Design Basics LLC v. Campbellsport Building Supply Inc et al

Filing 242

ORDER signed by Chief Judge William C Griesbach on 10-4-16 denying 164 Motion in Limine; denying 166 Motion in Limine; denying 168 Motion in Limine; denying 170 Motion in Limine; granting 174 Motion in Limine; denying 176 Motion in Limine; granting 178 Motion in Limine; denying 182 Motion in Limine; granting in part and denying in part 184 Motion in Limine; granting in part and denying in part 185 Motion in Limine. (cc: all counsel) (Griesbach, William)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
DESIGN BASICS, LLC,
Plaintiff,
v.

Case No. 13-C-560

DREXEL BUILDING SUPPLY, INC., et al.,
Defendants.

DECISION AND ORDER ON MOTIONS IN LIMINE

1. Docket No. 184 – Motion to Exclude Testimony of Robert Greenstreet, Ph.D.
The most significant motion presently before me is Plaintiff’s motion to exclude the
testimony of Robert Greenstreet, Ph.D., a licensed architect and the dean of the School of
Architecture at the University of Wisconsin-Milwaukee.

The Defendants proposed to offer Dr.

Greenstreet to give opinions on both validity (originality) and infringement.
I have already rejected Dr. Greenstreet’s opinions as to validity, finding that the designs at
issue have a modicum of creativity, within copyright law’s narrow meaning of that term, sufficient
to be copyrightable. The second question he proposes to testify about is infringement. In short, he
would testify to help explain to the jury the Defendants’ view that their home plans are sufficiently
different that they do not infringe. The Plaintiff argues that, as with the originality question, Dr.
Greenstreet lacked knowledge as to the meaning of substantial similarity within copyright law. In
his report, he states that he “critically compared” the designs to determine whether they were
substantially similar. However, the Plaintiff argues, the test for substantial similarity is not based

on an architectural expert conducting a “critical comparison,” it is based on the more humble
“ordinary observer” test first articulated by Judge Learned Hand some 56 years ago. Under that test,
“two works are substantially similar if ‘the ordinary observer, unless he set out to detect the
disparities, would be disposed to overlook them, and regard their aesthetic appeal as the same.’”
Wildlife Exp. Corp. v. Carol Wright Sales, Inc., 18 F.3d 502, 509 (7th Cir. 1994) (quoting Peter Pan
Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir. 1960)).
In determining infringement, the Seventh Circuit has adopted a two-part test.

The first

question is whether the Defendant copied the Plaintiff’s work, while the second asks whether what
was copied was the protectable part of the Plaintiff’s creation. Atari, Inc. v. N. Am. Philips
Consumer Elecs. Corp., 672 F.2d 607, 614 (7th Cir. 1982). The test is sometimes described as
confusing, or “somewhat nebulous.” Nash v. CBS, Inc., 704 F. Supp. 823, 826 (N.D. Ill. 1989). In
practice, the two prongs of the test often collapse into one, as in Atari and Incredible Techs., Inc.
v. Virtual Techs., Inc., 400 F.3d 1007, 1011 (7th Cir. 2005).
In Francescatti v. Germanotta, Judge Aspen of the Northern District of Illinois conducted
a thorough examination of the propriety of relying on expert testimony in copyright cases. 2014 WL
2767231, at *8 (N.D. Ill. June 17, 2014). In that case, which involved copyrighted songs the court
described as computer-generated and complex, the court concluded that expert testimony was
appropriate, given how complex the music was. Id. However, the testimony was only useful in
determining the first part of the two-part infringement analysis (copying); it was not appropriate for
determining whether what was copied was the protected expression. This conclusion echoes other
cases in this district and other circuits, such as the Second. See Design Basics, LLC, et al. v.
Lexington Homes, Inc., No. 14-C-1102, ECF No. 100 at 8-9 (E.D. Wis. September 30, 2016);
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Wildlife Exp. Corp. v. Carol Wright Sales, Inc., No. IP 89-844-C, 1992 WL 597841, at *2 (S.D. Ind.
Aug. 13, 1992) (“When considering the first test, one must compare the two works in their entirety,
including both the protected and the nonprotected portions . . . . To aid in making this comparison,
expert testimony analyzing each work and dissection of the parts of the work may be employed.”)
As its name suggests, however, the “ordinary observer” test should not rely on the opinions
of an expert.

