Design Basics, LLC v. Carhart Lumber Company et al

Filing 86

MEMORANDUM AND ORDER -Defendants' motion for summary judgment on its statute-of-limitationsdefense (Filing 62 ) is granted in part and denied in part as set forth within the order. Defendants' motion to strike (Filing 78 ) the declarati on of Carl Cuozzo (Filing 73 , Ex. A) is denied. Plaintiff's statement of objections (Filing 80 ) to Magistrate Judge Zwart's order denying Plaintiff leave to amend its complaint is denied, and the Magistrate Judges order entered on October 16, 2015, (Filing 76 ) is sustained and shall not be disturbed. Ordered by Senior Judge Richard G. Kopf. (MKR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
DESIGN BASICS, L.L.C.,
Plaintiff,
v.
CARHART LUMBER COMPANY,
SCOTT BRIAN CARHART,
BRENDA KUHLMAN CARHART,
WILLIAM C. CARHART, and
MICHAEL HERBOLSHEIMER,
Defendants.

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8:13CV125

MEMORANDUM
AND ORDER

Plaintiff Design Basics, L.L.C., (“DB”) is in the business of publishing and
licensing architectural designs. DB brings this copyright infringement action against
the defendants (“Carhart”)—who sell home building products and offer blueprintdrafting services—claiming that Carhart “made infringing copies of DB’s house
plans” and “may have built one or more infringing structures,” or aided in doing so.
Specifically, DB claims that Carhart “scann[ed], cop[ied], and/or reproduc[ed]
unauthorized copies” of DB’s house plans; “creat[ed] derivative works” from the
plans; and “advertised, marketed and/or sold these or other infringing structures, or
aided and abetted such activities.” (Filing 1, Complaint.)
Carhart has filed a motion for summary judgment (Filing 62), arguing that DB’s
claims are barred by the Copyright Act’s statute of limitations. Carhart has also filed
a motion to strike (Filing 78) a declaration filed in conjunction with DB’s opposition
to Carhart’s motion for summary judgment. Finally, DB has filed an objection (Filing
80) to Magistrate Judge Zwart’s order denying DB’s motion to file an amended
complaint.

I. UNDISPUTED MATERIAL FACTS
DB filed this lawsuit on April 18, 2013, alleging in its complaint that “DB first
became aware that Defendants had violated its copyrights in one or more distinct
ways” on April 20, 2010.1 In an answer to an interrogatory that asked, “when and
how Plaintiff first became aware that Defendant(s) had allegedly violated a copyright
of Plaintiff,” DB answered, “Carl Cuozzo was looking at different [Home Builders’
Associations] in Nebraska for potential new clients to market to. He ran across the
Carhart website on April 20th 2010 and noticed they marketed house plans. He then
noticed the infringing plans and notified [DB’s Chief Operating Officer].”
After the filing of this lawsuit, Carhart deposed Carl Cuozzo, DB’s senior
designer who also investigates potential infringement claims on behalf of DB. Cuozzo
testified that he first ran across Carhart’s website on February 24, 2010, at which time
he “saw that they had some plans shown on their website.” On that date, Cuozzo saw
four “elevations [which] alerted [him] that there might be some infringing floor plans.
Some of the elevations looked similar.” When Cuozzo saw the elevations on Carhart’s
website on February 24, 2010, he was concerned “that they might be similar or
substantially similar to Design Basics’ plans.” (Filing 63-2, Dep. Couzzo at CM/ECF
pp. 16-17, 21.)
In Cuozzo’s deposition, he testified that on February 24, 2010, he believed that
Carhart’s “Easy Living,” “Meadow Brook,” “Nebraskan,” and “Redfield” plans were
“substantially similar to,” respectively, DB’s “Logan,” “Sinclair,” “Rosebury,” and
“Gabriel Bay” plans. However, because Cuozzo “didn’t have time” to further
investigate at that time, he printed the portion of Carhart’s website that contained the
elevations and put the information “in the file.”

