or
“bulk rate” sales, J.A. 923–24, a court would be implying a term that is
inconsistent with AP’s express rights under the contract.
43
The cases on which AP relies do nothing to undermine our conclusion.9
Accordingly, we conclude that the district court erred in dismissing Plaintiffs’
claims for breach of the implied covenant of good faith and fair dealing.
9
In State Street Bank & Trust Co. v. Inversiones Errazuriz Limitada, the defendant, a
struggling company that owed tens of millions of dollars to the plaintiff bank,
claimed that the bank had breached the implied covenant of good faith and fair
dealing when it refused to consent to a sale of certain of the defendant’s assets.
374 F.3d 158, 168 (2d Cir. 2004). But the agreement between the parties expressly
gave the bank unrestricted approval rights for such sales, and the conditions the
bank sought to put on the sale — that the defendant pay $87 million from the
proceeds of the sale in partial repayment of its debt, and that the defendant
provide the bank with new collateral and economic benefits — can hardly be said
to have destroyed the fruits that the defendant company was to enjoy under the
contract. Id. at 168–69.
Times Mirror Magazines, Inc. v. Field & Stream Licenses Co. concerned a long-
running dispute over the trademark “Field & Stream,” which the defendant used
in connection with outdoor apparel and products, and the plaintiff used in the
title of a magazine and for products carrying that magazine’s branding. 294 F.3d
383, 384–89 (2d Cir. 2002). The parties had agreed that each party would have the
exclusive right to use the trademark in connection with specific products, and
“allowed the party that first used or licensed the mark in connection with a [new]
class of goods an exclusive right to the mark for that class.” Id. at 387. The
plaintiff sued the defendant, claiming that the defendant had breached the
implied covenant of good faith and fair dealing by entering into purportedly
“sham” license agreements. Id. at 388. We affirmed a grant of summary judgment
for the defendant, holding that because the agreement “clearly set forth the
parties’ respective rights” with respect to new products, and included a
procedure to test a party’s good faith, the plaintiff could not “avoid the express
terms of the contract by relying on the implied covenant of good faith and fair
dealing.” Id. at 395. No such clear contractual test of good faith is present here.
44
B. Breach of Fiduciary Duty
Plaintiffs allege that AP also violated a fiduciary duty to Plaintiffs by
granting the NFL complimentary access to their photographs. The district court
correctly dismissed that claim.
To state a breach of fiduciary duty claim under New York law, a plaintiff
must plead: “(i) the existence of a fiduciary duty; (ii) a knowing breach of that
duty; and (iii) damages resulting therefrom.” Johnson v. Nextel Commc'ns, Inc., 660
F.3d 131, 138 (2d Cir. 2011). “A fiduciary relationship exists under New York law
when one [person] is under a duty to act for or to give advice for the benefit of
another upon matters within the scope of the relation.” Flickinger v. Harold C.
Brown & Co., Inc., 947 F.2d 595, 599 (2d Cir. 1991) (internal quotation marks
omitted). Typically, “when parties deal at arms length in a commercial
transaction, no relation of confidence or trust sufficient to find the existence of a
fiduciary relationship will arise absent extraordinary circumstances.” In re
Mid–Island Hosp., Inc., 276 F.3d 123, 130 (2d Cir. 2002) (internal quotation marks
and brackets omitted).
Here, not only do the relationships between Plaintiffs and AP arise from
arm’s-length agreements, but those agreements expressly state that “[n]either the
45
making of this Agreement nor the performance of its provisions shall be
construed to constitute either Party an agent, partner, joint venture, employee or
legal representative of the other Party.” J.A. 920. We have previously held that a
breach of fiduciary duty claim fails where the governing agreement makes “clear
that [the defendants] were not to be held to the ordinary standard of care
applicable to fiduciaries.” Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998); see also
LBBW Luxemburg S.A. v. Wells Fargo Sec. LLC, 10 F. Supp. 3d 504, 523 (S.D.N.Y.
2014) (“[N]o fiduciary duty is owed where explicit contractual disclaimers of
fiduciary duty apply.”). Although the disclaimer in the contributor agreements
does not use the word “fiduciary,” it does disavow the very types of contractual
relationships that might create a fiduciary duty between parties to an arm’s-
length commercial agreement. See, e.g., Argilus, LLC v. PNC Fin. Servs. Grp., Inc.,
419 F. App’x 115, 119 (2d Cir. 2011) (“Under New York law, participants in a joint
venture owe one another the same fiduciary duties that inhere between members
of a partnership.”); ABKCO Music, Inc. v. Harrisongs Music, Ltd., 722 F.2d 988, 994
(2d Cir. 1983) (“There is no doubt but that the relationship between Harrison and
[his business manager] prior to the termination of the management agreement . . .
was that of principal and agent, and that the relationship was fiduciary in
46
nature”). Given the disclaimer, as well as the arm’s-length nature of Plaintiffs’
relationship with AP, Plaintiffs have failed to allege the requisite fiduciary
relationship, and their breach of fiduciary duty claims were properly dismissed.
