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Design Basics, LLC v. Landmark Communities, Inc.

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

June 4, 2019

Design Basics, LLC, Plaintiff,
v.
Landmark Communities, Inc., et al., Defendants.

          ORDER DENYING AS MOOT PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

          Susan J. Dlott, United States District Judge

         This matter is before the Court on Plaintiff's Motion for Partial Summary Judgment (Doc. 65) and the Landmark Defendants' Motion for Summary Judgment (Doc. 66). Plaintiff asserts that the Landmark Defendants copied and built homes using its copyrighted home designs. The Landmark Defendants deny copying Plaintiff's designs and deny that their home designs are substantially similar to Plaintiff's designs. For the reasons that follow the Court will DENY AS MOOT Plaintiff's Motion for Partial Summary Judgment and GRANT Defendants' Motion for Summary Judgment.

         I. BACKGROUND

         A. Procedural Posture

         The procedural posture of this case is complicated and will be addressed briefly at the outset before setting forth the factual background in detail. On June 29, 2017, Plaintiff Design Basics, LLC (“Design Basics”) initiated this suit against sixteen individuals and entities for copyright infringement of architectural home designs. (Doc. 1.)

         A group of eight defendants collectively referred to herein as the “Landmark Defendants, ” filed Waivers of Service of Process on July 28, 2017 and have mounted a litigation defense against the claims against them. (Docs. 22-29.) The Landmark Defendants include Landmark Communities, Inc.; Berkey Homes, LLC; Kelly Homes, Inc.; PR Properties, Inc.; Orchard Meadows, LLC; Paul A. Berding; Matthew P. Berding; and Ronald Gehrlich.

         Service of process was executed upon a separate group of four defendants collectively referred to herein as “the Gehrlich Defendants” in September and October 2017. (Docs. 41-44.) The Gehrlich Defendants include Gehrlich Group, Inc.; Gehrlich Group, LLC; Gehrlich Properties, LLC; and Keith M. Gehrlich. However, the Gehrlich Defendants did not file responsive pleadings. Upon application by Design Basics, the Clerk of Court filed an Entry of Default pursuant to Rule 55(a) of the Federal Rules of Civil Procedure against the Gehrlich Defendants on November 15, 2017. (Doc. 50.)

         Service of process was returned unexecuted on September 29, 2017 against three more defendants: Gehrlich Builders, LLC; Gehrlich Homes, Inc.; and Jeffrey A. Gehrlich. (Docs. 38- 40.) Finally, Defendant DL Gehrlich, LLC executed a Waiver of Service of Summons on August 16, 2017, (Doc. 36), but it did not file a responsive pleading, nor has it participated in this litigation. However, Design Basics has not sought an entry of default against the company.

         After these initial proceedings, Landmark Defendants and Design Basics engaged in discovery. Design Basics filed an Amended Complaint against all sixteen Defendants on June 1, 2018 asserting nine claims for non-willful copyright infringement, willful copyright infringement, and violations of the Digital Millennium Copyright Act. (Doc. 58.) The eight Landmark Defendants filed a timely Answer asserting thirteen affirmative defenses. (Doc. 59.) Following discovery, Design Basics and the Landmark Defendants filed the pending cross-Motions for Summary Judgment on March 1, 2019. Design Basics seeks partial summary judgment only on the issues of whether it has ownership of valid copyrights in the seven architectural home designs and whether the Landmark Defendants can support ten of their affirmative defenses. The Landmark Defendants seek summary judgment as a matter of law as to the claims against them.

         B. Factual History[1]

         1. Plaintiff Design Basics, LLC

         Design Basics formerly known as Design Basics, Inc. (“DB Inc.”), has been in the business of creating, marketing, publishing, and licensing the use of architectural works since the early 1980's. Carmichael and Sherman restructured DB Inc. into Design Basics. Design Basics owns the assets and intellectual property of DB Inc.

         For over three decades, Design Basics and its predecessor, DB Inc., marketed its original custom and ready-made home plans for single and multi-family homes through plan catalogs, home building industry publications, brokerage marketing partners, client-specific publications, and the internet. Every work within Design Basics' residential house plan portfolio is registered with the U.S. Copyright Office before being marketed in any way. Design Basics' customers license the home plans for marketing and construction purposes. Design Basics also customizes home plans for its builder customers and helps them market to potential home buyers. Design Basics has seen a decline in its annual plan licensing revenue over the past fifteen years. It has decreased its employee base by 75% as a result. Design Basics attributes the decline in its license sales to the rise of theft of its plans. Design Basics has filed more than 100 cases asserting copyright infringement of its plans.

         Patrick Carmichael and Myles Sherman purchased DB Inc. in 2009 as an investment opportunity. Carmichael and Sherman invested in the company's infrastructure, installed a new database system, created new, ready-made house designs, increased marketing, continued to attend national home building expos, and started an internet blog. Design Basics continues to create and market new original home plans. It has authored approximately 350 new home plans since 2009.

