Design Basics, LLC et al v. Quality Crafted Homes Inc.
OPINION AND ORDER: For the reasons set forth in the Opinion and Order, the Court DENIES Quality Crafted Homes' 30 Motion for Partial Summary Judgment. Signed by Judge Robert L Miller, Jr on 4/7/2017. (jss)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
DESIGN BASICS, LLC and
PLAN PROS, INC.,
QUALITY CRAFTED HOMES INC.,
Case No.: 1:16-cv-50 RLM-SLC
OPINION AND ORDER
This matter is before the court on Quality Crafted Homes’ motion for
partial summary judgment. Quality Crafted Homes argues that a three-year
look-back period prevents plaintiffs from claiming that Quality Crafted Homes
infringed on copyrights before February 3, 2013. The court disagrees.
Design Basics and Plan Pros allege that they’re in the business of designing
and licensing architectural works and technical drawings, and that they own
copyrights protecting their works. Quality Crafted Homes is in the business of
creating, publishing, and advertising home designs. On February 3, 2016,
Design Basics and Plan Pros sued Quality Crafted Homes for infringing on
copyrights for seven of their home designs.
Quality Crafted Homes asks for partial summary judgment, arguing that
claims based on alleged infringing acts before February 3, 2013 are time-barred.
II. STANDARD OF REVIEW
Summary judgment is appropriate when the record demonstrates that
there are no genuine issues of material fact and the movant is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986); Protective Life Ins. Co. v. Hansen, 632 F.3d 388, 391-92
(7th Cir. 2011). The court construes the evidence and all inferences that
reasonably can be drawn from the evidence in the light most favorable to the
non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
The moving party bears the burden of informing the court of the basis for its
motion and identifying the parts of the record that demonstrate the absence of
any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. at 323.
Claims under the Copyright Act must be “commenced within three years
after the claim accrue[s].” 17 U.S.C. § 507(b). “[T]he limitations period generally
begins to run at the point when ‘the plaintiff can file suit and obtain relief,’”
which is “when an infringing act occurs.” Petrella v. Metro-Goldwyn-Mayer, Inc.,
134 S. Ct. 1962, 1969 (2014). The equitable defense of laches doesn’t apply to
infringement claims brought within the limitations period. Id. at 1972. The Court
expressly noted that its decision doesn’t address the “discovery rule,” which nine
courts of appeals have adopted “as an alternative to the incident of injury rule.”
Id. at 1969 n.4; see also SCA Hygiene Prods. Aktiebolag v. First Quality Baby
Prods., LLC, No. 15-927, 2017 WL 1050978, at *7 (U.S. Mar. 21, 2017) (holding
that laches also isn’t a defense in patent suits, and again recognizing that
Petrella didn’t address the discovery rule).
Our court of appeals adopted the “discovery rule” for copyright claims.
Gaiman v. McFarlane, 360 F.3d 644, 653 (7th Cir. 2004). Under the “discovery
rule,” the “statute of limitations starts to run when the plaintiff learns, or should
as a reasonable person have learned, that the defendant was violating his rights.”
Id. Quality Crafted Homes argues that the logic of Petrella undermines our court
of appeals’ acceptance of the discovery rule; regardless of when an infringement
is discovered, suit is time-barred if the infringement occurred more than three
years before the filing date. Design Basics and Plan Pros argue that Petrella only
dealt with the laches defense and expressly decided not to impact the lower
courts’ discovery rules, so our court of appeals’ decision should remain binding.
In Chicago Building Design, P.C. v. Mongolian House, Inc., 770 F.3d 610
(7th Cir. 2014), our court of appeals stated that “in light of Petrella, we now know
that the right question to ask in copyright cases is whether the complaint
contains allegations of infringing acts that occurred within the three-year lookback period from the date on which the suit was filed.” Id. at 616. The court
found possible infringement within the three-year look-back period, so it didn’t
need to reach the question of “whether Petrella abrogates the discovery rule in
copyright cases.” Id. at 618. Like the Petrella Court, the court of appeals decided
to “express no opinion on that question today.” Id.
Our court of appeals took a nuanced approach to Petrella in Consumer
Health Information Corp. v. Amylin Pharmaceuticals, 819 F.3d 992 (7th Cir.
2016), where it held that Petrella was limited to disputes about copyright
infringement. Id. at 996-997. Copyright ownership claims, however, “‘accrue only
once,’ when the claimant receives notice that his ownership has been expressly
repudiated or contested.” Id. at 996. Despite clear language in Petrella describing
accrual, there might be good reason to limit the decision to its context.
After Petrella, our court of appeals might find reason to continue applying
the discovery rule in copyright infringement actions. Unlike the discovery rule,
laches is a purely equitable defense that existed in copyright to “fill[ ] a legislative
hole” during a time when there was no federal statute of limitations for copyright
claims. Petrella, 134 S. Ct. at 1968. Laches also prevented forum-shopping for
the state with the most favorable limitations period. Id. The creation of a federal
limitations period standardized the time a plaintiff had to bring an infringement
claim, eliminating the need for this equitable gap-filler. Id. at 1969.
