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Design Basics, LLC v. Forrester Wehrle Homes, Inc.

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

March 27, 2018

Design Basics, LLC, Plaintiff
v.
Forrester Wehrle Homes, Inc., et al., Defendants

          ORDER

          James G. Carr Sr. U.S. District Judge

         This is a copyright-infringement case.

         Plaintiff Design Basics, LLC (DB), creates, markets, and licenses architectural plans for single-family homes. (Doc. 58 at ¶1). It contends that defendants - Forrester Wehrle Homes, Inc.; Wehrle Development, Ltd.; and their principals Jeffrey, Richard, and Joseph Wehrle (collectively, FWH) - infringed DB's copyrights in twenty-three architectural plans. (Id. at ¶¶35-36). The defendants allegedly did so by copying DB's plans, marketing the copied plans, creating unauthorized derivative works, and using DB's plans to build homes. (Id. at ¶¶44-59).

         Pending are, inter alia, the defendants' motions for summary judgment on the issue of substantial similarity (Doc. 82) and to exclude the declaration of Carl Cuozzo. (Doc. 97). Because FWH has not shown that no reasonable jury could find that its designs are substantially similar to DB's works at the protected level of expression, I deny the motion for summary judgment. I also deny the motion to strike.

         Background

         DB is an architectural-design firm based in Omaha, Nebraska. (Doc. 58 at ¶¶1, 10). Since the 1980s, DB has “marketed its original custom and ready-made home plans for single and multi-family homes through plan catalogs, home building industry publications . . . client-specific publications, and the internet.” (Doc. 83-1 at 2). DB holds copyrights in roughly 2, 000 home designs. (Doc. 82-1 at 8); see also Design Basics, LLC v. Lexington Homes, Inc., 858 F.3d 1093, 1096 (7th Cir. 2017) (“[DB] and their affiliates claim rights to some 2700 home designs.”).

         Characterizing itself as “a leader in the residential home plan industry” (Doc. 83-2 at ¶19), DB observes that, each year between 1998 and 2005, it generated an average of $4 million by licensing its design plans. (Id. at ¶20). After the housing-market collapse of 2008, however, DB's licensing revenues shrank by seventy-five percent. (Id. at ¶¶20). DB's owners started looking for someone to take over the business, and, in 2009, Myles Sherman and Patrick Carmichael purchased DB. (Id. at ¶¶4, 7).

         Since the change in ownership, DB has “authored approximately 350 new original architectural works[.]” (Id. at ¶22).

         The company also began undertaking copyright litigation in federal courts across the country. Lexington, supra, 858 F.3d 1096-97 (noting Carmichael's testimony that “proceeds from litigation have become a principal revenue stream for [DB]”). Based on a search of the Public Access to Court Electronic Records (PACER) database, it appears that DB has filed at least 103 copyright infringement lawsuits since June, 2009, with the vast majority of the filings coming in or after 2013. As the Seventh Circuit recognized, the flood of litigation is a product of the company's internal and acknowledged “bounty program.” According to Sherman, “[t]heft of DB's readily available copyrighted works is rampant and has been for nearly two decades - since the rise of the internet and the ready availability of its plans.” (Doc. 83-2 at ¶10). Accordingly, DB “offers its employees incentives to scout out potential copyright infringement cases, paying its employees a finder's fee in the form of a percentage of the net recovery relating to any home plans that they located” on the Internet. Lexington, supra, 858 F.3d at 1097.

         A. DB's Relationship with FWH

          FWH is a family-run business located in Maumee, Ohio, that builds homes in Northwest Ohio and Southeastern Michigan. (Doc. 81-1 at 4-10; Doc. 87-2 at ¶¶1-2).

         The relationship between DB and FWH dates back to 1993, when DB licensed two of its architectural plans - the Ashton and the Albany - to FWH. (Doc. 58 at ¶37). Since then, DB, whether on its own initiative or at the request of FWH, mailed at least fifteen of its catalogs containing additional architectural designs to FWH. (Id.; Doc. 83-3 at ¶29).

         In March, 2013, while DB was preparing “marketing efforts” in Ohio, the company “became aware that [FWH] had violated its copyrights in one or more distinct ways.” (Doc. 58 at ¶35). DB acquired this information when its “senior designer, ” Carl Cuozzo, visited FWH's website and concluded that FWH's designs infringed DB's copyrighted plans. (Doc. 83-3 at ¶4).

         B. Litigation

         DB filed this suit in April, 2015, alleging that FWH's designs infringed DB's copyright in fifteen copyright works. (Doc. 1 at ¶26).