C. Unconscionability
Plaintiffs next contend that, should the contributory agreements be
deemed to allow AP to issue complimentary licenses, the agreements are
unconscionable and thus voidable.
“The doctrine of unconscionability seeks to prevent sophisticated parties
with grossly unequal bargaining power from taking advantage of less
sophisticated parties.” United States v. Martinez, 151 F.3d 68, 74 (2d Cir. 1998)
(internal quotation marks omitted). In general, a provision will be deemed
unenforceable on unconscionability grounds only where it is “both procedurally
and substantively unconscionable when made.” Gillman v. Chase Manhattan Bank,
N.A., 73 N.Y.2d 1, 10 (1988). In other words, “[a] contract or clause is
unconscionable when there is an absence of meaningful choice on the part of one
of the parties together with contract terms which are unreasonably favorable to
the other party.” Ragone v. Atl. Video at Manhattan Ctr., 595 F.3d 115, 122 (2d Cir.
2010) (quoting Nayal v. HIP Network Servs. IPA, Inc., 620 F. Supp. 2d 566, 571
47
(S.D.N.Y.2009)).
The district court initially held that the contributor agreements were
unconscionable, but on reconsideration decided to dismiss Plaintiffs’
unconscionability claims on the ground that Plaintiffs had ratified their
contributor agreements. We agree with that determination. Under New York law,
a party can ratify an unconscionable agreement, King v. Fox, 458 F.3d 39, 40 (2d
Cir. 2006); see also Lawrence v. Graubard Miller, 11 N.Y.3d 588, 595 n.3 (2008), and
does so by accepting benefits under the agreement with knowledge of its terms
instead of promptly repudiating it, see King v. Fox, 418 F.3d 121, 132 (2d Cir.
2005); VKK Corp. v. Nat'l Football League, 244 F.3d 114, 122–23 (2d Cir. 2001).
Here, until at least the time that Plaintiffs filed their operative complaint in
August 2015, Plaintiffs performed under the contributor agreements and
accepted the benefits that flowed from that performance. Plaintiffs, five of whom
waited more than four years before initiating this lawsuit, do not allege that they
have returned any of the benefits obtained under the agreements.10
10
Plaintiffs claim that two of the photographers, Witte and Stulka, stopped
providing photographs to AP upon commencement of this suit in 2013. Although
the declarations cited in support of that claim instead suggest that Stulka actually
stopped shooting NFL events in 2015, the fact remains that neither Plaintiff
disclaims having continued to receive royalties for photographs that Plaintiffs
48
Plaintiffs’ principal response is that they were under continuing duress
and thus had no opportunity (or obligation) to rescind the contributor
agreements. Cf. Austin Instrument, Inc. v. Loral Corp., 29 N.Y.2d 124, 133 (1971)
(rejecting claim that a party had ratified contract originally entered into under
duress where the party reasonably feared “further business compulsion” by the
counterparty). However, mere “financial pressure or unequal bargaining power”
does not constitute duress. Interpharm, Inc. v. Wells Fargo Bank, Nat’l Ass'n, 655
F.3d 136, 142 (2d Cir. 2011). Instead, the law “demands threatening conduct that
is ‘wrongful,’ i.e., outside a party’s legal rights.” Id.
Plaintiffs fail to allege such wrongful conduct. They claim that AP “forced
Plaintiffs to accept its terms or forgo any commercial licensing of any NFL-related
photos, past or present.” Appellants’ Reply Br. 27. But that is just another way of
saying that AP used its position as the licensing agent for the NFL’s intellectual
property — for which Plaintiffs themselves needed a license so that their
photographs could be available for commercial use — to drive a hard bargain.
Sports photographers do not have a general right to the NFL’s intellectual
property, and it was within AP’s legal rights as the NFL’s licensing agent to
had already licensed to AP and that AP still sublicenses to third parties.
49
threaten to withhold access to that intellectual property in negotiating the terms
of the contributor agreements. See Interpharm, Inc., 655 F.3d at 142 (recognizing
that “a threat to exercise a legal right” cannot constitute a wrongful threat).
