How does implied license and quantum meruit affect how clients use my photos?

Topic: Copyright
Time Investment: 7 Minutes
Suggested Product: Ultimate Copyright Kit

 

Before you give up and go find something else to read, we need to talk about a couple of concepts that come up time and time again in the context of copyright conflicts, especially in digital media. These concepts are “implied license” and Quantum Meruit.

 

Implied License

The “implied license” doctrine is relatively limited in relation to intellectual property. Implied licenses are often what ends up being asserted where there are gaps in existing contractual relationships. It is a way of articulating the subjective (or even objective) intent of the parties involved. Sometimes “implied license” is used as a way of superseding or bypassing explicit contract provisions (or filling in gaps where contract language is vague or poorly framed).

Simply put, an implied license is an unwritten license which permits a party (the licensee) to do something that would normally require the express permission of the owner (the licensor). Implied licenses may arise as a consequence of actions by the licensor that a reasonable person would believe (including the licensee) that they have the necessary permissions.

Implied licenses often become at issue where one party (the licensee) has purchased a physical or digital product – something which is the intellectual property of the licensor (say a Photographer), or has paid for its creation (say in terms of a photo shoot or a commissioned work), but has not obtained permission to use the intellectual property. For example, they may have purchased print rights but assume this also includes using the product (think: images) for advertising their business or asking another business to create an album from the digital prints.

Here’s the rub: even if a photographer (as licensor) has not explicitly granted certain types of licenses, they may – through their communications and conduct – have permitted their licensees (clients) to take actions that exceed the scope of the explicit license agreements.

 

Are these implied licenses legally enforceable against licensors (photographers)?

The 2013 case of Davis v. Tampa Bay Arena provides an overview of the enforceability of implied licenses in the context of photography. It is important to note that this is a US District Court case, and so its impact as legal precedence may alter depending on your location – your attorney will be the best place to advise on its specific relevance to your situation.

For background, Mitchell Davis had been the official photographer at Tampa Bay Arena since 1996. The parties’ agreement was initially oral, but in 2000, the parties entered into a written agreement in which Davis retained the copyrights to his photographs and granted the Arena nonexclusive and limited use rights, including the “rights to reproduce images for newsletter, advertising, display prints, broadcast, and the [Arena] web site.”

In 2009 or so, the Arena began to post Davis’ pictures on their Facebook page. Davis initially objected to the posting of his images and claimed their use violated the parties’ agreement. However, after the Arena agreed to several conditions, Davis agreed in an email that Arena was permitted to post the images. More than this, Davis assisted the Arena by creating, and granting Arena personnel online access to his photo-server. Throughout this period, Davis exchanged many email messages with the Arena, often complaining about compliance with his conditions, but continuing to confirm his consent to the Arena’s Facebook posting of his images.

In 2011, the Arena proposed a new agreement (the third in the history of their relationship) on substantially the same terms but with the addition of a provision that explicitly permitted the posting of Davis’ photos on the Arena’s Facebook page. Davis rejected the new agreement and subsequently commenced a lawsuit alleging copyright infringement, breach of contract, and other claims against the Arena. In response, the Arena moved for summary judgment (which means they asked the court to decide that there was no case).

In deciding the case, the court first addressed the legal standard for implied copyright licenses. The U.S. Copyright Act differentiates between exclusive and nonexclusive licenses, which is relevant because while an exclusive copyright license grant requires a formal writing, a nonexclusive grant (as in this case) may be conveyed orally or implied from the owner’s communications or conduct (See 17 U.S.C. § 204; 17 U.S.C. § 101 (defining transfer of copyright ownership to exclude a nonexclusive license). In Davis v Tampa Bay Arena, it was a non-exclusive license that was at issue. The court stated that the elements of an implied copyright license are:

1. A licensee requests the use of an owner’s work; and
2. The owner delivers the work to the licensee;
3. with the understanding and intention that the licensee may copy and distribute the work.

Furthermore, the court confirmed that in determining whether an implied license was indeed granted, courts look for objective evidence of the owner’s intent to permit the licensee’s use of a work.

Can you guess what the court might have decided in this case?

The Court put weight on those email communications and Davis granting access to his photo archive. The court held that Davis’ email communications with and assistance to the Arena marketing staff clearly confirm that Davis had indeed granted the Arena an implied license to post his images to the Arena’s Facebook page. The court also decided that any failure on the Arena’s part to comply with Davis’ conditions would not be regarded as a significant enough breach that would mean that the Arena was never granted the implied licenses in the first place. Accordingly, the court granted the Arena summary judgment on Davis’ copyright infringement claim and remanded Davis’ breach of contract claims to state court.

 

What might this mean for photographers?

