Opinion
Case No. 2:02CV923DAK.
February 11, 2005
MEMORANDUM DECISION AND ORDER
This matter is before the court on Defendants Majestic Homes, Inc. and David Larsen's (collectively, "Defendants" or "Majestic") Motion for Summary Judgment. A hearing on the motion was held on January 28, 2005. At the hearing, Defendants were represented by J. Angus Edwards and Plaintiff Techni-Graphic Services, Inc. ("TGS") was represented by Catherine L. Brabson. The court took the motion under advisement. The court has considered carefully the memoranda and other materials submitted by the parties, as well as law and facts relating to the motions. Now being fully advised, the court renders the following Memorandum Decision and Order.
BACKGROUND
Plaintiff Techni-Graphic Services, Inc. ("TGS") brought copyright infringement and unfair competition and false advertising claims against Defendants Majestic Homes, Inc., David Larsen, Architectural Concepts, Inc., and Claron Perry for allegedly infringing TGS's copyrights in two architectural plans for single family homes.
TGS has registered copyrights in two architectural plans for single family homes: TGS Plan 1885 and TGS Plan 1725. TGS Plan 1725 is a derivative of TGS Plan 1885. In the summer of 1999, TGS discovered that ACI was selling an architectural plan designated as ACI Plan 1801. TGS alleges that the 1801/1860 Plan is substantially similar to both TGS Plans 1885 and 1725. Thus, TGS, through counsel, sent two letters, dated August 11, 1999 and August 30, 1999, to Mr. Perry, President of ACI, demanding that ACI cease offering ACI Plan 1801 or consequently TGS would take legal action to enforce its intellectual property rights.
According to the ACI/Perry Defendants, Plan 1801 was originally designated as Plan 1760. Upon recalculation of the square footage of Plan 1760 it was found to be 1801 square feet, not 1760 as originally thought. Thus, ACI Plan 1760 was redesignated as Plan 1801. When ACI's Plan 1801 was built by Defendant Majestic appraisers stated that it had 1860 square feet. Therefore, Defendant Majestic designated ACI Plan 1801 as Majestic Plan 1860. Thus, Plans 1760, 1801, and 1860 appear to be the same plans.
TGS was represented by Paul C. Oestreich and Thomas Rossa of Trask Britt Rossa during this period of time.
In its letter, TGS also requested that ACI provide it with a list of all of ACI's customers that have purchased ACI Plan 1801. Defendant Majestic Homes had purchased Plan 1801 from ACI. However, ACI did not provide TGS with a list of customers and it appears that TGS did not pursue the matter of customer names any further with ACI.
In 1999, Perry advised Majestic that he had received a letter stating that there was another architect stating that he had a copyrighted plan similar to the ACI Plan 1801 and that rather than fight the claim ACI was going to cease sales of the ACI Plan 1801. ACI did not show Majestic the letter. When Defendant Larsen asked Perry whether Majestic could continue to purchase the 1500/1560 Plan from ACI, Perry stated that the letter only mentioned ACI Plan 1801.
In the Spring of 2001, TGS discovered that Majestic had obtained ACI Plan 1500, which is also known by Majestic as the 1560 Plan. Defendant Larsen told TGS that Majestic's customers had ordered homes from Majestic using the 1500/1560 Plan. But, when TGS notified Majestic that the 1500/1560 Plan allegedly infringed a copyright, it also stated that it did not have a plan in that range of square footage to sale to Majestic. Larsen delivered a 1500/1560 Plan to TGS for use in the preparation of TGS' 1526 Plan. Larsen informed Lunt that he did not know there was a copyright problem with the 1500/1560 Plan because Perry had told him there was only a problem with the 1801/1860 Plan.
After Majestic learned that TGS believed the 1500/1560 Plan Majestic was using to build two homes (Lot 311 and Lot 540 in the Foothills subdivision in Riverton City) was infringing TGS' copyrights, Majestic paid TGS for the TGS plans. Majestic's realtor prepared advertising brochures for homes built using both of the plans. Majestic also built a model home of the 1801/1860 Plan which potential customers could tour.
TGS markets and distributes a "Residential Designs" planbook to potential customers in the Salt Lake valley, and Utah and Davis Counties. The planbook contains abbreviated architectural plans that show the layout of floor plans, rooms, and dimensions including TGS Plans 1885 and 1725. TGS' invoice records show that Majestic Homes bought and paid for a TGS "Residential Designs" planbook on March 3, 1996. The invoice was issued in the name of Majestic Homes and signed by Gary Cannon, a realtor who worked with Majestic Homes on occasion. TGS invoice records also show that approximately one month later, on April 2, 1996, another Majestic Homes realtor, Gordon Milar, purchased 7 sets and a color rendering of TGS Plan 1885. TGS claims that Milar was the exclusive realtor for Majestic Homes Plan 1860 and Plan 1560. However, Defendant Larsen has submitted an Affidavit stating that neither realtor had the authority to act on behalf of Majestic at that time.
