Design Basics LLC et al v. J&V Roberts Investments Inc et al
Filing
83
ORDER signed by Judge J P Stadtmueller on 9/11/15: denying 45 Defendants' Motion for Summary Judgment; granting 51 ACCUITY a Mutual Insurance Company's Motion for Summary Judgment; and, granting in part and denying in part 42 Wilson Mutual Insurance Company's Motion for Summary Judgment. See Order. (cc: all counsel) (nm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
DESIGN BASICS LLC and
PLAN PROS, INC.,
Plaintiffs,
v.
J & V ROBERTS INVESTMENTS, INC.
d/b/a ROBERTS HOMES & REAL ESTATE,
and JAMES A. ROBERTS, d/b/a ROBERTS
HOMES & REAL ESTATE,
Case No. 14-CV-1083-JPS
Defendants,
WILSON MUTUAL INSURANCE
COMPANY and ACUITY A MUTUAL
INSURANCE COMPANY,
Intervenors.
ORDER
In this civil suit, filed on September 3, 2014, Plaintiffs, Design Basics
LLC (“Design Basics”) and Plan Pros, Inc. (“Plan Pros”) (collectively, “the
plaintiffs”), allege causes of action for both non-willful and willful violations
of the Copyright Act, 17 U.S.C. § 106, and violations of the Digital
Millennium Copyright Act, 17 U.S.C. § 1202, against Defendant J & V Roberts
Investments, Inc. (“J & V Roberts”) and Defendant James A. Roberts
(collectively “the defendants”). (Docket #1).1 The Court granted Wilson
Mutual Insurance Company (“Wilson Mutual”) and ACUITY a Mutual
Insurance Company (“ACUITY”) permission to intervene in this action.
(Docket #19, #34).
1
On March 9, 2015, the Court granted the plaintiffs’ unopposed motion to
dismiss defendants Debra Heller, Vicki Roberts, Jeffrey C. Alexander and Sandra
A. Colwin with prejudice and without costs to any party. (Docket #29).
On June 1, 2015, the defendants filed a Motion for Summary
Judgment. (Docket #45), Wilson Mutual filed a Motion for Summary
Judgment and Declaratory Judgment (Docket #42), and ACUITY filed a
Motion for Summary Judgment (Docket #51). The motions are now fully
briefed and ready for disposition.2 As discussed below, the Court will deny
the defendants’ motion; grant in part and deny in part Wilson Mutual’s
motion; and grant ACUITY’s motion, as more fully described below.
1.
FACTUAL BACKGROUND3
1.1.
The Parties
The plaintiffs are engaged in the business of creating publishing and
licensing architectural plans and designs, with their principal offices located
in Omaha, Nebraska. (PPFF ¶¶ 1-2). The defendants are in the business of
marketing, constructing and selling residential homes. (DPFF ¶ 2). James
Roberts owns J & V Roberts Investments, Inc., which does business as
Roberts Homes & Real Estate; Mr. Roberts opened this company in or about
1989. (DPFF ¶ 1). Intervenors, ACUITY and Wilson Mutual, issued various
insurance policies to the defendant that are relevant to this action.
2
The defendants’ reply argues that the Court should not consider the
plaintiffs’ opposition materials because they were filed untimely. (Defs’ Reply at
1, Docket #68). Defendants filed their motion for summary judgment on June 1,
2015. (Docket #45). The plaintiffs filed their opposition materials on July 6, 2015. As
such, the plaintiffs submissions were not untimely. See Civil L.R. 56(b)(2); Fed. R.
Civ. P. 6(a)(1)(C); Fed. R. Civ. P. 6(d).
3
The cited facts are from the parties’ proposed findings of fact, unless
otherwise indicated. The Court will cite to the defendants’ Proposed Findings of
Fact (Docket #46) as “DPFF.” The Court will cite to the plaintiff’s Proposed Findings
of Fact (Docket #67) as “PPFF.” To avoid any confusion, the Court will cite to
Wilson Mutual’s Proposed Findings of Fact (Docket #44) as “Wilson PFF” and
ACUITY’s Proposed Findings of Fact (Docket #52) as “ACUITY PFF.” Unless
otherwise indicated, the proposed findings to which the Court cites are undisputed.
Page 2 of 38
1.2
Alleged Infringement4
The plaintiffs’ infringement claims in this case revolve around eight
copyrighted architectural plans. Specifically, the eight (8) plans at issue are
registered with the U.S. Copyright Office under copyright registration
numbers VA 467-641 (hereinafter the “Adair” plan), VA 485-069 (hereinafter
the “Waverly” plan), VA 778-706 (hereinafter the “Thomasville” plan), VA
1-070-137 (hereinafter the “Millington” plan), VA 467-639 (hereinafter the
“Prairie” plan), VA 542-684 (hereinafter the “Avery” plan), VA 434-184
(hereinafter the “Fenton” plan), and VA 1-412-561 (hereinafter the
“McClover” plan) (collectively, the “Copyrighted Works”). All of the
Copyrighted Works were registered prior to their first publication. (PPFF
¶ 5). The defendants did not receive a license or authorization from the
plaintiffs for the “Adair,” “Waverly,” “Thomasville,” “Millington,” “Prairie,”
“Avery,” “Fenton,” or “McClover” plans. (PPFF ¶ 7).
Between 1989 and approximately mid-2009, J & V Roberts was a
licensed dealer of a business called Wausau Homes.5 All of the homes built
by J & V Roberts during those years were based upon licensed plans received
4
The defendants appear to misunderstand the meaning and use of
“undisputed facts” for the purposes of summary judgment. For example, the
defendants list as an undisputed fact that they did not infringe on the plaintiffs’
designs because the eight plans were either licensed to J & V Roberts with
permission to use them or designed specifically for them by independent
contractors. (See DPFF ¶ 9). This, of course, is the central issue in the case, and is
clearly disputed by the plaintiffs. (See Pl’s Response DPFF ¶ 9). A fact is not
undisputed merely because a party says so.
5
The parties provide no specific information about Wausau Homes. The
Court presumes it is a business that creates and/or licenses architecture plans.
Page 3 of 38
from Wausau Homes.6 J & V Roberts had a license from Wausau Homes to
build one of the allegedly infringing plans at issue in this case, the
“Brookhaven” plan. (DPFF ¶ 4). As to the other seven plans at issue, the
defendants allege that the home plans titled “Fox Hollow,” “Wilshire,”
“RiverRidge,” “Shadow Glen,” and “Fairwind” were all designed for J & V
Roberts for J & V Roberts’ use by independent contractors who were retained
in or about 2009. (DPFF ¶ 5). The defendants further allege that the home
plans titled “Pattison” and “Havenwood” were designed by Scott
Stallmacher for J & V Roberts’ use; Scott Stallmacher was retained as an
independent contractor in or about 2009. (DPFF ¶ 6).7
Plaintiffs claim the defendants have infringed on copyrights in the
subject plans as far back as August 2002. (DPFF ¶ 11). The plaintiffs allege the
following copyright violations:
(1)
Design Basic’s “Adair”—infringed by the defendants’ “Fox Hollow”;
(2)
Design Basic’s “Waverly”—infringed by the defendants’ “Wilshire”;
(3)
Design Basic’s “Thomasville”—infringed by the defendants’ “River
Ridge”;
(4)
Design Basic’s “Millington”—infringed by the defendants’ “Pattison”;
(5)
Design Basic’s “Prairie”— infringed by the defendants’ “Havenwood”;
(6)
Design Basic’s “Avery”—infringed by the defendants’ “Shadow
Glen”;
(7)
Design Basic’s “Fenton”—infringed by the defendants’ “Brookhaven”;
and
Plan Pro’s “McClover”—infringed by the defendants’ “Fairwind.”
(8)
6
The Court notes that the plaintiffs dispute this fact in terms of the validity
of the licenses. (Pl’s Response DPFF ¶ 3). They do not, however, appear to contest
the mere fact that the defendants had the licenses.
