DENISE COTE, District Judge:
This Opinion addresses cross-motions for summary judgment filed by The Associated Press ("AP"), a news cooperative, and Meltwater U.S. Holdings Inc., Meltwater News U.S. Inc., and Meltwater
Meltwater's principal defense against the infringement claim is that its excerpting of AP news stories is a fair use. Even though Meltwater's service is a closed system for subscribers only, Meltwater equates itself with Internet search engines. It argues that search engines transform the work they take from Internet news sites by using that content for a new purpose, that is, as an integral part of an information-location tool. According to Meltwater, this transformative purpose qualifies as a fair use of the copyright-protected material. It will be assumed for purposes of this Opinion that Internet search engines are a transformative use of copyrighted work. Nonetheless, based on undisputed facts, AP has shown that it is entitled to summary judgment on its claim that Meltwater has engaged in copyright infringement and that Meltwater's copying is not protected by the fair use doctrine.
This Opinion begins with a description of the facts taken from the parties' submissions on these cross-motions for summary judgment. The facts are largely undisputed; where there are factual disputes, those will be noted. Following a description of AP's business as it relates to these claims, and then Meltwater's, there will be a brief description of the procedural history of this lawsuit. The next sections of the Opinion will analyze the legal issues. They will include a discussion of Meltwater's five affirmative defenses to the claim of copyright infringement: fair use, implied license, equitable estoppel, laches, and copyright misuse. Finally, this Opinion will address Meltwater's motion for summary judgment on AP's secondary infringement claims and some of Meltwater's evidentiary objections.
AP was established in 1846; it is owned by over 1,400 newspapers across the United States and employs a staff of approximately 3,700 people. On any given day it produces between 1,000 and 2,000 news articles.
Each article is the result of a process that involves a number of creative decisions by AP reporters and editors. First, AP must select the topic to be covered in the article. The selection process can involve sifting through numerous press releases, comments made by politicians, and news tips received by AP in order to decide which topics are worthy of coverage. The actual writing of the story is often an iterative process, involving consultations between the reporter and editor about how to handle the assignment. During this process, the articles are reviewed for "completeness, clarity, balance and accuracy." The structure of a news article is itself the product of strategic and stylistic choices. For instance, breaking news stories are traditionally organized in the form of an "inverted triangle." The purpose of the "inverted triangle" structure is to include "as much key information as possible in the `lede,' or first portion of the story." As AP's Standards Editor has explained, an AP story lede "is meant to convey the heart of the story, rather than serving as a teaser for the remainder of the story." In
The news products that AP offers take many forms. For instance, subscribers can choose to subscribe to a regional news product, like AP's Latin American News, or Asia-Pacific News. Alternatively, a subscriber can select an AP product that is focused on a particular industry, like AP's Business Alert, Defense Alert, or Technology Alert.
Each of the thirty-three Registered Articles at issue in this lawsuit was written by an AP reporter. Most of articles authored by AP reporters are published by its members or licensees and not by AP itself. Thus, a principal component of AP's revenue comes from licensing fees it earns by licensing uses of its news products to its roughly 8,000 licensees. AP earns hundreds of millions of dollars in licensing fees annually.
In the digital age, AP's license agreements have expanded to permit the publication of its articles on the Internet. AP's license agreements with its digital and commercial clients account for more than $75 million of AP's annual gross revenue. Many of the websites on which AP content appears permit readers to access the articles without paying any fee.
AP's licensing agreements are crafted around the kind of redistribution rights the licensee wishes to have. For instance, AP's licensing agreements with LexisNexis and Factiva permit those services to give their customers access to full AP articles and to search through AP's archives. AP also has licensing agreements that permit the distribution of excerpts from or snippets of its articles. The license agreements between AP and three news clipping services that are competitors of Meltwater are examples of this kind of license. One such license granted the Internet news clipping service a license to distribute "AP text scraped from third party AP licensee websites ("AP Articles") ... as well as links to AP Articles and excerpts of AP Articles." In a second such license, AP permits the Internet news clipping service to redistribute "Snippets" of AP articles "as a part of an aggregated feed of licensed content," to a primary market of Media Monitoring & Evaluation companies who cater to "Internal corporate communications and PR professionals and their external agents." This license defines "Snippets" to mean "headlines and leading 140 characters from AP content." In a final example, the licensing agreement allows the news clipping service to make available directly or via its affiliate "snippets of [certain AP content] in response to search requests."
AP also offers a web-based platform known as AP Exchange to its licensees, which permits the licensees to search AP articles by keywords. Each AP article contains metadata tags. These tags attach
Meltwater is an international "software as a service" ("SaaS") company that operates in twenty-seven countries. It was founded in 2001 in Norway. Its united States subsidiaries currently have four hundred employees, nine U.S. offices, and an annual income of [REDACTED] of dollars.
In 2005, Meltwater began offering a news monitoring service to subscribers in the United States called Meltwater News. Meltwater News now has more than 4,000 customers in the United States. Its U.S. customers are businesses, non-profit organizations, and government agencies. An annual subscription fee costs thousands of dollars.
Meltwater News subscribers have access to Meltwater's "Global Media Monitoring" product, which offers a suite of online services. The Global Media Monitoring product enables users to monitor the news based on the presence of certain words or phrases in news articles appearing on the Internet and to receive excerpts of those news articles. Meltwater uses automated computer programs or algorithms to copy or "scrape" an article from an online news source, index the article, and deliver verbatim excerpts of the article to its customers in response to search queries.
Meltwater markets its services to communications and public relations professionals as a tool that will assist them in locating "mentions" of their businesses in the media, in tracking their company's press releases, and in conducting comparative research. Some of Meltwater's marketing materials and sales representatives also advertise Meltwater News as a useful tool for staying informed of general news developments. One Meltwater sales representative described Meltwater News as "provid[ing] the most news in the most efficient manner" and referred to the Meltwater News Reports as "customized news digest[s]." Another Meltwater employee has recommended telling customers that a Meltwater News excerpt "saves you time so you don't have to read the full article."
Meltwater competes with AP and its licensees for business. Meltwater identifies companies and services like LexisNexis, Cision, Google News, and Burrelles-Luce as its competitors. Each of these companies has held an AP license. Meltwater has succeeded in winning what it described as a "mega-contract" away from an AP licensee, and both AP and Meltwater have submitted bids to the same potential
Like Internet search engines, Meltwater News employs automated computer programs known as "crawlers" to scan the Internet for news. Meltwater's crawlers scan approximately 162,000 online news websites from over 190 countries each day to create an index of the websites' content. The program usually crawls a news website at roughly [REDACTED] intervals. Most of these websites make their articles available to readers without charge.
The crawlers extract and download content from the websites. The downloaded content is organized into a structured internal format that has seven fields, including a timestamp reflecting when the document was first seen by the crawler. The extracted content is then placed in a queue for indexing. Using an Application Programming Interface or API, an index is created that links or "maps" most of the words in the document to the document.
Meltwater's creation of the index permits its subscribers to search for and request delivery of information that is responsive to their search queries. Its subscribers can conduct two types of searches of the index.
First, a customer can use the Meltwater News platform to set up standing search queries known as "agents." An agent is a single string of words or phrases that will be used in searching Meltwater's index of online news content. For example, a customer interested in obtaining information on education policy might create an agent that reads: "("teachers" or "students") and education* and policies." The creation of an agent query allows the particular search to be conducted automatically on a recurring basis. A basic subscription offers a customer the ability to create five standing agent queries.
Customers receive agent search results in two ways. Most customers receive emails every weekday that contain the excerpts responsive to their standing search requests. These are labeled "News Reports." Customers can also view those same search results by logging onto their Meltwater News online account, where they can see all of their News Reports from the last seven months.
A typical News Report takes the following form. At the top of the News Report a banner appears that reads "News Report from Meltwater News." Directly beneath the banner appears a table entitled "Report Overview." The Table ordinarily consists of two columns; the first column contains the name of the "agent" query that retrieved hits; the second displays the raw number of hits in a given period of time (such as 3 in 1 day, or 635 in 23 hours).
