Opinion
06 Civ. 0765 (LMM).
May 22, 2006
MEMORANDUM AND ORDER
1.
In this action, removed from the Supreme Court of the State of New York, New York County, plaintiff, a photographer, seeks to stay an arbitration commenced by defendant, a publisher, which, in turn, seeks to compel arbitration.
In 1998, plaintiff licensed to defendant:
Non-exclusive reproduction rights only to the Copyright 1971 Jay Maisel photograph "Mosque rays" (SS101A) for use by McDougal Littell in the high school textbook "The Language of Literature" by Arthur N. Applebee, Judith Langer, et al. The image will appear as a full page in color. The print run is limited to 40,000 copies. It will be published in the year 2000.(Pl. Mem. Ex. B, Invoice, Nov. 12, 1998.) The quoted document, headed "INVOICE," added that "[a]ny additional usage must be negotiated separately," and " PLEASE SEE THE BACK OF THIS PAGE FOR FURTHER CONDITIONS". (Id.) The back of the page contained the following arbitration clause (¶ 12):
References to "Pl. Mem." are to Plaintiff's Memorandum in Support of Petition to Stay Arbitration and Opposition to Cross Motion to Compel Arbitration, dated March 31, 2006, submitted by plaintiff's present counsel subsequent to remand, rather than to the brief submitted by other counsel in the New York County Supreme Court. The Court has considered both briefs; the former appears to the Court to be more comprehensive than the latter.
Any dispute regarding this invoice, including its validity, interpretation, performance, or breach shall be arbitrated in New York, NY under the rules of the American Arbitration Association and the laws of New York. Judgment on the Arbitration Award may be entered in the highest federal or state court having jurisdiction. Any dispute involving $1,000.00 or less may be submitted, without arbitration, to any court having jurisdiction thereof. User shall pay all arbitration and court costs, reasonable attorney fees plus legal interest on any award of judgment.
(Id.)
Plaintiff claims that:
In late 2005 plaintiff, while conducting an audit of his licenses, inquired of defendant whether it was still reproducing his image. Defendant, without revealing its unauthorized uses, told plaintiff that it was still using his photograph, and requested a new license for 40,000 additional copies. When plaintiff refused to provide a new license until an exact accounting was made of past uses, defendant advised plaintiff in writing that defendant had actually reproduced his image 523,900 times in The Language of Literature between 2000 and 2005. A short time later, in-house counsel for Houghton Mifflin, into which McDougal Littell merge[d], further modified its use count in a letter to plaintiff's attorneys dated October 19, 2005, when she stated that the number of copies of plaintiff's photograph either made, or to be made, was closer to 1.4 million. None of the uses beyond the license parameters granted in 1998 were made with plaintiff's permission, knowledge or authority.
(Pl's. Mem. at 3-4 (citing Pl. Mem. Ex. C D).) After some unsuccessful negotiations, defendant, on or about December 30, 2005, filed a demand for arbitration with the American Arbitration Association ("AAA") pursuant to the AAA's Commercial Arbitration Rules, claiming that:
Respondent [i.e., plaintiff] has claimed that Claimant [i.e., defendant] has breached the above License Agreement dated November 12, 1998 and has therefore infringed Respondent's alleged copyright in a photograph. Claimant seeks a declaration that it has not violated the said agreement or infringed any copyright Respondent may have in the subject photograph, and/or that Respondent is entitled to no more than $1,800 as an additional use fee.
(Def. Not. of Cross-Mot. Ex. 2, p. 3 (Rider)).
Plaintiff characterizes the dispute quite differently than does defendant in its demand for arbitration:
In the instant case, once defendant . . . exceeded its authorized printing of 40,000 copies of plaintiff's image, it assumed the legal status of a `stranger' identical to one who takes the copyrights of others never having obtained a license in the first place. Here, defendant's status changed as soon as it exceeded the clear limits of plaintiff's license. At that moment defendant became a copyright infringer, identical to one who pirates wholesale the work of a copyright holder, never having had a contractual relationship with him in the first place.
(Pl. Mem. at 10.)
Plaintiff now moves for stay of arbitration, and defendant cross-moves for an order compelling arbitration.
Plaintiff has commenced an action in the United States District Court for the District of Colorado alleging that defendant's uses of his photograph outside of the 1998 license constitute infringement of his copyright in the photograph. That court has stayed its proceedings pending decision by this Court of the present motion and cross-motion.
2.
The parties agree that the Federal Arbitration Act ("FAA") applies. (Def. Mem. at 6; Pl. Mem. at 23.)
Under the FAA, there is a general presumption that the issue of arbitrability should be resolved by the courts. Acknowledging this presumption, we have held that "the issue of arbitrability may only be referred to the arbitrator if there is clear and unmistakable evidence from the arbitration agreement, as construed by the relevant state law, that the parties intended that the question of arbitrability shall be decided by the arbitrator."Contec Corp. v. Remote Solution Co., Ltd., 398 F.3d 205, 208 (2d Cir. 2005) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944-45 (1995), and quoting Bell v. Cendant Corp., 293 F.3d 563, 566 (2d Cir. 2002)) (footnote omitted).