7
Again, the plaintiffs clearly dispute this fact as they argue that the
defendants copied their designs and did not independently create them.
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(See DPFF ¶¶ 4-6).
All of the works contained within the plaintiffs’ home design catalogs,
as well as all the works contained on the plaintiffs’ website,
http://www.designbasics.com, display Plaintiffs’ copyright management
information, ensuring that all customers and potential customers know that
Plaintiffs’ own all rights and title to their copyrighted plans. (PPFF ¶¶ 1, 7)
The plaintiffs allege that they first became aware that the defendants
had violated their copyrights on September 10, 2011, when Mr. Cuozzo, an
employee of the plaintiffs, discovered the activity. (PPFF ¶ 21). J & V Roberts
posted the plans that allegedly infringe the plaintiffs’ designs on the J & V
Roberts website with J & V Roberts’ logo, “Roberts Homes and Real Estate”
prominently displayed in the upper-left corner of each plan page. (PPFF
¶ 23). The last page of J & V Roberts’ Floor Plan Book bore the notation “All
Plans in this book are the property of Roberts Homes, Custom View Design,
and Stelmacher Architecture and are copyrighted as such.” (PPFF ¶ 23).
1.3
Relevant Insurance Policies
Wilson Mutual Insurance Company issued the following policies to
the various defendants: (1) Contractors policy issued to Roberts Homes &
Real Estate (“Roberts Homes”) and J & V Roberts Investments, Inc., from
April 27, 2005, to April 27, 2010, Policy No. BC170885; (2) Businessowners
policy issued to J & V Roberts Investments, Inc., and/or James and Vicki
Roberts from April 27, 2009, to April 27, 2013, Policy No. BP232353; (3)
Commercial umbrella policy issued to Roberts Homes and J & V Roberts
Investments, Inc., from April 27, 2005, to April 27, 2010, Policy No.
CU170883; (4) Business Insurance policies issued to J & V Roberts
Investments, Inc., and/or James and Vicki Roberts from April 27, 2011, to
April 27, 2015, Policy No. 3200254260; (5) Commercial Package Policy issued
Page 5 of 38
to Roberts Homes, J & V Roberts Investments, Inc., and James and Vicki
Roberts from April 27, 2005, to April 27, 2009, Policy No. CP170882. (Wilson
PFF ¶ 12).
ACUITY issued a policy of insurance to “J & V Roberts Inc.”
containing Commercial General Liability (“CGL”) Forms and Commercial
Excess Liability (“Excess”) Forms under Policy No. F72223 during the policy
term of: 4/27/01-4/27/02; 4/27/02-4/27/03; 4/27/03-4/27/04; and 4/27/04 to
4/27/05. (ACUITY PFF ¶ 22). Additional named insureds on the policy are
James & Vicki Roberts and J & V Electric Inc. (ACUITY PFF ¶ 23). ACUITY
has agreed to assume the defense of J & V Roberts Investments, Inc., d/b/a
Roberts Homes & Real Estate and James A. Roberts d/b/a Roberts Homes &
Real Estate under a reservation of rights. (ACUITY PFF ¶ 24).
2.
LEGAL STANDARD
“The court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett, 477 U.S.
317, 324 (1986); Ames v. Home Depot U.S.A., Inc., 629 F.3d 665, 668 (7th Cir.
2011). “Material facts” are those under the applicable substantive law that
“might affect the outcome of the suit.” See Anderson, 477 U.S. at 248. A
dispute over “material fact” is “genuine” if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Id.
A party asserting that a fact cannot be or is genuinely disputed must
support the assertion by: “(A) citing to particular parts of materials in the
record, including depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including those made for purposes of
the motion only), admissions, interrogatory answers, or other materials; or
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(B) showing that the materials cited do not establish the absence or presence
of a genuine dispute, or that an adverse party cannot produce admissible
evidence to support the fact.” Fed. R. Civ. P. 56(c)(1). “An affidavit or
declaration used to support or oppose a motion must be made on personal
knowledge, set out facts that would be admissible in evidence, and show that
the affiant or declarant is competent to testify on the matters stated.” Fed. R.
Civ. P. 56(c)(4).
On summary judgment, courts must construe all facts and reasonable
inferences in the light most favorable to the nonmoving party. See CTL ex rel.
Trebatoski v. Ashland Sch. Dist., 743 F.3d 524, 528 (7th Cir. 2014). Additionally,
“[o]n summary judgment a court may not make credibility determinations,
weigh the evidence, or decide which inferences to draw from the facts; these
are jobs for a factfinder.” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003).
“Summary judgment is not appropriate ‘if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.’” Id. (quoting
Anderson, 477 U.S. at 248.
3.
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
The defendants’ motion for summary judgment argues that: (1) as a
matter of law, the plaintiffs cannot prove all of the prerequisites of a
copyright infringement claim; and (2) alternatively, that any claims for
infringements occurring prior to September 3, 2011, are barred by the statute
of limitations. The plaintiffs oppose all aspects of the summary judgment
motion, arguing specifically that the evidence shows all necessary elements
of the copyright claims and that their claims are not barred by the statute of
limitations in accordance with the law of the Seventh Circuit. As discussed
in detail below, the Court finds that: (1) material issues of fact preclude
summary judgment on the copyright claims; and (2) that the plaintiffs’ claims
Page 7 of 38
accruing prior to September 3, 2011, are not barred by the statute of
limitations because the discovery rule applies to copyright actions in this
circuit.
3.1
Legal Standard—Copyright Infringement
The Copyright Act, 17 U.S.C. §§ 101 et seq., provides a non-exhaustive
list of categories of artistic works for which protection is available. The
statute lists, for example, “sound recordings,” “pantomimes and
choreographic works,” “pictorial, graphic and sculptural works,” and
“literary works.” 17 U.S.C. § 102(a). When Congress passed the Copyright
Act of 1976, architectural works were not among the listed categories, and it
was not clear to what extent buildings or architectural plans could be
copyrighted. William F. Patry, 2 Patry on Copyright § 3:109 (2014). In the
1980s, however, Congress started the lengthy process of updating the
Copyright Act in order to join the Berne Convention, an international
agreement that governs copyright protection. See generally 7 Patry on
Copyright § 23:45. Among other things, the Berne Convention requires
signatory nations to protect architectural works. See 2 Patry on Copyright
§ 3:107. Thus, to join the Berne Convention, the United States was compelled
to clarify that architectural works are protectable under federal law. Id. To
this end, Congress passed the Architectural Works Copyright Protection Act
(“AWCPA”) of 1990 and added “architectural works” to the list of
protectable material. Id.
“To establish copyright infringement, [a party] must prove two
elements: ‘(1) ownership of a valid copyright, and (2) copying of constituent
elements of the work that are original.’” JCW Invs., Inc. v. Novelty, Inc., 482
F.3d 910, 914 (7th Cir. 2007) (quoting Feist Pubs., Inc. v. Rural Tel. Serv. Co.,
Inc., 499 U.S. 340, 361 (1991)). The owner of a copyright may obtain a
Page 8 of 38
certificate of copyright, which is “prima facie evidence” of its validity.
17 U.S.C. § 410(c). For purposes of this motion, the defendants do not dispute
that the plaintiffs own valid copyrights in the subject plans (Def. Opening Br.
at 4, Docket #46); thus, the Court need not address the issue.8
As to the second element, copying can be proven by direct evidence,
but that is “often hard to come by.” JCW Invs., 482 F.3d at 915. Because
“plagiarists rarely work in the open and direct proof of actual copying is
seldom available,” Johnson v. Gordon, 409 F.3d 12, 18 (1st Cir. 2005), the
second method of proof is used most commonly. In the alternative, copying
may be “inferred ‘where the defendant had access to the copyrighted work
and the accused work is substantially similar to the copyrighted work.’” JCW
Invs., 482 F.3d at 915. (citations omitted).