TGS further claims that three months later, in July of 1996, Majestic began constructing a home allegedly using the ACI 1801/1860 Plan. Plans used by Majestic Homes to construct a home for its customers, Tad and Michelle Campbell, were filed with the City of Riverton on or about July 17, 1996, and included the designation "DRAWN BY ARCHITECTURAL CONCEPTS" . . . "MAIN FLOOR PLAN 1760."
TGS seeks to recover damages from Majestic for copyright infringement in the construction of 35 homes that used the 1500/1560 Plan and the 1801/1860 Plan.
DISCUSSION
A. Statute of Limitations
First, Defendants argue that TGS's copyright cause of action is barred by the statute of limitations. Under 17 U.S.C. § 507(b) "[n]o civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued." This court's October 23, 2003 Order found that, with respect to the ACI Defendants, that any infringing activities accruing prior to August 13, 1999 were outside the limitation period.
Majestic argues that the same limitation period should apply to it because TGS would have or should have known that ACI sold its house plans to customers, such as Majestic. TGS argues that it was not and reasonably could not have been aware of Majestic's infringing homes before the spring of 2001. Of the 35 allegedly infringing homes, 15 were started by Majestic after August 1999.
A copyright claim accrues when the plaintiff learns, or in the exercise of due diligence should have learned, that the defendant was infringing its rights. James W. Ross, Inc. v. Cecil Allen Constr., Inc., 2004 U.S. Dist. LEXIS 7521. Courts must look to the facts and circumstances of each case to determine when the statute of limitations begins to toll. Id. The James W. Ross court rejected the notion that the owner of a copyrighted house plan would need to employ a full time investigator to scour public records and drive around every housing development to ensure that no infringing houses are being built. Id.
In this case, TGS's letter to ACI regarding alleged infringement requested ACI to disclose the names of the customers who had purchased ACI Plan 1801. Rather than provide those names in response, ACI responded to TGS by stating that it would remove Plan 1801 from the market. Even though ACI did not reveal the names of its customers, Majestic asserts that with due diligence TGS could have learned of its name and discovered the allegedly infringing conduct. Majestic argues that TGS knew that ACI did not build homes and its failure to require ACI to disclose its customers who had bought plans from ACI was unreasonable as a matter of law. TGS asserts that it had no reasonable means of discovery of the purchasers, including Majestic.
It is undisputed that TGS did not learn of Majestic's infringement until the spring of 2001 when a builder faxed Majestic Plan 1860 to TGS because he believed it was a TGS design. It was not until TGS sent a demand letter to Majestic in the spring of 2001 that TGS learned that Majestic had even purchased plans from ACI. Even if TGS had reviewed ACI's records, ACI's records show only one sale of its Plan 1500 to Majestic in February of 1999. The court cannot conclude based on the facts before it that Majestic's failure to pursue ACI's customers was unreasonable as a matter of law. There is a question of fact as to whether TGS could have reasonably learned of Majestic's infringement prior to the spring of 2001. Therefore, Majestic's motion for summary judgment on statute of limitation grounds is denied.
B. Other Lots
There are five other homes for which Majestic seeks summary judgment on the grounds that three were not built from TGS plans and two were paid for by Majestic. TGS asserts that the three homes that Majestic claims were not built using TGS plans are in fact infringing. Lot 547 and 558 in the Foothills subdivision in Riverton City have building permits that state that the "same plan 1500" was used. During discovery, Majestic admitted that it "card filed" its 1500/1560 Plan with Riverton City which allowed it to apply for multiple building permits without submitting additional blueprints for each home. TGS asserts that the indication on the building permits for Lot 547 and 558 that the plan being used was the "same plan 1500" demonstrates that the "card filed" plan was being used. With respect to Lot 208 of the Foothills subdivision in Riverton City, TGS asserts that the documents in Majestic's files for this home suggest that the plans were derived from TGS Plan 1885. TGS contends that there is a sketch for the home in the file that is substantially similar to TGS Plan 1885 although the plan was designated by Majestic as Adams Plan 1550.