The actual search results follow the Report Overview. They are organized in subcategories based on the agent query to which they respond. Within each agent category, the results appear in reverse chronological order, with the excerpt of the most recently published article appearing first.
Each search result in the News Report generally includes the following text: (1) the headline or title of the article and a hyperlink to the URL for the website from which the article was indexed; (2) information identifying the article's source, such as the publisher and the country of origin; and (3) usually two excerpts from the article. The first excerpt consists of up to 300 characters (including white space) from the opening text of the article or lede. The second excerpt is shorter and is known as the "Hit Sentence." It is approximately 140 characters (not including white spaces) "surrounding a single, algorithmically chosen appearance of one of the customer's matched search keywords." If the keyword appears in the lede, then the lede is repeated twice.
On occasion, the hyperlink to the article no longer leads to the article because the article has been removed from the web. Meltwater contends that when that occurs, the hyperlink will lead the Meltwater subscriber to the website where the article originally appeared, and the reader will see whatever content the operator of the webpage has chosen to display in place of the original article.
A Meltwater News subscriber can choose to have certain charts and graphs included in their News Reports. These charts and graphs — known as "Dashboard Analytics" or "Mail Analytics" — provide additional information about the search results. For instance, customers who opt to have Mail Analytics included in their daily News Report will see a pie chart showing the three or four countries that have had the highest coverage of a particular agent. They also have a choice of seeing an "up-and-down coverage" chart that indicates whether the volume of coverage has gone up or down during a certain period of time, or a "word cloud" illustrating certain buzz words appearing in the search results.
A subscriber can also view additional analysis of its agent searches by logging on to the Meltwater News platform. When it logs on, it encounters a "dashboard" page containing five tools; some of these tools overlap with the tools that can be delivered in the News Reports. Using the dashboard, the customer can view (1) a "tone analysis" tool, which analyzes whether the tone of the news coverage is negative, positive, or neutral; (2) a "word cloud" graphic, which illustrates the frequency with which a keyword appears in the search results; (3) a list of the "top publications" providing the most coverage of a given agent query; (4) an "up-and-down trend analysis" chart, which indicates "whether the volume of media coverage related to a given search query has increased or decreased over a given period;" and (5) a map that illustrates the "geographical distribution of relevant news coverage."
The second way in which customers can conduct searches of the Meltwater News index is through an "ad hoc" search. To perform an ad hoc search, a Meltwater News subscriber logs on to its Meltwater account, clicks on a "Search" tab, and types in keywords of its choice.
Ad hoc searches do not generate News Reports, but the format for presenting the results generated by an ad hoc search is identical to that in News Reports. The results of ad hoc searches are not saved on the Meltwater system unless the subscriber saves them to the subscriber's own archive folder. There is no limit on the number of ad hoc searches that a subscriber can perform.
A subscriber with a basic subscription has the ability to archive material in two ways. First, subscribers can archive any of their search results in a personal archive stored on Meltwater's database. For instance, as described above, an "Archive" button appears next to each excerpt contained in a Meltwater News Report. Clicking this button archives the search result. When a search result is archived in this way, the information stored in the archive includes (1) the headline or title of the article and the URL link; (2) a description of the source of the article; (3) an excerpt of the article, consisting only of the opening text; and (4) any text the user has typed or pasted into a comment box. In other words, the Hit Sentence is not automatically archived.
Second, Meltwater offers a tool called "Article Editor" that is accessible from the Meltwater News online platform. Clicking on the Article Editor tool causes a pop-up window to appear. The window contains boxes with the labels "Date, Title, Opening Text, Body Text, URL, Name of Publisher, and Country." The subscriber can type text into these boxes or can copy and paste text from other websites. For instance, if a customer clicks on a hyperlink provided as part of a search result, the customer can proceed to copy the article from the publishing website and paste the text into the Article Editor. The text can be saved in an "external archive folder" on Meltwater's system for as long as the subscriber remains a customer.
For an additional fee, Meltwater News assists its subscribers in creating their own newsletters. Material that has been saved in a subscriber's archive folder — search results or material entered into the Article Editor — can be incorporated into a "Newsletter" and sent to third-party recipients.
Alternatively, subscribers can elect to have their search results incorporated into a Newsfeed on their internal or external website. Meltwater describes the Newsfeed as a "dynamic list of search results, including links to full articles."
Meltwater delivered excerpts of each of the thirty-three Registered Articles to its customers in News Reports as a result of agent searches.
The parties have not calculated the percentage of each original AP news story that was excerpted and delivered in each of the News Reports, but it probably ranged from as low as 4.5% to slightly over 60%. There are several factors that affect the calculation of the percentage. One is the length of the Registered Article. The average length of the full text of the thirty-three Registered Articles is 2,571 characters (not including spaces), or 504 words.
For example, from the shortest Registered Article — entitled "Modern pentathlon tightens anti-doping policy" — Meltwater delivered the following excerpt:
The full text of the Registered Article reads as follows:
Some of Meltwater's customers have received multiple excerpts from the same AP article, apparently in a single News Report. In such instances, the percentage of the article that is provided to the Meltwater customer may increase since the Hit Sentence in the various excerpts can change.
Excerpts from the Registered Articles were also included in ten Newsletters created by Meltwater customers in the United States. There is no evidence, however, that any Meltwater subscriber used the Meltwater Newsletter feature to cut and paste a complete copy of any of the thirty-three Registered Articles into its customized newsletter.
Finally, Meltwater subscribers only clicked on the hyperlinks for seven of the thirty-three Registered Articles. The average click-through rate for the thirty-three Registered Articles is roughly 0.08%.
On February 14, 2012, AP filed this action against Meltwater. AP's amended complaint asserts six causes of action with respect to the Registered Articles: (1) copyright infringement; (2) contributory copyright infringement; (3) vicarious copyright infringement; (4) declaratory judgment of copyright infringement; (5) "hot news" misappropriation under New York common law; and (6) removal or alteration of copyright management information. In response, Meltwater has raised four counterclaims: (1) declaratory judgment of non-infringement; (2) declaratory judgment of safe harbor from infringement claims based upon the Digital Millennium Copyright Act ("DMCA"); (3) libel per se; and (4) tortious interference with business relations.
At a pretrial conference held on April 20, 2012, the Court proposed that the parties conduct an initial phase of discovery focused on Meltwater's liability on AP's copyright claims based on the nineteen articles identified in its original complaint. The parties thereafter agreed on a schedule that would permit them to focus on the core discovery needed to allow early briefing of the central legal issues in this case. At a May 11 conference, the Court determined that AP should be permitted to take targeted discovery not only of Meltwater's alleged infringement with respect to the Registered Articles, but also broader discovery of Meltwater's general practices and procedures.
On July 13, AP filed an amended complaint in which it included fourteen additional articles — bringing the total number of Registered Articles at issue to thirty-three. Discovery proceeded on all thirty-three articles and broader issues to permit the parties to litigate through summary judgment practice the copyright infringement claim and Meltwater's affirmative defenses to that claim.
Both sides filed the instant cross-motions for summary judgment on November 9.
These motions were fully submitted on January 23, 2013. Redacted sets of these motion papers were publicly filed in December 2012 and January 2013. The defendants also filed on December 26, 2012 and January 24, 2013, two motions to strike certain declarations submitted by the plaintiff and the plaintiff's Fed. R.Civ.P. 56.1 Statement.
The parties have cross-moved for summary judgment. Summary judgment may not be granted unless the submissions of the parties taken together "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination the court must view all facts in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Azrielli v. Cohen Law Offices, 21 F.3d 512, 517 (2d Cir.1994) ("[T]he court must resolve all ambiguities and draw all reasonable inferences in favor of the nonmoving party."). When the moving party has asserted facts showing that the nonmovant's claims cannot be sustained, the opposing party must "set forth specific facts showing that there is a genuine issue for trial," and cannot rest on the "mere allegations or denials" of his pleadings. Rule 56(e), Fed.R.Civ.P. See also Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir.1995). In deciding whether to grant summary judgment, therefore, this Court must determine (1) whether a genuine factual dispute exists based on the evidence in the record, and (2) whether the fact in dispute is material based on the substantive law at issue.