“It has been said that this test does not involve ‘analytic dissection and expert

testimony,’ but depends on whether the accused work has captured the ‘total concept and feel’ of
the copyrighted work.” Atari, Inc. v. N. Am. Philips Consumer Elecs. Corp., 672 F.2d 607, 614 (7th
Cir. 1982) (citations omitted). “While dissection is generally disfavored, the ordinary observer test,
in application, must take into account that the copyright laws preclude appropriation of only those
elements of the work that are protected by the copyright.” Id. Thus, the expert should not testify
about whether the defendants copied the plaintiff’s protected work. But that does not mean an
expert must play no role at all in the analysis. Specifically, in answering the ordinary observer
question, a jury will need to determine in a general sense what aspects of home designs are, and are
not, protectable. The court will instruct the jury as to what the law provides: for example, elements
that merely echo customary styles or industry standards are not protectable. Home Design Svcs.,
Inc. v. Turner Heritage Homes Inc., 825 F.3d 1314, 1324 (11th Cir. 2016). In addition,
Any design elements attributable to building codes, topography, structures that
already exist on the construction site, or engineering necessity should . . . get no
protection. There are scènes-à-faire in architecture. Neoclassical government
buildings, colonial houses, and modern high-rise office buildings are all recognized
styles from which architects draw. Elements taken from these styles should get no
protection. Likewise, there are certain market expectations for homes or commercial
buildings. Design features used by all architects, because of consumer demand, also
get no protection.

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Zalewski v. Cicero Builder Dev., Inc., 754 F.3d 95, 105 (2d Cir. 2014).
Although the court will instruct the jury as to what is protectable in an abstract sense, it is
reasonable to believe an expert in architecture could testify to the facts underlying the
protectable/unprotectable distinction.

For example, he 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. See, e.g., Home Design Svcs., 825 F.3d at 1318 (expert “began
by reviewing the industry standards governing the overall layout of a four–three split plan, and
describing the various considerations that drove the standards.”) By testifying in such a fashion, an
expert would not usurp the jury’s role in determining whether any copying was copying of protected
material. Instead, he would be providing the underlying factual information that the jury could use
to determine whether what was copied was protected.
To summarize, then, an expert may offer opinions relevant to copying, although it is unclear
the extent to which that question is at issue in this case. Presumably, Greenstreet’s expertise could
assist the trier of fact by highlighting differences in the works and explaining why those differences
tend to show an absence of copying. “If there is evidence of access and similarities exist, then the
trier of the facts must determine whether the similarities are sufficient to prove copying. On this
issue, analysis (‘dissection’) is relevant, and the testimony of experts may be received to aid the trier
of the facts.” Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir. 1946). The expert’s testimony may
also aid the jury in understanding elements of single-family homes that are common to a given style
or design. But the expert’s testimony may not stray into the more subjective question, which asks
whether the Defendants copied the Plaintiff’s protected material. “If copying is established, then
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only does there arise the second issue, that of illicit copying (unlawful appropriation). On that issue
. . . the test is the response of the ordinary lay hearer; accordingly, on that issue, ‘dissection’ and
expert testimony are irrelevant.” Id. Accordingly, the motion to exclude will be granted in part and
denied in part: it is granted in that Greenstreet will not be allowed to testify as to whether the
Defendants copied any protected material, but it is denied in all other respects.
2. Docket No. 164 – Motion to Limit Digital Millenium Copyright Act (DMCA) Damages 1
Defendants argue that the Plaintiffs should be entitled to a single DMCA statutory award
for each alleged infringement at issue in this case. Under 17 U.S.C. § 1203(c)(3), a party may elect
to recover an award of statutory damages for “each violation” of section 1201 or 1202, both of
which prohibit removing copyright management information (CMI) or circumventing copyright
protection systems.

In the Defendants’ view, this means each “act” that violates one of those

sections gives rise to a single claim for statutory damages. In other words, even if fifty people ended
up receiving the affected material, there was only one violation that could give rise to damages.
Unfortunately the parties are vague about what conduct is alleged to violate the DMCA, and
so it is difficult to issue a ruling in the abstract. It seems the Defendants disseminated several copies
of the same floor plan to builders at the same time, and thus they argue that issuing copies of the
same house plan should be viewed as a single, discrete violation.