Majestic argues that the building permits for Lots 208, 547, and 558 in the Foothills Subdivision are unreliable evidence that should not be admitted because the "same plan 1500" notation is an ambiguous reference whereas Majestic's verified discovery answers and the Affidavit of Defendant Larsen state that the homes were not built using the 1500/1560 Plan. Majestic also argues that, more importantly, the description of the plans in the building permits is unreliable to prove the size or style of homes that were built because the Chief Building Official for Riverton City, Mr. Ball, testified that building permits contain errors and the city was not too concerned with what was written on the permits. Mr. Ball also testified that the size of the home on the permit merely determined the amount of fees to charge and he did not inspect the homes for square footage. Therefore, Majestic argues that the fact that "Same Plan 1500" was written on the permits is not reliable evidence of the plan that Majestic used to build the home.
With respect to these three lots, the court concludes there is enough evidence to survive summary judgment. The credibility of the notations on the building permits are arguments for a jury, not for judgment as a matter of law. Therefore, Majestic's motion for summary judgment with respect to these lots is denied.
As to the two homes for which Majestic paid TGS for its plans, Majestic argues that TGS expressly authorized Majestic to build the homes. The invoices identified the lots and stated that "this purchase constitutes authority to build one building(s) only of each plan listed above." TGS argues that Majestic did not approach it to purchase plans for Lot 540 and Lot 311 until shortly after Lunt informed Majestic that it had learned of Majestic's alleged infringement. Majestic had already applied and obtained building permits for both lots using the infringing 1500/1560 Plan. The building permits for both of these lots indicate that they were applied for at least a month before TGS learned of Majestic's infringement and that the plan was the "same plan 1500" that Majestic had "card filed" with Riverton City.
Although TGS makes much of the fact that Majestic was allegedly infringing on its copyrights before it agreed to pay for the plans, TGS entered into an agreement with Majestic and granted Majestic authority to build the homes. TGS knew of the alleged infringement before it chose to grant Majestic authority for the two lots in its invoice. The court concludes that TGS should be bound by the representations in its invoice. Based on TGS's invoices specifically granting Majestic authority to build both homes, the court concludes that Majestic is entitled to judgment as a matter of law with respect to Lot 540 and Lot 311.
C. Copying — Access
Next, Defendants argue that TGS cannot demonstrate that Majestic copied TGS' plans because Majestic's only access to TGS' plans was when it bought the 1500/1560 or 1801/1860 Plans from ACI long after they were supposedly copied by ACI. Majestic acknowledges that the case law in this area allows TGS to prove "copying" with circumstantial evidence that Majestic "had access to the copyrighted work and that there are probative similarities between the copyrighted material and the allegedly copied material." Country Kids `N City Slicks, Inc. v. Sheen, 77 F.3d 1280, 1284 (10th Cir. 1996).
Majestic asserts that it does not provide any design services for its customers and has never drawn house plans to build homes. And, there is no evidence that Majestic engaged in contributory infringement by asking ACI to draw the 1500/1560 and 1801/1860 Plans for Majestic. The absence of any evidence of direct copying by Majestic means that TGS must prove that Majestic had access to TGS' 1725 and 1885 Plans and that those plans are substantially similar to the homes built by Majestic with the 1500/1560 and 1801/1860 Plans. Majestic contends that it has uncontested testimony that it did not have access to TGS' plans. Majestic claims that whenever it used Plans 1500/1560 and 1801/1860 to build a home, the plans were purchased from ACI.
Majestic argues that TGS has the burden to prove that Majestic had access to the 1725 and 1885 Plans before ACI created the 1500/1560 and 1801/1860 Plans. Majestic asserts that it was unaware of ACI and any of the plans in ACI's inventory at the time plaintiff contends that ACI copied the 1725 and 1885 Plans. In a copyright suit "[a] plaintiff must offer significant, affirmative and probative evidence to support a claim of access." Intersong-USA v. CBS, Inc., 757 F. Supp. 274, 281 (S.D.N.Y. 1991). "Conjecture or speculation of access will not suffice." Id. Majestic contends that TGS merely speculates that Majestic had access to its widely distributed plans because Majestic was a homebuilder in the same city as TGS.
TGS takes issue with Majestic's argument that there is only hypothetical evidence showing that it had access to the TGS home plans. The court agrees and concludes that there is enough evidence to create an issue of fact. Although Majestic claims that it never possessed a TGS "Residential Designs" planbook, according to TGS invoice records, Majestic Homes bought a TGS "Residential Designs" planbook on March 3, 1996. The invoice was issued in the name of Majestic Homes and signed by Gary Cannon, a realtor who worked with Majestic Homes on occasion. TGS invoice records also show that on April 2, 1996, another Majestic Homes realtor, Gordon Milar, purchased 7 sets and a color rendering of TGS Plan 1885. Both of these purchases were before the alleged "creation date" of the ACI 1801 Plan. Gordon Milar is the real estate agent Majestic Homes listed on its advertising brochures for the 1801/1860 and 1500/1560 Plans. TGS asserts that only three months after these purchases were made, Majestic began construction of an infringing home using the 1801/1860 Plan.
