IP Claims Quarterly
Florida Decision Shows Dissimilarities Outweigh Similarities in Copyright Claims
General liability carriers have long faced considerable exposure in copyright cases under the Personal & Advertising Injury coverage sections of the standard ISO general liability policy. Here is a case that every carrier should keep in their list of favorites. How many times does your insured lose summary judgment and suffer an adverse verdict of infringement, only to prevail on a motion to set aside the verdict and, as the prevailing party, obtain an order awarding attorney's fees?
Here is your golden ticket.
In Home Design Services, Inc. v. Turner Heritage Homes, (N.D. Fla. 2017) Case No. 4:08-cv-355, a residential home design company with a large plan library filed suit in federal court in Florida, alleging that the defendant, Turner Heritage Homes, had infringed two of its plans in the construction of 165 homes over the course of eight years. At the close of the evidence, the jury awarded Home Design Services (HDS) $127,760 in actual damages and no lost profits. The defendant moved to set aside the verdict on the ground that no reasonable juror could have found the plans to have been substantially similar as a matter of law. Relying upon Intervest from the 11th Circuit, the district court noted that while the general home plan designs were similar, the dissimilarities between the plans (setting aside functional or commonly occurring elements) were apparent, and judgment for the defendant was appropriate. Noting the limited number of 3/2 home configurations and the thin copyright protection available, the court found no infringement as a matter of law. Thereafter, the defendants filed a motion for attorney's fees. The court awarded attorney's fees under Section 505 of the Copyright Act, noting the Supreme Court's 1986 decision in Fogarty holding that in awarding fees under Section 505, courts are required to treat prevailing plaintiffs and defendants the same.
In determining whether and in what amount fees should be awarded, the district court employed a multi-factor test. While the court did not find the plaintiff's claims to be frivolous, it did note that HDS brought over 90 lawsuits against homebuilders but had waited until after the construction of 165 homes to file suit and then demanded actual damages of $200,000 and $7.5 million in lost profits. The defendants had made a proposal for settlement of $100,000 and were deemed the prevailing party by virtue of the judgment notwithstanding the verdict entered by the court. While noting that not all unsuccessful litigated claims are objectively unreasonable, the court found that, despite the prior denial of the defendant's motion for summary judgment, this case was controlled by the Intervest decision and that it should have been apparent to plaintiff's counsel that the dissimilarities in the plans and not the similarities in the common elements would prove dispositive under Intervest. Even though HDS filed suit before Intervest was decided, because HDS ignored the legal standard in Intervest and instead focused on the overall superficial similarity of the designs, the plaintiff's decision to pursue the case for another six years was held objectively unreasonable. Entitlement to fees was granted, and the matter was continued for a determination of the amount of fees to be awarded.
This case is of considerable value in the 11th Circuit for both the possibility of securing a judgment of no infringement following an adverse verdict and for successful defendants (and their carriers) seeking to recover attorney's fees. In the 11th Circuit, a prevailing defendant who serves an offer of judgment that is rejected under FRCP 68 may recover "costs" which under existing precedent is construed in copyright cases to include attorney's fees. This broad interpretation of "costs" under Rule 68 by the 11th Circuit is not shared by all federal circuits, but the rationale of the court is useful for any successful defendant in a copyright action who prevails by summary or final judgment. Both the substantive principles that require the courts to focus on "dissimilarities" and the later attorney's fee award provide defendants with valuable precedent in defending claims based on "thin" copyright claims where the similarities lie only in mundane common elements and where creative differences are apparent in the more original elements of the work, thus negating infringement.
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