The discovery rule serves a different role. Petrella impacted when an
infringement claim “accrue[s].” 17 U.S.C. § 507(b). But the discovery rule might
toll a limitations period once the claim has already “accrued,” see Taylor v.
Meirick, 712 F.2d 1112, 1117 (7th Cir. 1983) (“Often . . . the statute of limitations
is tolled until the plaintiff learned or by reasonable diligence could have learned
that he had a cause of action.”), or offer an alternative means of accrual. However
cast, with or without laches, a diligent plaintiff still has a reasonable opportunity
to sue. But without the discovery rule, a diligent plaintiff might not have
reasonable opportunity to sue for an infringement that takes too long to discover.
The Supreme Court expressly staked out the boundaries of its opinion to
avoid encroaching on the discovery rule. See Petrella, 134 S. Ct. at 1969 n.4.
Since neither our court of appeals nor the Supreme Court has ruled on whether
the discovery rule remains intact in copyright infringement actions after Petrella,
this court must follow precedent in continuing to apply it.
Every other court in our circuit that has addressed the issue has held that
Petrella leaves our court of appeals’ discovery rule intact unless it decides
otherwise. See Design Basics, LLC v. Lancia Homes, Inc., No. 1:16-cv-47, 2017
WL 228196 (N.D. Ind. Jan. 19, 2017); Boehm v. Heyrman Printing, LLC, No. 16cv-305, 2017 WL 53296, at *1-2 (W.D. Wis. Jan. 4, 2017); Design Basics, LLC v.
Best Built, Inc., No. 14-C-597, 2016 WL 8215055, at *8 (E.D. Wis. Dec. 8, 2016);
Seide v. Level-(1) Global Solutions, LLC, No. 16 C 2975, 2016 WL 4206076, at
*3 (N.D. Ill. Aug. 10, 2016); Design Basics, LLC v. J & V Roberts Invs., Inc., 130
F. Supp. 3d 1266, 1281-1282 (E.D. Wis. 2015); Design Basics, LLC v.
Campbellsport Bldg. Supply, Inc., 99 F. Supp. 3d 899, 919 (E.D. Wis. 2015);
Panoramic Stock Images, Ltd. v. John Wiley & Sons, Inc., No. 12-c-10003, 2014
WL 4344095, at *7 (N.D. Ill. Sept. 2, 2014); Frerck v. Pearson Educ., Inc., 63 F.
Supp. 3d 882, 887 n.3 (N.D. Ill. 2014); Beasley v. John Wiley & Sons, Inc., 56 F.
Supp. 3d 937, 945 n.5 (N.D. Ill. 2014); Frerck v. John Wiley & Sons, Inc., No.
11-cv-2727, 2014 WL 3512991, at *6 n.5 (N.D. Ill. July 14, 2014).
Nor has this court found a single case outside of the Seventh Circuit that
has done differently. See, e.g., Energy Intelligence Group, Inc. v. Kayne Anderson
Capital Advisors, LP, No. H-14-1903, 2016 WL 1203763, at *4 (S.D. Tex. Mar.
22, 2016) (following the Fifth Circuit’s discovery rule after Petrella); Wolf v.
Travolta, 167 F. Supp. 3d 1077, 1092-1093 (C.D. Cal. 2016) (applying the Ninth
Circuit’s discovery rule after Petrella); Design Basics, LLC v. Carhart Lumber Co.,
No. 8:13-cv-125, 2016 WL 424974, at *3 (D. Neb. Feb. 3, 2016) (following the
Eighth Circuit’s discovery rule after Petrella); Wu v. John Wiley & Sons, Inc., No.
14 Civ. 6746, 2015 WL 5254885,at *4 n.4 (S.D.N.Y. Sept. 10, 2015) (following
the Second Circuit’s discovery rule after Petrella); Oracle USA, Inc. v. Rimini St.,
Inc., No. 2:10-cv-106, 2015 WL 5089779, at *6 (D. Nev. Aug. 27, 2015) (following
the Ninth Circuit’s discovery rule after Petrella); Grant Heilman Photography,
Inc. v. McGraw-Hill Cos., Inc., 28 F. Supp. 3d 399, 411 (E.D. Pa. 2014) (following
the Third Circuit’s discovery rule after Petrella); Lefkowitz v. McGraw-Hill Global
Educ. Holdings, LLC, 23 F. Supp. 3d 344, 357 n.11 (S.D.N.Y. 2014) (following
the Second Circuit’s discovery rule after Petrella).
Unless a higher court directs otherwise, the discovery rule applies here.
The plaintiffs’ claims regarding infringing acts that occurred before February 3,
2013 can proceed if the plaintiffs discovered or reasonably should have
discovered the acts after that date.
For the forgoing reasons, the court DENIES Quality Crafted Homes’ motion
for partial summary judgment [Doc. No. 30].
ENTERED: April 7, 2017
/s/ Robert L. Miller, Jr.
United States District Court
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