Design Basics, LLC v. Forrester Wehrle Homes, Inc. et al
Filing
180
Order: Forrester Wehrle's motion to exclude the testimony and declarations of Carl Cuozzo (Doc. 153 ) is granted in part and denied in part as provided herein. Forrester Wehrle's motion to bar Design Basics from recovering damages in the form of profits Forrester Wehrle Homes generated through the sale of homes based on Design Basics' PGS works (Doc. 154 ) is denied. Forrester Wehrle's motion to exclude the spreadsheet evidence (Doc. 160 ) is granted w ithout prejudice as provided herein. Design Basics' omnibus motion (Doc. 158 ) is granted in part and denied in part as provided herein. Design Basics' motions to exclude evidence of its lost licensing revenue; the parties' curren t financial conditions; and the opinions and testimony of Brian Russell (Docs. 158 , 159 ) are referred to the Honorable Jack Zouhary for adjudication. In accordance with the order of April 22, 2019 (Doc. 172 ), this case is transferred to the docket of the Honorable Jack Zouhary for all further proceedings. Judge James G. Carr on 5/23/19.(C,D)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
WESTERN DIVISION
Design Basics, LLC,
Case No. 3:15CV666
Plaintiff
v.
ORDER
Forrester Wehrle Homes, Inc., et al.,
Defendants
This is a copyright-infringement case in which the plaintiff, Design Basics, LLC (DB),
alleges that the defendants – Forrester Wehrle Homes, Inc.; Forrester Wehrle Development, Ltd.;
and their principals Jeffrey, Joseph, and Richard Wehrle (collectively, FWH) – infringed DB’s
copyrights in a series of architectural plans.
DB alleges that FWH copied its plans and/or used them without permission to build
single-family homes in Northwest Ohio and Southeast Michigan. It also brings related claims
under the Digital Millennium Copyright Act.
Now that I have ruled on the parties’ motions for summary judgment, and with the parties
having failed to resolve the case via private mediation, the case is ready for trial on the issues not
adjudicated in the summary judgment orders.
Due to my unavailability to preside over a jury trial of the length (between ten and forty
trial days) currently anticipated by the parties, this case will be, upon my adjudication of the
parties’ motions in limine (Docs. 153, 154, 158, 159, 160), reassigned to the Honorable Jack
Zouhary for all further proceedings. (Doc. 172).
This order sets forth my rulings on those motions.
Discussion
A. Testimony of Carl Cuozzo
The defendants first move to exclude the lay opinions of DB’s “senior designer” Carl
Cuozzo and the pedagogical devices that he prepared. (Doc. 153). Their motion (id., PageID
1554) challenges the admissibility of Cuozzo’s opinions that:
Each of DB’s architectural plans “demonstrate[s] a ‘modicum of creativity.’”
(Doc. 89–7, PageID 3666–67 at ¶7).
Based on Cuozzo’s comparison of each of FWH’s plans to the DB plan that it
allegedly infringed, the parties’ plans are “substantially similar” so as to support
an inference of unlawful copying. (Id., PageID 3667 at ¶10).
Each FWH plan contains many design similarities as the corresponding DB plan.
(Id., PageID 3667 at ¶11).
Defense expert Richard Kraly’s opinion that the defendants’ plans are not
substantially similar to DB’s plans contains many “discrepancies.” (Id., PageID
3667 at ¶12).
Defendants argue that these opinions “rely on specialized knowledge and constitute
impermissible lay witness testimony.” (Doc. 153, PageID 6653). They also argue that the
opinions will not be helpful to the jury. Instead, the defendants claim, the opinions are “helpful
to DB only because they dictate the outcome of the . . . substantial similarity analysis.” (Id.,
PageID 6658).
FWH also seeks exclusion of Exhibits C and D to Cuozzo’s declaration.
The former comprises three exhibits that Cuozzo prepared.
Exhibit C-1, titled “Plan Elevations,” offers a visual comparison of the exterior frontages
of each DB plan and the FWH plan that allegedly infringes it. (Doc. 89–3). Exhibit C-2, styled
“Side-by-Side Layouts,” depicts the blueprint of each DB plan adjacent to the blueprint of the
2
allegedly infringing FWH plan. (Doc. 89–4). Exhibit C-3, “Plan Overlays,” depicts the blueprint
for each DB plan laid on top of the allegedly infringing FWH plan, thereby permitting the factfinder to observe how similar (or not) the parties’ plans are.
Exhibit D, in turn, is a list of purported similarities that Cuozzo detected between DB’s
plans and FWH’s allegedly infringing plans. (Doc. 89–6).
DB responds that Cuozzo may testify about “DB’s design process, the creation of the 17
[works] at issue, how DB discovered Defendants’ Accused Works, how he reviewed the
Accused Works, and what prompted him to believe that they were copied from DB’s
Copyrighted Works[.]” (Doc. 171, PageID 7150).
It also contends that I should allow Cuozzo to “explain in detail” to the jury “what makes
each [DB] plan ‘original’” and what “features present” in the defendants’ plans are “nearly
identical” to DB’s designs, “have no functional purpose[,]” and thus “evidence copying.” (Id.).
DB emphasizes that Cuozzo bases his opinions on the knowledge and experience he gained
working for DB, rather than on any specialized or technical knowledge that might implicate
Evidence Rule 702.
Regarding the pedagogical devices, DB argues that they are admissible because they
“serve only to augment the visual comparison [of the allegedly infringing and infringed works]
for the jury’s consideration.” (Id., PageID 7153).
1. Admissibility of Opinion Evidence
“A witness may testify based on opinion, as opposed to testifying to facts of which he has
direct knowledge, under two circumstances: as a lay person under Rule 701 or as an expert under
Rule 702.” U.S. v. Freeman, 730 F.3d 590, 595 (6th Cir. 2013).
