Ferguson and Katzman Photography, Inc. v. Key Food Stores Co-Operative, Inc.

Background

Ferguson & Katzmann Photography, Inc. sued Key Food Stores Co-Operative, Inc., Seven Seas Georgetowne LLC, Bogopa Service Corp., Fairway Group Holdings Corp., Village Supermarket Inc. (VSM), Amazon, Inc., and unidentified defendants for copyright infringement based on the alleged unauthorized display of photographs in grocery stores. Key Food had previously been voluntarily dismissed. Fairway was dismissed by stipulation after an order in Fairway’s bankruptcy case.

The opinion states that Old Market Group Holdings Corp., formerly known as Fairway, sold the store displays containing the photographs to VSM and other purchasers during the bankruptcy proceeding. VSM separately asked the bankruptcy court to find that it owned the displays free and clear, arguing that the finding could establish that its use of them was not copyright infringement.

Motion and arguments

VSM filed a premotion letter that the district court treated as a motion to stay the copyright case. VSM argued that waiting for the bankruptcy court’s decision would promote efficiency and avoid potentially unnecessary discovery and litigation expenses.

The photography company argued that ownership of the physical photographs or displays did not determine whether VSM had the right to use the copyrighted works. It asserted that Fairway’s license allowed Fairway to display the photographs but did not allow Fairway to transfer that license to others. It also argued that any Fairway license had expired before the displays were sold to VSM.

Court’s reasoning

The court agreed that the photography company’s point was legally valid: transferring ownership of a physical object containing a copyrighted work does not by itself transfer rights in the copyrighted work. The court nevertheless found that important questions remained about which intellectual-property rights Fairway did or could transfer to VSM. Those questions had already been presented to the bankruptcy court, and the sale occurred as part of the bankruptcy proceeding.

The court concluded that allowing the bankruptcy court to consider those issues first was more efficient. The bankruptcy court’s decision could ultimately resolve many, if not all, of the issues in the district-court lawsuit. The court also found that a stay would conserve judicial and financial resources and would not unfairly harm the photography company. The opinion noted that the bankruptcy court appeared to have held a hearing on VSM’s motion on July 8, 2021.

Disposition

The court granted VSM’s motion for a stay. The parties were directed to inform the district court within three days after the bankruptcy court issued the relevant decision. The district court did not resolve whether VSM infringed the copyrights, whether Fairway transferred a license, or whether any license had expired.