For these reasons, Plaintiffs’ unconscionability claims were properly
dismissed.
D. Fraud
Finally, Plaintiff contend that they have stated a claim for fraud on the
theory that AP falsely told Plaintiffs that it would not grant the NFL
complimentary access to their photographs in order to induce Plaintiffs to leave
Getty and sign contributor agreements with AP.
Proof of fraud under New York law requires a showing that “(1) the
defendant made a material false representation, (2) the defendant intended to
defraud the plaintiff thereby, (3) the plaintiff reasonably relied upon the
representation, and (4) the plaintiff suffered damage as a result of such reliance.”
Wall v. CSX Transp., Inc., 471 F.3d 410, 415–16 (2d Cir. 2006) (internal quotation
marks omitted). Misrepresentations made to induce a party to enter a contract are
not actionable as fraud, however, unless they are “collateral” to the contract
induced. Id. at 416; see Deerfield Comms. Corp. v. Chesebrough-Ponds, Inc., 68 N.Y.2d
50
954, 956 (1986) (holding that a false promise to not resell goods outside a specific
geographical area “constitute[d] a misrepresentation” for purposes of fraud
where geographical restrictions were not contained in the written agreement for
the purchase of those goods). Where a plaintiff alleges, by contrast, that the
defendant simply misrepresented its intent to perform under a contract, no
separate claim for fraud will lie, and the plaintiff must instead bring an action for
breach of contract. Wall, 471 F.3d at 416.
That rule extends to the implied terms of the contract. See N.Y. Univ. v.
Continental Ins. Co., 87 N.Y.2d 308, 318 (1995). In New York University, for
example, the plaintiff claimed that the defendants had fraudulently induced it to
take out an insurance policy by “misrepresent[ing] the integrity of their
company.” Id. The New York Court of Appeals rejected that claim. It reasoned
that because the implied covenant of good faith and fair dealing included the
defendants’ obligation “to investigate in good faith and pay covered claims,” the
general allegations relating to company integrity concerned no more than the
defendants’ intention to perform under the contract, including “any covenants
implied,”and thus the plaintiff’s claim was not separately actionable under a
theory of fraud. Id.
51
If Plaintiffs prevail on either the theory that the express terms of the
contributor agreements barred complimentary licenses or the theory that the
agreements’ implied covenant of good faith and fair dealing prohibited AP’s
give-away of Plaintiffs’ photographs, Plaintiffs’ claims for fraud will necessarily
fail: if either theory succeeds, AP will, at most, have done nothing more than
falsely promise to abide by the terms of the contributor agreements. But should it
ultimately be determined that neither the express nor the implied terms of the
agreements prohibit what AP is alleged to have done, a separate claim for fraud
may still lie.
AP offers three reasons why, even in that alternative scenario, Plaintiffs
nevertheless fail to state a claim for fraud.11
First, AP argues that Plaintiffs allege nothing more than a statement of
future intent. Although a “mere promissory statement as to what will be done in
the future” does not constitute a material misrepresentation of fact, a promise
11
AP also argues that dismissal of Plaintiffs’ fraud claims is warranted for the
same reasons as Plaintiffs’ unconscionability claims. But a plaintiff need not
renounce a contract to bring a fraud claim for damages, see Deerfield Commc’ns
Corp., 68 N.Y.2d at 956 (upholding damage award on claims of breach of contract
and fraudulent inducement of that contract), and it is dismissal of their fraud
claims for damages that Plaintiffs are appealing here.
52
“made with a preconceived and undisclosed intention of not performing it” does.
Deerfield Commc’ns Corp., 68 N.Y.2d at 956. Here, Plaintiffs allege that when AP’s
representative told Plaintiffs that AP “would not grant the NFL complimentary
use of Plaintiffs’ photographs,” the representative “knew at the time that AP
intended to permit the NFL unrestricted access to Plaintiffs’ photos and that it
did not intend to prohibit the NFL from copying and using Plaintiffs’ photos
without paying for a license.” J.A. 143. Moreover, Plaintiffs allege that by the time
AP made its representation, the NFL was already using other contributors’
photographs in the same way it ultimately used Plaintiffs’. In light of those
allegations, as well as AP’s allegedly deceptive response to the concerns Plaintiffs
raised about infringement by the NFL in 2012, it is certainly plausible that AP
never intended to keep its promise that it would not give Plaintiffs’ photographs
to the NFL for free.
