United States District Court, N.D. Indiana, Fort Wayne Division
DESIGN BASICS, LLC, and, W.L. MARTIN HOME DESIGNS, LLC, Plaintiffs,
HELLER & SONS, INCORPORATED d/b/a Heller Homes; and HELLER DEVELOPMENT CORPORATION, Defendants.
OPINION AND ORDER
A. BRADY JUDGE.
matter is one of dozens of lawsuits brought by Design Basics
and its associated entities alleging violations of their
copyrighted home designs. On June 24, 2019, this Court
entered summary judgment in favor of Defendants, determining
that Defendants had not violated any of the five home designs
identified by Design Basics. Having determined that
Defendants were the “prevailing parties” in this
litigation, this Court invited Defendants to file a request
for attorneys' fees pursuant to 17 U.S.C. § 505, and
further invited Design Basics to file a response in
opposition. Those filings have now been submitted
(see ECF Nos. 95, 97), and the issue of
attorneys' fees is now ripe for determination.
JURISDICTION TO DETERMINE FEE AWARD
19, 2019, Design Basics filed its Notice of Appeal (ECF No.
91). Generally, the filing of a notice of appeal divests the
district court of further jurisdiction over the case.
However, the Seventh Circuit has recognized that there is an
exception to this general rule permitting a district court to
enter an attorney fee award while the merits of the case are
on appeal. Terket v. Lund, 623 F.2d 29, 33-34 (7th
DEFENDANTS' ENTITLEMENT TO ATTORNEYS' FEES
Copyright Act provides that the district court may, in its
discretion, permit the recovery of all costs of litigation in
any copyright civil action, including the award of reasonable
attorneys' fees. 17 U.S.C. § 505. In determining
whether to award attorneys' fees, district courts
consider the nonexclusive list of factors identified in
Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n. 19
(1994), which include: (1) frivolity of the claim; (2)
motivation in filing the claim; (3) objective reasonableness
of the claim; and (4) considerations of compensation and
deterrence. Attorneys' fees cannot be awarded as “a
matter of course”; rather, a court must make the
determination based upon a particularized, case-by-case
assessment. Id. at 533. Unlike many other
fee-shifting statutes, a court may not treat prevailing
plaintiffs and prevailing defendants any differently;
defendants should be “encouraged to litigate
[meritorious copyright defenses] to the same extent that
plaintiffs are encouraged to litigate meritorious claims of
infringement.” Id. at 527.
objective reasonableness of the losing position is given
“substantial weight” in determining whether
attorney fees are warranted. Kirtsaeng v. John Wiley
& Sons, Inc., 136 S.Ct. 1979, 1986 (2016). However,
the Supreme Court has made it clear that objective
reasonableness is “only an important factor in
assessing fee applications-not the controlling one.”
Id. at 1988.
As we recognized in Fogerty, § 505 confers
broad discretion on district courts and, in deciding whether
to fee-shift, they must take into account a range of
considerations beyond the reasonableness of litigating
positions. That means in any given case a court may award
fees even though the losing party offered reasonable
arguments (or, conversely, deny fees even though the losing
party made unreasonable ones). For example, a court may order
fee-shifting because of a party's litigation misconduct,
whatever the reasonableness of his claims or defenses. Or a
court may do so to deter repeated instances of copyright
infringement or overaggressive assertions of copyright
claims, again even if the losing position was reasonable in a
particular case. Although objective reasonableness carries
significant weight, courts must view all the circumstances of
a case on their own terms, in light of the Copyright
Act's essential goals.
Id. at 1988-89 (citations omitted).
advance two arguments in support of their assertion that
Design Basics' claims were frivolous. First, Defendants
assert that “a modicum of due diligence pre-suit”
would have revealed that Design Basics' claims regarding
the Baisden design were frivolous, because Defendants built
the home allegedly based on the Baisden claim before the
Baisden plan was ever published. (ECF No. 95 at 5). Design
Basics does not specifically respond to this argument in its
Response in Opposition. However, after reviewing the record
this Court concludes that sufficient evidence existed for
Design Basics to pursue the Baisden claim even in the face of
the calendar issue.
Court addressed the Baisden issue in its Opinion and Order
dated May 3, 2018 (ECF No. 54). Defendants moved for summary
judgment on the Baisden claim arguing that Design Basics'
original copyright application stated that the Baisden plan
was not published until August 18, 2000, while construction
on the allegedly infringing home finished on July 18, 2000.
(Id. at 13). This Court determined that Design
Basics had failed to designate admissible evidence to
overcome the presumption that the information on the
copyright application was correct, and therefore granted
summary judgment on the Baisden claim in Defendants'
favor. (Id. at 13-16).
word in the foregoing sentence is “admissible.”
