Fraud Claims Brought Against Pearson Education

In the case of Pacific Stock, Inc. vs. Pearson Education United States District Judge Susan Oki Mollay in Hawaii has denied Pearson’s request for summary judgment with regard to Pacific Stock’s claim that Pearson had engaged in fraud and fraudulent inducement in its use of 59 images. Pacific Stock has also alleged that with regard to 151 images from 70 of its photographers Pearson exceeded the print run rights granted for the use of its images in Pearson textbooks.

On February 26, 2013 the court found that the evidence Pacific Stock presented supporting its fraud and fraudulent inducement claims was sufficient to send the matter to trial.

With regard to the fraud claim, on July 30, 2002 Pearson sent Pacific Stock a billing request asking for a license to use one image in “Up to 40,000” copies of a textbook. However, Pacific Stock has been able to provide evidence that in October 2001, prior to the above request, Pearson had already forecasted that it would print more than 55,000 copies of the textbook.



Pearson argued that unless Pacific Stock could show that there was fraud and fraudulent inducement in the licensing in all 151 images involved in the case then it should not be allowed to make this claim. The court rejected this argument, but stated, “The extent of the fraud that Pacific Stock will be able to prove at trial is unclear, but the court concludes that there are, at the very least, triable factual issues as to fraud.”

In its decision the court did point out that under the Federal Rules of Civil Procedure prior to trial Pacific Stock must provide Pearson with the identity of the specific images and statements on which the fraud and fraudulent concealment claims are based and provide explanations as to why the statements were fraudulent.



Pearson also argued that in a previous case it had been shown that the copyright registrations of images belonging to two of the photographers in this case had been backdated and were found invalid. However, the court found that in the present case the court “is not faced with any evidence contradicting” the validity of the copyright registrations. Thus, it denied Pearson’s motion for reconsideration.

The court rejected Pearson's argument that several of Pacific Stock's copyright registrations covering collective works were incorrectly filed. (Pacific Stock relied on the recommendations of the Copyright Office in its applications and its contributor agreement provided for an assignment of copyright.)

The court also rejected Pearson's argument that its preferred vendor agreements preclude summary judgment because they did not allow Pearson to increase its usage without paying for it.



A trial date has been set for August 6, 2013.