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Robert L. Stark Enterprises, Inc. v. Neptune Design Group, LLC

United States District Court, N.D. Ohio, Eastern Division

April 12, 2017

Robert L. Stark Enterprises, Inc., et al., Plaintiffs,
v.
Neptune Design Group, LLC, Defendant.

          MEMORANDUM OF OPINION AND ORDER

          PATRICIA A. GAUGHAN, United States District Judge

         INTRODUCTION

         This matter is before the Court upon Plaintiffs' Motion for Summary Judgment on Copyright Infringement (Doc. 28). Also pending is Plaintiffs' Motion for Summary Judgment on DMCA Claim (Doc. 29). This is a copyright infringement case. For the reasons that follow, the motions are GRANTED in PART and DENIED in PART. Plaintiff is entitled to summary judgment on all claims, with the exception of the copyright infringement and corresponding declaratory judgment claims as they pertain to defendant's allegation that plaintiff emailed copies of certain plans to Bialosky.

         FACTS

         Plaintiffs Robert L. Stark Enterprises, Inc. and Yogurt Treats (collectively “plaintiff”) bring this lawsuit against defendant Neptune Design Group, LLC seeking a declaratory judgment of non-infringement and further asking that the Court declare that plaintiff did not improperly remove Copyright Management Information (“CMI”).

         MGI Group, Inc. (“Menchie's”) started as a frozen yogurt store located in California. The plans for that location were prepared by another architect. The plans include a circular pay counter and a curved wall of yogurt machines. Mara Lubbell worked as a designer on the Menchie's brand, including preparing the logo and determining colors, shapes, characters, features, and other design elements. By 2008, other Menchie's stores were located in California. In October of 2008, Elisa Bayha and Chris Neal, employees of defendant, met with a Menchie's representative regarding the possibility of replacing Menchie's previous architect. (Bayha Dep. 16-17). Menchie's was looking to replace its “teams” as it was not happy with any of the previous architectural teams and was unhappy with the existing stores. (Bayah Dep. 16). After the meeting, Bayha and Neal again met with Menchie's and toured certain store locations. (Bayha Dep. 18). After a subsequent meeting, Menchie's sent defendant a number of materials including a “graphic designer generated elevations for the Fallbrook store, ” a “layout for the Fallbrook store, ” “the same graphic designer developed rendered plan -- or layout or elevation for the Valley Village store, ” and “a set of drawings for Culver City.” (Bayha Dep. 20). In addition, at some point Menchie's provided defendant with construction documents for the Rendondo Beach store and 3-D color renderings, i.e., color illustrations, of the Valley Village store. (Neal Dep. 35, 53).

         The parties agree that the first project defendant submitted to Menchie's involved the Woodland Hills store. (Bahya Dep. 123). Defendant and Menchie's entered into a design services contract with respect to this store and all other stores for which defendant provided services to Menchie's franchisees. (“DS Contracts”). The DS Contracts were either between Menchie's and defendant or defendant and the franchisee. Those contracts provide, in relevant part:

Drawings, specifications, and other design documents, whether written or electronic, prepared by [defendant] or [defendant] consultants, are instruments of service used solely with respect to this Project. [Defendant] and [defendant's] consultants are deemed the authors and sole owners of their respective instruments of service and shall retain all common law, statutory, and other reserved rights, including copyrights. [Menchie's] and [Menchie's] contractors shall have no right to copy or use the data on other projects, or for additions to this Project, without agreement of and compensation to [defendant], and all of Client's written agreement with its contractors shall reflect this fact accordingly....

(Doc. 37).

