Panoramic Stock Images, Ltd v. McGraw-Hill Global Education Holdings, LLC

District court denies textbook publisher McGraw-Hill’s motion for summary judgment on its statute of limitations defense to stock photography agency’s copyright infringement claims, holding that “discovery rule” is still law of the Seventh Circuit even after Supreme Court applied “injury rule” in Petrella v. Metro-Goldwyn-Mayer, Inc.

Plaintiff Panoramic Stock Images, Ltd., is a stock photography agency that licenses photographs to publishing companies, including defendant textbook publishers McGraw-Hill Global Education Holdings, LLC, and McGraw-Hill School Education Holdings, LLC (“McGraw-Hill”). Panoramic sued McGraw-Hill for copyright infringement, alleging that McGraw-Hill exceeded the scope of its license for various images.

McGraw-Hill moved for summary judgment on its statute of limitations defense, asserting that Panoramic was aware of a potential infringement more than three years before filing suit. McGraw-Hill argued that the Supreme Court’s May 2014 ruling in Petrella v. Metro-Goldwyn-Mayer, Inc. overruled the Seventh Circuit’s “discovery rule” in the context of copyright cases and that, under the injury rule, Panoramic was barred from seeking damages for any claims of infringement that took place before Dec. 11, 2009.

The district court rejected McGraw-Hill’s argument, explaining that the Court in Petrella qualified its use of the injury rule in a footnote: “Although we have not passed on the question, nine Courts of Appeal have adopted, as an alternative to the incident of injury rule, a ‘discovery rule,’ which starts the limitations period when the plaintiff discovers, or with due diligence should have discovered, the injury that forms the basis for the claim.” Citing recent decisions by district courts in the Seventh Circuit, the court concluded that, until the Seventh Circuit holds otherwise, the discovery rule remains the applicable law.

McGraw-Hill then argued that Panoramic’s claims were barred even under the discovery rule, because Panoramic learned or reasonably should have learned of McGraw-Hill’s copyright infringement no later than November 2009, based on a magazine article about unauthorized use of stock agencies’ photographs by textbook publishers, conversations that Panoramic’s president had with an attorney about copyright litigation against textbook publishers, and the attorney’s request for information to determine whether various publishers, including McGraw-Hill, had exceeded the scope of their license. Panoramic argued that it did not discover McGraw-Hill’s specific infringing activity until discovery in this case. Interpreting Seventh Circuit precedent, the court held that the statute of limitations is triggered by “actual or constructive knowledge of the basis for a claim,” not “mere suspicions and concerns about potential wrongdoing.” The court denied McGraw-Hill’s motion for summary judgment on its statute of limitations defense, finding a genuine issue of material fact as to whether Panoramic had actual or constructive knowledge of specific acts of infringement by McGraw-Hill in November 2009.

The district court then turned to Panoramic’s motion for summary judgment on McGraw-Hill’s liability for 82 claims of infringement. Because McGraw-Hill disputed Panoramic’s copyright ownership for only one claim, the district court granted summary judgment for Panoramic on its ownership of the remaining 81 claims. To prove that McGraw-Hill had exceeded the scope of its license and thereby infringed Panoramic’s copyrights, Panoramic submitted evidence that McGraw-Hill had reproduced more copies than authorized, distributed the images outside the designated geographic areas, and reproduced the images in unauthorized electronic media. Because McGraw-Hill did not dispute that it had exceeded the print quantity and geographic scope restrictions, the court granted summary judgment for Panoramic on those claims. The court denied summary judgment on Panoramic’s claims of unauthorized electronic distributions, finding that Panoramic had failed to present sufficient evidence that McGraw-Hill published certain of Panoramic’s images in electronic format.