3
“Such lay opinion testimony is permitted under Rule 701 because it has the effect of
describing something that the jurors could not otherwise experience for themselves by drawing
upon the witness’s sensory and experiential observations that were made as a first-hand witness
to a particular event.” Id. (internal quotation marks omitted). To ensure that lay testimony serves
the “objective of putting the trier of fact in possession of an accurate reproduction of the event,”
id., Rule 701 instructs that:
If a witness is not testifying as an expert, testimony in the form of an opinion is
limited to one that is: (a) rationally based on the witness’s perception; (b) helpful
to clearly understanding the witness’s testimony or to determining a fact in issue;
and (c) not based on scientific, technical, or other specialized knowledge within
the scope of Rule 702.
Fed. R. Evid. 701.
“If a witness’s testimony fails to meet any one of the three foundational requirements, it
is not admissible.” Freeman, supra, 730 F.3d at 596.
2. Analysis
I will grant the defendants’ motion in part and deny it in part.
First, to the extent that Cuozzo proposes to testify about DB’s design processes, how DB
created the seventeen architectural plans at issue, and how Cuozzo came to learn about FWH and
their designs, such testimony is not inadmissible under Rules 701 and 702. 1
DB has represented, without contradiction from the defendants, that Cuozzo has worked
for DB for more than thirty years, and that “he has personally observed and taken part in the
creation of these designs[.]” (Doc. 171, PageID 7150). His experience provides an adequate
1
Whether the defendants challenge this testimony on some other basis will raise issues
for Judge Zouhary to resolve.
4
foundation for Cuozzo to testify about the areas outlined above. U.S. v. White, 492 F.3d 380, 403
(6th Cir. 2007).
Second, to the extent that Cuozzo intends to opine on the supposed “originality” of DB’s
architectural works, or the creativity inherent in them, he may testify only that DB and/or its
agents and employees created the plans at issue.
As I explained at the summary-judgment stage, “[o]riginal, as the term is used in
copyright, means only that the work was independently created by the author (as opposed to
copied from other works), and that it possesses at least some minimal degree of creativity.”
Design Basics, LLC v. Forrester Wehrle Homes, Inc., 302 F. Supp. 3d 933, 941 (N.D. Ohio
2018).
For that reason, Cuozzo – who participated in the creation of some or all of the DB works
at issue – may testify that DB and its employees, on their own, created those plans. But Cuozzo
may not opine that the works are “original” in the sense that they possess “some minimal degree
of creativity.”
Whether Cuozzo, a lay witness, believes that the designs are original (and therefore
entitled to copyright protection) is irrelevant and not helpful to the jury. Rather, the jury will be
able to decide, based on the testimony it hears and its review of the architectural plans, whether
DB’s works possess a minimal degree of creativity. See Freeman, supra, 730 F.3d at 597.
Third, and for largely the same reasons, Cuozzo may not opine that DB’s works and
FWH’s works are substantially similar.
“To generate an inference of copying, the copyright owner must show “(1) access to the
allegedly-infringed work by the [infringer] and (2) a substantial similarity between the two
5
works at issue.” Design Basics, LLC v. Forrester Wehrle Homes, Inc., 2017 WL 5444569, *1
(N.D. Ohio 2017).
“Because not all copying . . . is copyright infringement . . . the plaintiff must establish
that the defendant’s work is substantially similar to protectible elements of the plaintiff’s work.
Thus the term substantial similarity is properly reserved for similarity that exists between the
protected elements of a work and another work.” Id. (internal quotation marks and citations
omitted).
Cuozzo, being only a lay witness, has no specialized knowledge or experience that would
permit him to offer a helpful opinion – an opinion that the jurors could not form for themselves –
as to what constitutes protected expression in either DB’s or FWH’s designs. Moreover,
Cuozzo’s opinion that the parties’ works appear similar would not be helpful to the jury because
it would “merely tell the jury what result to reach.” Freeman, supra, 730 F.3d at 597.
Fourth, Exhibits C-1, C-2, and C-3 to Cuozzo’s declaration are not inadmissible under
Rules 701 and 702.
These exhibits present objective data – depictions of the exterior frontages of the parties’
architectural plans, side-by-side-comparisons of the designs’ blueprints, and an overlay of the
blueprints – that are of obvious and extreme value to the jury. Indeed, if admitted, they would
simplify the task of comparing the plans to determine whether they are substantially similar.
The defendants have not objected that the comparisons are inaccurate, unfairly
prejudicial, or otherwise problematic. And while Cuozzo is not qualified to offer an expert
opinion in this case, that does not mean he is unqualified to assemble Exhibits C-1, C-2, or C-3
or to testify about how he assembled those exhibits and what the comparisons show (e.g., both
parties’ plans feature design component A in room B, design feature X in hallway Y, and so on).
6
Fifth, Exhibit D to Cuozzo’s declaration – a lengthy list of the similarities that Cuozzo
observed between the allegedly infringing and infringed plans – is likely inadmissible as
substantive evidence, but, assuming it accurately reflects Cuozzo’s testimony, it may be used by
counsel as a demonstrative aide in presenting Cuozzo’s testimony. Given my necessarily
provisional understanding of Cuozzo’s likely testimony I will leave it to the parties to seek
further refinement of this ruling, if such is needed, before Judge Zouhary.
Sixth, because I hold below that Richard Kraly may not offer an opinion for the
defendants that the parties’ works are substantially similar, Cuozzo may not testify about the
supposed discrepancies in Kraly’s opinion.
B. Lost Profits and PGS Works
FWH moves to bar DB from recovering any profits that FWH generated by constructing
and selling homes that allegedly infringe the DB plans that are registered with the Copyright
Office only as pictorial, graphic, or sculptural (PGS) works. (Doc. 154).
1. Parties’ Arguments
“Until 1990, architectural works could be registered [for copyright protection] only as
‘technical drawings’ under the category of PGS works.” Design Basics, LLC v. Forrester Wehrle
Homes, Inc., 2018 WL 1583103, *10 (N.D. Ohio 2018). “A PGS copyright protected the
underlying design from being copied, but it did not prevent the construction of a building based
on those plans.” Id. at *11; see also, e.g., Oravec v. Sunny Isles Luxury Ventures, L.C., 572 F.3d
1218, 1231 (11th Cir. 2008) (“a PGS copyright cannot be infringed by an as-built structure”). 2
2
In 1990, with the passage of the Architectural Works Copyright Protection Act,
copyright protection extended to “architectural works,” which the statute defined as the “design
of a building as embodied in any tangible medium of expression, including the building,
architectural plans, or drawings.” 17 U.S.C. § 101.