         The construction drawings for the Woodland Hills store are dated November 14, 2008 and entitled “2008 MGI CD Set of Plans.” (Hereafter, “2008 Plans”) (Neal Depo. Ex. 26). The architect for the project was David Udkow. (Bayha Dep. 24). Udkow was not employed by defendant and, instead, was an independent contractor (Bayha Dep. 25). The plans identify Udkow as the architect. (Neal Dep. Ex. 26 a p.3). Udkow is a licensed architect who reviewed the plans for approval and permitting. (Bahya Dec. 19). He did not participate in the creation of any work for which defendant received a copyright. (Bahya Dec. ¶ 19)[1]. In addition, the plans provide:

Upon city approval and permit these plans have been reviewed by Menchie's for its design consistency and conformity to Menchie's strict design standards. Under no circumstances shall these drawings be modified in any way without the express written consent of both the architect and Menchie's corporate office.

         Defendant used the outcome of the Woodland Hills project as a template for the next project. After the first few months of the relationship, Menchie's and defendant agreed that Menchie's would use defendant exclusively for the development of all future franchises. (Bahya Dec. ¶ 6). Thereafter, defendant created a document entitled “2009 [Menchie's] Design Guide” to assist franchisees and building contractors. (Bahya Dec. ¶ 23). In addition, for approximately four years, defendant created store designs, floor layouts, and construction documents for Menchie's stores. (Bahya Dec. ¶ 6). Ultimately, defendant registered a number of copyrights correlating to plans defendant prepared for various Menchie's stores, although defendant did not disclaim any pre-existing material in these registrations. Defendant obtained a copyright registration from the Copyright Office on May 13, 2005. (Neal Dep. Ex. 26).

         In late 2010, plaintiff began its relationship with Menchie's. Plaintiff planned to build a number of stores quickly. (Neal Depo. Ex. 11). Menchie's required plaintiff and defendant to work together on the projects. To that end, plaintiff and defendant entered into four DS Contracts for locations in Ohio (“Ohio DS Contracts”). Defendant created and delivered to plaintiff plans for those stores. Defendant obtained copyright registrations for those materials.

         Defendant further prepared some initial layouts for additional stores plaintiff intended to open. Defendant sent those initial layouts to Menchie's for review. (Bayha Dep. p. 79-80). At some point in the process, plaintiff became frustrated with defendant's work. Plaintiff inquired of Menchie's as to whether plaintiff could utilize the services of another architect for the remaining stores it planned to open. It appears that Menchie's agreed. (Regev. Dep. Ex. M)

         To that end, plaintiff hired Bialosky Partners Architects, LLC (“Bialosky”) to replace defendant. Plaintiff continued to be bound by its obligations as a franchisee of Menchie's. In other words, plaintiff had to operate under the “Menchie's System, ” which included utilizing certain design requirements imposed by Menchie's. (Kleinberger Dep. Ex. C). As such, Menchie's instructed one of its employees to send plaintiff “2-3 full packages of new projects (make sure you are using the most update [sic] package; new frames, starlet, etc.') ....We provide the different plans to make sure [plaintiff] has all items and can convert a full set for CAD.[2]” (Regev. Dep. Ex. L). In addition, the agreement between plaintiff and Bialosky required Bialosky to create site specific architectural plans “based on Menchie's standard criteria drawings.” (Rapport Dep. Ex. 27 at ¶ 1). The agreement further provides that plaintiff “will be provided with Autocad.dwg CAD files of the prototype drawings that will be created by scanning existing drawings. The CAD files that we are provided with will be created using our standard layering system....” (Id. at § G5).

         Menchie's sent plaintiff the drawings with instructions to have CAD files created from the PDF files. (Deutsch Dep. Ex X). Plaintiff forwarded to Bialosky plans for certain Menchie's stores. The drawings had title blocks containing defendant's name, as well as the name of the architect. The drawings also had Menchie's name on them. From this set, Bialosky selected drawings of a North Carolina Menchie's store, along with several pages of the Westgate store, to send to a CAD company. (Deutsch Dep. 164-67). Bialosky also sent its “layering standards” to create a “kit” that Bialosky could use in designing the stores for plaintiff. Bialosky always receives prototype drawings and puts them into its specific CAD format. (Deutsch Dep. 151-52). At no point did any party receive permission from defendant to use works copyrighted by defendant and defendant was not included in the communications between Menchie's and plaintiff. Thereafter, Bialosky created a number of drawings used by plaintiff in opening new Menchie's stores. Plaintiff testified that all of the Menchie's franchises it opened share a “very consistent” design.