Access is shown where the defendant had an opportunity to view the
copyrighted item. Wildlife Express Corp. v. Carol Wright Sales, Inc., 18 F.3d 502,
508 n.5 (7th Cir. 1994). “It is not essential to prove access, however.” JCW
Invs., 482 F.3d at 915. If “‘two works are so similar as to make it highly
probable that the later one is a copy of the earlier one, the issue of access
need not be addressed separately…’” Id. (quoting Ty, Inc. v. GMA Accessories,
Inc., 132 F.3d 1167, 1170 (7th Cir. 1997)).
As to the question of substantial similarity, the Seventh Circuit applies
the “ordinary observer test: ‘whether the accused work is so similar to the
plaintiff’s work that an ordinary reasonable person would conclude that the
defendant unlawfully appropriated the plaintiffs’ protectable expression by
taking material of substance and value.’” Wildlife Exp. Corp., 18 F.3d at 509
(quoting Atari Inc. v. N. Am. Philips Consumer Elecs. Corp., 672 F.2d 607, 614
8
The plaintiffs filed certificates of copyright with their pleadings (Docket #1).
Page 9 of 38
(7th Cir. 1982) (superseded by statute on other grounds as recognized in Scandia
Down Corp. v. Euroquilt Inc., 772 F.2d 1423, 1429 (7th Cir. 1985)).
3.2
Analysis
As noted above, the defendants do not dispute the validity of the
plaintiffs’ copyrights for the purposes of summary judgment. Thus, the
Court’s analysis focuses solely on the second prong of the copyright inquiry:
whether the plaintiffs can prove “‘copying of constituent elements of the
work that are original.’” JCW Invs., 482 F.3d at 914 (quoting Feist, 499 U.S. at
361). This inquiry, however, is much more nuanced to answer than the
question suggests. The plaintiffs have not offered any direct evidence of
copying, so the Court must use the second method of proof; the Court may
infer copying through proof of: (1) access; and (2) that the accused work is
substantially similar to the copyrighted work. Id. The Court now turns to
discuss each of these elements separately.
3.2.1
Access
The defendants argue that the plaintiffs can “only speculate or
conjecture as to whether J & V Roberts had access to the copyrighted plans.”
(Defs’ Opening Br. at 6, Docket #46). The plaintiffs argue there is “abundant
evidence” of access here because they received dozens of its home plan
catalogs, and regularly conducted business with the plaintiffs over the last
twelve years. (Pl’s Opp. at 7, Docket #65).
To prove access, the plaintiff must offer evidence that the defendant
had an opportunity to view the copyrighted work. Wildlife Express, 18 F.3d
at 508 n.5. Additionally, access may be inferred under certain circumstances,
Bucklew v. Hawkins, Ash, Baptie & Co., LLP., 329 F.3d 923, 926 (7th Cir. 2003)
(proof of access not required when similarities between copyrighted work
Page 10 of 38
and its accused infringer concern details of such arbitrary character that
probability of independent duplication is remote).
Here, the plaintiffs allege access because they have conducted business
with the defendants for the past twelve years. The plaintiffs allege that
defendants ordered twenty-four home plan catalogs from the plaintiffs. (Pls’
Opp. at 8, Docket #65). The defendants, in turn, argue that the plaintiffs
grossly mischaracterize the evidence and that they never ordered any of the
plaintiffs catalogs. Instead, the defendants argue that any sent catalogues
were unsolicited and, therefore, do not prove access. (Defs’ Reply at 4-5,
Docket #68).
The Court finds that material issues of fact exist as to the access issue.
First, there seem to be factual issues as to whether the defendants actually
received and viewed any of the twenty-four catalogues allegedly sent to the
defendants. Second, as discussed below, there are questions of material fact
as to how similar the accused works are to the plaintiffs’ designs, which in
turn will affect the question of whether proof of access is even required. See
Bucklew, 329 F.3d at 926 . In sum, at the very least, the plaintiffs have shown
that it was at least reasonably possible that the paths of the defendants’ and
the plaintiffs’ work crossed. As such, the defendants are not entitled to
summary judgment on the access prong. The Court now turns to address the
more complicated issue of substantial similarity.
3.2.2
Substantial Similarity and Wrongful Copying
The defendants do not dispute that there are various similarities
between their architectural works and the plaintiffs’ works. They maintain,
however, that the plaintiffs’ copyrights do not cover the architectural works
in their entirety, but rather only certain limited creative contributions that the
plaintiffs made. The defendants argue that any similarities between their
Page 11 of 38
designs and the plaintiffs’ relate only to noncopyrightable subject matter. As
such, the defendants conclude that they are entitled to summary judgment
because the accused plans are not substantially similar to the copyrighted
plans. (Defs’ Opening Br. at 9-11, Docket #46). In contrast, the plaintiffs point
to evidence showing all of the similarities between their copyrighted works
and the accused works. The plaintiffs argue that, in light of those similarities,
material issues of fact exist to preclude summary judgement on the issue of
substantial similarity. (Pls’ Opp. at 16, Docket #65).
The substantial similarity inquiry consists of two steps : (1) identifying
which aspects of an artist’s work, if any, are protectable by copyright; and (2)
determining whether the allegedly infringing work is “substantially similar”
to protectable elements of the artist's work. In conducting this inquiry, the
Court keeps in mind that “[w]here reasonable minds could differ on the issue
of substantial similarity…summary judgment is improper.” Cavalier v.
Random House, Inc., 259 F.3d 97, 112 (1st Cir. 2006); accord Atkins v. Fischer,
331 F.3d 988, 995 (D.C. Cir. 2003) (citing Sturdza v. United Arab Emirates, 281
F.3d 1287, 1297 (D.C. Cir. 2002) (“This issue of substantial similarity in a
copyright infringement case ‘is customarily an extremely close question of
fact,’ as to which ‘summary judgment has traditionally been frowned
upon.’”).
3.2.2.1 Scope of the Copyright Protection
The issue of copyrightability, at least in this Circuit, is a question of
law (albeit one that is fact-specific) to be determined by the court. See Gaiman
v. McFarlane, 360 F.3d 644, 648–49 (7th Cir. 2004); Publ'ns Int'l, Ltd. v. Meredith
Corp., 88 F.3d 473, 478 (7th Cir. 1996); see also, Yankee Candle Co. v. Bridgewater
Candle Co., 259 F.3d 25, 34 n. 5 (1st Cir. 2001) (cited with approval in Gaiman).
Page 12 of 38
The fact that a work is copyrightable “says very little about the scope of its
protection.” Atari, Inc., 672 F.2d at 616–17.
A fundamental rule of copyright law is that it protects only “original
works of authorship,” those aspects of the work that originate with the
author himself. 17 U.S.C. § 102(a). Everything else in the work, the history it
describes, the facts it mentions, and the ideas it embraces, are in the public
domain free for others to draw upon. Zalewski v. Cicero Builder Dev., Inc., 754
F.3d 95, 102 (2d Cir. 2014). It is the peculiar expressions of that history, those
facts, and those ideas that belong exclusively to their author. See 17 U.S.C.
§ 102(b). For example, “[a]ny artist may portray the Spanish Civil War, but
no one may paint another Guernica. And anyone may draw a cartoon mouse,
but there can be only one Mickey.” Zalewski,754 F.3d at 102.
“Original, 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 possess at least some minimal degree of creativity.”
Feist Publ'ns, 499 U.S. at 345 (citing 1 M. Nimmer & D. Nimmer, Copyright
§§ 2.01[A], [B] (1990) (hereinafter “Nimmer”)). “To be sure, the requisite level
of creativity is extremely low; even a slight amount will suffice. The vast
majority of works make the grade quite easily, as they possess some creative
spark, ‘no matter how crude, humble or obvious' it might be.” Id. (quoting
Nimmer at § 1.08[C][1] ).