1

The parties agree on the facts set forth above for purposes of Carhart’s motion
for summary judgment. (See Filing 64, Defs.’ Br. Supp. Mot. Summ. J. at CM/ECF
pp. 2-7; Filing 72, Pl.’s Br. Opp’n Defs.’ Mot. Summ. J. at CM/ECF pp. 3-11.)
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Couzzo did not return to the Carhart website until April 20, 2010, when he
“went back and looked at the floor plans and ran a history to see if any plans were
purchased, had a license purchased with them.” (Id. at CM/ECF p. 18.) On this date,
Cuozzo learned that Carhart’s “Nebraskan” plan actually infringed on DB’s “Laramy”
plan, and that Carhart’s “Easy Living” plan actually infringed on DB’s “Winter
Woods” plan.
In February and March 2014—during the course of discovery in this
matter—DB learned that Carhart had infringed upon an additional 17 of DB’s
copyrighted house plans. Magistrate Judge Zwart denied DB’s motion to amend the
complaint to add these additional infringements.
II. PENDING MOTIONS
A. Motion for Summary Judgment Based on Statute of Limitations
Carhart moves for summary judgment on its defense of the statute of limitations
under 17 U.S.C. § 507(b), which provides: “No civil action shall be maintained under
the provisions of this title unless it is commenced within three years after the claim
accrued.” 17 U.S.C. § 507(b) (Westlaw 2016). The question, then, is when DB’s
“claim accrued.”
The parties do not dispute that Congress has been silent regarding how to
determine accrual under the Copyright Act. Plaintiff DB argues that the “discovery
rule” applies. (Filing 72, Pl.’s Br. Opp’n Defs.’ Mot. Summ. J. at CM/ECF pp. 1631.) The Carhart defendants assert that the “occurrence rule” applies, but that DB’s
lawsuit is untimely under both the “occurrence rule” and the “discovery rule.” (Filing
64, Defs.’ Br. Supp. Mot. Summ. J. at CM/ECF pp. 10-20.)

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1. Occurrence Rule
In the course of deciding whether the equitable defense of laches may bar relief
on a copyright-infringement claim brought within § 507(b)’s period of limitations, the
Supreme Court recently discussed when a copyright-infringement claim “accrues” for
purposes of that statute: “when an infringing act occurs.” Petrella v. Metro-GoldwynMayer, Inc., 134 S. Ct. 1962, 1969 (2014). Further, “[e]ach time an infringing work
is reproduced or distributed, the infringer commits a new wrong,” and each wrong
constitutes a “claim” that “accrues” when the wrong occurs. Therefore, “each
infringing act starts a new limitations period.” Id. “Thus, when a defendant has
engaged (or is alleged to have engaged) in a series of discrete infringing acts, the
copyright holder’s suit ordinarily will be timely under § 507(b) with respect to more
recent acts of infringement (i.e., acts within the three-year window), but untimely with
respect to prior acts of the same or similar kind.” Id. at 1970.
Applying this “occurrence” rule to this case, DB may “gain retrospective relief
running only three years back from the date the complaint was filed.” Id. Because
DB’s complaint was filed on April 18, 2013, it may recover for Carhart’s alleged
copyright infringement occurring on or after April 18, 2010.
2. Discovery Rule
The Petrella court specifically noted that, as an “alternative” to this “incident
of injury” (or “occurrence”) rule, nine Courts of Appeal have adopted a “discovery
rule” in copyright-infringement cases, which starts the limitations period when “‘the
plaintiff discovers, or with due diligence should have discovered, the injury that forms
the basis for the claim.’” Petrella, 134 S. Ct. 1962, 1969 n.4 (quoting William A.
Graham Co. v. Haughey, 568 F.3d 425, 433 (3rd Cir. 2009); citing 6 W. Patry,
Copyright § 20:19, p. 20-28 (2013) (“The overwhelming majority of courts use
discovery accrual in copyright cases.”)). Presumably because it was not necessary for

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disposition of the case before it, the Court specifically stated that it had “not passed
on the question” of whether the discovery rule applies in copyright cases. Id.
Both before and after Petrella, courts within the Eighth Circuit have uniformly
applied the discovery rule in copyright-infringement cases. I shall do the same.2
Comcast of Illinois X v. Multi-Vision Elecs., Inc., 491 F.3d 938 (8th Cir. 2007)
(applying 17 U.S.C. § 507(b) to claim under Cable Communications Policy Act; “In
federal question cases, the discovery rule applies in the absence of a contrary directive
from Congress. Under this rule, a cause of action accrues and the statute of limitations
begins to run when the plaintiff discovers, or with due diligence should have
discovered, the injury which is the basis of the litigation.” (internal quotation and
citation omitted)); Asche & Spencer Music, Inc. v. Principato-Young Entm’t, Inc., No.
CV 15-3305, 2015 WL 7573884, at *4 (D. Minn. Nov. 24, 2015) (under 17 U.S.C. §
2

