Most Rights Managed stock images can be used in many different non-conflicting ways by a variety of customers. The theory behind RM licensing is that the fee charged to use an image should have some relation to the value the customer receives from the use. RM photographers are encouraged to carefully negotiate, and spell out in detail in a license, the rights and limitations of each use. It is assumed that an honest customer will then track its usage. If the customer wants to make additional use of the same image the customer will then come back and negotiate an additional license. Is that working?
A recent judgment in the case of Grant Heilman Photography, Inc. (GHPI) vs. McGraw-Hill Global Education provides some interesting insights into why the RM licensing concept may not work. In most cases the image licensor has no way of tracking actual use, and is forced to “trust” the buyer to supply the needed information.
On April 18, 2012 Heilman filed suit in the United States District Court for the Eastern District of Pennsylvania against McGraw Hill. At issue were 2,395 instances of infringing uses going back to 1995. Judge Michael M. Baylson ordered that a “bellwether” trial of 53 claims be presented to a jury to give both sides an indication of what might happen when the others cases are tried before a jury. Following a six-day trial in September 2014 the bellwether jury found in favor of GHPI and
awarded them the amount of $127,087. However, nothing has been paid, or will be paid, until all appeals are exhausted.
Because there is a three-year statue of limitations under the Copyright Act, McGraw-Hill filed an appeal claiming that GHPI should not be allowed to make claims for infringements that occurred before April 18, 2009 (three years before the filings). If the appeal had been successful all the unauthorized used between 1995 and 2009 would have been dropped from the case.
Judge Baylson’s Memorandum on the motion filed March 20, 2015 denied McGraw-Hill’s motion and found in favor of GHPI. The Judge said, “there was a legally sufficient evidentiary basis for the jury’s finding that GHPI’s claims accruing before April 18, 2009 were not time-barred under the discover rule.”
The claim hinged on the fact that in the 1990s some unauthorized uses had been discovered. When GHPI notified McGraw-Hill of these uses beyond the licenses the company paid for the use and a penalty was negotiated.
In addition, in 2006 Heidi Kidwell of the Glencoe division of McGraw-Hill sent a letter to GHPI along with a check for $39,433.10 for “usage in a print run larger than originally anticipated” in 10 publications involving 16 separate invoices. Grant Heilman’s Sonia Wasco testified that she believed this was evidence that Glencoe was finally tracking and paying for overruns even if it was after the fact and not according to the letter of the agreements.
McGraw-Hill’s lawyer argued that these instances should have been a “storm warning.” GHPI should have recognized that the tracking of uses was seriously flawed and they should have immediately filed suit in order to discover other possible infringements.
Ms. Wasco testified that despite the instance of “late licensing” and “print overruns” GHPI did not think it should run into court and sue McGraw-Hill for all of the images they had ever licensed “because we were always able to work out an agreement and resolve the issue and license the images correctly.”
In the bellwether trial Rachel Norton, Director of Publishing Operations at the McGraw-Hill School Group, testified that McGraw-Hill did not know that it had exceeded the limits of the 53 licenses at issue until she began researching them in 2013 while responding to GHPI’s discovery request. Ms. Norton agreed that, “surely Heilman Photography would not have known until 2013 of these infringement” because McGraw-Hill “didn’t communicate that we were over prior to that.”
The “
Factual Summary of Evidence at Trial” in Judge Baylson’s 36-page “
Memorandum Re Defendants’ Motion For Judgment As A Matter Of Law,” is worth reading because it makes clear that for the most part of two decades McGraw-Hill had not put in place any system that would allow them to easily compare licensing agreements with actual usage.
GHPI is now waiting to hear if McGraw-Hill will appeal Judge Baylson’s latest decision, or if a trial date will be set to deal with the rest of the 2,395 images. Any recovery for GHPI is likely to be years down the road.
Will Buyers Honor Inconvenient Agreements That Limit Usage?
While this case only deals with McGraw-Hill, there have been enough legal actions against other educational publishers in the last few years to indicate that the practice of disregarding the terms of licensing agreements was widespread in the educational publishing industry until the middle to the end of the first decade of this century.
When the publishers began to realize they had a problem the solution, for the most part, was not to own up to previous errors and make restitution. Rather, they have used every legal technique to make it difficult for suppliers to learn of unauthorized uses and make claims.
Secondly, when it comes to new licenses, they started extending the print runs, the number of years and variety of related ways the image could be used. Today, most licenses authorize all this extended use for fees that are very similar to what the publisher paid for a 40,000 print run in a single title in the 1990s. Today, it is not uncommon for licenses to allow an image to be reproduced in 1,000,000 copies of a book for 25 years along with unlimited web and electronic use. Some publishers now ask for the right to use an image for the “Life of Program in any and all media now known or to be known in the future.” That can be interpreted as almost anything.
Back in the 80s we used to get many reuse fees at 75% of the original fee when a title became popular and went into additional printings. Now, all that is gone. It raises the question of whether trying to negotiate complex agreements is worth the trouble. Once the buyer gets the image they will use it to the maximum in any way they can conceive. The upfront fee is all you’re going to get. If that’s the case is there any reason not to call licenses to publishers Royalty Free? Just make sure that upfront fee paid for an RF license is reasonable and enough to allow you to remain in business.