         Defendant also testified that it had received shell drawings prepared by the architect of the buildings in CAD form from the landlord. According to defendant, these drawings contain only shell outlines of the space. Defendant incorporated the CAD into its CAD in order to create a design for the Menchie's store. (Bayha Dep. 51). Defendant indicated that such a process is commonplace. (Bayha Dep. 141-42).

         In February of 2013, while working together on another project, Menchie's sent defendant a confidentiality agreement. That document provides that all “Confidential Information, ” which is defined to include copyrights, belongs to Menchie's. The document is missing the evenly numbered pages, and the “Confidential Information” provision is set forth on an evenly numbered page. Nonetheless, the parties signed the document.

         Thereafter, in October of 2013, defendant and Menchie's agreed to part ways. (Neal Dep. 139-140). Defendant offered Menchie's full ownership rights to its CAD files and designs for two Menchie's franchise drawings, as well as a set of “drive through” designs. Menchie's responded that it did not believe it needed the design plans for two stores or the drive-through designs. (Neal Dep. Ex. 20). As such, Menchie's inquired as to whether the price for the CAD for one store would be $4, 500.00. (Id.). It does not appear that any further communication occurred. (Neal Dep. 146). One of Mechine's employees testified that he understood the email to be an offer to perform new work. (Regev Dep. 94). Menchie's believes that it owns the rights to items such as “the logo, colors, the curved wall and the circular bubble, the signage, whether it's interior and exterior.” (Kleinberger Dep. 245). This is so because these elements were present in the first store. (Id.).

         In late 2015, counsel for defendant wrote to plaintiff alleging that defendant owned certain copyrighted designs, including those covered under the DS Contracts and others, and that plaintiff had used those designs without defendant's permission. In response, plaintiff filed this lawsuit asserting two claims for declaratory relief. Count one seeks a declaration of non-infringement and count two seeks a declaration that plaintiff did not violate the Digital Millennium Copyright Act (“DMCA”). Defendant filed a counterclaim asserting ten claims for relief. Counts one through eight assert copyright infringement claims. Count nine is a claim for violation of DMCA and count ten is a claim for breach of contract. The Court previously granted in part defendant's motion to compel mediation and arbitration. The Court determined that counts one and two, as well as counterclaims one through nine, are subject to mediation and arbitration to the extent they are based on copyrights derived from work performed pursuant to the Ohio DS Contracts. The Court further compelled mediation and arbitration with respect to the breach of contract claim.

         Plaintiff now moves for summary judgment with respect to the remaining claims and defendant opposes the motions.

         STANDARD OF REVIEW

         Rule 56(a) of the Federal Rules of Civil Procedure, as amended on December 1, 2010, provides in relevant part that:

A party may move for summary judgment, identifying each claim or defense-or the part of each claim or defense-on which summary judgment is sought. 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).

         Rule 56(e) provides in relevant part that “[i]f a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may ... consider the fact undisputed for purposes of the motion ... [and] grant summary judgment if the motion and supporting materials-including the facts considered undisputed-show that the movant is entitled to it.” Fed.R.Civ.P. 56(e).

         Although Congress amended the summary judgment rule, the “standard for granting summary judgment remain unchanged” and the amendment “will not affect continuing development of the decisional law construing and applying” the standard. See, Fed.R.Civ.P. 56, Committee Notes at 31.

         Accordingly, summary judgment is appropriate when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986) (citing Fed.R.Civ.P. 56(c)); see also LaPointe v. UAW, Local600, 8 F.3d 376, 378 (6th Cir. 1993). The burden of ...


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