I note that in a recent post-Petrella decision involving the federal Driver’s
Privacy Protection Act (“DPPA”) and the “catch-all, four-year statute of limitations
in 28 U.S.C. § 1658(a),” the Eighth Circuit Court of Appeals acknowledged that in
federal-question cases, it has “[t]raditionally . . . applied the discovery rule as the
default statute-of-limitations rule in the absence of a contrary directive from
Congress.” However, relying on two United States Supreme Court cases dealing with
statutes of limitation in the federal Fair Credit Reporting Act and Investment Advisers
Act, the Eighth Circuit Court of Appeals decided it must examine whether the “text,
structure, and purpose of [the] limitations provision [in the DPPA] suggest[ed] that
Congress may not have intended for the discovery rule to apply.” McDonough v.
Anoka Cty., 799 F.3d 931, 942 (8th Cir. 2015). The McDonough court stated that in
cases where it is evident that Congress may not have had such intent, courts should
“determin[e] whether to apply the discovery or occurrence rule” by taking “into
account the general policy underlying statutes of limitation, as well as equitable
considerations relevant to the cause of action at hand.” Id. Because McDonough was
not a copyright-infringement case involving 17 U.S.C. § 507(b); because McDonough
did not cite or discuss Petrella and whether it abrogates the discovery rule in
copyright cases in the Eighth Circuit; and because the text of the provision at issue in
McDonough contained both a general statute of limitations and an express discovery
rule for some types of claims, I decline to deviate from the past practice in this circuit,
which is to apply the discovery rule in copyright-infringement cases.
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507(b), claims accrue when plaintiff discovers infringement); Goldstein v. Giist, No.
CIV. 14-5026-JLV, 2015 WL 1476759, at *7 (D.S.D. Mar. 31, 2015) (cause of action
under 17 U.S.C. § 507(b) accrues “when a plaintiff knows of the infringement or is
chargeable with such knowledge”); Scott Breuer Const., Inc. v. Koch, No.
12-CV-3182, 2014 WL 2893200, at *1 (D. Minn. June 26, 2014) (parties agreed that
discovery rule applied in determining when claim accrued for purposes of § 507(b);
“‘Under this rule, a cause of action accrues and the statute of limitations begins to run
when the plaintiff discovers, or with due diligence should have discovered, the injury
which is the basis of the litigation.’” (quoting Comcast of Ill. X v. Multi-Vision Elecs.,
Inc., 491 F.3d 938, 944 (8th Cir. 2007)); Two Palms Software, Inc. v. Worldwide
Freight Mgmt., LLC, 780 F. Supp. 2d 916, 920 (E.D. Mo. 2011) (cause of action
accrues within meaning of 17 U.S.C. § 507(b) when “the plaintiff has knowledge of
a infringement or is chargeable with such knowledge”); Gleeson v. Jackson, No.
1:05-CV-088, 2006 WL 462110, at *2 (D.N.D. Feb. 24, 2006) (“A cause of action for
copyright infringement accrues when one has knowledge of a violation or is
chargeable with such knowledge.”)
It is undisputed that Carl Cuozzo, DB’s senior designer, accessed Carhart’s
website on February 24, 2010, at which time he saw four elevations that looked
“similar” to DB’s plans, “alert[ing] [him] that there might be some infringing floor
plans.” Specifically, when Cuozzo saw the elevations for Carhart’s “Easy Living,”
“Meadow Brook,” “Nebraskan,” and “Redfield” plans on Carhart’s website on
February 24, 2010, he was concerned “that they might be similar or substantially
similar to Design Basics’ plans.” (Filing 63-2, Dep. Couzzo at CM/ECF pp. 16-17,
21.)
Although Cuozzo did not confirm his suspicions until April 20, 2010, because
he claims he did not “have time” to further investigate on February 24, 2010, Cuozzo
clearly had notice of Carhart’s possible infringement of four specific DB plans on
February 24, and he could have confirmed the existence of such infringement if he had
continued to look further on Carhart’s website that day, instead of simply filing the
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material until he had more time. See Scott Breuer Const., 2014 WL 2893200
(copyright statute of limitations began to run when plaintiff drove past home that
looked “suspiciously” like copyrighted design and unsuccessfully asked permission
to view home’s interior and obtain copies of floor plan; suit filed four years later was
untimely under 17 U.S.C. § 507(b)); Reeves v. Airlite Plastics, Co., No. 8:04CV56,
2005 WL 2347242, at *1 (D. Neb. Sept. 26, 2005) (ERISA statute of limitations began
running when account statement was delivered to plaintiff, despite fact that plaintiff
deliberately refused to look at it; “Prohibiting a plaintiff from benefitting from his
own ‘willful blindness’ at another party’s expense . . . furthers the meritorious public
policies underlying statutes of limitations.”).
I find that the statute of limitations on DB’s claims involving Carhart’s posting
on its website house plans that potentially infringed DB’s copyrighted “Winter
Woods,” “Sinclair,” “Laramy,” and “Gabriel Bay” plans expired three years after
February 24, 2010, the date of discovery. Therefore, DB’s filing of those specific
claims on April 18, 2013, was untimely, and Carhart’s motion for summary judgment
on its statute-of-limitations defense must be granted as to infringement related to the
posting of those four specific plans on Carhart’s website. However, DB’s claims
involving other possible acts of infringement related to those four house plans—such
as reproducing unauthorized copies of the plans, aiding in the construction of
infringing structures from those plans, and marketing or selling infringing structures
derived from those plans—are not barred.
As to the remaining copyrighted house plans and plan books referenced in DB’s
complaint, I conclude that the complaint reasonably encompasses potentially
infringing acts that occurred within the three-year period leading up to the filing of the
complaint, so section 507(b) does not bar DB’s claims against Carhart for its potential
acts of copyright infringement that DB first discovered, or with due diligence should