In this case, the substantive law governing the parties' dispute is found in the law of copyright. The Copyright Act of 1976 invests a copyright holder with a bundle of exclusive rights. 17 U.S.C. § 106 et seq. This bundle consists of the rights to "reproduce, perform publicly, display publicly, prepare derivative works of, and distribute copies of" the copyrighted work. Arista Records v. Doe 3, 604 F.3d 110, 117 (2d Cir.2010); see also 17 U.S.C. § 106. "The principle purpose of the Copyright Act is to encourage the origination of creative works by attaching enforceable property rights to them." Matthew Bender & Co., Inc. v. West Pub. Co., 240 F.3d 116, 122 (2d Cir.2001).
To prevail on a claim of copyright infringement, "two elements must be proven: (1) ownership of a valid copyright, and (2) copying constituent elements of the work that are original." Arista Records, 604 F.3d at 117 (citation omitted). A certificate of copyright registration is prima facie evidence of both valid ownership of copyright and originality. See Scholz Design, Inc. v. Sard Custom Homes, LLC, 691 F.3d 182, 186 (2d Cir.2012); see also Boisson v. Banian, 273 F.3d 262, 268 (2d Cir.2001). The copying of the constituent elements of the work that are original can be established through direct or indirect evidence. Boisson, 273 F.3d at 267.
The reporting of facts is not protectable under the Copyright Act since facts are "never original to an author." Nihon Keizai Shimbun, Inc. v. Comline Business Data, Inc., 166 F.3d 65, 70 (2d Cir.1999). But compilations of facts may be protected under the Act since the arrangement or presentation of facts "can display originality." Id. There is even more room for originality in descriptions of
AP has carried its burden to show both its ownership of a valid copyright in the Registered Articles and Meltwater's copying of protected elements of those works. Meltwater does not contest this showing, but relies instead on five affirmative defenses. Its principal defense is that it made fair use of the Registered Articles. It also contends that there are triable issues of fact that require a trial as to four additional defenses: its possession of an implied license, estoppel, laches, and copyright misuse. Each of these defenses will be addressed in turn, but none of them prevents the issuance of summary judgment in AP's favor based on its copyright claim.
Meltwater contends that its use of the Registered Articles is fair because Meltwater News functions as an Internet search engine, providing limited amounts of copyrighted material to its subscribers in response to their queries and thereby pointing its subscribers to a source of information online. It contends that this service is transformative of the original works. Based on undisputed evidence, Meltwater's fair use defense fails.
Notwithstanding the copyright protections guaranteed by Section 106 of the Copyright Act, the law of copyright recognizes the need for "breathing space." Campbell v. Acuff-Rose Music, 510 U.S. 569, 579, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994); see also On Davis v. The Gap, Inc., 246 F.3d 152, 174 (2d Cir.2001). Thus, even where a plaintiff has established a prima facie case of copyright infringement, liability is excused where the defendant demonstrates that he made "fair use" of the plaintiff's copyrighted work. Because fair use is an affirmative defense, the burden of proof rests with party relying on the defense. Infinity Broadcast Corp. v. Kirkwood, 150 F.3d 104, 107 (2d Cir.1998). The availability of a fair use defense permits courts to avoid the "rigid application of the copyright statute" when "it would stifle the very creativity which the law is designed the foster." Campbell, 510 U.S. at 577, 114 S.Ct. 1164.
The fair use doctrine, although of common law origin, has been codified at 17 U.S.C. § 107. This section provides that
17 U.S.C. § 107. The applicability of the fair use defense is a mixed question of law and fact. Bill Graham Archives v. Dorling Kindersley, Ltd., 448 F.3d 605, 608 (2d Cir.2006). The issue of fair use may be resolved on summary judgment where the court determines that there is no genuine dispute of material facts. Id.
In determining whether a defendant has made fair use of the plaintiff's copyrighted work, the court is guided by four nonexclusive statutory factors:
17 U.S.C. § 107. No single factor is determinative. "All are to be explored, and the results weighed together, in light of the
When these four factors are examined in light of the purpose of the copyright law, AP has shown through undisputed evidence that Meltwater's copying is not protected by the fair use doctrine. Each of these four factors will be examined in turn.
The first factor of the fair use analysis poses a deceptively simple question. It asks
Campbell, 510 U.S. at 579, 114 S.Ct. 1164 (citation omitted). A decision on whether a work is transformative need not be an all-or-nothing assessment. Nihon, 166 F.3d at 72. The inquiry asks not merely whether the new work is transformative, but also the extent to which it transforms the copyrighted work. "[T]he more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use." Campbell, 510 U.S. at 579, 114 S.Ct. 1164. The inquiry into the transformative nature of the work is "guided by" the preamble to § 107, which directs attention to whether the use of copyrighted material is for the several listed purposes, among them news reporting and research. Id. at 578, 114 S.Ct. 1164. But, the list of fair uses included in the preamble of section 107 is only "illustrative." Infinity Broadcast Corp., 150 F.3d at 107 (citation omitted). Nonetheless, "the illustrative nature of the categories should not be ignored." Id.
Of course, not all alterations of a copyrighted work are "transformative." A "use of copyrighted material that merely repackages or republishes the original is unlikely to be deemed a fair use" and a "change of format, though useful" is not transformative. Infinity Broadcast Corp., 150 F.3d at 108 & n. 2 (citation omitted). On the other hand, if copyrightable expression in the original work is used as "raw material, transformed in the creation of new information, new aesthetics, new insights and understandings — this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society." Pierre N. Leval, Toward a Fair Use Standard, 103 Harv. L. Rev. 1105, 1111 (1990); see also Castle Rock Entm't, Inc. v. Carol Publ'g Group, Inc., 150 F.3d 132, 142 (2d Cir.1998). In considering whether the second work has transformed the original, it is appropriate to consider the percentage of the allegedly infringing work that is made up of the copyrighted work since this offers some indication of whether the defendant's use of the "original materials has been sufficiently transformative."
Another aspect of the first fair use factor is the extent to which the new work has a commercial or non-profit educational
Campbell, 510 U.S. at 584, 114 S.Ct. 1164 (citation omitted). The fact that a given use is profit-driven is not the focus of the commerciality inquiry. Instead, the "crux of the profit/nonprofit distinction is ... whether the user stands to profit from the exploitation of the copyrighted material without paying the customary price." Harper & Row Publishers, Inc. v. Nation Enterp., 471 U.S. 539, 562, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985). Thus, the fair use doctrine "distinguishes between a true scholar and a chisler who infringes a work for personal gain." Id. at 563, 105 S.Ct. 2218 (citation omitted).
A determination of whether a use "exploits" a copyrighted work calls for a careful exploration of the link between the defendant's precise use of the copyrightable elements of the plaintiff's work and the defendant's financial gain. Where a defendant did not gain "direct or immediate commercial advantage" from the copying, its status as a for-profit enterprise is less relevant. Am. Geophysical Union v. Texaco, Inc., 60 F.3d 913, 921 (2d Cir.1994). Conversely, "when the copier directly and exclusively acquires conspicuous financial rewards from its use of the copyrighted material" a finding of fair use is less likely. Blanch v. Koons, 467 F.3d 244, 253 (2d Cir.2006). Of course, a use that generates value for the "broader public interest" weighs in favor of fair use. Id.
In analyzing the purpose of the use, a court may consider as well other aspects of a defendant's purpose. For instance, was the copying intended to supplant the copyright holder's "commercially valuable right of first publication." Harper & Row, 471 U.S. at 562, 105 S.Ct. 2218. As the term itself suggests, "[f]air use presupposes good faith and fair dealing." Id. (citation omitted).
