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Design Basics, LLC v. Quality Crafted Homes Inc.

United States District Court, N.D. Indiana, Fort Wayne Division

April 7, 2017

DESIGN BASICS, LLC and PLAN PROS, INC., Plaintiffs,
v.
QUALITY CRAFTED HOMES INC., Defendant.

          OPINION AND ORDER

          Robert L. Miller, Jr. Judge

         This matter is before the court on Quality Crafted Homes' motion for partial summary judgment. Quality Crafted Homes argues that a three-year look-back period prevents plaintiffs from claiming that Quality Crafted Homes infringed on copyrights before February 3, 2013. The court disagrees.

         I. Background

         Design Basics and Plan Pros allege that they're in the business of designing and licensing architectural works and technical drawings, and that they own copyrights protecting their works. Quality Crafted Homes is in the business of creating, publishing, and advertising home designs. On February 3, 2016, Design Basics and Plan Pros sued Quality Crafted Homes for infringing on copyrights for seven of their home designs.

         Quality Crafted Homes asks for partial summary judgment, arguing that claims based on alleged infringing acts before February 3, 2013 are time-barred.

         II. Standard of Review

         Summary judgment is appropriate when the record demonstrates that there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Protective Life Ins. Co. v. Hansen, 632 F.3d 388, 391-92 (7th Cir. 2011). The court construes the evidence and all inferences that reasonably can be drawn from the evidence in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The moving party bears the burden of informing the court of the basis for its motion and identifying the parts of the record that demonstrate the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. at 323.

         III. Discussion

         Claims under the Copyright Act must be “commenced within three years after the claim accrue[s].” 17 U.S.C. § 507(b). “[T]he limitations period generally begins to run at the point when ‘the plaintiff can file suit and obtain relief, '” which is “when an infringing act occurs.” Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S.Ct. 1962, 1969 (2014). The equitable defense of laches doesn't apply to infringement claims brought within the limitations period. Id. at 1972. The Court expressly noted that its decision doesn't address the “discovery rule, ” which nine courts of appeals have adopted “as an alternative to the incident of injury rule.” Id. at 1969 n.4; see also SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, No. 15-927, 2017 WL 1050978, at *7 (U.S. Mar. 21, 2017) (holding that laches also isn't a defense in patent suits, and again recognizing that Petrella didn't address the discovery rule).

         Our court of appeals adopted the “discovery rule” for copyright claims. Gaiman v. McFarlane, 360 F.3d 644, 653 (7th Cir. 2004). Under the “discovery rule, ” the “statute of limitations starts to run when the plaintiff learns, or should as a reasonable person have learned, that the defendant was violating his rights.” Id. Quality Crafted Homes argues that the logic of Petrella undermines our court of appeals' acceptance of the discovery rule; regardless of when an infringement is discovered, suit is time-barred if the infringement occurred more than three years before the filing date. Design Basics and Plan Pros argue that Petrella only dealt with the laches defense and expressly decided not to impact the lower courts' discovery rules, so our court of appeals' decision should remain binding.

         In Chicago Building Design, P.C. v. Mongolian House, Inc., 770 F.3d 610 (7th Cir. 2014), our court of appeals stated that “in light of Petrella, we now know that the right question to ask in copyright cases is whether the complaint contains allegations of infringing acts that occurred within the three-year look-back period from the date on which the suit was filed.” Id. at 616. The court found possible infringement within the three-year look-back period, so it didn't need to reach the question of “whether Petrella abrogates the discovery rule in copyright cases.” Id. at 618. Like the Petrella Court, the court of appeals decided to “express no opinion on that question today.” Id.

         Our court of appeals took a nuanced approach to Petrella in Consumer Health Information Corp. v. Amylin Pharmaceuticals, 819 F.3d 992 (7th Cir. 2016), where it held that Petrella was limited to disputes about copyright infringement. Id. at 996-997. Copyright ownership claims, however, “‘accrue only once, ' when the claimant receives notice that his ownership has been expressly repudiated or contested.” Id. at 996. Despite clear language in Petrella describing accrual, there might be good reason to limit the decision to its context.

         After Petrella, our court of appeals might find reason to continue applying the discovery rule in copyright infringement actions. Unlike the discovery rule, laches is a purely equitable defense that existed in copyright to “fill[ ] a legislative hole” during a time when there was no federal statute of limitations for copyright claims. Petrella, 134 S.Ct. at 1968. Laches also prevented forum-shopping for the state with the most favorable limitations period. Id. The creation of a federal limitations period standardized the time a plaintiff had to bring an infringement claim, eliminating the need for this equitable gap-filler. Id. at 1969.

         The discovery rule serves a different role. Petrella impacted when an infringement claim “accrue[s].” 17 U.S.C. § 507(b). But the discovery rule might toll a limitations period once the claim has already “accrued, ” see Taylor v. Meirick, 712 F.2d 1112, 1117 (7th Cir. 1983) (“Often . . . the statute of limitations is tolled until the plaintiff learned or by reasonable diligence could have learned that he had a cause of action.”), or offer an alternative means of accrual. However cast, with or without laches, a diligent plaintiff still has a reasonable ...


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