The central question of this case is how to apply these and related
doctrines to separate the protectable from the unprotectable in architectural
works. Although no bright line rule delineates the scope of what may be
copyrighted, 17 U.S.C. § 101 provides some guidance regarding the scope of
copyrights pertaining to architectural works. These works are defined by
statute to include:
Page 13 of 38
the design of a building as embodied in any tangible medium
of expression, including a building, architectural plans, or
drawings. The work includes the overall form as well as the
arrangement and composition of spaces and elements in the
design, but does not include individual standard features.
17 U.S.C. § 101.
Nonetheless, there are many aspects of architectural plans that are not
copyrightable because they lack originality. For example, efficiency is an
important architectural concern that courts have found to receive no
protection. Zalewski, 754 F.3d at 105. Thus, any design elements attributable
to building codes, topography, structures that already exist on the
construction site, or engineering necessity should get no protection. Id.
Likewise, “[d]esign features used by all architects, because of consumer
demand, also get no protection.” Id. Indeed, the plaintiff “can get no credit
for putting a closet in every bedroom, a fireplace in the middle of an exterior
wall, and kitchen counters against the kitchen.” Zalewski, 754 F.3d at 106.
Courts have also imported concepts from other copyrightable works
into the architecture sphere. For instance, “scenes a faire,” defined as
“thematic concepts or schemes” that are not original to the author, Reyher v.
Children's Television Workshop, 533 F.2d 87, 91 (2d Cir.1976), and “incidents,
characters or settings which are as a practical matter indispensable, or at least
standard, in the treatment of a given topic,” play a role in which elements of
a work are protectable by copyright. Atari, Inc., 672 F.2d at 616. The idea of
scenes a faire “has been most commonly employed in the literary or dramatic
context,” see Southco, Inc. v. Kanebridge Corp., 390 F.3d 276, 287 (3d Cir. 2004),
but the concept has been applied in cases involving computer software
copyrightability and audiovisual games. Autoskill, 994 F.2d at 1494 (holding
Page 14 of 38
that items which necessarily follow from a given theme or setting must be
filtered from the court's infringement analysis).
Important to this case, the Second Circuit recently applied “scenes
a faire” to an architectural design by analogy.9 In Zalewski, the court
recognized the unoriginality in certain styles of architecture, such as
neoclassical government buildings, colonial houses, and modern high-rise
office buildings. 754 F.3d at 105; see also Sturdza v. United Arab Emirates, 281
F.3d 1287, 1295–96 (D.C. Cir. 2002) (holding that that “scenes a faire” must be
excluded as unprotectable elements where copyrightability of an embassy
design was at issue).
Conversely, what can be afforded copyright protection, as relevant
here, is that the particular selection, arrangement, and combination of
individual elements in one house may be sufficiently original and detailed to
be afforded copyright protection. See 17 U.S.C. § 101; see also Zalewski, 754
F.3d at 107; Frank Betz Assoc., Inc. v. J.O. Clark Const., LLC, No. 3:08-CV-159,
2010 WL 4628203 at *5 (M.D. Tenn. November 5, 2010) (citing cases) (“In the
case of more mundane residential designs, it is obvious that the use of
porches, porticos, dormers, and bay windows, for example, is not protected,
but the particular expression of those ideas, and their combination in one
house, may be protected.”); T–Peg, Inc. v. Vt. Timber Works, Inc., No.
03–CV–462–SM, 2009 WL 839522 at *3 (D.N.H. Mar. 27, 2009) (holding that
after filtering out unprotectable architectural elements, “the overall
9
The Court looks to Zalewski as persuasive authority for three reasons: (1)
a lack of Seventh Circuit cases analyzing copyright infringement specifically in the
context of architecture designs; (2) both parties rely on the case; and (3) the decision
is well-reasoned and applicable to this case.
Page 15 of 38
arrangement and composition of spaces and elements” must still be
considered).
In applying these concepts to the present case, the Court finds that the
plaintiffs’ designs at issue contain some modicum of originality that is
protectable. To be sure, these are not architecture designs for the Sagrada
Familia or the Taj Mahal, and originality is limited. However, the Court
nonetheless finds that amidst the various unprotectable elements present in
the plaintiffs’ designs, the particular selection, arrangement, and combination
of individual elements contains originality so as to warrant copyright
protection. The Court now turns to the issue of wrongful copying.
3.2.2.2 Wrongful Copying
The second step of the substantial similarity analysis involves
determining whether the allegedly infringing work is substantially similar
to protectable elements of the artist's work. In the process of determining
whether the plaintiffs’ work is copyrightable, the Court filtered out the
non-protectable portions of the plaintiffs’ work. To determine whether the
defendants’ designs infringe on the Plaintiffs’ work, the protectable elements
of the Plaintiffs’ work must be compared to the defendant’s designs. See
Zalewski, 754 F.3d at 101 (“When an original work contains many un
protected elements, however, a close similarity between it and a copy may
prove only copying, not wrongful copying.”)
The defendants argue that the similarities with the plaintiffs’ designs
include only the same basic conventional and standard elements found, of
necessity, in every modestly priced home, i.e., as their expert opines, “a
conventional array of rooms and spaces, predictably arranged and consistent
with housing alternatives seen in housing markets across the country for
many years,” and that substantial differences exist. (Defs’ Opening Br. at 11,
Page 16 of 38
Docket #46). The plaintiffs, however, argue that substantial similarity exists
because of the “overall flow” and locations of rooms, hallways, bathrooms,
access points and closets are substantially similar” in both the plaintiffs’ and
defendants’ designs. (Pls’ Opp. at 16, Docket #65).
A finding of substantial similarity does not require that an infringing
work be a “virtual copy” of a protected one. Nor is the sine qua non of
substantial similarity whether an ordinary observer would “confuse” the two
works in their entirety. Rather, substantial similarity is determined by asking
“‘whether the accused work is so similar to the plaintiff's work that an
ordinary reasonable person would conclude that the defendant unlawfully
appropriated the plaintiff's protectable expression by taking material of
substance and value.’” Wildlife Express, 18 F.3d at 509 (quoting Atari, Inc., 672
F.2d at 614). The test is rooted in a decision authored by Judge Learned Hand
more than fifty years ago. Judge Hand wrote that 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.” Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d
Cir.1960) (quoted in Wildlife Express, 18 F.3d at 509).
But “[w]ho is the ‘ordinary’ observer, and how does this person
choose the level of generality?” Nash v. CBS, Inc., 899 F.2d 1537, 1540 (7th Cir.
1990) (Easterbrook, J.).
Ordinary observers, like reasonable men in torts, are fictitious
characters of the law, reminders that judges must apply
objective tests rather than examine their own perceptions. They
do not answer the essential question: at what level of
generality? After 200 years of wrestling with copyright
questions, it is unlikely that courts will come up with the
answer any time soon, if indeed there is “an” answer, which
we doubt.
Page 17 of 38
Id. This test requires a side-by-side comparison of the works. Wildlife Express,
18 F.3d at 506 n.1.
The defendants have provided substantial evidence regarding the
numerous ways in which their designs differ from the plaintiffs’ designs.
Defendants’ expert, Robert Greenstreet, has summarized the differences
between the plaintiffs’ designs and the defendants’ designs as follows.
When collectively assessed, a comparison of the Design Basics’
models to those created by Roberts reveals many differences.
In addition to differing room dimensions and overall square
footage, there are further examples of different design features
in each of the sets of drawings compared. These range from
differences in the plan layouts, where rooms are in differing
juxtapositions to the alleged “original”…, to variations in
overall massing of the homes caused by contrasting roofing
configurations…, building footprints and overall different
building sizes…. There are also many indications of the use of
different building materials, particularly on the exteriors of the
compared models, which change the appearance of the
homes…. In addition, many examples can be found of differing
building details, such as windows, porches, garage doors and
other details around doors and eaves.…
The many differences in square footage, individual room
dimensions, building massing, roofing configurations, building
materials and building details . . . support the conclusion that
none of the models of Design Basics and Roberts listed at issue
are substantially similar. To the extent that Design Basics’
comparisons attempt to claim substantial similarity, any such
similarities exist only at the level of standard, traditional and
non-original elements and their arrangement, not a the level of
any creative, original expression.
