977 F. Supp. 2d 714
E.D. Mich.2013Background
- Design Basics, LLC (Plaintiff) owns valid copyrights in architectural plans and licensed Chelsea Lumber (Chelsea) in 1998 to market, display, sell, and prepare modifications subject to contractual terms (reporting sales, paying fees, selling underlying blueprint before modifications, and displaying copyright notice).
- License gave Chelsea a limited, non-transferable promotional/sales license and required Plaintiff to issue a separate construction license to buyers after Chelsea reported sales.
- Plaintiff discovered potential unauthorized promotion/sales/modifications in 2009 after infrequent earlier inspections and a private investigator’s purchase revealed Chelsea selling plans and offering reduced copies; modifications were performed by employee Matthew Hagood.
- Plaintiff sued for copyright infringement (including derivative works and distribution), contributory and vicarious infringement, and removal of copyright management information; parties stipulated copyright ownership and validity.
- Cross-motions for summary judgment concentrated on affirmative defenses: statute of limitations, laches, express and implied license, waiver, estoppel, and several other defenses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations (3-year accrual) | Claims accrued in 2009; Plaintiff lacked actual or inquiry notice earlier; no duty to continuously police Chelsea | Plaintiff should have discovered infringement earlier with due diligence and regular inspections; limitations bar older claims | Plaintiff entitled to summary judgment — defendants failed to show "storm warnings" or inquiry notice >3 years before suit; statute did not bar claims |
| Laches | No undue delay or prejudice; no earlier actual knowledge to trigger duty to investigate | Plaintiff unduly delayed and failed to exercise contractual inspection rights; delay prejudiced defendants | Plaintiff entitled to summary judgment — defendants failed to show lack of diligence or evidentiary prejudice; strong presumption favoring plaintiff because statute of limitations had not run |
| License (express): scope — sales, promotion, notice, reporting vs. modifications | Many license terms are conditions precedent (e.g., notice, reporting, fees, construction license) so unauthorized uses are infringement | License granted rights to sell/display; most requirements are covenants (post-sale duties), so breaches are contract claims, not infringement; modification restriction arguably a condition | Mixed ruling: selling unmodified plans and promoting/displaying without notice breach contract (not infringement); requirement that underlying blueprint be sold before modification is an unambiguous condition precedent — modifying without that sale may be copyright infringement |
| Implied license, waiver, estoppel, and other affirmative defenses | Implied license and equitable defenses may bar some claims because Plaintiff allegedly failed to police rights | Existence of express license and its reservation of copyright ownership negates any implied license; no evidence of intentional waiver or estoppel | Plaintiff entitled to summary judgment on implied license, waiver, estoppel, judicial estoppel, and several other defenses (de minimis, public domain, copyright office timing, nonvolitional/no knowing infringement, misuse); no implied license here and defendants produced no evidence to support equitable defenses |
Key Cases Cited
- Roger Miller Music, Inc. v. Sony/ATV Publ’g, LLC, 477 F.3d 383 (6th Cir. 2007) (accrual of copyright claims when plaintiff knows or is chargeable with knowledge)
- Warren Freedenfeld Assocs., Inc. v. McTigue, 531 F.3d 38 (1st Cir. 2008) (inquiry-notice/storm-warnings standard for discovery rule)
- William A. Graham Co. v. Haughey, 568 F.3d 425 (3d Cir. 2009) (discovery rule and inquiry notice analysis)
- Graham v. James, 144 F.3d 229 (2d Cir. 1998) (nonexclusive licenses waive infringement claims; distinction between conditions and covenants)
- S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989) (scope of license controls whether use exceeds authorization)
- Chirco v. Crosswinds Communities, Inc., 474 F.3d 227 (6th Cir. 2007) (laches may bar certain injunctive remedies where plaintiff unreasonably delayed and prejudice is clear)