7
FWH contends that DB registered ten of the plans at issue – the Kendall, Sherburne,
Lancaster, Carrington, Galvin, Monte Vista, Harrisburg, Chandler, Ambrose, and Harrington
plans – only as PGS works. (Doc. 154, PageID 6666).
Because building (and then selling) a home based on these PGS-copyrighted architectural
plans would not constitute copyright infringement, FWH argues that DB cannot recover profits
that it generated from building and selling homes based on DB’s PGS works. FWH therefore
asks me to hold that, with respect to any alleged infringements of the PGS works, DB can
recover only those damages caused by the copying of the plans themselves (e.g., the licensing
revenues the defendants did not pay for using the DB plans).
DB makes two arguments in response.
First, it argues that four of the designs at issue are, in fact, registered with the Copyright
Office as both PGS works and architectural works. (Doc. 170, PageID 7094). DB explains that it
“inadvertently omitted” the corresponding registration materials from its summary-judgment
filings, but “plans to present evidence at trial that these 4 works are protected as architectural
works[.]” (Id., PageID 7089 n.4).
Second, relying on the Sixth Circuit’s decision in Robert R. Jones & Assocs., Inc. v. Nino
Homes, 858 F.2d 274 (6th Cir. 1988), DB argues that the proper measure of damages from
FWH’s alleged infringement of the PGS works includes the profits that FWH generated by using
the PGS works to design, build, and sell houses.
The district court in that case found that Nino Homes had copied a floor plan created by
the plaintiff, Robert R. Jones & Associates, and used it to build (and sell) seven houses. Nino
Homes, supra, 858 F.2d at 275–76. It awarded the Jones firm damages in the form of the “profits
8
it would have earned on the sale of additional houses had Nino Homes not used infringing copies
of the [Jones] plans to build houses which it sold.” Id. at 277.
On appeal, Nino Homes argued that this “‘lost profits’ standard” was improper. Id. It
urged the Sixth Circuit to fix damages instead at “the fair market value of the architectural plans
at the time of the infringement.” Id.
The Circuit rejected that argument. After surveying the case law, the court held that the
Jones firm was entitled to recover the profits that Nino Homes generated by using its plans to
build and sell houses:
[t]he rule which emerges from these cases is that one may construct a house
which is identical to a house depicted in copyrighted architectural plans, but one
may not directly copy those plans and then use the infringing copy to construct
the house. As a logical extension of this rule, we hold that, where someone makes
infringing copies of another’s copyrighted architectural plans, the damages
recoverable by the copyright owner include the losses suffered as a result of the
infringer’s subsequent use of the infringing copies.
Id. at 280.
2. Analysis
In light of Nino Homes, supra, I will overrule the defendants’ motion.
That case holds, in rather plain terms, that when an infringer copies an architectural plan
and “use[s] the infringing copy to construct [a] house,” the damages caused by the infringement
– i.e., the copying – “include the losses suffered as a result of the infringer’s subsequent use of
the infringing copies.” Nino Homes, supra, 858 F.2d at 280 (emphasis supplied).
As applied here, Nino Homes instructs that if DB were to prove that FWH copied the ten
PGS-copyrighted plans and used those copies to build homes that it later sold, the profits that
FWH generated through such sales would be an available form of damages.
FWH urges me to ignore Nino Homes, but I cannot do so.
9
FWH’s first argument is that Nino Homes was wrongly decided. This is so, FWH
maintains, because the case’s lost-profits rule of is inconsistent with the principle that “the
construction of a house from a PGS copyrighted home design does not infringe that copyright.”
(Doc. 154, PageID 7173). In other words, where there is no infringement, there can be no
damages.
The main problem with this argument is that Nino Homes, which is binding on me, held
that the revenue from such sales is an available form of damages. More to the point, Nino Homes
is not inconsistent with the rule that an as-built structure does not itself infringe a PGScopyrighted design.
Nino Homes did not hold that building a home based on a PGS-copyrighted design is
copyright infringement. Rather, “[i]n an attempt to make up for a perceived deficiency in
copyright law’s protection of architectural structures,” Nino Homes simply “calculated damages
so as to include profits realized from the construction of works using infringing copies of
technical drawings.” Nat’l Med. Care, Inc. v. Espiritu, 284 F. Supp. 2d 424, 435 (S.D.W. Va.
2003) (citing Nino Homes, supra, 858 F.2d at 280).
Second, defendants argue that Nino Homes is distinguishable because the parties in that
case were direct competitors whose competition “creat[ed] an overlap between the plaintiff’s loss
of profit from sales that presumably went to the defendant’s gain from those same sales.”
(Doc. 154, PageID 7174).
But the holding of Nino Homes did not turn on the parties’ competitive relationship.
Instead, the Sixth Circuit broadly held that the available damages include the damages that result
from a competitor’s subsequent use of the infringing copies. Nino Homes, supra, 858 F.2d at
280.
10
The evidence in that case convinced the district judge that, but for Nino Homes’ use of
the Jones firm’s plan to build and sell seven homes, the Jones firm itself would have sold seven
homes. Id. at 276. Accordingly, the Sixth Circuit affirmed the district court’s finding that the
proper measure of damages was “the profits Jones Associates would have made on houses it
would have sold but for Nino Homes’ unauthorized duplication of the Aspen plans and Nino
Homes’ use of its infringing copies to build its Riverside houses.” Id. at 281.
Whether the profits that FWH generated by selling homes based on DB’s PGS works are,
as a factual matter, “losses suffered as a result of [FWH’s] subsequent use of the infringing
copies” or, as the copyright statute puts it, “attributable to the infringement” will be a matter for
the jury to decide. See 17 U.S.C. § 504 (“The copyright owner is entitled to recover the actual
damages suffered by him or her as a result of the infringement, and any profits of the infringer
that are attributable to the infringement and are not taken into account in computing the actual
damages.”). 3
C. Admissibility of the DB Spreadsheet
Defendants also move to exclude a spreadsheet that lists the 351 homes that one or more
of the defendants allegedly built from a DB plan. (Doc. 160).