Page 18 of 38
(Robert Greenstreet Report at 7-8, Docket #48-2).10 The defendants contend
that, based on the laundry list of differences they have identified, no
reasonable jury could possibly find the defendants’ designs to be
substantially similar to the plaintiffs’ designs.
The plaintiffs, on the other hand, submit evidence from an employee,
Carl Cuozzo, opining that the works at issue are substantially similar in too
many ways to have been the product of independent creation. (Pls’ Opp. at
16, Docket #65). Mr. Cuozzo alleges that the plans at issue are substantially
similar because the “overall flow and location of rooms, hallways,
bathrooms, access points and closets are substantially similar in both plans.”
(PPFF ¶ 20).11
The parties both rely on language in Zalewski, where the court granted
summary judgment for the defendant on the issue of substantial similarity.
754 F.3d at 107. As such, the Court finds it important to distinguish Zalewski
from this case. In Zalewski, the court found that most of the similarities
between the plaintiff’s and the defendant’s homes were “features of all
colonial homes, or houses generally.” Id. at 106. Specifically, the defendant
included evidence in the form of treatises on the basics of colonial
architecture, Id. at 106 n.20, and the Court found that “given the constraints
of a colonial design, [the differences were] significant. Id. Beyond the
similarities, the Court found that the “layouts [were] different in many ways”
10
The expert report also contains detailed lists of all the primary differences
between the plaintiffs’ works and the defendants’ allegedly infringing works.
(Docket #48-2 at 21-36). The Court finds it imprudent to list every single difference.
11
The plaintiffs provide a detailed list of all the similarities between the
plaintiffs’ and the defendants’ corresponding designs. (Docket #64-4 at 1-12). Again,
the Court does not find it useful to its analysis to specifically list each and every
similarity.
Page 19 of 38
and that the “exact placement and sizes of doors, closets, and countertops
often differ[ed], as [did] the arrangement of many rooms.” 754 F.3d at 107.
In other words, the Zalewski court found most elements of the designs to be
non-original and that the original elements were not infringed. Id.
On the other hand, the facts of this case are distinguishable from
Zalewski. That is because, most noticeably, in comparing the plaintiffs’ and
defendants’ designs, the placement of rooms in nearly every configuration
is almost identical. This is not the case where mere convention dictates that
a dining room is typically next to a kitchen, and a master bath is next to a
master bedroom. Indeed, for example, a side-by-side comparison of the
plaintiffs’ “Adair” plan (Docket #48-3 at 1) with the defendants’ “Fox
Hollow” plan (Docket #64-1 at 2) shows that the arrangement of every single
room in the defendants’ plan is nearly identical to the plaintiffs’ design.
Additionally, the placement of countertops, wet bars, and closets appears
identical as well.12 Although, as mentioned above, the plaintiff does not
get originality credit for things such as functional consumer expectations
and general house design, the exact arrangement of these features can
be protectable. See T–Peg, Inc. v. Vt. Timber Works, Inc., 459 F.3d 97, 110
(1st Cir. 2006) (“while individual standard features may not be individually
copyrightable…the combination of such standard features may be
copyrightable”).
Moreover, this case is distinguishable because the designs in question
are not of a particular style, such as the colonial style discussed in Zalewski.
Presumably, the style of “conventional, modestly priced housing,” which the
12
A side-by-side comparison of all eight designs and their alleged infringing
counterparts reveal similar comparisons in the arrangements and flow of the
designs.
Page 20 of 38
defendants allege are present in this case, may require certain specific
features; however, at this juncture in the case, it is not entirely clear what
those features are. For example, the court in Zalewski found that the identical
placement of the doors in the plaintiff’s and defendant’s designs did not
show substantial similarity because a colonial style house specifically
required a door centered at the front of the house. 754 F.3d at 106. In contrast,
the defendants have provided no evidence of this type to support an
argument that the “conventional, modestly priced” style of house requires
the placement or the arrangement of features in any specific way.
Courts have found that “[w]here reasonable minds could differ on the
issue of substantial similarity…summary judgment is improper.” Cavalier,
259 F.3d at 112. Here, the Court finds that the similarities in the particular
selection, arrangement, and combination of individual elements between the
plaintiffs’ and defendants’ designs are sufficient to enable an ordinary,
reasonable observer to find that the overall look and feel of the works is
substantially similar. Although the defendants have pointed to numerous
and identifiable differences, the Court nonetheless finds that the similarities
weigh in favor of denying summary judgment. See T–Peg, 459 F.3d at 113–14
(holding that district court erred in focusing on differences and in failing to
consider those similarities that went to the “overall form” of the building as
well as the “arrangement and composition of spaces and elements”); Sturdza,
281 F.3d at 1299 (holding that, despite differences between the two designs,
they were “sufficiently similar with respect to both individual elements and
overall look and feel for a reasonable jury to conclude that the two are
substantially similar”).
Page 21 of 38
Viewing the designs side-by-side, the Court finds that an ordinary
observer, and a reasonable jury, could conclude that the designs are
substantially similar with regard to the copyrightable elements. Accordingly,
material issues of fact exist in this case to preclude summary judgment on the
issue of substantial similarity. As such, the Court must deny the defendants’
motion for summary judgement on the copyright claims, and the issue will
proceed to trial.
3.2.3
Statute of Limitations—Date of Accrual
Copyright infringement claims are governed by a three-year statute
of limitations. No action under Title 17 may be maintained unless it is
commenced within three years after the claim accrued. 17 U.S.C. § 507(b).
The plaintiffs allege they did not discover the alleged copyright
infringements until September 10, 2011. (Docket #1 ¶ 22). However, the
plaintiffs claim the alleged infringement in this case began as early as August
2002. (PPFF ¶ 11). As such, the defendants argue that any claims for
infringements prior to September 3, 2011, are time-barred by the statute of
limitations. The principle inquiry here is when a copyright claim “accrues”
for the three year statute of limitations to begin to run.
The Seventh Circuit recognizes that the discovery rule—that is, that
the statute of limitations starts to run when the plaintiff learns, or should as
a reasonable person have learned the defendant was violating his
rights—applies to copyright. Gaiman v. McFarlane, 360 F3.d 644, 653 (7th Cir.
2004). The defendants nonetheless argue that the injury rule—that the statute
of limitations begins to run when the infringing act occurs—should apply.
The defendants argument is based on the language found in the Supreme
Court’s recent copyright case, Petrella v. MGM, __ U.S. __, 134 S. Ct. 1962,
1969 (2014).
Page 22 of 38
The specific issue in Petrella was whether laches can serve as a
complete defense to a copyright claim that is timely filed; the Court held that
laches does not bar a copyright infringement claim filed within the three-year
limitations period of § 507(b). Petrella, 134 S. Ct. at 1962. Relevant to the
present case, the Court applied the injury rule (under which the statute of
limitations is triggered when an injury occurs, even if a plaintiff is not aware
of the injury) to determine when the plaintiff's copyright claim accrued. See
id. at 1969 (“A copyright claim thus arises or ‘accrues’ when an infringing act
occurs.”); id. at 1972–73 (applying the rule). The defendants claim that Petrella
overruled the Seventh Circuit's discovery rule and that, under the injury rule,
“[a]ny claims for infringements occurring prior to September 3, 2011, are
time-barred by the statute of limitations.” (Defs’ Opening Br. at 11, Docket
#46).
Since Petrella, district courts in the Seventh Circuit have continued to
apply the discovery rule, and have specifically declined to adopt the
defendants’ line of reasoning. For example, in Frerck v. Pearson Educ., Inc., 63
F. Supp. 3d 882, 887 (N.D. Ill. 2014), the court stated that:
the Supreme Court said “[a] copyright claim…arises or
‘accrue[s]’ when an infringing act occurs.” 134 S.Ct. at 1969.