Here, the arbitration clause in question provides for arbitration before the AAA, pursuant to its Commercial Arbitration Rules. Those Rules provide that "`[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.'" Contec, 398 F.3d at 208 (quoting AAA Rule R-7(a)). The Second Circuit has "held that when . . . parties explicitly incorporate rules that empower an arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties' intent to delegate such issues to an arbitrator." Id. (citations omitted). The law of New York is to the same effect. Shaw Group, Inc. v. Triplefine Intern. Corp., 322 F.3d 115, 123 (2d Cir. 2003) (citing Smith Barney Shearson Inc. v. Sacharow, 91 N.Y.2d 39, 46-47 (1997)).
AAA Rule R-7(a) remains in effect in the same language as quoted by the Second Circuit in Contec. (Commercial Arbitration Rules Mediation Procedures, Rule R-7(a), Amended Effective Sept. 15, 2005, http://www.adr.org/sp.asp?id=22440.)
Under the foregoing case law, the question of whether plaintiff's claim is arbitrable under the 1998 arbitration provision is one for the arbitrator. Plaintiff's arguments to the contrary are not persuasive.
The issue of whether or not the agreement represented by the 1998 invoice has expired — the arbitration clause therefore not surviving (Pl. Mem. at 6-17) — is one for the arbitrator, who "decides issues like expiration or termination, which involve the interpretation of other contractual provisions and not of the arbitration clause itself." ACEquip Ltd. v. American Engineering Corp., 315 F.3d 151, 155-56 (2d Cir. 2003) (citation omitted).
Whether the scope of the arbitration clause can be construed to include copyright infringement claims (Pl. Mem. at 17-19) is an issue for the arbitrator as well because the arbitration clause incorporates the rules of the AAA (see discussion above). Defendant allegedly exceeding the apparent 40,000 limit of the license can be reasonably construed as either an infringement of plaintiff's copyright or a breach of the 1998 license, or both.
Plaintiff relies to a considerable degree on The Basketball Marketing Co., Inc. v. Urbanworks Entertainment, No. Civ. A 04-CV-3179, 2004 WL 2590506 (E.D. Pa. Nov. 10, 2004), a case in which a licensor of intellectual property had sued a licensed distributor of that intellectual property for (i) breach of the license agreement for failure to make payments due under the agreement, to provide an audit or accounting as required by the license agreement, and to abide by the covenant of good faith and fair dealing, and (ii) for use of the intellectual property after termination of the agreement, under various provisions of the Lanham Act, and in conversion. The defendant licensed distributor countered by moving to compel arbitration of all of the claims under the license agreement's arbitration clause. Judge Davis found (on consent) that the first set of claims (for sums due, the provision of an audit or accounting, and for breach of the covenant of good faith and fair dealing) were arbitrable, but that "defendant's interpretation of the arbitration provision as covering any and all post-agreement disputes is untenable as a matter of law," Basketball Marketing, 2004 WL 2590506, at *6, and denied the motion to compel arbitration as to the claims that involved the defendant's use of the plaintiff's intellectual property after termination of the agreement.
There are, however, meaningful differences between Basketball Marketing and the present case. There, the agreement contained a provision for its termination on a specifically ascertainable date, id. at *1, which is not the case here. There, "[d]efendant [did] not argue that the agreement still exist[ed]. Nor [did] defendant argue that the contract permitted the continued use of plaintiff intellectual property throughout May 2004." Id. at *6. Here, defendant specifically argues that neither the license agreement nor the arbitration clause has expired. (Def. Mem. in Opp. at 11.) The Court does not, of course, pass on the merits of these contentions, which are for the arbitrator to consider.
For reasons discussed above, the Court does not find persuasive plaintiff's arguments that arbitrability is not to be decided by the arbitrator. (Pl. Mem. at 19-20.) The significant difference between the case law on which plaintiff relies and the present case is the incorporation in the arbitration provision here of the AAA rules.
The argument that the 40,000 limit in the 1998 license is a condition and not a covenant (Pl. Mem. at 20-21), is plainly a question of the interpretation of the contract as regards the merits, and is for the arbitrator.
The Court has considered all of plaintiff's arguments even if not specifically mentioned, and remains persuaded that the issue of arbitrability is one for the arbitrator.
3.
The Court grants plaintiff's motion for leave to supplement the record with the Nov. 9, 1998 letter attached to its motion as Exhibit A. However, the Court does not find this letter relevant to the issues or the motions discussed above.
4.
For the reasons set forth above, plaintiff's motion for a stay of arbitration is denied and defendant's motion for an order compelling arbitration is granted. The temporary stay of arbitration entered in the Supreme Court of the State of New York prior to removal is vacated. Plaintiff is directed to arbitrate before the AAA.
Plaintiff may, of course, pursue his copyright infringement claims in the arbitration. Such claims are arbitrable. McMahan Securities Co. L.P. v. Forum Capital Markets L.P., 35 F.3d 82, 89 (2d Cir. 1994).
All issues raised by the petition for a stay of arbitration (and the cross-motion to compel arbitration) having been resolved, the Clerk is directed to close this case. Either party may, upon completion of the arbitration, make a timely application to reopen for any purpose contemplated by the FAA.
SO ORDERED.