3
My ruling moots FWH’s argument that DB’s failure to disclose that it had registered the
Ambrose, Galvin, Harrisburg, and Shannon plans as architectural works should preclude DB
from recovering the profits that FWH generated by allegedly using those designs to build and
sell homes. Because lost-profits damages would be available even if those designs were
registered only as PGS works, whether the designs are also registered as architectural works is
not relevant. That said, nothing in this order should preclude defendants from renewing their
objection at trial if DB sought to introduce those plans’ registrations as architectural works for
some other reason. DB’s failure to disclose the registrations of these four designs as architectural
works at any point during this litigation – including at summary judgment, when a focus of the
litigation was on the scope and validity of DB’s copyright registrations – ought to weigh heavily
against its being able to prosecute its infringement claims vis-à-vis the Ambrose, Galvin,
Harrisburg, and Shannon plans as architectural works.
11
For each of the homes at issue, the spreadsheet identifies: 1) the FWH plan used to build
the home; 2) the DB plan that the FWH plan allegedly infringed; 3) the house’s address; 4) the
year the house was built; 5) which defendant built the home; and 6) the sale price. (Doc. 160–1,
PageID 6862–6881).
FWH argues that the spreadsheet is inadmissible under Fed. R. Evid. 1006.
According to the defense, DB has not: 1) shown that the documents underlying the
spreadsheet are “so voluminous as to require the use” of a summary; 2) provided the defense
with all of the documents on which the spreadsheet is based; or 3) established that the underlying
documents are themselves admissible. (Doc. 160, PageID 6853–56).
DB’s response brief does not address these arguments in a meaningful way.
Instead, DB devotes nearly three-quarters of its brief to cataloguing, in needless and
exhausting detail, the defendants’ alleged shortcomings in producing information that DB needed
to prepare the spreadsheet. (Doc. 169, PageID 7052–61). Based on those perceived blunders, DB
contends, and because the defendants supposedly failed to comply with my prior orders to
produce such information during discovery, they have no basis to object to the spreadsheet’s
admissibility. 4
Then, ignoring the major premise of FWH’s motion, DB argues that “there is no dispute
that the documents and information underlying the spreadsheet are voluminous.” (Id., PageID
7062).
4
Although I ordered FWH to produce, under penalty of perjury, the information that DB
assembled into the spreadsheet, nowhere did I order, as DB implies, that once DB assembled the
spreadsheet it would be admissible under Rule 1006 without regard to FWH’s objections.
12
Based on the limited information before me, and in light of the singularly unhelpful
briefing, I will grant FWH’s motion, though without prejudice.
There is nothing before me that establishes whether, in fact, the documents underlying
the spreadsheet are so voluminous as to necessitate its use. See U.S. v. Bray, 139 F.3d 1104, 1109
(6th Cir. 1998). Such a showing is a “precondition[ ] to admitting a 1006 summary chart,” and
DB has not even tried to make that showing. Id.
That said, it would be wholly inappropriate to deny the jury access to a chart or summary
like the spreadsheet, even though DB has not yet laid an adequate foundation that the spreadsheet
is admissible.
The spreadsheet contains objective information that does not appear to be in dispute:
namely, which plans FWH used to build a particular home, which DB plan FWH allegedly
infringed, which defendant built the home, and the sale price. Much of this information,
moreover, came from the defendants themselves. (Doc. 169, PageID 7062). Given the number of
claims at issue, moreover, the information would seem to be of obvious value to the jury, at the
very least as an organizational tool during their deliberations.
In these circumstances, the parties should be able to work together either to: 1) verify the
accuracy of the information in the spreadsheet, so that they can stipulate to its accuracy; or 2)
create a more acceptable spreadsheet, such as Exhibit C to DB’s opposition brief (which
eliminates much of the extraneous materials to which FWH objected, but which DB never
disclosed until filing its opposition brief).
The parties’ failure or inability to do so would needlessly prolong the trial, which is – and
which the parties must, notwithstanding their scorched-earth approach to pretrial litigation,
13
understand is – unacceptable. Ultimately, however, I will leave it to Judge Zouhary’s discretion
to fashion a fair and reasonable solution to this issue.
D. DB’s Omnibus Motion
For its part, DB moves to exclude nine categories of evidence from the trial. (Doc. 158).
1. Richard Kraly’s Testimony
DB first moves to exclude the opinions and declarations of FWH’s expert, Richard Kraly.
(Doc. 158, PageID 6816–21). Kraly, an Ohio architect, intends to opine that: 1) none of DB’s
plans contains protected expression; and 2) even if the plans did contain protected expression,
FWH’s plans are not substantially similar to DB’s plans. 5
DB argues that the former opinion is “moot” because, at the summary-judgment stage, I
ruled as a matter of law that each of DB’s plans contains protected expression. (Id., PageID
6817–18). Regarding the latter opinion, DB argues that there is no need for expert testimony on
the issue of substantial similarity, where the controlling test is whether the parties’ designs
appear similar to an ordinary observer. (Id., PageID 6818–19).
FWH opposes the motion, arguing that my rulings at summary judgment did not find that
DB’s plans contain protected expression (Doc. 167, PageID 6953–54), and that Kraly’s opinions
on that subject will be helpful to the jury. It also argues that I have discretion to permit an expert
to testify whether two parties’ architectural designs would appear similar to an ordinary observer.
(Id., PageID 6955–56).
I will grant DB’s motion in part and deny it in part.
5
I have already excluded Kraly’s first declaration to the extent that it expressed legal
opinions characterizing DB’s designs as too unoriginal to warrant copyright protection. Design
Basics, LLC v. Forrester Wehrle Homes, Inc., 2017 WL 5467152, *4 (N.D. Ohio 2017).
Accordingly, Kraly may not offer any such testimony at trial.
14
First, Kraly may opine, in light of his specialized knowledge and training as an architect,
that DB’s designs do not contain protected expression.
