The U.S. Court of Appeals for the Second Circuit reversed the dismissal of a copyright infringement claim, holding that the district court erred in dismissing the claim on the basis that the contract at issue unambiguously granted the defendants the right to copy plaintiffs' materials indefinitely. Chapman v. New York State Div. for Youth, Case No. 05-7010 (2nd Cir., Oct. 14, 2008) (Walker, J.).

Plaintiffs Bruce Chapman and Handle With Care Behavior Management Systems (HWC) marketed a training program that teaches a safe technique for physically restraining others. The plaintiffs sued 16 defendants—various New York state entities—for copyright infringement and antitrust violations based on a dispute arising from a 1997 contract. Pursuant to the contract, HWC provided training in the techniques to defendants and allowed defendants to reproduce the training materials. The contract provided for a four-month term ending on August 31, 2007. In 1998, one defendant, Cornell University, developed and marketed a competing restraint method and training service. The applicable New York state agency then began to withhold approval of facilities unless they implemented the new method. Upon learning of the agency's policy, HWC filed a lawsuit alleging copyright infringement for defendants' use of its training materials after the contract expired and antitrust violations based on the agency's requirement to use the second method.

The district court dismissed both claims. The Second Circuit affirmed the dismissal of the antitrust claim but reversed the dismissal of the copyright claim. With respect to the copyright claim, the district court held that the contract at issue unambiguously granted defendants the right to copy plaintiffs' training materials indefinitely. On appeal, the Second Circuit disagreed and concluded that the contract was ambiguous on its face. While the contract provided that a defendant "has the right to reproduce all training materials," the Second Circuit found that the provision was unclear on its face as to whether this right was meant to end with the agreement or whether it was meant to continue for a reasonable period of time after the agreement ended to allow for further training. The Second Circuit rejected the defendants' argument that the contract granted a perpetual license to use the training materials; New York courts are reluctant to declare a perpetual license without an explicit grant of one. Therefore, the Second Circuit remanded the copyright claim to the district court so that the relevant extrinsic evidence could be considered and weighed to determine what the parties intended.

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