         1. Infringement Claims

         In November, 2016, DB filed its second amended complaint. This complaint alleged that twenty-nine of FWH's plans infringed DB's copyright in twenty-three of its own designs. (Doc. 58 at ¶¶35-36). It also alleged that FWH used either DB's plans, or plans FWH made by copying DB's plans, to build more than three hundred homes in Northwest Ohio.

          There are nine counts in the second amended complaint:

• Count One: Infringement of DB's copyrighted works by “scanning, copying, and/or reproducing unauthorized copies thereof, ” in violation of 17 U.S.C. § 106(1).
• Count Two: Infringement of DB's copyrighted works by “publicly displaying on [FWH's] website(s) and elsewhere, for purposes of advertising and marketing, unauthorized copies or derivatives thereof, ” in violation of 17 U.S.C. § 106(5).
• Count Three: Infringement of DB's copyrighted works by “creating derivatives therefrom in the form of two dimensional plans and fully constructed residences, ” in violation of 17 U.S.C. § 106(2).
• Count Four: Infringement of DB's copyrighted works by “advertising, marketing, and/or selling one or more houses based upon copies or derivatives of said works, ” in violation of 17 U.S.C. § 106(3).
• Counts Five through Eight: Infringement as described in Counts One through Four committed “willfully.” • Count Nine: Violation of the Digital Millennium Copyright Act, 17 U.S.C. § 1202, et seq., by “remov[ing] and omitt[ing] DB's copyright management information from copies of DB's works, ” and distributing copies or derivatives of such works with the knowledge that distributing them without DB's copyright management information would induce and facilitate further infringement of DB's copyrights.

(Doc. 58 at ¶¶45, 47, 49, 51, 53, 55, 57, 59, 61-64).

         FWH originally asserted an “independent creation” defense to DB's claims, but it later withdrew the defense “with prejudice” as to all of the allegedly infringing works except FWH's Franklin design. (Doc. 49 at 18-19).

         2. Earlier Proceedings

         Discovery closed in mid-April, 2017, and, after I denied FWH's belated, eleventh-hour motion to extend fact discovery (Docs. 73, 77), summary-judgment practice got underway in July, 2017. The defendants filed: 1) a motion for partial summary judgment on statute-of-limitations grounds (Doc. 81); 2) a motion for summary judgment on the issue of the substantial similarity of the parties' works (Doc. 82); and 3) the motion to strike Cuozzo's declaration (Doc. 97).

         DB filed its own motion for partial summary on the issues of FWH's access to its designs and the validity of DB's copyrights. (Doc. 83). It also filed motions to strike and exclude the reports of defendants' experts John D. Gugliotta and Richard Kraly. (Docs. 84, 89).

         By order entered November 14, 2017, I granted in part and denied in part FWH's motion to exclude Kraly's original report and granted in full the motion to exclude Kraly's supplemental report. Design Basics, LLC v. Forrester Wehrle Homes, Inc., 2017 WL 5467152 (N.D. Ohio) (Design Basics I).

         In a separate order issued that day, I concluded that the parties' briefs were insufficient to allow me to determine “whether there is a triable issue on the question of the works' substantial similarity.” Design Basics, LLC v. Forrester Wehrle Homes, Inc., 2017 WL 5444569, *1 (N.D. Ohio) (Design Basics II).

         For one thing, DB misrepresented the state of the law by claiming that the Sixth Circuit had yet to provide “a clear and unequivocal method of analyzing substantial similarity for architectural works.” (Doc. 89 at 32). As I explained - and as a Magistrate Judge of this District had previously explained to DB's counsel when counsel raised this same argument in an earlier case, see Design Basics, LLC v. Petros Homes, Inc., 2017 WL 2842783, *2 (N.D. Ohio) (Parker, J.) - the Sixth Circuit evaluates the substantial similarity of all copyrighted works under a two-step framework:

[T]he first step requires identifying which aspects of the artist's work, if any, are protectible by copyright; the second involves determining whether the allegedly infringing work is substantially similar to protectible elements of the artist's work. We approve this method and adopt it.
The essence of the first step is to filter out the unoriginal, unprotectible elements - elements that were not independently created by the inventor, and that possess no minimal degree of creativity - through a variety of analyses.

Design Basics II, supra, 2017 WL 5444569 at *2 (quoting Kohus v. Mariol, 328 F.3d 848, 853 (6th Cir. 2003)).