In his declarations, Kraly identifies multiple external considerations that allegedly
deprive DB’s plans of original, protected expression. 6 Such testimony may help the jury “filter
out” the unprotected components, if any, of DB’s plans and focus on the protected level of
expression, if any, in the designs. Kohus v. Mariol, 328 F.3d 848, 855 (6th Cir. 2003); see also
Design Basics, LLC v. Drexel Bldg. Supply, Inc., 2016 WL 5794746, *2 (E.D. Wis. 2016)
(holding that “an expert in architecture” could “identify engineering or design requirements that
are common to all single-family homes; he could explain which features are common to a given
style or floor plan; and he could identify aspects of room placement and flow that are inherent in
home design”). 7
6
In moving for summary judgment on the issue of substantial similarity, the defendants
relied on only four pages of Kraly’s 137-page declaration. Design Basics, supra, 302 F. Supp. 3d
at 942–43 & n.1. As my order explained, those portions of Kraly’s report were conclusory,
unsupported, and insufficient to warrant summary judgment. Id. at 945–48. Among the
information that defendants failed to cite or discuss – despite my order directing them to cite the
record to support their assertions and forbidding them from incorporating the experts’ lengthy
reports by reference – are detailed lists of the design choices in each DB plan that Kraly believes
are not protected expression. Those summaries, combined with Kraly’s general opinions that
external considerations can limit the amount of original expression in an architectural plan,
would seem to provide an adequate basis for Kraly to opine why a given DB plan contains only
standard features or is otherwise not original.
7
Contrary to DB’s arguments, my denial of the defendants’ motion for summary
judgment on the issue of substantial similarity was not – certainly not by its terms or even by
implication – a grant of summary judgment to DB on the ground that its designs contained
protected expression.
The dispositive issue in that motion was what, exactly, constituted the protected level of
expression in DB’s architectural plans. Design Basics, supra, 302 F. Supp. 3d at 941–42. DB
contended that copyright protection extended to the “overall form” or the “look and feel” of the
homes, the “arrangement and composition of spaces and elements across the first and second
floors” of the homes, the “program of the architectural work,” the “three-dimensional alignment
of the spaces and elements,” and the “outside elevations.” Id. at 942. Relying on Kraly’s
declarations, FWH contended that none of those elements was protectable. Id. After surveying
15
Second, Kraly may not opine whether DB’s and FWH’s plans are substantially similar.
The “traditional approach” for determining whether two works are substantially similar
is the “ordinary observer” test, which “requires the trier of fact to gauge the similarities of the
two works solely on the basis of his ‘net impression’ and without relying on expert analysis or
dissection.” Kohus, supra, 328 F.3d at 854 (some internal quotation marks omitted).
“[T]he inquiry in the second prong of the substantial similarity test should focus on the
intended audience,” which “will ordinarily be the lay public.” Id. at 857 (emphasis in original).
“[T]he finder of fact’s judgment should” therefore “be from the perspective of the . . . ordinary
reasonable person.” Id.
Under Kohus, the jury’s answer to the substantial-similarity question will turn on the
jurors’ own impressions of the works’ similarities or differences – their sense, that is, as
“ordinary observers” whether the plans’ “aesthetic appeal” is essentially “the same.” Design
Basics, supra, 302 F. Supp. 3d at 950 (internal quotation marks omitted). Kraly’s proposed
testimony – i.e., that he, not as an ordinary observer, but as an architect with special training and
knowledge about the conventions of home designs, believes the designs are dissimilar – would
not be helpful to the jury on this issue and is therefore inadmissible.
the case law, I resolved that dispute by concluding that “copyright law protects the arrangements
of standard elements for which DB seeks protection.” Id. at 945. Because DB held “certificates
of copyright registration in the allegedly infringed works, I presume[d]” – rather than held as a
matter of law – that “its designs satisfy the extremely low threshold for originality.” Id. at 941
(internal quotation marks omitted and emphasis supplied). I then explained why Kraly’s opinion,
viewed in the light most favorable to DB, was insufficient to overcome the presumption and
establish as a matter of law that any reasonable juror would find that DB’s designs contained no
protected expression.
The upshot of this ruling is that the existence of protected expression in DB’s designs
was then, and remains today, an issue for the jury.
16
2. John Gugliotta’s Testimony
DB next moves to exclude the testimony of FWH’s second expert, attorney John D.
Gugliotta. (Doc. 158–1, PageID 6821).
Gugliotta prepared a report opining, inter alia, that DB’s architectural plans contain no
original expression and are ineligible for copyright protection. His report also contained a
summary of his investigation into other issues at play in the case, including whether DB owns
the copyrights for the designs at issue and whether any of the defendants had access to those
plans. (Doc. 88–1).
In a prior order, I excluded Gugliotta’s report to the extent that it set forth legal
conclusions. Design Basics, supra, 2018 WL 1583103, *3–4. But I held that the report was
admissible to the extent Gugliotta “recount[ed] personally observable facts relevant to FWH’s
defenses” of ownership, validity, and access. Id.
Accordingly, Gugliotta may not testify to any legal conclusions, but his testimony and
report are admissible on the issues of: 1) DB’s ownership of, the validity of, and defendants’
access to DB’s Ashton and Albany plans; 2) the defendants’ access to the Tollefson and Kirby
Farms plans; and 3) defendant Wehrle Development’s access to all remaining plans.
3. “Independent Creation” Defense
DB moves to preclude the defendants from “introducing evidence in support of or in any
way arguing that they independently created any of the Accused Works” – i.e., the FWH plans
that allegedly infringe DB’s plans. (Doc. 158–1, PageID 6822).
Relying on Fed. R. Civ. P. 37(c)(1), DB argues that “[d]efendants have produced no
evidence – nor provided any explanation – for the origin of [the] Accused Works.” (Id.). It then
points out that, during a status conference in July, 2016, the defendants represented that they
17
were withdrawing their “independent creation defense as to all designs . . . with prejudice” with
the sole exception of FWH’s Franklin design. (Doc. 89–1, PageID 3582). 8
FWH does not dispute – much less acknowledge – any of the foregoing. (Doc. 167,
PageID 6961–62). It instead argues that DB is mistaken that “independent creation” is an
affirmative defense as to which FWH has the burden of proof.
