IP Law Daily, COPYRIGHT—2d Cir.: No breach of audio book licensing agreement where ‘catch-all’ included streaming, (Feb 20, 2025)

By Justin Marcus Smith, J.D.

An expansive phrase and other indicia in a license agreement showed the parties unambiguously granted and received broad rights to distribute unabridged copies of audio recordings, including the right to stream them.

In an unpublished opinion, an audio book licensing agreement unambiguously allowed for subscription service streaming as a potential method of distribution, affirmed the United States Court of Appeals in New York City, in reviewing a district court dismissal for failure to state a claim. Although “streaming” was not explicitly mentioned in the license agreement, an expansively drafted phrase that operated like a technological catch-all unambiguously included streaming. As the district court found, a different section of the licensing agreement that specified a per-unit royalty showed the parties understood how to specify per-unit royalties when they wanted to. The district court correctly held the defendants facially acted within the scope of the licensing agreement when they distributed the licensed works on their subscription streaming services. The district court also correctly held the copyright licensor failed to state a claim of copyright infringement with respect to abridged works. On this point, fractional listening, whereby a listener would simply stop listening to a streamed distribution, did not indicate distribution of a condensed or altered work. The Second Circuit accordingly affirmed dismissal of the plaintiff licensor’s direct and secondary federal copyright infringement claims against the defendant licensees. If anything, the licensor may have had a contract claim about royalties due (Teri Woods Publishing, LLC v. Amazon.com, Inc., No. 24-1137 (2d Cir. Feb. 19, 2025)).

Background. In its complaint, plaintiff Teri Woods Publishing, LLC (TWP) asserted claims for breach of contract claims against defendant Urban Audio Books, LLC (Urban Audio) and copyright infringement claims against the three downstream defendants Amazon.com, Inc. (Amazon), Audible, Inc. (Audible), and Blackstone Audio, Inc. (Blackstone) (collectively, defendants) in connection with the streaming of licensed works. TWP alleged that Urban Audio breached the royalty terms of a copyright license agreement for the production and distribution of twenty TWP copyrighted audiobooks and the implied covenant of good faith and fair dealing. TWP said its royalties under the license agreement plummeted after the defendants exceeded the permissible scope of the agreement and began distributing the audiobooks as digital streams, such that some features of Amazon and Audible payment models distributed the licensed works at no charge to subscribers, and in some cases, gave subscribers permanent access.

More specifically, TWP alleged the subscription streaming model violated the license agreement by allowing “fractional” distributions of the licensed works. TWP said the license agreement did not permit distribution of abridged readings. TWP alleged that Urban Audio and Blackstone had similar subscription streaming services such that subscribers redeemed monthly credits for an audiobook, leading to underpayment of royalties.

The downstream defendants and Urban Audio filed two discrete motions to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6). They argued their activities did not exceed the scope of the license agreement. The district court granted dismissal of the direct and indirect federal copyright infringement claims and declined to exercise supplemental jurisdiction over the state claims.

The district court determined that the license agreement captured the parties’ clear intent to grant Urban Audio broad rights to publish and monetize unabridged copies of audio recordings of the licensed works. The district court said it did not need to decide how TWP should be compensated for streaming under the royalties section because distribution on the defendants’ streaming platforms did not violate the license agreement. The court construed that revenue from subscription fees for streaming would logically fit within the scope of “transactions” or “receipts.” The arguments TWP made failed because they were contrary to the plain meaning of the catch-all phrase “other contrivances, appliances, mediums and means (now known and hereafter developed)”. The phrase included streaming.

The district court determined that TWP did not have a claim for breach of the licensing agreement with respect to abridged format distribution, via fractional “listens” shorter than five minutes, because the complaint did not plausibly allege any distribution of abridged copies. The fact that a listener could simply stop listening at a certain point did not make the copy “abridged” in violation of the agreement.

The district court also found that the agreement gave Urban Audio the right to distribute the licensed works through subscription streaming services. Urban Audio also had the right to sublicense to the downstream defendants.

The district court further held that TWP did not state a claim for secondary copyright infringement against Urban Audio or Blackstone. Again, Urban Audio had expansive publishing rights that were also fully assignable. Urban Audio assigned to Blackstone, and Blackstone then sublicensed to Amazon and Audible. None of this exceeded the scope of the licensing agreement.

Having granted dismissal of the federal claims, the court declined to exercise supplemental jurisdiction over the remaining TWP claims.

De novo review. On appeal, TWP contended that the district court erred in concluding that the licensing agreement between TWP and Urban Audio unambiguously permitted the defendants to distribute through online subscription streaming services. The Second Circuit applied de novo review to the question of whether the license agreement was ambiguous about streaming.

Catch-all phrase. The Second Circuit applied the same analysis as did the district court. The agreement contained, essentially, a catch-all phrase that could encompass streaming, and TWP failed to meaningfully explain why it did not. There was a broad grant of rights.

Royalties. TWP again pointed to the royalty section and argued that distribution “for free” ran afoul of payment provisions and conflicted with party intent to generate revenues for TWP and Urban Audio. The Second Circuit disagreed, first, because the complaint did not contain an allegation that Urban Audio sublicensed to Audible, Amazon, or Blackstone for free. The Second Circuit additionally observed that distribution of the works did not entirely fail to generate royalties for TWP.

Moreover, no part of the agreement restricted how Urban Audio could sell or distribute. In particular, the Second Circuit agreed with the district court’s reasoning that section II of the agreement did not require royalties to be generated on a per-unit basis except with respect to certain “Playaway” format sales. During the district court proceedings, the parties agreed that the Playaway format was not a form of streaming.

Spinelli distinguishable. The Second Circuit also agreed with the district court that TWP complaint was facially distinguishable from a case where a license agreement did not permit sublicensing on anything but a per-copyrighted-work basis. See Spinelli v. Nat'l Football League, 903 F.3d 185, 197 (2d Cir. 2018). As the district court found in the instant matter, the royalties section did not require TWP to be compensated on a per-book basis. And again, unlike Spinelli, the Second Circuit observed that TWP was not altogether deprived of royalties.

No abridgement. The district court also correctly reasoned that fractional listens would not amount to abridgment. TWP never alleged that the defendants produced condensed or otherwise altered versions of the original works. Again, if any defendant shorted TWP of royalties for brief listens under 5 minutes, it only suggested breach of contract, not copyright infringement.

Contractual dispute. In short, TWP’s allegations amounted to only a contractual dispute over what royalties TWP should have received for the defendants’ distribution of the TWP works, not a claim for copyright infringement.

The Case is No. 24-1137.

Judge: Per curium.

Attorneys: Daniel Goldberger (Dorsey & Whitney LLP) for Teri Woods Publishing, LLC. Deena Julia Greenberg Feit (Fenwick & West LLP) for Amazon.com, Inc.

Companies: Teri Woods Publishing, LLC; Amazon.com, Inc.

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