Neither the purpose nor use of the Meltwater News Reports, nor its excerpts from the Registered Articles in the News Reports, is transformative. Meltwater uses its computer programs to automatically capture and republish designated segments of text from news articles, without adding any commentary or insight in its News Reports. Meltwater copies AP content in order to make money directly from the undiluted use of the copyrighted material; this is the central feature of its business model and not an incidental consequence of the use to which it puts the copyrighted material. Thus, it is not surprising that Meltwater's own marketing materials convey an intent to serve as a substitute for AP's news service. Meltwater describes its Meltwater News products as "News at a glance" and "News brought to you." They trumpet that "Meltwater News continuously tracks news sources, updating its database continuously throughout the day so searches return fresh, relevant content," and advertise that "your news is delivered in easy to read morning and/or afternoon reports."
Nor is Meltwater's taking of copyrighted material more defensible because its business relates to news reporting and research — two of the purposes of the fair use doctrine captured in the statute's preamble. The news reporting and research upon which Meltwater relies was not done by Meltwater but by AP; the copyrighted material that Meltwater has taken is the
For this same reason, the examination of the public interest weighs against Meltwater. Paraphrasing James Madison, the world is indebted to the press for triumphs which have been gained by reason and humanity over error and oppression. Investigating and writing about newsworthy events occurring around the globe is an expensive undertaking and enforcement of the copyright laws permits AP to earn the revenue that underwrites that work. Permitting Meltwater to take the fruit of AP's labor for its own profit, without compensating AP, injures AP's ability to perform this essential function of democracy.
While commercial Internet news clipping services like Meltwater perform an important function for their clients, the public interest in the existence of such commercial enterprise does not outweigh the strong public interest in the enforcement of the copyright laws or justify allowing Meltwater to free ride on the costly news gathering and coverage work performed by other organizations. Moreover, permitting Meltwater to avoid paying licensing fees gives it an unwarranted advantage over its competitors who do pay licensing fees.
As will be further explored below, Meltwater characterizes itself as an Internet search engine and emphasizes the importance of search engines to the operation of the Internet. Together, search engines and the Internet have delivered the world's knowledge to the fingertips of multitudes across the globe. There is a strong public interest in preserving this democratic, instantaneous, and efficient access to information. But, there is no necessary tension between these two important public goods: news reporting and search engines. Quite to the contrary, these interests are complementary. The Internet would be far poorer if it were bereft of the reporting done by news organizations and both are enhanced by the accessibility the Internet provides to news gathered and delivered by news organizations. Neither Meltwater nor its amici have shown that a finding that Meltwater's activities do not amount to fair use threatens Internet search engines in any way. For all of these reasons, the first factor in the fair use analysis decidedly favors AP.
Meltwater's argument that its use of the Registered Articles is transformative is premised on a single contention. It characterizes Meltwater News as a search engine that directs users to a source of information online and whose search results provide insight into "where, when, how often, and in what context" certain words or phrases appear on the Internet. Meltwater defines a search engine as a system that by design and operation improves access to information that is available on the Internet. According to Meltwater, the design and function of a search engine should decrease the likelihood that users would put the material displayed by the search engine to the same use as the original works.
But, as can be gleaned from the discussion of Meltwater's operations in earlier sections of this Opinion, Meltwater's own description of Internet search engines does not correspond to how Meltwater News itself functions.
As far as the thirty-three Registered Articles are concerned, customers rarely clicked-through to the underlying AP article. It occurred just 0.08% of the time. In her deposition, a Meltwater executive testified that a click-through rate of 0.05% would be consistent with her expectations. The click-through rate for the thirty-three Registered Articles is also consistent with a UK tribunal's finding that Meltwater's services produced a click-through rate of 0.5% for certain UK news sources.
This was a conscious decision on Meltwater's part. During the discovery period, AP repeatedly requested additional data about Meltwater's click-through rate in anticipation of any argument by Meltwater that Meltwater News directs traffic to the original websites for the news articles. Meltwater took the position that the data was not relevant to these summary judgment motions and refused to provide this discovery. The upshot is that Meltwater has no evidence that its system systematically drives its customers to third-party websites.
Instead of driving subscribers to third-party websites, Meltwater News acts as a substitute for news sites operated or licensed by AP. Meltwater always reprints the story's title and lede, as well as material surrounding one targeted keyword. Just as a news clipping service should do, Meltwater systematically provides its subscribers with what in most instances will
Rather than offering any evidence from which to compare its actual performance with that of Internet search engines, Meltwater has chosen to rely on two decisions from the Ninth Circuit Court of Appeals. Meltwater argues from these two decisions that the extent of its copying of the underlying work is irrelevant to the fair use analysis since even the copying of the full work can be transformative when done by an Internet search engine. Those two decisions, however, provide little comfort to Meltwater.
In Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir.2007), the Ninth Circuit vacated a preliminary injunction and held that Google was likely to succeed in showing at trial that the display of small images called "thumbnails," which were reduced, lower-resolution versions of the plaintiff's copyrighted photographs of nude models, on Google Image Search webpages was a fair use of the images. Id. at 1154-55, 1168. The court found that Google's use of thumbnails was "highly transformative" since its function was to serve as a pointer to a source of information rather than serving as a form of entertainment. Id. at 1165.
Similarly, in Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir.2003), the Court of Appeals for the Ninth Circuit held that the display of small low-resolution pictures, again called thumbnails, on the website of an Internet search engine constituted a fair use of the plaintiff's photographs of the American West. Id. at 815. The search engine in Kelly produced only thumbnails in response to a user's query, and no text. The court found that the use of the thumbnails was transformative because their use was "unrelated to any aesthetic purpose" since any enlargement "results in a significant loss of clarity of the image, making them inappropriate as display material." Id. at 818. The display of thumbnails did not "stifle artistic creativity" or "supplant the need for the originals." Id. at 820.
There are several distinctions to be drawn between the instant dispute and the issues at stake in Perfect 10 and Kelly. The first and most obvious is that it was undisputed in both cases that the fair use defense was being applied to a search engine engaged in a transformative purpose. Unlike the searches in Perfect 10 and Kelly, Meltwater's searches are not publicly available and are run against a defined list of content providers. As already noted, Meltwater has also not offered evidence that it actually functions like a search engine in other important respects. In short, use of an algorithm to crawl over and scrape content from the Internet is surely not enough to qualify as a search engine engaged in transformative work.
The second observation that should be made is that the two Ninth Circuit decisions on which Meltwater relies provide little support for its argument that the reprinting of the entirety of a copyrighted work is a fair use so long as the reprinting
Moreover, Meltwater's discussion of search engines is to some extent beside the point. While it is important to understand how Meltwater News functions, even if it were a search engine it would still be necessary to examine whether Meltwater had acted to violate the Copyright Act. The fact that Perfect 10 and Kelly addressed the issue of the fair use defense in the context of webpages created by a search engine, and found the defense available to those defendants, does not relieve Meltwater of its independent burden to prove that its specific display of search results for its subscribers qualifies as a fair use. In other words, using the mechanics of search engines to scrape material from the Internet and provide it to consumers in response to their search requests does not immunize a defendant from the standards of conduct imposed by law through the Copyright Act, including the statutory embodiment of the fair use defense.
By the same token, even though it could be said that a search engine merely "repackages" the original work, Infinity Broadcast Corp., 150 F.3d at 108 & n. 2, and does not transform it in the sense of adding "new expression, meaning or message," Campbell, 510 U.S. at 579, 114 S.Ct. 1164, that does not mean that its taking is ineligible for protection under the fair use defense. Where a defendant's use "is plainly different from the original purpose" for which the work was created, that use may be transformative. Bill Graham Archives, 448 F.3d at 609 (approving reproduction of a small image of poster along a timeline in a biography). As described by amici, the purpose of search engines is to allow users to sift through the deluge of data available through the Internet and to direct them to the original source. That would appear to be a transformative purpose. But, as discussed above, Meltwater has not shown that that is how it functions.
Based on the undisputed facts in this record, Meltwater provides the online equivalent to the traditional news clipping service. Indeed, Meltwater has described itself as adding "game-changing technology for the traditional press clipping market." There is nothing transformative about that function. See, e.g., Video Pipeline, Inc. v. Buena Vista Home Entm't, Inc., 342 F.3d 191, 199 (3d Cir.2003) (clip previews of movies); Nihon, 166 F.3d at 72 (abstracts of news articles); Infinity Broadcast Corp., 150 F.3d at 108 (radio monitoring service); Los Angeles News Service v. Tullo, 973 F.2d 791, 797, 799 (9th Cir.1992) (video news clipping service.); Pacific and Southern Co., Inc. v. Duncan, 744 F.2d 1490, 1496 (11th Cir. 1984) (TV news clipping service).