Defendant takes this to mean that I should not apply the
discovery rule in this case. Dkt. 138 at 1–2, Defendant's Notice
of Supplemental Authority. I disagree. In Petrella, the Supreme
Court explicitly said it was not passing on the question of the
“nine Courts of Appeals [who] have adopted, as an alternative
to the incident of injury rule, a ‘discovery rule,’ 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.’” Id. at 1969 n.4. Since the Court did not
take up this issue—and because I am bound to follow Seventh
Circuit precedent—I will continue to apply the discovery rule.
Id.
Page 23 of 38
Additionally, in this district, Judge Randa recently stated that: “Given
the controlling case law of the Seventh Circuit Court of Appeals which is in
accord with that of eight other courts of appeals, the Court declines the
Defendants’ invitation to delve into statutory interpretation.” Design Basics
v. Campbellsport Bldg. Supply, No. 13-CV-560, 2015 WL 1609144 at *18 (E.D.
Wis. April 10, 2015); accord Panoramic Stock Images, Ltd. v. John Wiley & Sons,
Inc., No. 12–cv–10003, 2014 WL 4344095, at *7 (N.D. Ill. Sept. 2, 2014) (holding
that Petrella did not abrogate this circuit's discovery rule).
This Court agrees with the reasoning of its sister courts, and
recognizes that it is bound by the controlling case law of the Seventh Circuit.
Until the Seventh Circuits holds otherwise, this Court concludes that the
discovery rule is still the law of this circuit. Thus, the Court will apply the
discovery rule to determine when the plaintiffs’ claims accrued. See Chicago
Bldg. Design, P.C. v. Mongolian House, Inc., 770 F.3d 610, 614, 618 (7th Cir.
2014) (acknowledging that the Seventh Circuit “recognizes a discovery rule
in copyright cases” and reserving the question of “whether Petrella abrogates
the discovery rule in copyright cases”).
4.
ACUITY MOTION FOR SUMMARY JUDGMENT
ACUITY, one of the defendants’ insurers, seeks summary judgment
extinguishing its duty to indemnify the defendants and, therefore, defend
with respect to the allegations in this case. ACUITY argues that: (1) the initial
grant of coverage is limited to injury arising out of copyright infringement
in the defendants’ advertisement of the Brookhaven plan; (2) that the “prior
publication” exclusion in ACUITY’s policy bars coverage of any injury
arising out of the Brookhaven home in the defendants’ advertising; and (3)
in the alternative, if the Court determines that the “prior publication”
Page 24 of 38
exclusion does not apply, its duty to indemnify should exclude the claim for
willful copyright and violation under the DCMA.
The plaintiffs acknowledge that ACUITY’s policies only provide initial
coverage for the alleged copyright infringement arising out of the
advertisement of the Brookhaven plan on their website beginning in 2002,
and not for any of the other seven allegedly infringing plans. (Defs’ Opp. at
3, Docket #59). As the parties agree, and it is undisputed that seven of the
allegedly infringing plans were created four years after ACUITY’s policy was
terminated (ACUITY PFF ¶ 46), the Court need not address this issue any
further. The Court now turns to ACUITY’s policy to discuss the “prior
publication” exception and whether it excludes coverage in this instance.
4.1
ACUITY Policy
ACUITY issued a policy of insurance to “J & V Roberts Inc.” that
contained Commercial General Liability (“CGL”) Forms and Commercial
Excess Liability (“Excess”) Forms under Policy No. F72223 during the policy
terms of: 4/27/01-4/27/02; 4/27/02-4/27/03; 4/27/03-4/27/04; and 4/27/04-4/27/05.
(ACUITY PFF ¶ 22.) ACUITY is currently defending J & V and Roberts under
a reservation of rights. (ACUITY PFF ¶ 25.) According to the ACUITY CGL
Form, “Who is an Insured” for an organization other than a partnership, joint
venture or limited liability company is the named insured (J & V Roberts,
Inc.), and its executive officers, directors, and shareholders, but only with
respect to their duties and liability as such. (ACUITY PFF ¶ 26).
The CGL Forms provided coverage for personal and advertising
liability as follows:
Page 25 of 38
SECTION I – COVERAGES
COVERAGE B – PERSONAL AND ADVERTISING INJURY
LIABILITY
1.
Insuring Agreement
a.
We will pay those sums that the insured becomes
legally obligated to pay as damages because of personal
and advertising injury to which this insurance applies.
We will have the right and duty to defend the insured
against any suit seeking those damages. However, we
will have no duty to defend the insured against any suit
seeking damages for personal and advertising injury to
which this insurance does not apply.…
b.
This insurance applies to personal and
advertising injury caused by an offense arising out of
your business, but only if the offense was committed in
the coverage territory during the policy period.
(ACUITY PFF ¶ 28).
The CGL Forms contained the following relevant definitions:
SECTION V – DEFINITIONS
1.
“Advertisement” means a notice that is notice that is
broadcast or published to the general public or specific market
segments about your goods, products or services for purpose
of attracting customers or supporters.
…
14.
“Personal and advertising injury” means injury,
including consequential bodily injury, arising out of one or
more of the following offenses:
a.
False arrest, detention or imprisonment;
b.
Malicious prosecution;
Page 26 of 38
c.
The wrongful eviction from, wrongful entry into,
or invasion of the right of private occupancy of a room,
dwelling or premises that a person occupies, committed
by or on behalf of its owner, landlord or lessor;
d.
Oral or written publication, in any manner, of
material that slanders or libels a person or organization
or disparages a person’s or organization’s goods,
products or services;
e.
Oral or written publication, in any manner, of
material that violates a person’s right of privacy;
f.
The use of another’s advertising idea in your
advertisement;
g.
Infringing upon another’s copyright, trade dress
or slogan in your advertisement.
(ACUITY PFF ¶¶ 32, 33).
Each of the CGL Forms contain a prior publication exclusion that the
insurance does not apply to personal and advertising injury “arising out of
oral or written publication of material whose first publication took place
before the beginning of the policy period.” (ACUITY PFF ¶ 30).
The Commercial General Liability Coverage Forms are listed as an
“underlying insurance” to which the Excess Forms apply. (ACUITY PFF
¶ 37). The Excess Forms contain an insuring agreement that reads as follows:
SECTION I – COVERAGES
1.
Insuring Agreement
a.
We will pay those sums, in excess of the amount
payable under the terms of any underlying insurance,
that the insured becomes legally obligated to pay as
damages because of injury or damage to which this
insurance applies, provided that the underlying
Page 27 of 38
insurance also applies, or would apply but for the
exhaustion of its applicable Limits of Insurance.…
b.
We have the right to participate in the
investigation or settlement of claims or the defense of
the insured against suits seeking damages because of
injury or damage to which this insurance may apply.…
However, we will have no duty to defend the insured
against any suit seeking damages for injury or damage
to which this insurance does not apply.
(ACUITY PFF ¶ 34).
4.2
Legal Standard–Insurance Policy Interpretation
The parties are in apparent agreement that substantive Wisconsin law
applies to the insurance issues arising from Design Basics’ allegations that the
Defendants infringed upon its copyrighted architectural works. In applying
Wisconsin law, the Court generally applies the law of the Wisconsin Supreme
Court. Home Valu, Inc. v. Pep Boys, 213 F.3d 960, 963 (7th Cir. 2000). If,
however, “the Wisconsin Supreme Court has not spoken on the issue,” the
Court must treat “decisions by the state's intermediate appellate courts as
authoritative ‘unless there is a compelling reason to doubt that [those] courts
have got the law right.’” Id. (citations omitted). Moreover, if the Court is
“faced with two opposing and equally plausible interpretations of state law,
‘[it should] generally choose the narrower interpretation which restricts
liability, rather than the more expansive interpretation which creates
substantially more liability.’” Id.