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have discovered, on or after April 18, 2010.3 See Asche & Spencer Music, Inc., 2015
WL 7573884, at *4 (“claims for infringement continue to accrue so long as an
infringing party continues to infringe” (citing Petrella, 134 S. Ct. at 1969)); Goldstein,
2015 WL 1476759, at *3 (“‘[A]n infringement action may be commenced within three
years of any infringing act, regardless of any prior acts of infringement; [courts] have
applied the three-year limitations period to bar only recovery for infringing acts
occurring outside the three-year period.’” (quoting Kwan v. Schlein, 634 F.3d 224,
228 (2nd Cir. 2011)); Two Palms Software, Inc., 780 F. Supp. 2d at 920 (because each
act of infringement is a distinct harm, § 507(b) “bars infringement claims that accrued
more than three years before suit was filed, but does not preclude infringement claims
that accrued within the statutory period”).
B. Motion to Strike
Carhart moves to strike (Filing 78) the declaration of Carl Cuozzo (Filing 73,
Ex. A) because it directly contradicts his undisputed deposition testimony (Filing 632) made as a corporate representative in a Rule 30(b)(6) deposition, and the
declaration was “offered in an attempt to contradict his previous deposition testimony
and to prevent the issuance of summary judgment in Defendants’ favor.” (Filing 79,
Defs.’ Br. Supp. Mot. to Strike at CM/ECF p. 4.) DB counters that Cuozzo’s
declaration does not contradict his deposition testimony; rather, it “simply adds more
detailed or contextual information.” (Filing 82, Pl.’s Br. Opp’n Mot. to Strike and
CM/ECF p. 5.)

