Powers v. Caroline's Treasures Inc.

          ORDER

          Honorable Susan M. Brnovich United States District Judge.

         At issue is Defendants' Motion for Summary Judgment (Doc. 43, “Mot.”). Plaintiff responded to the motion (Doc. 53, “Resp.”), and Defendants replied. (Doc. 60). For the reasons that follow, Defendants' motion is denied in part and granted in part.

         I. Background

         Suzanne Powers (“Powers” or “Plaintiff”) created 56 drawings entitled “Dogs of the West aka Dog Country” in 1997 and 1998. In 2002, Powers entered into an agreement with Caroline Treasure's, Inc. (“CTI”) to license these works for use on CTI's products for two years (the “2002 License”). (Resp. at Exh. B). CTI is an Alabama Corporation that retails home items. (Doc. 31 ¶ 64). Defendants Ronald Rutherford (“Rutherford”) and Walter Knight (“Knight”) are officers of CTI. (Doc. 31 ¶¶ 65-66). The 2002 License included a clause that said the agreement could be renewed in one-year increments if both parties agreed. (Resp. at Exh. B). The 2002 License ended on May 29, 2004.

         Nevertheless, after the license expired, the parties stayed in contact and Defendants continued to use Plaintiff's works and their business relationship continued under the same terms. (Mot. at 4; Resp. at 1). In November 2006, Powers and CTI entered into a new two-year licensing agreement (the “2006 License”). The 2006 License had a same renewal clause as the 2002 License. (Resp. at Exh. D). When the license lapsed in November 2008, CTI continued selling licensed products. (Mot. at 5). In November 2009, Powers contacted CTI requesting a payment for royalties, which CTI paid by check. (Id.). In the memo line for that check, it noted it was for royalties from October 2008 to October 2009.

         The parties present different characterizations of their business relationship between 2002 and 2009. Defendants argue that it was established practice that they would pay Powers royalties whenever she requested. (Mot. at 3-6). Powers argues this was a constant frustration for her, and she attaches emails from 2003, 2004, and 2007 asking for payment. (Resp. at 9, Exh. E, F, G). In a May 30, 2007, email, Powers wrote, “If you are not going to send me what is owed on a timely basis without me hounding you . . . I wish to terminate our relationship . . . .” (Resp. at Exh. F). A week later, she seems to walk back her demand in another email: “I would like to not have to ask to be paid, that's all. As far as pulling the designs, that is up to you. As long as you don't disappear into the night on me!” (Resp. at Exh. G).

         Powers claims she thought the agreement lapsed November 26, 2008, and Defendants would stop selling her works at that point. (Resp. at Declaration of Suzanne Powers, “Powers Decl., ” ¶ 14). She further alleges that even though the last check for her royalties went through “Oct. 2009, ” she thought it was just for October 2008 and November 2008, the last two months of the license agreement. (Id. ¶¶ 15-16). She alleges she only found out about the continued use of her images in June 2017 and immediately contacted CTI. (Id. ¶ 21). When she contacted CTI at that time, they sent her a check for post-October 2008 royalties. (Mot. at 8, Exh. M-1). She did not deposit the check, because she “decided to look into a lawsuit.” (Id. at M-1).

         Defendants argue that Powers impliedly consented to continuing the license by following the same course of conduct that followed the 2002 License's lapse. Plaintiff contends that she believed their business relationship was over once the 2006 License ended and Defendants continuing to sell past the expiration date of the 2006 License constitutes breach of contract and copyright infringement. Powers also alleges violations of the Digital Millennium Copyright Act. Pub. L. No. 105-304, 112 Stat. 2860 (1998) (codified in scattered sections of Title 17). Powers alleges she sent all 56 of the copyrighted works to Defendants digitally with her signature and the copyright symbol (©), which constitutes copyright management information (“CMI”) under 17 U.S.C. § 1202. (Resp. at 5). When the images were posted online to sell the goods, the signature and copyright symbol were not shown. Defendants say they posted the images as they received them and did not remove a signature or copyright symbol, and they provide website archives from June 2002 through April 2004 and June 2004 through May 2006 that show the images without a signature or copyright symbol on their website and crediting Powers as creating the artwork. (Reply at 2; Doc. 56). Powers notes that when she saw her images replaced with a new background on various websites in June 2017, none of the sites credited her and instead had references to Caroline's Treasures. (Resp. at 6, Exh. H).