Finally, Meltwater seeks to defend its copying of the Registered Articles by pointing out that it used the content it takes from the Internet to also provide its subscribers with services like Dashboard Analytics. Meltwater argues that this use of the material constitutes a transformative use. This lawsuit does not challenge the display of any of Meltwater's analytics
The second factor — the nature of the copyrighted work — considers principally two characteristics of the copyrighted work. First, this factor calls for consideration of "whether the work is expressive or creative, such as a work of fiction, or more factual." Blanch, 467 F.3d at 256 (citation omitted). Works of fiction are "closer to the core of intended copyright protection" than are works that are predominantly factual. Infinity Broadcast Corp., 150 F.3d at 109 (citation omitted). Accordingly, the scope of fair use is broader with respect to factual works than it is with respect to works of fiction. See Nihon, 166 F.3d at 73.
The second characteristic of the copyrighted work that is relevant to this factor is whether the work is published or unpublished. The right of first publication is an important right held by the copyright owner and "the scope of fair use is narrower with respect to unpublished works." Wright v. Warner Books, Inc., 953 F.2d 731, 737 (2d Cir.1991) (citation omitted).
AP's articles are news stories and therefore more vulnerable to application of the fair use defense than works of fiction. Moreover, Meltwater copied works that were already published. As a consequence, this factor "is at most neutral on the question of fair use," Nihon, 166 F.3d at 73, and should be weighed in favor of finding fair use.
The third factor examines the amount and substantiality of the copying by the infringing work. This factor has both quantitative and qualitative dimensions, NXIVM Corp. v. The Ross Inst., 364 F.3d 471, 480 (2d Cir.2004), and is reviewed "with reference to the copyrighted work, not the infringing work." Wright, 953 F.2d at 738.
The quantitative assessment examines the portion of the copyrighted work that was taken in relation to the whole of that work. The qualitative dimension of this factor considers the importance of the expressive components of the portion copied. See Campbell, 510 U.S. at 587, 114 S.Ct. 1164; see also Rogers v. Koons, 960 F.2d 301, 311 (2d Cir.1992). In other words, the court should consider whether the portion taken is "essentially the heart" of the copyrighted expression. NXIVM Corp., 364 F.3d at 480 (citation omitted). The "most relevant" question for this factor is whether the infringer has taken "no more" than is necessary. Infinity Broadcast Corp., 150 F.3d at 110.
In terms of quantitative copying, the Second Circuit has found that copying as little as eight percent of the original work may tip this factor against a finding of fair use. Iowa State Univ. Research Found., Inc. v. Am. Broad. Co., 621 F.2d 57, 61-62 (2d Cir.1980) (broadcasting of eight percent of student-made film); see also Salinger v. Random House, Inc., 811 F.2d 90, 98 (2d Cir.1987) (copying one-third of seventeen letters and ten percent of forty-two letters weighed against finding of fair use).
The reasonableness of the amount and portions copied will vary depending on the character and purpose of the secondary use. It may be necessary for the secondary user to copy a certain amount or specific portion of the original work in order to accomplish the transformative purpose. The Supreme Court's analysis in Campbell v. Acuff-Rose Music, 510 U.S. 569, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994), is instructive. In that case, a rap group — 2 Live Crew — sampled portions of Roy Orbison and William Dees' song "Oh, Pretty Woman" in a rap parody entitled "Pretty Woman." Id. at 572, 114 S.Ct. 1164. In considering the amount and substantiality of the copying, the Supreme Court offered the following analysis:
Id. at 588, 114 S.Ct. 1164 (citation omitted). An analysis of this factor may offer insight into the fourth factor of the fair use analysis as well. In effect, the substantiality of the copying may foreshadow the extent to which the second work will be capable of serving as a market substitute for the original work. Id. at 587, 114 S.Ct. 1164.
This factor weighs strongly against a finding of fair use here. Meltwater has not shown that its taking from the Registered Articles was defensible from either a quantitative or qualitative perspective.
Meltwater took between 4.5% and 61% of the Registered Articles. It automatically took the lede from every AP story. As described by AP's Standards Editor, the lede is "meant to convey the heart of the story." A lede is a sentence that takes significant journalistic skill to craft. There is no other single sentence from an AP story that is as consistently important from article to article — neither the final sentence nor any sentence that begins any succeeding paragraph in the story.
Nor has Meltwater attempted to show that it took no more than necessary to perform as a search engine, which is how it seeks to justify its infringement. It has not offered evidence that its automated programs for culling and displaying passages from articles are consistent with the industry standards for search engines. As the evidence offered on this motion illustrates, search engines regularly display briefer segments of news articles. As the CCIA describes the segments taken by
Meltwater makes essentially three arguments to support its infringement under the third factor's quantitative and qualitative tests. None of these arguments is persuasive.
First, Meltwater relies on Nihon, 166 F.3d at 65, to argue that its taking was not quantitatively significant. In Nihon, the Second Circuit found, although acknowledging that it was a "close call," that the copying of only one paragraph of a six-paragraph news article was not an act of infringement since the two articles were not substantially similar in a "quantitative sense." Id. at 71. Since Meltwater has not chosen, however, to contest AP's showing that its copying of each of the Registered Articles was an act of infringement, the Nihon court's discussion about the substantial similarity test for infringement has limited relevance here. In any event, when it reached the fair use defense, the Nihon court found that the abstracting of news articles by the defendant was not a fair use of those articles. In connection with the third factor, it emphasized the amount of copying of protectable expression and held that this factor also tipped against fair use. Id. at 73.
Next, Meltwater argues that the extent of its copying is justified because its purpose is to serve as a search engine. But, Meltwater has failed to show that it takes only that amount of material from AP's articles that is necessary for it to function as a search engine. Indeed, the evidence is compellingly to the contrary.
Finally, Meltwater disagrees that the lede is qualitatively significant. It points out that two of the ledes are teasers and not summaries of news.
Campbell, 510 U.S. at 590, 114 S.Ct. 1164 (citation omitted). Where there is a fully functioning market for the infringer's use of the copyrighted material, it will be difficult for the infringing party to show that it made fair use without paying a licensing fee. See Harper & Row, 471 U.S. at 566 n. 9, 105 S.Ct. 2218. In contrast, "when the only possible adverse effect occasioned by the secondary use would be to a potential market or value that the copyright holder
When analyzing the fourth factor, "the impact on potential licensing revenues is a proper subject for consideration." Am. Geophysical Union, 60 F.3d at 929. In considering this type of harm, however, a court must be wary of falling into the trap of circular reasoning. The Second Circuit has provided the following guidance:
Id. at 930-31. Thus, in order to prevent the loss of licensing fees from becoming a syllogistic consideration, courts consider only the loss to potential licensing revenues from "traditional, reasonable, or likely to be developed markets." Id. at 930; see also Bill Graham Archives, 448 F.3d at 614.
Consequently, when the use is transformative or takes place in a market that the copyright holder is unlikely to develop, it is more likely that the defendant has engaged in a fair use of the material. After all, "[c]opyright holders rarely write parodies of their own works, or write reviews of them, and are even less likely to write news analyses of their underlying data from the opposite political perspective." Twin Peaks Productions, Inc. v. Publ'ns Intern., Ltd., 996 F.2d 1366, 1377 (2d Cir.1993) (citation omitted); cf. Campbell, 510 U.S. at 592-93, 114 S.Ct. 1164. Accordingly, while a copyright holder's current participation in a given market is relevant to the determination of whether the market is "traditional, reasonable, or likely to be developed," it is not determinative.
Bill Graham Archives, 448 F.3d at 614-15 (citation omitted). In other words, "[c]opyright owners may not preempt exploitation of transformative markets." Id. at 615 (citation omitted). Additionally, this factor requires careful attention to the source or cause of the harm.