         Contrary to DB's representation, the Circuit had applied this two-step filtration test to architectural works specifically in Tiseo Architects, Inc. v. B & B Pools Serv. & Supply Co., 495 F.3d 344, 345 (6th Cir. 2007) (“Because the district court properly analyzed the similarity of the works after filtering out the unprotectable elements of Tiseo Architects' drawings, the judgment of the district court is affirmed.”).

         For its part, FWH focused on explaining “why certain constituent elements of DB's plans . . . are not themselves original or copyrightable.” Design Basics II, supra, 2017 WL 5444569 at *3.

         This focus was misguided, I concluded, because:

I do not understand DB to be claiming a copyright in these kinds of standard features or elements, which the Copyright Act in any event excludes from protection. See 17 U.S.C. § 101. Rather, DB seems to claim copyright protection in the allegedly unique way in which it has arranged these kinds of elements in each of its home designs. Yet the defendants' briefs and supporting materials devote less attention to that question.

Id.

         Accordingly, I directed the parties to file supplemental briefs on the question whether, “viewing the evidence in the light most favorable to DB, a reasonable jury could find that FWH's design plans are substantially similar to DB's plans at the protected level of expression.” Id. at *3.

         More specifically, I ordered FWH to identify “what parts of DB's architectural work - the overall look and feel, the selection, composition, and arrangement of standard or unprotected elements, or other design choices and elements - amount to unprotected expression and to protected expression.” Id. at *5. In doing so, I directed FWH to “support such claims by citing to the record, ” with all citations in compliance with Fed.R.Civ.P. 56(c)(1). Id. As to DB, I ordered it to “identify, with as much specificity as the record permits - and by citing to the record in accordance with Fed.R.Civ.P. 56(c)(1) - what parts of its architectural works amount to protected expression.” Id. at *6.

         Standard of Review

          Summary judgment is appropriate under Fed.R.Civ.P. 56 where the opposing party fails to show the existence of an essential element for which that party bears the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The movant must initially show the absence of a genuine issue of material fact. Id. at 323.

         Once the movant meets that burden, the “burden shifts to the nonmoving party [to] set forth specific facts showing there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). Rule 56 “requires the nonmoving party to go beyond the [unverified] pleadings” and submit admissible evidence supporting its position. Celotex, supra, 477 U.S. at 324.

         I accept the non-movant's evidence as true and construe all evidence in its favor. Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 456 (1992).

         Discussion

         To prevail on an infringement claim, a copyright holder must establish that: 1) it owns a valid copyright in the work at issue; 2) the defendant copied its work; and 3) the copying was wrongful. Kohus, supra, 328 F.3d at 853. As I explained in Design Basics II, supra, 2017 WL 5444569 at *1:

The plaintiff can prove copying “with either direct evidence of copying, ” or, as DB attempts to do here, “through an inference of copying.” Robert L. Stark Enterprises, Inc. v. Neptune Designs Grp., LLC, 2017 WL 1345195, *5 (N.D. Ohio) (Gaughan, J.).
To generate an inference of copying, the copyright owner must show “(1) access to the allegedly-infringed work by the [infringer] and (2) a substantial similarity between the two works at issue.'” Id. (quoting Kohus, supra, 328 F.3d at 853-54).
Because “[n]ot all copying . . . is copyright infringement, ” Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 348 (1991), the plaintiff must establish that “the defendant's work is ‘substantially similar' to protectible elements of the plaintiff's work, ” Sturdza v. United Arab Emirates, 281 F.3d 1287, 1295 (D.C. Cir. 2002). Thus “the term substantial similarity is properly reserved for similarity that exists between the protected elements of a work and another work.” Zalewski [v. Cicero Builder Dev., Inc., ] 754 F.3d [95], 101 [(2d Cir. 2014)].

         “To determine whether an instance of copying is legally actionable, a side-by-side comparison must be made between the original and the copy to determine whether a layman would view the two works as substantially similar.” Lennar Homes of Tex. Sales & Marketing, Ltd. v. Perry Homes, LLC, 117 F.Supp.3d 913, 933 (S.D. Tex. 2015); see Kohus, supra, 328 F.3d at 857 (“the inquiry in the second prong of the substantial similarity test should focus on the intended audience, ” which “will ordinarily be the lay public”) (internal emphasis omitted).

         A. Protected Level of Expression in Architectural Works

         An architectural work” is “the design of a building as embodied in any tangible medium of expression, including a building, architectural plans, or drawings.” 17 U.S.C. § 101.

         Copyright protection in such works extends to “the overall form as well as the arrangement and composition of spaces and elements in the design, but does not include individual standard features.” Id. Nor does protection extend to the “standard configurations of spaces as well as common windows, doors, ...


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