Commercial purpose of intermediary does not violate Creative Commons licence when it is executed

Great Minds is a non‐profit organization that designs educational materials. These include a copyrighted curriculum called “Eureka Math” (the “Materials”). Great Minds sells the Materials in book form and also releases them to the public without charge but subject to a “public license” (the “License”), using a template that is made available by a group called Creative Commons. The License allows “any member of the public to download, reproduce, and distribute the Materials pursuant to the terms of the License, which is made available to all on the same terms without the need to negotiate.”

The License provides that “every recipient of the Materials automatically receives an offer from the Licensor to exercise the Licensed Rights under the terms and conditions of this License,” and grants each “individual or entity exercising the Licensed Rights” what it describes as a “worldwide, royalty‐free, non‐sublicensable, non‐exclusive, irrevocable license to . . . reproduce and Share the Materials, in whole or in part, for NonCommercial purposes only.” It defines “NonCommercial purposes” to mean purposes “not primarily intended for or directed towards commercial advantage or monetary compensation.”

In the complaint, Great Minds characterizes these provisions as amounting to an “explicit limitation of the License to noncommercial use requiring that commercial print shops… negotiate a license and pay a royalty to Great Minds if they wish to reproduce the Materials… at the request of their paying customers.”

In late 2015 and early 2016, Great Minds discovered that FedEx stores in Michigan and New York reproduced the Materials, without Great Minds’ authorization, in the course of their ordinary, for‐profit business. After each such discovery, Great Minds sent a letter to FedEx demanding that FedEx either negotiate a royalty‐bearing license with it or cease commercial reproduction of the Materials. FedEx refused, arguing that it had permissibly reproduced the Materials at the request of school districts, which sought to use the Materials for noncommercial purposes under the License.

Great Minds filed the instant lawsuit in March 2016, asserting a single claim of copyright infringement against FedEx. The District Court dismissed the action under Rule 12(b)(6), concluding that the unambiguous terms of the License permit FedEx to provide for‐profit copying services on behalf of a school district exercising noncommercial use rights under the License. Great Minds appealed.

FedEx conceded that its copying services are commercial in nature, and that its reproduction of the Materials would therefore be impermissible under the License if FedEx were acting as a direct licensee. Great Minds, in turn, has not alleged that the school districts’ use of the Materials exceeded the scope of the License. At the appeal there was only one main question to be answered – whether the License permits school districts to use FedEx’s services in furtherance of their own noncommercial use of the Materials under the License.

The court held that, under long‐established principles of agency law, a licensee under a nonexclusive copyright license may use third‐party assistance in exercising its license rights unless the license expressly provides otherwise.

The License authorizes licensees to “reproduce and Share” the Materials for noncommercial purposes. FedEx argues that, because the License defines “Share” to mean “providing material to the public by any means or process” – including “reproduction” – FedEx’s provision of commercial copying services falls within the licensee school districts’ right to “reproduce and Share” the Materials. This argument plucks out of context the operative License language, however.

The License specifies more fully that Great Minds’ licensees may “Share” by “providing material to the public by any means or process that requires permission under the Licensed Rights”. “Licensed Rights,” in turn, are “limited to all Copyright and Similar Rights… that the Licensor has authority to license.” Thus, the term “Share” encompasses the various types of reproduction and dissemination activities that require permission from the copyright holder; it does not expressly describe a right to enlist the services of third parties in performing those activities.

Great Minds agrees that, under the License, school districts may themselves “reproduce and Share” the Materials. It maintains, however, that the school districts’ authority to use commercial reproduction services for the same purpose is limited by the License’s “downstream recipients” provision. Under that provision, “every recipient of the Materials automatically receives an offer… to exercise the Licensed Rights under the terms and conditions of this License.” In Great Minds’ view, FedEx was a “recipient” of the Materials that received an “offer” to exercise the Licensed Rights. It therefore acted as a licensee in its own right when it reproduced the Materials for profit, which violated the terms of the License and thereby made FedEx liable for copyright infringement.

Great Minds fails to account for the mundane ubiquity of lawful agency relationships, in which “one person, to one degree or another…, acts as a representative of or otherwise acts on behalf of another person.” The concept of an agency relationship is a sine qua non in the world of entities like corporations and public school districts, which have no concrete existence. If a school district decides to incorporate Great Minds’ Materials into the standard curriculum, the teachers and administrative staff who receive, reproduce, and disseminate the Materials do so within the scope of their employment, as agents for the school district. They act as extensions of the school district, and therefore act pursuant to the school district’s license rights.

Under Great Minds’ reading of the License, each teacher and administrator who handles the Materials is a “downstream recipient” who acts as an independent licensee, even if their use of the Materials is compelled by the terms of their employment. If a license were intended to achieve such a radical result, the court would expect a clear statement in the license to that effect. Great Minds’ public license contains no such statement. The court concluded, therefore, that the “downstream recipients” provision cannot reasonably be read to apply within the scope of employment relationships.

By the same token, the court concluded that Great Minds’ licensees may rely on nonemployee agents in carrying out permitted uses without converting those agents into independent licensees. The License text provides no basis for distinguishing between a school that directs its employees to make copies on the school’s machines and a school that achieves an identical result by enlisting a temporary independent contractor – or a commercial duplication service.

Great Minds could, if it wished, draft a public license that specified whether, and under what circumstances, a licensee may rely on employees or non‐employee agents in reproducing or otherwise engaging with the Materials. But Great Minds included no such specification in the license at issue.

In sum, Great Minds’ non‐exclusive public license does not expressly preclude licensee school districts from engaging third parties, including commercial third parties, in furtherance of their rights under the License. Absent any such limitation, licensees may rely on services provided by third‐party agents when exercising their license rights. The court concluded that the License unambiguously permitted school districts to engage FedEx, for a fee, to reproduce the Materials. Great Minds has therefore failed to state a plausible claim of copyright infringement against FedEx.