There are a few things that come to mind. If you have a contract that details licenses and you allow a client to use the images in ways that go beyond those licenses without clearly stating that this is copyright infringement, you may only be able to claim contract breach, not copyright infringement. Secondly, your business practices can help or hurt you when it comes to implied licenses. As a consequence, you might consider making it a business policy to avoid casually talking about licenses or use of images of products that might be acts or omissions that breach, contradict, or exceed the terms of your explicit agreements. You might also maintain a consistent process to document and memorialize all license agreement changes in writing signed by both parties. Finally, you might ask your lawyer to include provisions in your license agreements reserving all rights not expressly granted to clients and perhaps a disclaimer about the contract being the whole agreement and no additional statements being waivers to prohibitions in the contract.

This is an area where an attorney should be involved because there is a difference between the effect of covenants and “conditions precedents,” and if you don’t know the difference the chances are high that you are not an attorney. Why is this so important and not just a ploy for attorneys to get more work? Because this difference could cost you up to $150,000 in copyright infringement statutory damages, along with actual damages and attorney’s fees if your agreements are not carefully drafted.

 

Quantum Meruit

Time for us to get our Latin on! It’s not too bad, promise.

Quantum meruit translates into English as “as much as he/she deserved.” This concept is important because if you have an implied contract, Quantum meruit is the principle on which the remedy or damages may be calculated if there has been a breach of that implied contract.

Put another way, quantum meruit is a claim or count grounded on an implied contract that the client would pay the vendor as much as deserved for services or materials provided. It is also a theory or doctrine that permits recovery by a party for services or materials provided despite the absence of an express contract if those services or materials were accepted and used by the client under circumstances which gave reasonable notice that the photographer expected to be paid for them. It is used where the court awards a monetary payment that is not determined by reference to a contract. The amount awarded under quantum meruit will be the “reasonable value” of services performed.

Some of you may be wondering about the legal basis on which you or a vendor has an entitlement to payment in circumstances where there are no contractual provisions. Quantum meruit can arise in situations including: where there is a contract but no price has been listed; quasi-contract, like when work has been done prior to contractual terms being settled like starting work on site, and the negotiations subsequently failing; work done outside the scope of a contract at the client’s request; and, importantly, work under a void, unenforceable, or terminated contract. The basis of the entitlement for payment under quantum meruit is an implied contract.

In essence, quantum meruit claims are based on the law of restitution (and flow from the principle of unjust enrichment). An example could be a MUA for a styled shoot who does not receive the agreed images following, who seeks to recover the costs of providing the makeup services (both service and product).

 

When would you make a claim under Quantum Meruit?

For you to make a claim against a client, or a vendor to make a claim against you, there must be: the person you are making the claim against must have been “enriched by the receipt of a benefit”; the benefit must have been gained “at the expense of the contractor”; and it would be “unjust” in the circumstances to allow the recipient to retain the benefit.

Your attorney will need to be involved in assessing questions of “benefit”, “contractor’s expense”, and “unjust” because there is a significant amount of case law that defines their specific legal meaning.

 

Specifics to keep in mind

If the client “renounces liability” under the contract; that is, they show an intention to no longer be bound by the contract or only to perform their side of the contract in a way that contradicts the contractual terms, the contract is not automatically terminated. The contractor must decide between continuing to perform their contractual obligations or accepting the client’s repudiation and terminating the contract.

Only if the contractor chooses to accept the repudiation and termination can they sue. It is important to note that a contractor can’t make a claim under quantum meruit if you have an ongoing and continuing contractual relationship. If the lawsuit is successful, then the contract must also elect between damages assessed on a quantum meruit or contractual basis.

“Reasonable sum” is often determined by the court as a fair commercial rate and you may need to present evidence from experts on what constitutes reasonable sum for your location, scope of work, or experience.

Facts are king. The specific facts of your case are a major influencing factor. Sometimes photographers (or vendors) have received a significant result from a quantum meruit claim; however, this is not a guarantee, and quite often contractors find that while they are able to claim the cost of materials or costs of doing business, they have been less likely to recover any profit margin. This is because it is the value of the work done and the monies expended by the contractor that is intended to be the subject of a quantum meruit claim. It is for this reason that talk of whether you can also recover profit margins is more properly considered as part of an assessment of contractual damages (which is separate and distinct from quantum meruit).

Quantum meruit is an important concept to know and understand as a business owner – this can help you as you consider the best course of action when a client seeks to cancel their contract with you (for whatever reason). As you document your costs of doing business and any amount you have expended in preparation for specific work, remember that contractual damages are not the only way to think about monetary recovery. Consider how your business practices help or hinder your ability to protect you from granting licenses you don’t intend to or to recover your expenses where a contract has been repudiated.