Majestic argues that the Affidavit of Defendant Larsen states that in 1996 Cannon and Milar were not authorized by Majestic to execute these invoices or to buy materials for Majestic. Mr. Cannon was never employed by Majestic and Mr. Milar was Majestic's real estate agent for homes built at the Foothills subdivision but not until 1998-2 years after the invoices were signed. However, the court concludes that there is evidence supporting both sides and the issue should resolved at trial.
In addition, the TGS "Residential Designs" planbook is and was widely available throughout the Salt Lake Valley region. In the expert report of Guy Haskell, he specifically noted this fact and acknowledged to TGS when he was approached to be an expert in this matter that he had a current copy of TGS' "Residential Design" planbook. In response to a similar argument advanced by co-defendant ACI, this court denied summary judgment on this issue of access based on Mr. Lunt's declaration that the TGS "Residential Designs" planbook is widely available and commonly possessed by Salt Lake area homebuilders. Although Majestic claims that its only opportunity for access to the TGS plans was through the purchase of ACI's plans, such a conclusion could be undermined by these facts. Therefore, the court concludes that, based on the above evidence, summary judgment is improper and Majestic is not entitled to judgment as a matter of law on this issue.
D. Lanham Act
Defendants argue that the advertising brochures and any other published advertising for the allegedly infringing homes built by Majestic were prepared by Majestic's realtor, not Majestic. The Lanham Act allows an action against "[a]ny person who . . . uses in commerce . . . any false designation of origin . . . which is likely to cause confusion, or to cause mistake, or to deceive as to . . . the origin . . ." of goods or services. 15 U.S.C. § 1125. In Johnson v. Jones, 149 F.3d 494 (6th Cir. 1998), where "the plaintiff alleged that defendant, a competing architect copied plaintiff's drawings, removed plaintiff's name and seal, and replaced them with his own name and seal," the court found that "[i]t is difficult to imagine how a designation of origin of a product could be more false, or could be more likely to cause confusion or mistake as to the actual origin of the product. . . ." Id.
Defendants argue that TGS has not produced expert testimony or other evidence that the purported copying of its plans caused confusion among plan consumers. However, violation of the Lanham Act by ACI will not show that Majestic sold and marketed the TGS plans without leaving TGS' name and seal on them since Majestic purchased all the allegedly-infringing plans from ACI or plaintiff.
TGS contends that even if Majestic's realtor prepared all the advertising for the homes, he would have done so with information provided by and approved by Majestic. It is undisputed that the brochures/website/magazine advertisements all contain the designation "Majestic Homes." TGS alleges that this designation falsely conveys to the consumer the association between Majestic Homes and the plan. Also, there is no mention on any of these advertisements or brochures of any other company. TGS contends that Majestic cannot escape liability on the basis that someone else prepared the false advertising with its name emblazoned on it.
In addition to the print advertising, TGS argues that Majestic also advertised its plans heavily through the use of "model homes." Majestic built a 1860 Plan home which potential customers could tour and then hire Majestic to build a home from the 1860 Plan or the 1560 Plan — the smaller, reduced-size version of the 1860 Plan. TGS asserts that the impact of these model homes made it clear to customers that they would be purchasing a Majestic Homes plan, when in fact, they were purchasing a TGS plan. Majestic asserts that it built the homes for a variety of purposes, including marketing, a sales office for its realtor, and to assist buyers who would find it difficult to select options from a drawing. Furthermore, Majestic contends that a construction of a home is not a false identification of the designer — there is no evidence that consumers were confused about the designer of the model home since Majestic did not use the model home to promote the designer.
The court concludes that the Lanham Act claim presents questions of fact that preclude summary judgment. Even if there is no affidavit or deposition testimony that the real estate agent prepared the advertising with information from Majestic, the advertising states Majestic Homes, appears to be created for them, and they should have some responsibility for it given the closeness of the relationship between Majestic and its exclusive real estate agent for the subdivision. The materials speak for themselves — there is no reference to a designer on the advertisement, only Majestic Homes is mentioned. The advertisements appear to convey the message that it is Majestic's plan or at least that they have the authority to use the plan. Therefore, the court finds that there is potential for consumer confusion. A jury should decide whether the exclusion of that information created confusion. Therefore, the court denies Majestic's motion for summary judgment on the Lanham Act claim.