         2. The Landmark Defendants

         In 1978, Defendant Paul Berding, Defendant Ronald Gehrlich, and non-party Joe Schwartz, formed Defendant Landmark Communities, a single-family home building company. Paul Berding and Ronald Gehrlich had previously worked for Joe Schwartz at Universal Home Builders. (P. Berding Aff., Doc. 60 at PageID 543.). Paul Berding, an architect, drafted plans for homes that Universal Home Builders was or would be constructing. After its founding, Landmark Communities constructed some homes using Universal Home Builders' designs with permission from Joe Schwartz.

         Defendant Kelly Homes, Inc. was formed in 1996 by Paul Berding, Ronald Gehrlich, and non-party Dennis Kelly. Defendant Berkey Homes was formed in 2005 by Defendant Matthew Berding, Paul Berding's son and a former employee of Landmark Communities, and non-party Kevin Keyes, Paul Berding's son-in-law and a former employee of Landmark Communities. (LC Dep., Doc. 74-1 at PageID 1033.) Paul Berding gave both Kelly Homes and Berkey Homes permission to use Landmark Communities' designs to market, construct, and sell homes. The companies, therefore, share the same base home designs. Berkey Homes and Kelly Homes share office space with Landmark Communities, but all three companies keep separate books. (Id. at PageID 1032-1034.)

         Paul Berding also formed Defendant PR Properties in 1989 and Defendant Orchard Meadows in 2005, both to purchase and develop tracts of land for residential home sites. Neither PR Properties nor Orchard Meadows belong to any builders' association nor have they marketed, sold, or constructed a home. PR Properties and Orchard Meadows have not received profits from Landmark Communities, Kelly Homes, or Berkey Homes. (P. Berding Aff., Doc. 60 at PageID 544.)

         3. Purported Copyright Infringement

         Design Basics obtained the registration certificates from the U.S. Copyright Office for the seven home designs at issue in this case (“the Copyrighted Works”): the Paterson, Bermier, Ingram, Pawnee Point, Collier, Linden, and Lancaster designs. Patrick Carmichael, an owner and the chief operating officer of Design Basics, stated that on July 1, 2014 he found designs on the website, www.berkeyhomes.com, which infringed upon Design Basics' home designs. The Copyrighted Works and the corresponding Accused Works constructed, marketed, and sold by the Landmark Defendants can be found in the record as follows:

Design Basics' Copyrighted Works

PageID #

Defendants' Accused Works

PageID #

Paterson

Doc. 63-1 at 646-660

Beech Creek

Doc. 72-2 at 894, 903, 912

Bermier

Doc. 63-2 at 661-680

Muirfield

Doc. 72-2 at 897, 906, 915

Ingram

Doc. 63-3 at 681-701

Sunnybrook

Doc. 72-2 at 898, 907, 916

Pawnee Point

Doc. 63-4 at 702-715

Windsor, Windsor III, Windsor IV

Doc. 72-2 at 901-902, 910-911, 920

Collier

Doc. 63-5 at 716-733

Amberwood

Doc. 72-2 at 896, 905, 914

Linden

Doc. 63-6 at 734-752

Hutchinson/Applegate

Doc. 72-2 at 899-900, 908-909, 917-918

Lancaster

Doc. 63-7 at 753-767

Bedford

Doc. 72-2 at 895, 904, 913

         Design Basics asserted that through investigation and discovery it determined that the Landmark Defendants constructed, marketed, and sold at least 274 three-dimensional copies (houses) of the seven Copyrighted Works. (Carmichael Aff., Doc. 63 at PageID 644-645.)[2]

         The Landmark Defendants deny that their home designs or the homes constructed using the designs infringe upon the Copyrighted Works. Paul Berding stated that he had not heard of Design Basics before this lawsuit. (LC Dep., Doc. 74-1 at PageID 1041.) He denied that Landmark Communities copied the Copyrighted Works, and he asserted generally that all of the home designs offered by Landmark Communities were either designed from scratch or were modifications to the original Universal Home Builders' designs. (P. Berding Aff., Doc. 60 at PageID 543.) More specifically, he stated that he created a design called the American Classic with eight different elevations in the early 1980s. (Id. at PageID 543-544.) He later used the American Classic to create designs entitled Hutchinson and Applegate.[3] However, Landmark Communities also retained co-op students to draft house designs. (LC Dep., Doc. 74-1 at PageID 1031-1032.) Paul Berding specifically stated on behalf of Landmark Communities that he did not know who designed several of the Accused Works including the Sunnybrook, the Windsor, the Amberwood, the Applegate, or the Bedford. (Id. at PageID 1032, 1036-1037.) He agreed that it likely was the co-op student drafters. (Id.) He admitted that he did not know what steps the co-op student drafters took to design new home plans such as the Accused Works. (Id. at PageID 1037.)

         II. LEGAL STANDARDS FOR SUMMARY JUDGMENT MOTIONS

         Federal Rule of Civil Procedure 56 governs motions for summary judgment. Summary judgment is appropriate if “there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The movant has the burden to show that no genuine issues of material fact are in dispute. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); Provenzano v. LCI Holdings, Inc., 663 F.3d 806, 811 (6th Cir. 2011). The movant may support a motion for summary judgment with affidavits or other proof or by exposing the lack of evidence on an issue for which the nonmoving party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986). In responding to a summary judgment motion, the nonmoving party ...


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