According to FWH, because DB must prove that FWH copied its designs, FWH is
entitled to present evidence to disprove that element of DB’s claim. (Id.). That evidence
apparently consists of testimony from Richard Wehrle, who executed a declaration in April,
2019 indicating, rather vaguely, that a predecessor company he formed in 1969 created some
home designs that his sons ultimately had access to. (Doc. 167–1).
In reply, DB argues that FWH never tendered Wehrle’s declaration or the exhibits
attached to it during discovery (which closed in 2017) or before I decided the parties’ dispositive
motions (more than a year ago). (Doc. 177, PageID 7967). DB emphasizes that FWH’s
opposition brief makes no effort to show that its failure to do so was “substantially justified”
under Rule 37(c)(1). Finally, DB reiterates that it made “countless requests” for evidence
showing that, or an explanation how, FWH independently created the allegedly infringing works,
but FWH never produced such evidence or explanation. (Id., PageID 7966).
I will grant DB’s motion, for to do otherwise would condone litigation tactics of the most
misleading and underhanded sort.
Nearly three years ago, defendants represented to me and to DB in the plainest terms that
the “[o]nly design as to which the independent creation defense may and will be offered is . . .
8
Because DB has withdrawn its claim that the Franklin plan infringes one of its plans,
whether FWH created the Franklin will not be an issue at trial.
18
the Franklin design[.]” (Doc. 89 –1, PageID 3583). DB sought that representation to assure itself,
and the representation certainly caused me to believe, that FWH would not be presenting
evidence that it or its agents independently created the allegedly infringing plans.
Furthermore, DB has represented – without contradiction from the defendants – that it
had continually sought to learn from the defendants whether they would take the position that
they created the works. Defendants responded not only with radio silence, but also with an
unequivocal statement from their attorney, Robert H. Stoffers, that it had “withdrawn that
defense” with prejudice. (Id., PageID 3582–83).
In light of these events, it is far too late for FWH to say “gotcha” by injecting its
independent-creation evidence – in the form of Wehrle’s declaration and exhibits (which DB
represents, again without contradiction, were never disclosed during discovery) – into the case.
Finally, whether the law properly classifies “independent creation” as an affirmative
defense or a way of disproving an element of DB’s claims is immaterial.
The defendants took the position that they would not offer an “independent creation
defense,” and that is the position to which they must adhere at trial. Allowing them to present
such evidence on the theory that it is not part of an affirmative defense that they withdraw, but,
rather, simply evidence rebutting DB’s claims, would make their representations to me and DB
entirely misleading and essentially meaningless. 9
4. Originality of DB’s Works
DB next argues that I should bar the defendants from offering evidence that its plans
“lack originality or are otherwise not deserving of [copyright] protection.” (Doc. 158–1, PageID
9
Nor is it relevant that DB chose not to depose any of the individual Wehrles. (Doc. 167,
PageID 6961). Why would DB bother when FWH had assured it that the Wehrles would have
nothing to say about independent creation?
19
6822). It notes that I have ruled as a matter of law that DB’s copyrights in eighteen designs are
valid, which triggers a presumption that the works are original. Design Basics, supra, 2018 WL
1583103 at *13–16; see also 17 U.S.C. § 410(c); Lexmark Int’l, Inc. v. Static Control
Components, Inc., 387 F.3d 522, 534 (6th Cir. 2004).
FWH responds that it is entitled to present evidence that the works are not original,
including its evidence that Richard Wehrle independently created the designs at issue. (Doc. 167,
PageID 6962–63).
I will deny the motion in part and grant it in part.
By virtue of my summary-judgment rulings, DB is entitled at trial to a presumption that
its plans are “original.” Lexmark, supra, 387 F.3d at 534. However, as already explained supra,
my rulings did not establish as a matter of law that DB’s designs contain original, protected
expression. Rather, I determined only that copyright law protected the kinds of design features at
issue in DB’s works and presumed that those features constituted protected expression.
For these reasons, the defendants are entitled to introduce evidence that would overcome
the presumption and prove that DB’s designs are not, in fact, original. Design Basics, supra,
2018 WL 1583103 at *14. That said, under no circumstances may the defendants introduce
evidence that they independently created the allegedly infringing works.
5. Non-Party Created Architectural Designs
DB also moves to prevent the defendants from trying to prove that its designs are not
original with evidence that “other third party home designs may have similar features to any of
DB’s copyrighted works[.]” (Doc. 158–1, PageID 6823).The defendants respond that they are
entitled to introduce Richard Wehrle’s testimony “regarding the creation of various home
designs and their evolution over time[.]” (Doc. 167, PageID 6963).
20
I will grant DB’s motion to the extent DB directs it at the defendants’ belatedly disclosed
independent-creation evidence. This ruling should not, though, preclude the defendants from
introducing evidence in other forms (such as Kraly’s opinions) that DB’s designs are unoriginal.
6. Licensed Architect
Next, DB argues that I should bar FWH from: 1) presenting evidence that a licensed
architect did not create any of its designs; and 2) arguing to the jury that DB’s designs are
entitled to less copyright protection because an architect did not create them. (Doc. 158–1,
PageID 6823). The defendants respond that DB has not justified this request, though they do not
indicate whether they intend to offer such evidence. (Doc. 167, PageID 6963–64).
I will grant the motion. Whether an architect created DB’s plans is not relevant to any
issue in dispute at trial and defendants do not contend that they plan to introduce any such
evidence. Furthermore, I presume that Judge Zouhary will instruct the jury on what DB must
prove to convince the jury that its designs are entitled to copyright protection, and counsel’s
arguments to the jury about whether DB’s designs are so protected should conform to those
instructions.
7. Lost Licensing Revenue
DB also moves to bar the defendants from presenting evidence of the “actual damages”
that their infringements caused, including “(1) fees DB could have charged for preparing the
plans of the houses built by the Defendants; (2) the revenue or profit DB might have earned from
providing such services; (3) the ‘value’ of DB’s copyrighted floor plans; and/or (4) the revenues
or profits DB could have or has earned from the licensing of such works for construction or
promotion.” (Doc. 158–1, PageID 6824).