Second, AP argues that Plaintiffs could not have reasonably relied on pre-
contract statements that AP would not grant complimentary licenses because the
“unambiguous terms” of the contributor agreements “permitted AP to issue
royalty-free sublicenses to the NFL.” AP Br. 49. As we have already determined,
the terms of those agreements are certainly not unambiguous. Even if they were,
53
the fact that a party is permitted to take a certain action does not necessarily
make it unreasonable to rely on that party’s extracontractual promise to
nevertheless refrain from doing so. If AP’s proposition were true, a fraud claim
based on a false promise made in contract negotiations could never succeed: such
a claim is available only where the promise is collateral to the contract, meaning
the alleged fraud will always concern an action that was not prohibited by the
contract itself. See, e.g., Deerfield Commn’cs Corp., 68 N.Y.2d at 956 (upholding
fraud claim concerning promise to restrict sales to certain geographic area where
contract included no such restrictions). Here, the complaint alleges that AP told
Plaintiffs that its agreement with the NFL did not require complimentary licenses
and, further, that it was financially necessary to charge the NFL for licenses for
Plaintiffs’ works in order to “offset the complimentary use of AP’s wholly-owned
photos that AP already had agreed to.” J.A. 113. In light of those allegations, we
do not think that it was unreasonable as a matter of law for Plaintiffs to rely on
AP’s representation that it would not grant the NFL complimentary licenses.
Finally, AP argues that Plaintiffs fail to allege any damages that are
separate and apart from those suffered as a result of AP’s alleged breach of
contract. Because Plaintiffs’ fraud claim will come into play only if it is
54
determined that AP did not violate the express and implied terms of the
contributor agreements, Plaintiffs’ recovery on their fraud claim will not (and
could not) duplicate damages resulting from AP’s violation of the contributor
agreements’ terms. Moreover, Plaintiffs do allege damages that are distinct from
the damages that they could recover for breach of contract and, instead, represent
the “loss suffered through th[e] inducement.” Deerfield Commn’cs Corp., 68 N.Y.2d
at 956. For instance, Plaintiffs allege that, relying on AP’s misrepresentations,
they “terminate[d] their agreements with Getty Images thus causing [them] to
lose substantial revenue from licensing opportunities related to their non-NFL
content,” which they were required to remove from Getty’s image library. J.A.
145. We have upheld fraud claims in similar circumstances. See, e,g., Stewart v.
Jackson & Nash, 976 F.2d 86, 87–88 (2d Cir. 1992) (dismissal of fraud claim
improper where plaintiff alleged she was fraudulently induced to leave her
previous employer and sign employment contract with new firm, allegedly
causing her loss of professional opportunity, loss of professional reputation, and
damage to career growth and potential).
We are thus unpersuaded by AP’s arguments and conclude that the district
court erred in holding that Plaintiffs had failed to state a claim for fraud.
55
III. Antitrust Violations
Finally, Plaintiffs contend that they alleged a plausible antitrust conspiracy
involving the NFL and AP in the “market for commercial licensing of [NFL]-
related stock photography.” J.A. 133. Specifically, Plaintiffs allege that the NFL
and the NFL teams, by pooling and collectively licensing their intellectual
property, formed a horizontal conspiracy, which they operate in conjunction with
AP as their exclusive licensing agent in order to “control the commercial market
for professional football-related stock photography.” J.A. 135.
The Sherman Act prohibits “[e]very contract, combination in the form of
trust or otherwise, or conspiracy, in restraint of trade or commerce among the
several States.” 15 U.S.C. § 1; see id. § 3 (extending same prohibition to U.S.
territories and District of Columbia). Because the NFL’s decision to jointly license
its intellectual property is not per se illegal, Plaintiffs’ claims are subject to a rule
of reason analysis, which requires antitrust plaintiffs to “demonstrate that a
particular contract or combination is in fact unreasonable and anticompetitive
before it will be found unlawful.” Major League Baseball Props., Inc. v. Salvino, Inc.,
542 F.3d 290, 315 (2d Cir. 2008) (internal quotation marks omitted); see Am. Needle,
Inc. v. Nat’l Football League, 560 U.S. 183, 196–204 (2010) (remanding for
56
consideration of whether the NFL’s decision to collectively license intellectual
property was justified under the rule of reason); NCAA v. Bd. of Regents of the
Univ. of Okla., 468 U.S. 85, 100–04 (1984) (applying rule of reason to assess NCAA
restrictions on college football broadcasts). Under the rule of reason, plaintiffs
“bear[] the initial burden of showing that the challenged action has had an actual
adverse effect on competition as a whole in the relevant market; to prove it has
been harmed as an individual competitor will not suffice.” Capital Imaging
Assocs., P.C. v. Mohawk Valley Med. Assocs., Inc., 996 F.2d 537, 543 (2d Cir. 1993).