On Davis, 246 F.3d at 175. The concern of this factor is not with "whether the secondary use suppresses or even destroys the market for the original work or its potential derivatives, but [with] whether the secondary use usurps or substitutes for the market of the original." Castle Rock Entm't, 150 F.3d at 145.
The fourth factor weighs strongly against Meltwater. AP has expended considerable
Meltwater ignores most of this record. It relies almost exclusively on its contentions that it is a search engine and that search engines make a transformative use of the copyrighted news stories. But, as discussed above, AP has not shown that it should be characterized as a search engine imbued with a transformative purpose; adopting technology used by search engines does not by itself make one a search engine in this sense. As tellingly, Meltwater has not shown that it has taken only that amount of content that is necessary for it to function as a search engine.
Examining the four factors individually, and considering them as a whole in light of the purposes of the Copyright Act and the fair use defense, Meltwater has failed to raise a material question of fact to support its fair use defense. Meltwater's business model relies on the systematic copying of protected expression and the sale of collections of those copies in reports that compete directly with the copyright owner and that owner's licensees and that deprive that owner of a stream of income to which it is entitled. Meltwater's News Reports gather and deliver news coverage to its subscribers. It is a classic news clipping service. This is not a transformative use. As significantly, the rejection of the fair use defense here will further the ultimate aim of the Copyright Act, which is to stimulate the creation of useful works for the public good. Harper & Row, 471 U.S. at 558, 105 S.Ct. 2218.
Throughout its discussion of the fair use defense, Meltwater has attempted to escape the straight forward application of the four-part fair use test by characterizing itself as a search engine. Meltwater has failed to show, however, that its interactions with its subscribers are equivalent in any material way to the functioning of search engines, as that term is commonly understood. Exploitation of search engine technology to gather content does not answer the question of whether the business itself functions as a search engine. In any event, however Meltwater's business is classified, it must still show that its use of copyrighted expressive content was a fair use. This it has not done.
AP has also moved for summary judgment on Meltwater's second affirmative defense, the defense that Meltwater was granted an implied license by AP. It is a defense to copyright infringement that the alleged infringer possessed a license to use the copyrighted work. Graham v. James, 144 F.3d 229, 236 (2d Cir.1998). The burden of proving that a license exists falls on the party invoking the defense. Id.
Pursuant to the Copyright Act, all grants of exclusive rights in a copyright must be made in writing. 17 U.S.C. § 204(a). Nonexclusive licenses, however, need not be in writing. 17 U.S.C. § 101;
Id. at 241, 47 S.Ct. 366.
The test for determining whether an implied license exists in the copyright context has three elements. The defendant must show that
See Latimer v. Roaring Toyz, Inc., 601 F.3d 1224, 1235 (11th Cir.2010); see also Wilchombe v. TeeVee Toons, Inc., 555 F.3d 949, 956 (11th Cir.2009); Atkins v. Fischer, 331 F.3d 988, 991-92 (D.C.Cir.2003); Nelson-Salabes, Inc. v. Morningside Development, LLC, 284 F.3d 505, 514 (4th Cir.2002); I.A.E. Inc. v. Shaver, 74 F.3d 768, 776 (7th Cir.1996). The circumstances in which an implied license may be found are therefore quite "narrow." SmithKline Beecham Consumer Healthcare v. Watson Pharmaceuticals, Inc., 211 F.3d 21, 25 (2d Cir.2000) (citation omitted).
Even those courts that do not require evidence of each of these three elements do require evidence of a meeting of the minds between the licensor and licensee such that it is fair to infer that the licensor intended to grant a nonexclusive license. Baisden v. I'm Ready Prods., Inc., 693 F.3d 491, 501 (5th Cir.2012) (collecting cases); see also Psihoyos v. Pearson Educ. Inc., 855 F.Supp.2d 103, 124 (S.D.N.Y. 2012). Since an implied license is a creature of contract law, the parties' intent is a critical factor. I.A.E., 74 F.3d at 775-76; see also Johnson v. Jones, 149 F.3d 494, 502 (6th Cir.1998).
Meltwater has failed to offer evidence from which a reasonable juror could conclude that AP impliedly granted Meltwater a license to copy and distribute its articles. It is undisputed that the Registered Articles were not created at Meltwater's request. Moreover, the parties had essentially no contact with each other before this litigation.
Meltwater has not shown that it had the type of interaction with AP that existed in any of those few instances in which Courts of Appeals across the country have found evidence of an implied license. See, e.g. Lukens Steel Co. v. Am. Locomotive Co., 197 F.2d 939, 941 (2d Cir.1952) (the parties
Nor has Meltwater offered any evidence of interaction with any of AP's licensees from which it could be inferred that any one of those licensees had impliedly granted a sublicense to Meltwater to excerpt material found on their websites. This is unsurprising since AP's licenses do not grant its licensees the authority to sublicense AP content.
In its opposition, Meltwater makes one argument to support its affirmative defense of implied license. It once again equates its activities with those of a search engine that makes its searches freely available to the public in order to direct the Internet user to the websites that respond to the user's search requests. Meltwater argues that AP impliedly granted Meltwater a license to use the Registered Articles when it did not require its licensees to employ on their websites robots.txt protocol to exclude web crawlers.
Meltwater has not offered any expert testimony about robots.txt, but the parties appear to agree that it functions as follows. Robots.txt protocol, also known as the Robot Exclusion Standard, was designed by industry groups to instruct cooperating web crawlers not to access all or part of a website that is publicly viewable. If a website owner uses the robots.txt file to give instructions about its site to web crawlers, and a crawler honors the instruction, then the crawler should not visit any pages on the website. The protocol can also be used to instruct web crawlers to avoid just a portion of the website that is segregated into a separate directory.
For several reasons, the failure of AP's licensees to employ the robots.txt protocol did not give Meltwater an implied license to copy and publish AP content. First, what Meltwater is suggesting would shift the burden to the copyright holder to prevent unauthorized use instead of placing the burden on the infringing party to show it had properly taken and used content.
As significantly, there is no fair inference, based simply on the absence of the robots.txt protocol, that there has been a meeting of the minds between the copyright owner and the owner of the web crawler about the extent of copying. The implied license that Meltwater is advocating would reach to every web crawler with no distinction between those who make fair use and those who do not, or between those whose uses may be publicly observed and those whose uses are hidden within closed, subscriber systems. Meltwater has presented no evidence to suggest that robots.txt instructions are capable of communicating which types of use the copyright holder is permitting the web crawler to make of the content or the extent of the copying the copyright holder will allow.
There are also practical problems with Meltwater's argument in the event that AP and its licensees wanted to continue to permit search engines to visit their sites. AP is engaged in an ongoing licensing program that includes granting licenses that permit the scraping of AP content by web crawlers from online sources. Robots.txt protocol can be adopted to allow or
There is yet another policy reason against the use of robots.txt protocol to enforce the Copyright Act. The protocol is a helpful innovation that gives instructions to cooperating crawlers. But, in the interest of openness on the Internet, one would expect it to be used only when it is in the clear interest of the website to broadly limit access. It is fair to assume that most Internet users (and many owners of websites) would like crawlers employed by search engines to visit as many websites as possible, to include those websites in their search results, and thereby to direct viewers to a vast array of sites. Adopting Meltwater's position would require websites concerned about improper copying to signal crawlers that they are not welcome.
Finally, in support of its argument, Meltwater cites Field v. Google, 412 F.Supp.2d 1106 (D.Nev.2006), and Parker v. Yahoo!, Inc., No. 07 Civ. 2757, 2008 WL 4410095 (E.D.Pa. Sept. 25, 2008). Neither decision suggests that AP impliedly consented to the copying done by Meltwater because its licensees permitted search engines to crawl their sites. These two decisions principally discuss a website protocol that performs a different function than robots.txt. They address the storage of web pages by search engines. The "cached" pages at issue allowed users of the search engines to access an archival copy of a webpage stored in the search engine's system. The archival copy shows the page as it appeared the last time the search engine visited the page. Field, 412 F.Supp.2d at 1111. This can be particularly useful when a page has been removed from its original location. Id. By adopting a "no-archive" meta-tag, the website owner could instruct the search engines not to provide a cached link to search engine users. Id. at 1112-13. The copyright owners in each of these decisions chose not to use the "no-archive" meta-tags, knew that the search engines would honor the meta-tags, and also knew the search engines would remove the cached copy upon request. In such circumstances, the courts found an implied license. Id. at 1116; Parker, 2008 WL 4410095, at *4.