The Defendants are correct

inasmuch as the DMCA applies for each act violating the DMCA without respect to how many
individuals are recipients of the affected work. The DMCA focuses on violating acts, not recipients.
However, that does not mean distributing the same floor plan to multiple people constitutes a single

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Plaintiffs do not oppose the motions filed at ECF No. 172 and 180, and so I do not
address them herein.
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violation. The Defendants do not have any support for the contention that the DMCA would lump
violating acts together merely because they involve the same floor plan or occur at the same time.
Instead, the DMCA makes it a violation for each act. The McClatchey case, on which Defendants
rely, proves the point, emphasizing that damages are available per act. There, it was happenstance
that more than a thousand people received the violating images because there was only a single act
(one email):
The DMCA damages provisions are clearly focused on the defendant's conduct.
Compare section 1203(c)(3)(A) (calculating statutory damages “per act”). In
essence, the term “each violation” is best understood to mean “each violative act
performed by Defendant.” Thus, AP would violate the DMCA each time it
wrongfully distributed a photograph to its subscribers. In this case, the Court
concludes that AP committed only one alleged violative act by distributing the End
of Serenity photograph to its PhotoStream subscribers, even though there were 1,147
recipients.
McClatchey v. Associated Press, No. 305-CV-145, 2007 WL 1630261, at *6 (W.D. Pa. June 4,
2007).
Here, if the Defendants shared the same image multiple times, that would be multiple acts
in violation of the DMCA. McClatchy’s reasoning does not apply because it is based on a single
act, not a single photograph. Under McClatchy’s line of reasoning, if the defendant had sent 1,147
emails, that would result in 1,147 violations even if the emails contained the same copyrighted
photo. Accordingly, the motion in limine is denied.
3. Docket No. 166 – Motion to Bar Testimony of Former Drexel Employees
Defendants move to exclude testimony of former Drexel employees on the grounds that the
statements are largely speculative and constitute inadmissible hearsay. For example, Edward Ochs
was a designer at Cambellsport Building Supply (a Drexel entity) until 2006. He claims that he was

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told to “cut off” anything with a copyright symbol on it. Brian Redig was a designer at two other
Drexel entities and says that he was told to remove copyright information as well. Finally, Tyson
Strebelinski, another designer, alleged that Cambellsport Building Supply had a practice of
removing copyright information from plans that customers brought in.
These statements are neither “speculative” nor hearsay. In fact, they are the opposite of
hearsay because they would be in-court statements (i.e. live witness testimony) about what each of
these individuals witnessed. When proving the truth of a matter asserted, live testimony from
percipient witnesses is the typical way to proceed. In fact, it is hard to imagine how a party could
try a case without calling the very individuals who witnessed the statements or practices like the
ones alleged. Their testimony is not hearsay. The motion will therefore be denied.
4. Docket No. 168 – Motion to Bar Carl Cuozzo From Offering Testimony Without Personal
Knowledge
Carl Cuozzo was the senior designer of Design Basics, whose testimony would be offered
with respect to the creation of the copyrighted plans in suit. The Defendants argue that he lacks
personal knowledge as to how many of the plans were created, and thus he should be barred from
testifying.
It is not clear the extent to which Cuozzo’s testimony will be relevant anymore, at least on
that topic. This court has ruled that the copyrights are sufficiently creative, and in that ruling I also
noted that since the underlying files were destroyed, there appears to be no remaining evidence
about their creation. I further concluded that Design Basics’ “explanation that the designs were all
in-house or for-hire works . . . was credible.” (ECF No. 236 at 9.) To the extent the Cuozzo
testifies on this topic, any questions about foundation may be addressed at that time, and in all
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likelihood they will go to the weight of the evidence rather than its admissibility.

For now,

however, the motion will be denied.
5. Docket No. 170 – Motion to Bar Plaintiff Regarding Drexel Employees’ Perceptions about
Illegality
The Defendants also seek to bar any testimony from Drexel Employees suggesting that they
believed they had “infringed” certain floor plans, because such statements consist of legal opinions
rather than facts. The motion will be denied. To the extent any witnesses seek to offer legal
opinions, the court will bar such testimony. However, as Design Basics notes, the state of mind of
witnesses may be relevant to wilfulness. The jury may be instructed that the witnesses are not legal
experts, of course, but whether they believed they were infringing valid copyrights is certainly
relevant to any wilfulness inquiry.
6. Docket No. 174 – Motion to Bar Recovery of Profits from Activity Occurring Before 2007
Defendants also seek to bar Plaintiff from recovering profits Drexel may have earned from
infringing activity prior to 2007 on the grounds that records of its revenue from that period have
been destroyed. As such, they argue the Plaintiff is limited to recovery of statutory damages for any
proven infringements from that period. The Plaintiff protests, but having spent significant efforts
justifying its own destruction of records, it finds itself in a difficult position. Even so, it asserts that
it should be entitled to attempt to prove its pre-2007 damages by extrapolating from the profits it
can show it lost during the period for which records are available.
The fact that the copyright laws provide for statutory damages is an effort by Congress to
address the very problem posed here. In a trademark case, the Second Circuit addressed the
problem created when a defendant would fail to appear and cooperate in a lawsuit, thus depriving
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a plaintiff the ability to prove its actual damages.
Congress appears to have been motivated by a gap in the law: Plaintiffs who were
victorious on their civil counterfeiting claims were often unable to obtain an
adequate recovery in actual damages because counterfeiters often maintain sparse
business records, if any at all. In passing the Act, which allows trademark plaintiffs
to elect to recover statutory damages in counterfeit cases in lieu of actual damages,
Congress apparently sought to ensure that plaintiffs would receive more than de
minimis compensation for the injury caused by counterfeiting as a result of the
unprovability of actual damages despite the plain inference of damages to the
plaintiff from the defendant's unlawful behavior.
Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 111 (2d Cir. 2012) (internal citations
omitted).
The same holds true here.