21
Under the Copyright Act, a copyright holder who prevails on an infringement claim can
recover either its “actual damages and any additional profits of the infringer” or “statutory
damages.” 17 U.S.C. § 504(a).
Here, DB intends to pursue only the defendants’ profits “received through the advertising
and sale of infringing homes constructed from DB’s Copyrighted Works” and has disclaimed its
right to seek “actual damages” in the form of lost licensing revenue. (Id.; see also Doc. 177,
PageID 7972 (DB’s representation that it “waives its right to seek damages for lost licensing
revenue”).
Because this motion relates to the issue of damages only, I will defer its adjudication to
Judge Zouhary, thereby enabling him to decide in light of the evidence and outcome on the
question of liability, or in some other fashion, what, if any, of those elements of damages the jury
may consider.
8. DB’s Litigation History
DB moves to preclude the defense from introducing evidence of, or referring in any way
to, the number of previous infringement lawsuits that DB has filed; asserting that DB’s business
model is primarily to profit from copyright litigation; or characterizing DB as a “copyright troll,”
a “professional plaintiff,” or a “vexatious litigant.” (Doc. 158–1, PageID 6827–29).
FWH responds that it can introduce evidence of this sort to prove, first, that DB’s claims
are untimely. (Doc. 167, PageID 6969).
According to FWH, “if the evidence shows that DB’s approach to the market and use of
resources to seek out and pursue purported infringers put it on inquiry notice of potential
infringement by Defendants before April 6, 2012, then its claims are time-barred[.]” (Id.). In
support of that theory, FWH argues that DB knew “at least one of the Defendants had licensed
22
plans in the past and had received plan books from [DB], but had not sought to license any such
plans for years prior to 2012.” (Id., PageID 6970).
FWH also contends that the “litigation history” evidence is relevant to proving its
“‘unclean hands’ defense, under which the copyright abuse/misuse defense arises.” (Id.).
The crux of this defense is FWH’s assertion that, even though “many elements of [DB’s]
designs are . . . generic or unprotected or unprotectable” under copyright law, DB has filed more
than one hundred lawsuits seeking to force a settlement or obtain damages from design firms and
home builders who allegedly copied the non-copyrightable designs. (Id., PageID 6972–73).
a. Timeliness
I will deny DB’s motion to the extent that it seeks to prevent FWH from using the
“litigation history” evidence to prove that DB’s claims are untimely.
To be sure, I previously denied FWH’s motion for summary judgment on statute-oflimitations grounds. Design Basics, LLC v. Forrester Wehrle Homes, Inc., 305 F. Supp. 3d 788
(N.D. Ohio 2018). In doing so, however, I viewed the evidence in the light most favorable to DB
and concluded that a reasonable jury could find that DB was not on inquiry notice of FWH’s
alleged infringements before Cuozzo in fact discovered them in March, 2013:
According to defendants, DB should be chargeable with the knowledge that FWH
allegedly infringed its copyrighted works. This is so, FWH maintains, because
“the current ownership of DB acquired their interest in the company expressly
because of the potential for copyright infringement cases that ‘have become a
principal revenue stream for [DB].’” In this vein, FWH observes that DB uses a
“bounty program” whereby it encourages its employees to look for potential
copyright infringements on the Internet and pays them a finder’s fee if the
employee’s research leads to a successful infringement suit. Finally, defendants
emphasize the sheer number of infringement suits that DB has filed – at least 100
suits across the country since 2009, the majority of which DB filed in or after
2013.
*
*
23
*
Viewing the evidence in the light most favorable to DB, a reasonable jury could
find that DB had no reason to know of FWH’s infringing conduct until Cuozzo
discovered it in early March, 2013.
Most importantly, FWH was one of DB’s customers: FWH licensed two of DB’s
architectural works, and DB, whether on its own initiative or at FWH’s request,
sent FWH copies of its plan catalogs. As DB observes, “[d]efendants appeared to
be law-abiding customers, following the licensing requirements spelled-out on
DB’s plan catalogs.” There is simply is no evidence – at least FWH has cited none
– that DB had reason to think that FWH might be infringing its works before
Cuozzo discovered the infringements in March, 2013.
Furthermore, FWH cites no authority to support its argument that, simply because
DB began aggressively to pursue copyright-infringement cases – against different
defendants – in 2009, DB was on inquiry notice of FWH’s – and, by implication,
every other bad actor’s – infringing conduct.
This omission is not surprising, given that inquiry notice, at least for a copyrightinfringement claim, is necessarily defendant-specific. Indeed, even a case on
which FWH relies on – Warren Freedenfeld Assoc., Inc. v. McTigue, 531 F.3d 38,
44 (1st Cir. 2008) – recognized that the relevant question is whether the plaintiff
had “some reason to investigate whether he may have suffered an injury at the
hands of a putative infringer.” (Emphasis supplied); see also Chicago Bldg.
Design, P.C. v. Mongolian House, Inc., 770 F.3d 610, 615 (7th Cir. 2014)
(inquiry notice is defendant-specific).
Accordingly, that DB had reason to know that others – indeed, many others – had
allegedly infringed its copyright works does not compel a reasonable jury to find
that it also had reason to think FWH, too, had infringed its works.
Id. at 794–95 (most internal citations omitted).
However, DB did not seek summary judgment on this issue, and thus I have not ruled that
FWH’s evidence is insufficient to permit a rational jury finding that DB knew or should have
known that FWH had infringed its designs. Accordingly, it will be for the jury to decide whether
DB’s claims are timely. What shape the defendants’ evidence should take, any limits on such
evidence, and whether DB is entitled to a jury instruction to the effect that it had no duty or
obligation to search out copyright infringement, will be matters for the parties to resolve before
Judge Zouhary.
24
b. Copyright Misuse
However, I will grant the motion to the extent that the evidence bears on FWH’s defense
of copyright misuse.