Meltwater does not provide its subscribers with access to cached pages, reserves the right to disregard certain robots.txt instructions, and has not suggested that it will remove content from its system at the request of the copyright owner. As a result, these two decisions have limited relevance.
It is worth observing that, when a crawler is making a fair use of a website's content, it does not need to resort to the implied license doctrine; where it does not, then the website's failure to use the robots.txt protocol to block its access will not create an implied license. Accordingly, Meltwater's implied license defense fails as a matter of law.
Meltwater relies on three additional affirmative defenses as reasons why summary judgment may not be entered in favor of AP on its copyright infringement claim. The first is equitable estoppel.
Meltwater argues that AP is estopped from bringing its claim of copyright infringement because it failed to take protective measures and was silent in the face of Meltwater's actions. This defense is no more effective than Meltwater's affirmative defense of implied license.
The doctrine of equitable estoppel applies "where the enforcement of the rights of one party would work an injustice upon the other party due to the latter's justifiable reliance upon the former's words or conduct." Marvel Characters, Inc. v. Simon, 310 F.3d 280, 292 (2d Cir.2002) (citation omitted). Essential to any finding of estoppel is "detrimental reliance on the adverse party's misrepresentations." Republic of Ecuador v. Chevron Corp., 638 F.3d 384, 400 (2d Cir.2011). Reliance is not justifiable if the party invoking estoppel "had the means by which with reasonable diligence he could acquire the knowledge so that it would be negligence on his part to remain ignorant by not using those means." In re Becker, 407 F.3d 89, 99 (2d Cir.2005) (citation omitted) (Emphasis omitted.) Silence alone is rarely a basis for finding equitable estoppel, but "where a party has a legal duty to speak, silence can constitute an affirmative `misrepresentation.'" Kosakow v. New Rochelle Radiology Assocs., P.C., 274 F.3d 706, 725 (2d Cir.2001); see also Veltri v. Bldg. Service 32B-J Pension Fund, 393 F.3d 318, 326 (2d Cir.2004); General Elec. Capital Corp. v. Armadora, S.A., 37 F.3d 41, 45 (2d Cir.1994).
Meltwater has not carried its burden of raising a question of fact suggesting that AP made any misrepresentations or acted in any way that would have justified Meltwater believing that it was entitled to publish the excerpts from the Registered Articles or would not be sued for copyright infringement if it did. Meltwater has not pointed to any representation by AP or its licensees that led it to believe that it could act as it did in publishing the excerpts of AP articles. To the contrary, many if not all of AP's licensees display terms of use on their websites prohibiting the commercial use of content.
Meltwater next argues that, until it initiated this lawsuit, AP never told Meltwater that it had any objection to Meltwater's use of AP content. But, Meltwater has offered no evidence of any relationship or communication with AP that imposed upon AP the duty to speak. In the absence of a duty to speak, Meltwater could not reasonably rely on AP's alleged silence about its copyright infringement.
Not only has Meltwater failed to offer evidence of any justifiable reliance, but the evidence submitted on these motions also indicates that Meltwater was on notice of the risk it ran of being sued by AP for copyright infringement. As mentioned, many — if not all — of the websites that Meltwater crawled in order to copy AP articles post terms of use that specifically prohibit commercial use of the website's content. In October of 2007, AP sued one of Meltwater's competitors — Moreover Technologies, Inc. ("Moreover") — for copyright infringement on the basis of Moreover's scraping of AP content from websites and distribution of excerpts or entire articles to Moreover's customers.
Meltwater also argues that its affirmative defense of laches prevents summary judgment from being granted in AP's favor. The Copyright Act sets a three-year statute of limitations for copyright infringement claims. 17 U.S.C. § 507(b). A copyright claim accrues "when a plaintiff knows or has reason to know of the injury upon which the claim is premised." Merchant v. Levy, 92 F.3d 51, 56 (2d Cir.1996). When the copyright claim is based on infringement, the "action may be commenced within three years of any infringing act, regardless of any prior acts of infringement." Kwan v. Schlein, 634 F.3d 224, 228 (2d Cir.2011). The parties agree that the plaintiff's copyright infringement claims with respect to the Registered Articles were filed within the three-year statute of limitations.
The defendant claims that while the statute of limitations may not bar the plaintiff's claims, the doctrine of laches does. The doctrine of laches is derived from the equitable principle that "equity aids only the vigilant, and not those who sleep on their rights." Ivani Contracting Corp. v. City of New York, 103 F.3d 257,
There is disagreement among the Circuits regarding whether laches is a viable defense to a copyright claim brought within the three-year statute of limitation. See Petrella v. Metro-Goldwyn-Mayer, Inc., 695 F.3d 946, 958 (9th Cir.2012) (Fletcher, J., concurring) (describing the circuit split). In the Second Circuit, "[t]he prevailing rule" in the context of a federal statutory claim seeking legal relief, is one in which "laches cannot bar that claim, at least where the statute contains an express limitations period within which the action is timely." Ivani Contracting Corp., 103 F.3d at 260. Even in the context of an action in equity, the doctrine of laches will rarely be applied within this circuit to an action brought within the statutory period. Ikelionwu, 150 F.3d at 238. Nonetheless, severe prejudice coupled with unconscionable delay may limit injunctive relief in a copyright action. New Era Publ'ns Intern., ApS v. Henry Holt and Co., Inc., 873 F.2d 576, 584-85 (2d Cir.1989).
Accordingly, laches is not a defense to the plaintiff's claim for damages. Laches is also not available to Meltwater as a defense to copyright infringement to the extent AP seeks prospective injunctive relief. See Peter Letterese and Assocs., Inc. v. World Inst. of Scientology Enterp., 533 F.3d 1287, 1321 (11th Cir.2008). Equitable considerations — like laches-may arise, however, where a plaintiff seeks retrospective injunctive relief and can demonstrate each of the traditional elements of the laches defense. See New Era Publ'ns, 873 F.2d at 584.
In its amended complaint, AP seeks both damages and injunctive relief. In terms of injunctive relief, AP seeks both prospective relief and an order requiring Meltwater to "delete from its database and all computers under Defendants' control all copyrighted materials owned by AP and all AP news reports." Should Meltwater carry its burden of showing laches, it would at most be able to bar AP's request that AP's content be swept from Meltwater's databases. The parties will be given an additional opportunity to address whether retrospective injunctive relief should be granted in this case.
As its fifth and final affirmative defense to AP's copyright infringement claims, Meltwater argues that AP should be barred from enforcing its copyrights because — by engaging in price-fixing with competing news organizations in violation of the antitrust laws — it has misused its copyrights. This final defense fails as well.
The Second Circuit has not yet recognized the affirmative defense of copyright misuse. See Shady Records v. Source Enters., 03 Civ. 9944(GEL), 2005 WL 14920, at *15 (S.D.N.Y. Jan. 3, 2005). Although copyright misuse has been acknowledged as a potential affirmative defense to an action for copyright infringement in at least five circuits, only a handful of decisions have ever applied it to bar an otherwise successful claim of copyright infringement. See Video Pipeline, 342 F.3d at 206 (recognizing defense but finding no misuse); Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772, 795 (5th Cir.1999) (plaintiff's copyright misuse barred it from obtaining injunctive relief on its copyright infringement claim); Practice Mgmt. Info. Corp. v. Am. Med. Assoc., 121 F.3d 516, 521 (9th Cir.1997) (reversing award of damages and injunction for copyright infringement
The defense of copyright misuse arises from the better-known defense of patent misuse described in Morton Salt Co. v. G.S. Suppiger, 314 U.S. 488, 62 S.Ct. 402, 86 L.Ed. 363 (1942). In Morton Salt, the patent holder for the design of a salt-depositing machine also produced salt tablets. Morton Salt entered into licensing agreements that required its licensees to use Morton salt tablets exclusively. When Morton Salt brought suit for patent infringement, the Supreme Court found that its suit was barred by its use of its "patent monopoly to restrain competition in the marketing of unpatented articles." Id. at 491, 62 S.Ct. 402. The Supreme Court described the rationale behind the defense as follows:
Id. at 492, 62 S.Ct. 402 (citation omitted).