The interpretation of an insurance policy contract is a question of law
for the Court. Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 268 Wis.2d 16, 673
N.W.2d 65, 73 (Wis. 2004). The primary objective in interpreting a contract is
to ascertain and carry out the intentions of the parties. Wadzinski v.
Page 28 of 38
Auto–Owners Ins. Co., 342 Wis.2d 311, 818 N.W.2d 819, 824 (Wis. 2012).
Wisconsin state courts construe a policy as it would be understood by a
reasonable person in the position of the insured. Am. Girl, 673 N.W.2d at 73.
The language of the policy determines the extent of coverage. Soc'y
Ins. v. Town of Franklin, 233 Wis.2d 207, 607 N.W.2d 342, 345 (Wis. Ct. App.
2000). The policy's words must be given their common and ordinary
meaning, and when the policy language is plain and unambiguous, the
policy is enforced as written, “without resorting to the rules of construction
or principles from case law.” Johnson Controls, Inc. v. London Market, 325
Wis.2d 176, 784 N.W.2d 579, 586 (Wis. 2010). “[I]f the language of a policy is
ambiguous, susceptible of more than one reasonable interpretation, [the
Wisconsin courts] will construe it narrowly, against the insurer, and in favor
of coverage.” Liebovich v. Minn. Ins. Co., 310 Wis.2d 751, 751 N.W.2d 764, 771
(Wis. 2008). “However, [Wisconsin state courts] do not interpret insurance
policies to provide coverage for risks that the insurer did not contemplate or
underwrite and for which it has not received a premium.” Am. Girl, 673
N.W.2d at 73.
Insurance policy interpretation requires a three-step process. Id. First,
the court must examine the facts to determine whether the policy’s insuring
agreement makes an initial grant of coverage. Id. Second, if there is an initial
grant of coverage, the court is to examine the exclusions to determine
whether any of them preclude coverage. Id. Third, the court looks to whether
any exceptions to the applicable exclusions reinstate coverage. Id. The Court
now turns to apply these principles to the “prior publication” exception in
ACUITY’s policy.
Page 29 of 38
4.3
Analysis
The parties do not dispute that Wausau Homes published the
Brookhaven plan in its plan book, American Dream Two Story Homes, in
2000. (ACUITY PFF ¶ 39). The parties also do not dispute that ACUITY’s
policy does not apply to personal and advertising injury “arising out of oral
or written publication of material whose first publication took place before
the beginning of the policy period.” (ACUITY PFF ¶ 30). Thus, the only
question for the Court to answer is whether the exception applies in this case
as a result of the Brookhaven publication in 2000. ACUITY argues that based
on the plain language of the policy, any advertising injury arising out of the
Brookhaven plan is excluded from coverage because it was first published in
2000, well before the beginning of the policy period. The defendants argue
in turn that the exclusion does not bar coverage because it does not apply
when the prior publication was by an unrelated third party.
Because Wisconsin courts have not interpreted and applied the “prior
publication” policy exclusion, the Court looks to other jurisdictions for
persuasive authority. See State v. Frey, 178 Wis. 2d 729, 740, 505 N.W.2d 786,
790 (Ct. App. 1993). The Seventh Circuit has succinctly summarized the
background of the “prior publication” exclusion:
The purpose of the “prior publication” exclusion (a common
clause in liability-insurance contracts, though rarely litigated)
can be illustrated most clearly with reference to liability
insurance for copyright infringement. Suppose a few months
before insurance began on October 7, 1997, the insured
published an infringing book that it continued selling after
October 6. The “prior publication” exclusion would bar
coverage because the wrongful behavior had begun prior to
the effective date of the insurance policy. The purpose of
insurance is to spread risk—such as the risk that an advertising
campaign might be deemed tortious—and if the risk has
Page 30 of 38
already materialized, what is there to insure? The risk has
become a certainty.
Taco Bell Corp. v. Cont'l Cas. Co., 388 F.3d 1069, 1072-73 (7th Cir. 2004)
(internal citation omitted.) The Seventh Circuit elaborated on this principle
in Capitol Indem. Corp. v. Elston Self Serv. Wholesale Groceries, Inc., 559 F.3d 616
(7th Cir. 2009), stating:
In Taco Bell's copyright hypothetical, it is the wrongful act that
triggers the prior publication exclusion. If the insured does not
publish actionable material prior to the policy date, the prior
publication exclusion will not apply, regardless of whether the
insured publishes very similar material that is actionable after
the policy inception.
Id. at 621 (applying Illinois law).13
The defendants’ argument hinges on the above language that “[i]f the
insured doe not publish…the prior publication exclusion will not apply.” Id.
(emphasis added). Although, given this language, the defendants’ argument
certainly sounds convincing, a closer read of the case suggests otherwise.
Capitol Indemnity specifically analyzed whether the insured’s prior
publication barred coverage. Id. at 620. There is simply no analysis in the
case, however, as to a prior publication by a third party and whether that
outcome would be any different. As such, this language is not outcome
determinative, and the Court turns back to examine the plain language of the
policy.
The Seventh Circuit in Capitol Indemnity held that the “prior
publication” exclusion policy language was clear and unambiguous so as to
13
The policy language in Capitol Indemnity read: “Insurance does not apply
to…‘advertising injury’ [a]rising out of oral or written publication of material
whose first publication took place before the beginning of the policy period.”
Capitol Indem. Corp., 559 F.3d at 620.
Page 31 of 38
preclude coverage. Id. Here, the language in ACUITY’s policy is nearly
identical, and the Court agrees that the language is unambiguous and thus
the Court need not look to the rules of construction or principles from case
law. See Johnson Controls 784 N.W.2d at 586. The policy’s language,“arising
out of oral or written publication of material whose first publication took
place before the beginning of the policy period” (ACUITY ¶ PFF 30), says
nothing about limiting who published the material before the beginning of the
policy period, and it is not the Court’s place to insert language in a contract
that is not there. (“[C]ourts cannot insert what has been omitted or rewrite
a contract made by the parties.” Columbia Propane, L.P. v. Wis. Gas Co., 2003
WI 38, ¶ 12, 261 Wis. 2d 70, 85, 661 N.W.2d 776, 783 (Wis. 2003).14
It would be contrary to ACUITY’s insurance policy to require that the
defendants published the allegedly infringing material prior to the policy
period. The plain language of ACUITY’s policy requires only that the first
publication of the allegedly infringing oral or written material occur prior to
ACUITY’s policy period, which, as here, it did when the Brookhaven plan
was first published in the year 2000. As such, the Court will grant ACUITY’s
motion for summary judgment; ACUITY has no duty to defend or indemnify
the defendants. 15
14
If the parties wished the “prior publication” exception to apply only when
the insured published materials prior to the beginning of the policy, they certainly
could have written the policy that way. Indeed, as ACUITY points out, other “prior
publication policies,” such as Wilson Mutual’s policies, include this exact language.
(ACUITY Reply at 5) (noting Wilson Mutual language stating “oral or written
publication of the same or similar material by or on behalf of an insured that took
place prior to the policy”) (emphasis added).
15
Because the Court grants summary judgment for ACUITY, it need not
address ACUITY’s alternative argument related to the willful infringement
exclusion.
Page 32 of 38
5.