“The doctrine of copyright misuse” – which the Sixth Circuit has neither recognized nor
rejected – “prohibits a copyright holder from using a copyright to secure an exclusive right or
limited monopoly not granted by the Copyright Office and which is contrary to public policy.”
Design Basics, LLC v. Petros Homes, Inc., 240 F. Supp. 3d 712, 720 (N.D. Ohio 2017) (Parker,
J.) (internal quotation marks and brackets omitted).
“To assert copyright misuse, defendants must establish that plaintiff violated antitrust
laws, plaintiff unlawfully extended the scope of the monopoly granted under its copyright or
violated the public policy behind copyright laws.” Malibu Media v. Doe, 2014 WL 2616902, *4
(E.D. Mich. 2014).
The defense “functions as an absolute bar on recovery for copyright plaintiffs who have
attempted to extend their limited rights to property not covered by the copyright.” Petros Homes,
supra, 240 F. Supp. 3d at 720.
As proposed by FWH, the defense of copyright abuse in this case depends on proof that
“many elements of the plaintiff’s design plans are . . . generic or unprotected or unprotectable[.]”
(Doc. 167, PageID 6972). Stated another way, FWH wants to argue that DB has copyrighted
architectural plans that, in fact, contain no original expression and used the purported monopoly
that the copyrights give DB principally to extort damages from design firms and home builders.
But this is precisely the defense that FWH already intends to offer on the issue of
unlawful copying: because there is no protected expression in the DB plans, DB cannot prove
25
that FWH’s designs are substantially similar to its own “at the protected level of expression.”
Design Basics, supra, 302 F. Supp. 3d at 941.
Because both defenses turn on whether DB’s plans contain protected expression, FWH
need not invoke the copyright-misuse defense to make that critical point to the jury.
In any event, the likelihood of undue prejudice, confusing and misleading the jury, and
needlessly prolonging the trial substantially outweigh whatever possible relevance the “litigation
history” evidence. See Fed. R. Evid. 403.
For one thing, the evidence that DB has filed more than 100 infringement lawsuits would
inevitably invite the jury to speculate or infer that DB is a vexatious litigant or a “copyright
troll.” Such speculation would not only distract the jury from the real issues, it would also
significantly prejudice DB’s efforts to prove that its architectural plans are entitled to copyright
protection, and to make out the other elements of its claims.
If FWH proposes offering not just the number of lawsuits, but their outcomes, the
prejudice would be difficult to counter and overcome. Were the jury to also learn that courts had
dismissed DB’s suits without a trial due to the lack of litigable merit, the prejudice would be well
nigh irresistible. Finally, if the jury heard that other courts had opined that DB was a copyright
troll, as the Seventh Circuit has, that risk would be absolute.
Moreover, the sheer volume of the litigation history evidence risks confusing the jury and
raises the specter of multiple mini-trials of substantial length on DB’s past lawsuits and strategy.
Such a course of proceedings ought to be avoided, especially where FWH retains the ability raise
the gravamen of its misuse contention: that DB’s plans are not entitled to copyright protection.
26
9. Parties’ Current Financial Condition
The final component of DB’s omnibus motion is its request to bar evidence of any party’s
“current business or financial condition.” (Doc. 15–1, PageID 6829).
FWH responds that DB’s motion is too vague to allow it to offer a proper response.
(Doc. 167, PageID 6974). It also contends that the “parties’ financial conditions will be relevant”
on the issue of damages and, as well, on its statute-of-limitations defense. (Id., PageID 6975)
(“As for [DB’s] financial condition, evidence of market downturns and sales losses bear directly
on the question whether [DB] was on inquiry notice of Defendants’ alleged infringements more
than three [3] years prior to the April 2015 inception of this matter.”).
Given the vagaries of DB’s motion and the difficulty of determining at this juncture
whether and to what extent evidence of the parties’ financial conditions will be relevant at trial, I
do not believe it is appropriate to adjudicate this motion now. Rather, I will refer it to Judge
Zouhary for his consideration as the contours of the trial and conflicting evidence become clearer
in the courtroom.
E. Daubert Challenge to Brian Russell
The final motion in limine is DB’s motion to exclude the opinions and testimony of the
defendants’ damages expert, Brian Russell. (Doc. 159). DB argues that Russell’s testimony is
inadmissible under Fed. R. Evid. 702 and Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579
(1993), because: 1) Russell based his opinions on “insufficient facts”; 2) his methodology is
unreliable.
Having reviewed this motion and the defendants’ response, I believe it is appropriate to
refer this motion to Judge Zouhary for adjudication. Because the motion relates only to a
damages issue, it seems most practical to address the motion only if DB prevails on the issue of
27
FWH’s liability. Alternatively, it may be the case that a Daubert hearing is warranted, and Judge
Zouhary will be in a better position than I to hold such a hearing forthwith before trial begins.
Conclusion
It is, therefore,
ORDERED THAT:
1.
FWH’s motion to exclude the testimony and declarations of Carl Cuozzo
(Doc. 153) be, and the same hereby is, granted in part and denied in part as
provided herein.
2.
FWH’s motion to bar DB from recovering damages in the form of profits FWH
generated through the sale of homes based on DB’s PGS works (Doc. 154) be,
and the same hereby is, denied.
3.
FWH’s motion to exclude the spreadsheet evidence (Doc. 160) be, and the same
hereby is, granted without prejudice as provided herein.
4.
DB’s omnibus motion (Doc. 158) be, and the same hereby is, granted in part and
denied in part as provided herein.
5.
DB’s motions to exclude evidence of its lost licensing revenue (Doc. 158–1,
PageID 6823–26); the parties’ current financial conditions (Doc. 158–1, PageID
6829); and the opinions and testimony of Brian Russell (Doc. 159) be, and the
same hereby are, referred to the Honorable Jack Zouhary for adjudication.
6.
The parties’ motions for leave to exceed page limitations (Docs. 165, 173) be, and
the same hereby are, granted.
28
7.
In accordance with the order of April 22, 2019 (Doc. 172), this case be, and the
same hereby is, transferred to the docket of the Honorable Jack Zouhary for all
further proceedings.
So ordered.
/s/ James G. Carr
Sr. U.S. District Judge
29
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