Given the Defendants’ inability to produce evidence prior to

2007, it will be impossible for the Plaintiff to prove actual damages. Attempting to extrapolate from
lost profits it can show after 2007 would be fraught with guesswork and speculation. And in fact
the statute’s damages provision indicates that, in seeking actual damages, “the copyright owner is
required to present proof only of the infringer's gross revenue . . .” 17 U.S.C. § 504(b). When there
is no proof of gross revenue, a Plaintiff cannot proceed. However,Congress has provided a remedy
for this by allowing for statutory damages. Indeed, the lost profits that the Plaintiff can show will
provide the court with a reference point for awarding statutory damages within the wide range
provided by statute. See Columbia Pictures Television, Inc. v. Krypton Broad, of Birmingham, Inc.,
259 F.3d 1186, 1194 (9th Cir. 2001) (“If statutory damages are elected, the court has wide discretion
in determining the amount of statutory damages to be awarded, constrained only by the specified
maxima and minima.”) (quotation marks and alteration omitted).

But the Plaintiff has not

established any precedent for proceeding on actual damages when it concedes that there are no
records of any gross revenues.
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7. Docket No. 176 – Motion to Bar Use of “Overlays”
The Defendants also seek to bar the Plaintiff from using overlays in an attempt to show
substantial similarity between the copyrighted designs and the Defendants’ materials. They argue
that what’s important is whether the Defendants’ designs infringe the protected expression in the
copyrighted designs, not just whether their designs resemble them more generally. Using overlays,
they believe, could improperly influence the jury by conflating the issues of general similarity with
infringement of the expression that is protected.
I am not satisfied that the use of overlays would be sufficiently prejudicial to bar their use
entirely.

The Plaintiff states that its demonstrative overlays have “stripped” out the unprotected

elements of its floor plans while preserving those elements that are protected, such as the overall
form of the designs and the arrangement of spaces. What is and is not unprotected may be in
dispute, however, which may require Plaintiff to avoid characterizing elements it has removed in
that fashion.

Regardless, the overlays could assist the jury in focusing on protectable elements

rather than on the overall designs, which presumably incorporate a large number of “stock” features
and qualities that are not copyrighted.

The Defendants take issue with the Plaintiff’s efforts,

however, suggesting that the overlays have been doctored and will be misleading. If that proves to
be the case, the court may reconsider its ruling at a future time. In addition, the Defendants may be
able to make the same arguments to the jury, and they of course will be able to give their view as
to why the jurors should not rely on the overlays. However, for now, I cannot say that their use as
demonstrative exhibits is categorically unfair or prejudicial in the fashion the Defendants argue.
8. Docket No. 178 – Motion to Bar Evidence of Past Copyright Infringement
Defendants also move to bar the Plaintiff from citing previous instances in which they were
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accused of violating other builders’ copyrights, arguing that such references would be “bad acts”
evidence under Fed. R. Evid. 404. The Plaintiff protests that it wants to cite the instances not to
show conformity with past practice but to show that any infringement the Defendants committed
in this case was willful.
Past instances of actual infringement would indeed be relevant to the willfulness question.
However, here the evidence is thinner— the Plaintiffs merely cite evidence of accusations from two
other builders, both of which resulted in settlements.

The Defendants dispute the underlying

allegations and never admitted culpability. It could be argued that allowing the evidence would
therefore require a mini-trial about the nature of those allegations. United States v. Groysman, No.
10CR459 SJ RML, 2011 WL 6131286, at *2 (E.D.N.Y. Dec. 8, 2011). If offered for the limited
purpose of establishing willfulness, on the other hand, all that need be shown is that the Defendants
have previously faced copyright infringement accusations.

That is, the merit and truth of those

accusations is less relevant than the fact that they were made at all. It is the accusation, combined
with the settlement, that arguably placed the Defendants on notice that their actions were causing
others to call their conduct into question—regardless of the merit of those questions.