In 1990, the Fourth Circuit became the first circuit to expressly recognize the defense of copyright misuse. Lasercomb Am., 911 F.2d at 977-79. Relying on "[t]he origins of patent and copyright law in England, the treatment of these two aspects of intellectual property by the framers of our Constitution, and the later statutory and judicial development of patent and copyright law in this country," the court concluded that the misuse of copyright should be available as a defense to copyright infringement. Id. at 974. It further concluded that the existence of an antitrust violation was not a pre-requisite to a viable copyright misuse claim:
Id. at 978. Consistent with this rationale, it described copyright misuse as arising from a copyright holder's attempt to use its copyright in a particular expression "to control competition in an area outside the copyright." Id. at 979.
Whatever the metes and bounds of the defense, it is one that is applied "sparingly." Apple Inc. v. Psystar Corp., 658 F.3d 1150, 1157 (9th Cir.2011). Its focus is on the improper stifling of competition. Id. at 1157-59.
Meltwater contends that it has offered sufficient evidence that AP engaged in a per se violation of the antitrust laws to raise a question of fact that prevents summary judgment being granted on AP's copyright infringement claim. Specifically, Meltwater asserts that it has offered evidence that AP violated antitrust law "[b]y foisting a pricing structure and minimum
The licensing entity to which Meltwater is referring is NewsRight. NewsRight is a joint venture between AP and other publishers formed in 2011 and publicly launched in 2012. NewsRight's stated aim is to "work with third parties — such as commercial aggregators and media-monitoring companies — to license content from a large set of major publishers and to allow both publishers and third-party licensees to track and analyze the use of news content online." Those news publishers that are members of NewsRight have authorized NewsRight to license their content on a nonexclusive basis. So far, NewsRight has entered into two license agreements, but it has not yet licensed any AP content.
Even assuming that this circuit were to adopt the affirmative defense of copyright misuse to a claim of copyright infringement, and assuming further that Meltwater had raised a question of fact as to whether AP shared its own pricing information with NewsRight and "imposed" a pricing structure on and minimum prices for the licenses offered by the joint venture, Meltwater has not shown that summary judgment should not be granted to AP on its copyright infringement claim. AP's alleged conduct does not amount to copyright abuse. Nothing in the conduct alleged by Meltwater suggests that AP has improperly leveraged its copyrights to exert control over competition in the delivery of news. Every one of its competitors, whether a member of NewsRight or not, retains the power to issue its own licenses according to whatever pricing scale it chooses. AP does not create the news, control access to the news, or have any power to restrict any other party's entry into the business of reporting the news. Meltwater has not explained how AP's supposed actions would have interfered with the Copyright Act's goal of "increas[ing] the store of creative expression for the public good." Video Pipeline, 342 F.3d at 205.
Moreover, Meltwater's proffered evidence does not even suggest any misconduct by AP. Meltwater's argument that AP has used its participation in NewsRight to engage in price fixing relies on essentially three documents. The most significant of these is an email from 2011, in which AP suggests that the aggregator market be divided into three segments (Top players; Premium Institutional Specialists; and PR Community/Press Clipping Services) and then suggests minimum target licensing fees for NewsRight's licenses within each of the segments.
In addition to moving for summary judgment on the basis of its fair use defense, Meltwater has moved for summary judgment on AP's claims of contributory and vicarious copyright infringement. These claims are based on AP's allegations that Meltwater has encouraged and assisted its customers to copy, store, and redistribute AP articles or portions of AP articles, in particular, through the use of Meltwater's archiving, Newsletter, and Newsfeed functions. In its motion for summary judgment, Meltwater points out that AP has offered no evidence that an actual Meltwater customer ever stored or distributed full text versions of any of the thirty-three Registered Articles.
Meltwater has filed two motions to strike. In Meltwater's first motion, it seeks to strike: (1) the declaration of Elizabeth McNamara in its entirety and sixty-seven of the accompanying exhibits; (2) portions of the declaration of Sue Cross ("Cross") and eight of the accompanying exhibits; (3) portions of the declaration of Thomas Curley ("Curley") and four of the accompanying exhibits; (4) portions of the declaration of Joy Jones ("Jones") and seven of the accompanying exhibits; (5) portions of the declaration of Thomas Kent; (6) portions of the declaration of John D. Rizzo and four of the accompanying exhibits; and (7) substantial parts of AP's Rule 56.1 statement. The second motion seeks to strike: (1) the declaration of Alison B. Schary in its entirety and eight of the accompanying exhibits; and (2) portions of the declaration of Linda Steinman. In addition, both parties have raised objections in their Rule 56.1 counterstatements of undisputed material facts. Some of these objections have already been addressed. To the extent that any objection is not discussed in this Opinion and the Court relied on the challenged evidence, the objection has been considered and rejected. Three more categories of objections are addressed below.
In its motions to strike, Meltwater argues that the Court should also strike statements and documents regarding matters occurring prior to 2009, because "AP unilaterally imposed a date restriction of January 1, 2009" in responding to Meltwater's document requests. Both parties preserved their objections to the production of older documents. AP generally objected to production of documents predating January 1, 2009, and Meltwater objected to producing documents predating March 1, 2010. Despite that general objection, AP proceeded to produce responsive documents dated before 2009, including each of the documents submitted in connection with these summary judgment motions. Meltwater never indicated during discovery that AP's general objection was a concern and it did not seek to compel the production of other documents dated prior to 2009. Furthermore, AP placed no timeframe restriction on its witnesses when they were deposed. Under the circumstances, Meltwater has shown no basis to strike all documents and statements relating to matters occurring prior to 2009, which in any event are few in number.
Meltwater has also objected on grounds of relevance to the submission by AP of many of the Meltwater documents produced in discovery. These include its promotional materials and samples of its News Reports. It also objects on relevance grounds to the samples of Google News Alerts. The objections to these and other documents on the ground of relevance have been considered and rejected.
Meltwater has raised objections to the declarations of Cross, Curley, and Jones, among others, on the ground that these individuals have not set forth facts showing that they have personal knowledge of the matters described in their declarations. Cross has been AP's Senior Vice President of Business Development and Partner Relations for the Americas since 2010. Previously, she held a number of positions with AP, including Bureau Chief in Los Angeles, Vice President for the Western Region, Vice President for Online Services for U.S. Newspapers, and Senior Vice President for Global New Media and Media Markets for the Americas. To the extent the Court has relied on Cross's declaration it has been for facts such as the number of AP's licensees, AP's annual licensing revenues, AP's agreements with its licensees, AP's business model, and a description of AP Hosted. All of these matters are plainly within her personal knowledge. Similarly, Jones (Vice President for Platform Strategy and Operations) and Curley (former Chief Executive Officer) offered statements expressly based on their personal knowledge about the composition of AP, NewsRight,
The plaintiff's November 9, 2012 motion for summary judgment is granted, with one exception. The defendants' November 9 motion for summary judgment is denied. The parties will be given an additional opportunity to address whether retrospective injunctive relief should be granted in this case.
Meltwater made a limited request of AP for documents concerning NewsRight, and that request related to the licensing of the Registered Articles by NewsRight. It is undisputed that the Registered Articles were never licensed by NewsRight. Despite Meltwater's narrow document request, AP searched all of its e-discovery custodians for communications with NewsRight concerning licensing efforts generally and produced such documents. It also searched for hard-copy documents from those same custodians and produced documents sufficient to show NewsRight's role in licensing AP content, among other things. Meltwater examined AP deponents at length about NewsRight. In sum, Meltwater has not shown that it is entitled to further discovery on this issue before summary judgment may be entered for AP.