WILSON MUTUAL MOTION FOR SUMMARY JUDGMENT
Wilson Mutual acknowledges it has a duty to continue to defend in
this case; however, it argues its indemnity is limited. Wilson Mutual requests
the Court to declare that: (1) the Wilson Mutual policies do not provide
coverage for the defendants’ alleged infringement of the plaintiffs’ Fenton
plan; (2) the Wilson Mutual policies only provide coverage for the plaintiffs’
copyright claims related to or caused by advertising and not for the plaintiffs’
claims for alleged scanning, copying and/or reproducing design plans,
creating derivatives in the form of two dimensional plans and fully
constructed residences, advertising, marketing and/or selling one or more
houses based upon copies or derivatives of their design plans, and violations
of the DMCA; and (3) the Wilson Mutual policies from April 27, 2005, to
October 27, 2010, do not provide coverage for the plaintiffs’ claims for willful
infringement or intentional violations of the DMCA. (Wilson Reply at 7,
Docket #72). As the defendants agree that Wilson Mutual has no duty to
defend or indemnify for the alleged infringement of the plaintiffs’ Fenton
plan (Defs’ Opp. at 3, Docket #56), the Court need not dwell on this issue;
thus, Wilson Mutual has no obligation to indemnify for the defendants’
damages arising out of the Fenton plan.
The Court now turns to discuss the remaining two issues. The Court
first notes that the same general legal standards apply to this insurance
contract as those discussed above, see discussion supra Section 4.2, and thus,
the Court need not repeat the standards.
5.1
April 27, 2010, to April 27, 2015 Coverage
Wilson Mutual seeks to limit its insurance coverage in specifying that
its policies “only provide coverage for Design Basics’ claims that Robert
Holmes advertised or displayed Design Basics’ copyrighted design plans.”
Page 33 of 38
(Wilson Opening Br. at 19, Docket #43). Specifically, it denies that its
coverage provides coverage for “Design Basics’ claims arising out of alleged
copying and scanning of design plans, creating derivatives of design plans,
constructing homes based on design plans, advertising and marketing homes
(not plans) and violations of the DMCA.” (Wilson Opening Br. at 19, Docket
#43). Wilson Mutual argues this is so because these activities were not
“connected to or caused by Robert Holmes’ advertising, a requirement for
coverage under the personal and advertising injury coverage.” (Wilson
Opening Br. at 19, Docket #43).
The defendants concede that for the alleged infringement prior to
April 27, 2010, Wilson Mutual only has a duty to defend or indemnify the
defendants for alleged infringement related to or caused by advertising and
not for Design Basics’ other copyright infringement claims. (Defs’ Opp. at 4,
Docket #56). They argue, however, that the Wilson Mutual umbrella policy
from April, 2010 to April 2015, has different language that does not require
a causal connection to advertising. (Defs’ Opp. at 4, Docket #56).
Beginning April 27, 2010, and continuing through at least April 27,
2015, the language in Wilson’s umbrella policy described its obligations to
insureds as follows:
SECTION I – COVERAGES
A.
Insuring Agreement.
We will pay on behalf of the insured the “ultimate net
loss”:
a.
In excess of the “underlying limit”: or
b.
For an occurrence covered by this policy which is
either excluded or not covered by the “underlying insurance”;
because of “bodily injury,” “property damage,”
“personal injury” or “advertising injury” to which this
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Coverage Form applies, caused by an “occurrence”
anywhere in the world.
(Wilson Br. at 13, Docket #43); (Defs’ Opp. at 4-5, Docket #56) (emphasis
added). The broad scope of the coverage afforded by the umbrella policy
clearly obligates Wilson Mutual to pay for an occurrence covered by the
policy regardless of whether the occurrence is excluded from the underlying
insurance. In other words, the umbrella policy not only provides excess
coverage for occurrences covered by the underlying policy, it also provides
coverage for occurrences that are not covered by the underlying insurance.
The umbrella coverage form has its own set of definitions separate and
distinct from any definitions that may be found in the underlying insurance
that defines “advertising injury” as that term applies to the umbrella
coverage:
SECTION VI – DEFINITIONS
A.
“Advertising Injury” means injury arising out of one or
more of the following offenses committed during the policy
period:
1.
The publication or utterance of a libel or slander
or of other defamatory or disparaging material, or a
publication or utterance in violation of an individual’s
right of privacy;
2.
Infringement of copyright, title or slogan; or
3.
Piracy or unfair competition or idea misappropriation.
(Wilson Opening Br. at 13, Docket #43; Wilson PFF ¶ 1) (emphasis added).
The court in Design Basics LLC v. Campbellsport Building Supply, Inc.,
No. 13-CV-560, 2015 WL 1609144, at *1 (E.D. Wis. Apr. 10, 2015), recently
addressed this very issue, and found that Wilson Mutual’s umbrella policies
did “not require that the infringement occur in the context of any advertising,
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nor does the umbrella policy exclude coverage for advertising injury based
on copyright infringement. Id. at *11. The court reasoned that:
Wilson Mutual does not acknowledge that the definitions in its
business policies and its umbrella policies are different, and
that the umbrella policies include injury arising out of
copyright infringement but do not include the additional
requirements found in the underlying business policies that the
infringement occur in the context of advertising or in the
insured's own advertisement. The differing definitions in the
two types of policies are the result of Wilson Mutual's drafting,
and it bears the consequences of the language it chose.
Id. Here, the Court agrees with the above reasoning, and Wilson Mutual does
nothing to distinguish it. Wilson Mutual initially ignored the case entirely,
and in its reply argues only that it disagrees with the reasoning and that it
intends to appeal the ruling once it becomes a final order. (Wilson Reply at
4, Docket #72). The language of the policy is clear, however, and Wilson
Mutual bears the consequences of the language it chose.
Additionally, as the Campbellsport decision notes, the Court agrees that
the case relied on by Wilson Mutual, Krueger Int'l, Inc. v. Fed. Ins. Co., 647
F.Supp.2d 1024 (E.D. Wis. 2009), is distinguishable because the policy
language included conditions not found here.16 As such, the Court finds that
the Wilson Mutual umbrella policies from April 2010 to April 2015 do not
require a causal connection to advertising; thus, the Court will deny Wilson
Mutual’s motion for declaratory relief on this issue.
16
The policy language at issue in Krueger was a follows: “We'll pay amounts
any protected person is legally required to pay as damages for covered advertising
injury that…results from the advertising of your products, work or completed
work.” 647 F. Supp.2d at 1028 (St. Paul policy).
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5.2
Willful Infringement Coverage
Wilson Mutual’s motion also requests, albeit in only three sentences,
that the Court declare that Wilson Mutual does not provide coverage for the
defendants’ alleged willful infringement from April 27, 2005, to April 27,
2010. (Defs’ Opening Br. at 22, Docket #43). Wilson Mutual’s opening brief
cites no facts in the record in support of this argument, nor does it cite to any
legal authority. “Judges are not like pigs, hunting for truffles buried in [the
record].” United Sates v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991); see also
Corely v. Rosewood Care Ctr., Inc. of Peoria, 388 F.3d 990, 1001 (7th Cir. 2004)
(“[W]e will not root through the hundreds of documents and thousands of
pages that make up the record here to make his case for him.”). As such, the
Court finds that Wilson Mutual’s argument is wholly undeveloped and,
therefore, does not merit declaratory relief.
6.
CONCLUSION
In sum, the Court finds that: (1) the defendants’ motion for summary
judgment will be denied, as more fully described above, because material
issues of fact exist as to the copyright claims; (2) ACUITY’s motion for
summary/declaratory judgment will be granted because the prior publication
language precludes ACUITY’s duty to defend/indemnify; and (3) Wilson
Mutual’s motion for summary and declaratory judgement is granted in part
and denied in part, as more fully described above.
Accordingly,
IT IS ORDERED that the defendants’ Motion for Summary Judgment
(Docket #45) be and the same is hereby DENIED, as more fully described in
detail above;
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IT IS FURTHER ORDERED that ACUITY’s Motion for Summary
Judgment (Docket #51) be and the same is hereby GRANTED, as more fully
described above; and
IT IS FURTHER ORDERED that Wilson Mutual’s Motion for
Summary Judgment (Docket #42) be and the same is hereby GRANTED in
part and DENIED in part, as more fully described above.
Dated at Milwaukee, Wisconsin, this 11th day of September, 2015.
BY THE COURT:
J.P. Stadtmueller
U.S. District Judge
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