The US Court of Appeals for the Ninth Circuit affirmed a district court dismissal of a lawsuit brought by a nonprofit licensor of copyrighted math materials against a commercial duplicating company that copied the materials for licensee school districts for a fee. Great Minds v. Office Depot, Inc., Case. No. 18-55331 (9th Cir. Dec. 27, 2019) (Farris, J).

Great Minds publishes a copyrighted math curriculum called Eureka Math, which it licenses royalty-free to schools and school districts for “noncommercial” uses. The licensees are permitted to make copies of the materials for their own use. Great Minds reserves the right to collect royalties when the materials are used for “other than noncommercial” purposes.

Office Depot provides copying services to the public for a fee. Office Depot’s sales representatives advertise their copying services to schools and school districts that license Eureka Math, and these schools and school districts use Office Depot’s services to duplicate Eureka Math materials.

Great Minds sued Office Depot, claiming that Office Depot’s duplication of Eureka Math materials constituted an unlicensed commercial use because Office Depot profited from making the copies. Great Minds argued that Office Depot must obtain a paid license from Great Minds to render these services to schools and school districts. Prior to 2017, Office Depot had in fact paid Great Minds for a license to copy these materials. However, after a district court ruled in a nearly identical case that FedEx did not have to obtain its own license to duplicate Eureka Math materials for its licensed customers, Office Depot refused to continue paying for a license. Great Minds then filed the current suit.

After the district court dismissed Great Minds’ lawsuit under Fed. R. Civ. P. 12(b)(6) with no opportunity to amend, Great Minds appealed.

The Ninth Circuit affirmed the dismissal. The Court took a pragmatic approach to the analysis, noting that because there was no dispute that the schools were permitted to copy the Eureka Math materials themselves under the noncommercial license, and could order their employees to do so, there was no logical or contract-based reason why they could not hire a third party such as Office Depot to perform this service for them. The Ninth Circuit relied on the Second Circuit’s decision in Fedex as well as similar decisions from other circuits regarding a licensee’s right to use agents and contractors to perform tasks the licensee itself was permitted to do, and held that “[a] licensee’s hiring of a third-party copy service to reproduce licensed material strictly for the licensee’s own permitted use does not turn that third party into a licensee that is bound to the License terms.”

Further, because permitting Great Minds to amend its complaint would not change this basic legal principle, the Ninth Circuit affirmed the district court’s refusal to permit amendment.

Practice Note: A licensee that has the personal right to duplicate copyrighted materials may exercise that right by hiring a duplication service to do the work on its behalf. This does not turn the duplication company into a downstream licensee.