If the

allegations in this case are proven, a jury could (or could not) find their settlements with other
parties relevant to their state of mind. A jury may properly be instructed to limit any inferences
accordingly.
I conclude that evidence of prior accusations and perhaps settlements may be admissible.
It will depend on whether the probative value of the evidence outweighs the danger of unfair
prejudice, a determination that cannot be made without knowing the defense offered and evidence
presented at trial. The motion will therefore be granted in that such evidence should not be offered
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or referred to in the presence of the jury absent further ruling of the court.
9. Docket No. 182 – Motion to Bar Testimony of Website Links
Defendant also seeks to bar the Plaintiff from offering evidence that in 2006 one of the
Defendants displayed links to six home plan websites on its own website. The Defendant’s website
directed customers to those sites, apparently for inspiration. At the time, the Plaintiff’s own plans
were shown on all six of those websites. Thus, the Plaintiff wants to show that the Defendants had
access to its plans, and also that the Defendants had a general practice of relying on third-party
copyrighted designs.

The Defendants protest that there is no evidence that any of the numerous

plans at issue in this case were available on those websites in 2006. Even if true, that is an argument
they may make to the jury. The evidence, if credited, would tend to show access, even if it does not
conclusively prove it. That is a classic factual dispute, not a ground for excluding evidence.
10. Docket No. 184 – Plaintiff’s Motion to Exclude Evidence
A. Evidence of Deductible Expenses
The Plaintiff and Defendants agree that once a plaintiff shows the infringer’s gross revenues,
the burden is placed on the infringer to establish any deductible amounts. Here, the Defendants did
not provide any information of such deductions during the discovery process, and so the Plaintiff
believes they should now be barred from introducing evidence of deductions at trial. The Defendant
responds that, at the time it provided its responses to the Plaintiff’s original discovery requests, the
case involved only three copyrights. At that time it had nothing responsive. The fact that it did not
later supplement its responses once the case expanded should not preclude it from offering such
evidence at trial.
This motion was originally made on the eve of trial, but the trial has now been postponed
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until 2017. Given that change in circumstances, I am satisfied that there is enough time prior to trial
to allow the Defendants to supplement their discovery responses and allow further discovery, if
needed, by the Plaintiff. This will ensure no prejudice is suffered by the Plaintiff while staving off
the overly penal result that the Defendant would have to surrender its gross revenues rather than just
its profits. Accordingly, the motion will be denied.
B. Evidence of Plaintiff’s Lost Licensing Revenue
Plaintiff will attempt to obtain the profits it lost due to the Defendants’ infringement, while
eschewing any effort at recovering license fees it was unable to charge due to the infringement. As
such, it argues that any reference to license fees, or the abstract value of its plans, would be
irrelevant and prejudicial because it would confuse the jury.
The Defendants argue that because records are missing for many of the homes in question,
they should have the right to show license fees and other measures of actual damages, because these
could assist the jury in awarding statutory damages. But juries do not award statutory damages,
judges do. Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 345, 118 S. Ct. 1279, 1283,
140 L. Ed. 2d 438 (1998) (“Statutory damages are to be assessed in an amount that ‘the court
considers just.’”). The Defendants have therefore failed to show that the information in question
is relevant to any claim being advanced by the Plaintiff.
C. Reference to Previous Marhofer Litigation
The Plaintiffs also want to bar the Defendants from raising any arguments based on the
Marhofer litigation, in particular, the report of the magistrate judge regarding spoliation. This court
has already decided the spoliation issue, and so it is difficult to see what relevance the prior
litigation has. In fact, since the outcomes of the two cases are somewhat at odds, reference to that
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litigation could be expected to confuse the jury. Accordingly, the motion to exclude reference to
the previous case will be granted.
D. Reference to Plaintiff’s Litigation History
Finally, Plaintiff seeks to exclude any reference to any suggestion that it is a frequent
litigant, a copyright “troll,” or that litigating copyright claims is part of its business model.

The

Defendant has not explained how any such evidence would be relevant to any of the facts at issue
before the jury. The Plaintiff is not on trial, and thus its own history of litigation is irrelevant to any
of the questions the jury must consider.
III. Conclusion
For the reasons given above, the following docket entries are hereby resolved as follows:
164 is denied; 166 is denied; 168 is denied; 170 is denied; 174 is granted; 176 is denied; 178 is
granted; 182 is denied; 184 is denied in part and granted in part; and 185 is denied in part and
granted in part. Because the rulings are in limine, they are subject to change and reconsideration
as the circumstances of trial take place, but they are binding on the parties absent further ruling by
the court.
SO ORDERED this 4th day of October, 2016.
/s William C. Griesbach
William C. Griesbach, Chief Judge
United States District Court

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