         Defendants also raise a statute of limitations defense. Defendants believe Powers was on notice that they were continuing to use the images based on their previous business dealings and the royalty check noting it went through October 2009. Thus, any damages that accrued more than three years prior to filing suit are time-barred. Additionally, Defendants believe Knight and Rutherford should be granted summary judgment on the breach of contract claim even if CTI is not, because only the corporate entity is liable. The Court will take each argument in turn.

         II. Legal Standard

         Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A material fact is any factual issue that might affect the outcome of the case under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a fact is “genuine” if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id. “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by . . . citing to particular parts of materials in the record” or by “showing that materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1)(A), (B). The court need only consider the cited materials, but it may also consider any other materials in the record. Id. 56(c)(3). Summary judgment may also be entered “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

         Initially, the movant bears the burden of demonstrating to the Court the basis for the motion and “identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Id. at 323. If the movant fails to carry its initial burden, the nonmovant need not produce anything. Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). If the movant meets its initial responsibility, the burden then shifts to the nonmovant to establish the existence of a genuine issue of material fact. Id. at 1103. The nonmovant need not establish a material issue of fact conclusively in its favor, but it “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The nonmovant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Liberty Lobby, 477 U.S. at 247-48. Additionally, the Ninth Circuit “has refused to find a ‘genuine issue' where the only evidence presented is ‘uncorroborated and self-serving' testimony.” Villarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (quoting Kennedy v. Applause, Inc., 90 F.3d 1477, 1481 (9th Cir. 1996)). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Libberty Lobby, 477 U.S. at 249-50 (citations omitted). However, in the summary judgment context, the Court believes the nonmovant's evidence, id. at 255, and construes all disputed facts in the light most favorable to the nonmoving party, Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 2004). If “the evidence yields conflicting inferences [regarding material facts], summary judgment is improper, and the action must proceed to trial.” O'Connor v. Boeing N. Am., Inc., 311 F.3d 1139, 1150 (9th Cir. 2002).

         III. Analysis

         1. The DMCA Claim Under 17 U.S.C. § 1202(b)-Removal of CMI

         Section 1202(b) states:

No person shall, without the authority of the copyright owner or the law-

(1) intentionally remove or alter any [CMI],

(2) distribute or import for distribution [CMI] knowing that the [CMI] has been removed or altered without authority of the copyright owner . . . knowing or . . . having reasonable grounds to know that it will induce, enable, facilitate or conceal an infringement of any right under this title.

         CMI is “information conveyed in connection with” a work. 17 U.S.C. § 1202(c). It includes the name of and identifying information about the author of a work. Id. § 1202(c)(2). Powers alleges Defendants removed her signature and a copyright symbol from the copyrighted works and replaced them with a notation that said “Caroline's Treasures.” She argues this constitutes two DMCA violations regarding CMI-one for removing her CMI and one for adding false CMI.

         Neither party has submitted the original images, which were sent electronically to the Defendants in 2002.^[1] The only evidence Powers presented that her signature and a copyright symbol were on the images when Defendants received them is her statement that it was her business practice to put them on her copyrighted works. (Resp. at 5; Powers Decl. ¶ 5). Defendants do not contest that a signature and copyright symbol are CMI. Rather they allege they received the images without the signature and copyright symbol on them. Therefore, they could not have removed them. Defendants have also presented website archives showing the alleged CMI missing from the images they posted on their store website while the licensing agreement was still in place. (Mot. at Exh. M-4 & M-5). They argue this shows both that the CMI was not there ...