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DB’s complaint makes several “claims” that Carhart infringed—either willfully
or non-willfully—upon DB’s copyrights in seven house plans and various plan books
by scanning, copying, and/or reproducing such plans; by creating derivative works
therefrom; and by advertising, marketing, and/or selling infringing structures made
from such plans, or aided and abetted such activities. DB’s complaint does not allege
a timeframe within which these acts of infringement allegedly occurred. (Filing 1,
Complaint at CM/ECF pp. 4-6 (alleging eight counts of “willful” and “non-willful”
infringement).)
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I shall deny the motion to strike because the relevant portions of Cuozzo’s
declaration do not contradict his deposition testimony. As stated above, the parties do
not dispute that Cuozzo testified by deposition that on February 24, 2010, he “saw that
[Carhart] had some plans shown on their website” that were “substantially similar to”
DB’s plans—specifically, four “elevations [which] alerted [him] that there might be
some infringing floor plans.” Cuozzo further stated that on April 20, 2010, he learned
that some of Carhart’s plans “actually infringed” on some of DB’s plans after he
“went back and looked at the floor plans and ran a history to see if any plans were
purchased, had a license purchased with them.”
Cuozzo’s declaration recounts the same information—that he visited Carhart’s
website on February 24, 2010, and saw “several elemental house plan elevation
sketches” that “could be similar to some of DB’s plans,” but he learned of “actual
infringement” on April 20, 2010. (Filing 73 at CM/ECF pp. 5-7.)
C. Objection to Magistrate’s Order
Finally, DB objects (Filing 80) to Magistrate Judge Zwart’s order (Filing 76)
denying DB leave to amend its complaint to add claims under the Digital Millennium
Copyright Act and to specifically name 17 additional copyrighted house plans that
Carhart has allegedly infringed. As Judge Zwart pointed out, DB was aware of its
new claims at least 17 months before DB moved to amend the complaint, and it
presented no evidence or brief explaining its delay.
Pursuant to 28 U.S.C. § 636(b)(1)(A), Fed. R. Civ. P. 72(a), and NECivR 72.2,
I find that the challenged order is not clearly erroneous or contrary to law. See
NECivR 7.1(a)(1)(B) (“If the court concludes that a motion raises a substantial issue
of law, . . . it may treat the failure to file a brief as an abandonment of the motion.”);
NECivR 39.2(c) (“[A] judge may treat a party’s failure to file a brief or discuss an
issue in a brief as an abandonment of that party’s position on any issue not briefed or
discussed.”); Cody Foster & Co., Inc. v. Urban Outfitters, Inc., No. 8:14CV80, 2015
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WL 1981980, at *1 (D. Neb. May 4, 2015) (Fed. R. Civ. P. 16(b)(4) requires that case
management order setting progression deadlines may be modified only for good
cause; movant’s diligence is the “first consideration,” and courts “will not generally
find good cause to amend” absent a change in law, newly discovered facts, or changed
circumstance (citing Sherman v. Winco Fireworks, Inc., 532 F.3d 709 (8th Cir. 2008)).
Accordingly,
IT IS ORDERED:
1.
Defendants’ motion for summary judgment on its statute-of-limitations
defense (Filing 62) is granted in part and denied in part as follows:
(a) Defendants’ motion for summary judgment (Filing 62) is granted
only as to infringement claims related to the posting on Carhart’s website
of house plans that potentially infringed DB’s copyrighted “Winter
Woods,” “Sinclair,” “Laramy,” and “Gabriel Bay” house plans;
(b) Defendants’ motion for summary judgment (Filing 62) is denied
as to DB’s other possible acts of infringement related to DB’s
copyrighted “Winter Woods,” “Sinclair,” “Laramy,” and “Gabriel Bay”
house plans, such as reproducing unauthorized copies of the plans, aiding
in the construction of infringing structures from those plans, and
marketing or selling infringing structures derived from those plans;
(c) Defendants’ motion for summary judgment (Filing 62) is denied
as to Carhart’s potential acts of infringement on the remaining
copyrighted house plans and plan books referenced in DB’s complaint
that DB first discovered, or with due diligence should have discovered,
on or after April 18, 2010.

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2.
Defendants’ motion to strike (Filing 78) the declaration of Carl Cuozzo
(Filing 73, Ex. A) is denied.
3.
Plaintiff’s statement of objections (Filing 80) to Magistrate Judge Zwart’s
order denying Plaintiff leave to amend its complaint is denied, and the Magistrate
Judge’s order entered on October 16, 2015, (Filing 76) is sustained and shall not be
disturbed.
DATED this 3rd day of February, 2016.
BY THE COURT:
Richard G. Kopf
Senior United States District Judge

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