Plaintiffs’ allegations of anticompetitive effect here are insufficient. First,
Plaintiffs allege that the conspiracy “has substantially reduced the output of stock
photography for NFL events.” J.A. 140. But an antitrust plaintiff must allege an
adverse effect “in the relevant market,” Capital Imaging, 996 F.2d at 543, and the
relevant market, as Plaintiffs define it, is the market for commercial licenses of NFL
event photographs. Even if Plaintiffs plausibly allege that fewer credentials are
being given for particular NFL events and thus fewer photographs are being
taken of those events, those allegations say nothing about the market for licenses
for such photographs because, among other reasons, the pool of photographers,
no matter its size, still captures the entirety of each event, and multiple
57
commercial licenses can attach to each photograph taken. Without a match
between the injury alleged and the market described, Plaintiffs’ “reduced output”
allegation is insufficient to show an anticompetitive effect on the commercial
licensing of NFL event photographs.
Second, Plaintiffs allege that “[b]ecause of the Defendants’ influence on
and control over this market, the aggregate cost to consumers [of commercial
licenses] has increased.”12 J.A. 140. But they cite no examples, data, or other facts
to support their assertion, and a conclusory allegation that prices have increased
will not suffice to state anticompetitive effect. See Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 556 (2007).
Plaintiffs’ only stab at specificity relates to alleged black market sales of
Plaintiffs’ photographs in Wisconsin. They claim that “Plaintiffs Boehm and
Stluka have been forced to file two separate lawsuits against nearly 30 different
12
It is not entirely clear that an antitrust conspiracy that raised prices for
consumers of commercial licenses for NFL event photographs would necessarily
hurt suppliers of those photographs like Plaintiffs. Pursuant to the parties’
agreements, any increased revenue from such licenses would be divided among
AP, the NFL, and the contributing photographer. Plaintiffs are certainly
dissatisfied with how that pie is divided, but their dissatisfaction would seem to
stem not from anticompetitive behavior in the market for commercial licenses for
NFL event photographs, but from potentially anticompetitive behavior in the
market for licenses for NFL’s own trademarks.
58
Wisconsin sports memorabilia dealers and retailers related to the illegal use of
their photos to create sports memorabilia, canvases, posters, and other products,”
and posit that the fact that “these retailers are even willing to risk the stiff
damages for copyright infringement demonstrates the lengths that the relevant
market consumers now are forced to go to avoid paying the licensing fees
demanded by AP and the NFL.” J.A. 140–41. The identification of two copyright
lawsuits, in one state, however, does not suffice to permit a plausible inference
that Defendants’ alleged anticompetitive behavior increased prices in the market
for commercial licenses for NFL photographs “as a whole.” Capital Imaging, 996
F.2d at 543. Copyright infringement is a common problem even in competitive
markets, and it is too speculative to infer, based on the specific instances of the
infringement alleged in Plaintiffs’ other suits, that Defendants’ anticompetitive
behavior has improperly caused the cost of commercial licenses to increase.
We do not suggest that the nature of professional sports makes the NFL
immune from antitrust scrutiny, and it is possible that other photographers in
Plaintiffs’ position might frame their claims differently — for example, by
alleging anticompetitive behavior in the market for commercial licenses for NFL
trademarks, of which sports photographers are consumers, a fact that makes those
59
photographers well positioned to allege actual changes in costs over time. But we
must assess Plaintiffs’ allegations vis-à-vis the market Plaintiffs define, and
Plaintiffs do not plausibly allege an adverse effect on competition in the market
for commercial licenses for NFL event photographs. For this reason, Plaintiffs
have failed to state an antitrust claim, and the district court was right to dismiss
their assertion of such a claim.
CONCLUSION
For the foregoing reasons, we VACATE those portions of the district
court’s judgment that dismiss (i) Plaintiffs’ claims for copyright infringement
against AP and the NFL relating to the NFL’s uses of Plaintiffs’ photographs
from 2009 to present, (ii) Plaintiffs’ claims for copyright infringement against AP,
the NFL, and Replay relating to uses of Plaintiffs’ photographs in connection
with the Replay Photo Store, (iii) Plaintiffs’ claims for breach of the implied
covenant of good faith and fair dealing against AP, and (iv) Plaintiffs claims for
fraud against AP. We AFFIRM the judgment in all other respects, and REMAND
for further proceedings consistent with this opinion.
60