Design Basics did designate evidence that the date on the
copyright application was incorrect in the form of an
affidavit from its principal, Pat Carmichael, and a
supplemental registration application that was filed with the
Copyright Office on October 4, 2017. The Court found that the
Carmichael declaration was not made upon his own personal
knowledge, and therefore disregarded Carmichael's
statements. (Id. at 15). This determination does not
preclude the Court from considering the affidavit for the
purposes of the attorney fee determination. See
Whimsicality, Inc. v. Rubie's Costume Co., 836
F.Supp. 112, 120 (E.D.N.Y 1993) (finding that otherwise
inadmissible affidavit could be considered “for the
limited purpose of deciding the fees question”). In
addition, the Court also found that its determination might
be different if the supplemental registration application was
granted and invited the parties to file a motion for
reconsideration if the application was granted. (Id.
at 16, n. 4). Thus, while the evidence designated by Design
Basics was insufficient to overcome summary judgment, it is
sufficient for the Court to find that there was a factual
basis to maintain the Baisden claim. See,
e.g., Felton v. City of Chi., 827 F.3d 632,
635 (7th Cir. 2016) (defining frivolous as “lacking an
arguable basis either in fact or law”).
second argument asserts that this litigation, and in fact all
of Design Basics' copyright cases, were rendered
frivolous no later than the Seventh Circuit's decision in
Design Basics, LLC v. Lexington Homes, Inc., 858
F.3d 1093 (7th Cir. 2017). To be sure, Lexington is not
favorable to Design Basics or its claims. It described Design
Basics' copyright as “thin, ” required
“very close copying” before alleged infringement
is actionable, compared Design Basics' designs to the
mass-produced homes of William Levitt, and ascribed a
motivation for Design Basics' litigation that was less
copyright protection and more copyright trolling. It is
certainly possible to read Lexington and conclude
that it is difficult, if not impossible, for Design Basics to
ever succeed on any copyright infringement suit.
being said, the Court does not believe that
Lexington is the magic bullet that is described by
Defendants. While Lexington sets forth the legal
standard by which Design Basics' claims must be
evaluated, it does not mandate a result in any specific case.
As Design Basics notes, this Court has denied summary
judgment for a different defendant alleged to have violated
Design Basics' copyrights even after applying the
Lexington standard. See Design Basics, LLC v.
Big C Lumber, Cause No. 3:16-CV-53, ECF No. 78. Since
each case requires a court to compare different designs of
Design Basics to different designs of a defendant,
Lexington can only make Design Basics' cases
difficult, not frivolous.
does the Court believe that Design Basics' act of
retaining Matthew McNicholas is evidence of frivolousness, as
Defendants further assert. (ECF No. 95 at 7-8). It is true,
as Defendants note, that McNicholas used an incorrect legal
test in determining the issue of substantial similarity.
However, McNicholas' report must be viewed in the context
of Design Basics' arguments generally. McNicholas'
report reflects more closely the analysis used by the First
Circuit in T-Peg, Inc. v. Vermont Timber Works,
Inc., 459 F.3d 97 (1st Cir. 2006), and that used by the
D.C. Circuit in Sturdza v. United Arab Emirates, 281
F.3d 1287 (D.C. Cir. 2002). Design Basics recognizes that
Lexington controls, but nonetheless asserts that
T-Peg and Sturdza more properly analyze the
Copyright Act in the context of architectural works. (ECF No.
75 at 12, n.2). Given this assertion, the Court views the
hiring of McNicholas as little more than part of Design
Basics' effort to overturn Lexington. That will
be a tall task, but the attempt to complete the task in this
case is not frivolous.
is conflicting evidence in the record regarding Design
Basics' motivation in filing this and other similar
actions. Design Basics claims that the sole reason for its
copyright violation suits is “to protect its valuable
intellectual property, which it invested considerable
resources to design and market over many years.” (ECF
No. 97 at 7). In support of this claim, Design Basics notes
that the revenues from the licensing of their designs has
fallen more than 75%, which they attribute to “the
widespread theft of its valuable home designs from the
on the other hand, assert that Design Basics is
“motivated by proceeds from litigation, rather than a
desire to keep control over its intellectual property.”
(ECF No. 95 at 8). This is certainly the view taken by the
Seventh Circuit in Lexington. Judge Hamilton
referred to Design Basics' litigation tactics as
“the Art of the Intellectual Property Shakedown,
” stating that firms like Design Basics “try to
extract rents from market participants who must choose
between the cost of settlement and the costs and risks of
litigation.” Lexington, 858 F.3d at 1097.
Carmichael has acknowledged that potential litigation income
“influenced his decision to become an owner of Design
Basics, ” id. at 1096-97, and the cases have
been extraordinarily lucrative for Design Basics' owners:
the owners realized approximately $5 million in net
litigation profits in 2016 and 2017 alone, while the gross
revenues for Design Basics during the same period of time
were approximately $2.5 million. Big C Lumber, ECF
No. 78 at 4. Where Design Basics was once an architectural
firm that occasionally litigated copyright issues, it now
appears to be copyright litigation firm that occasionally
licenses one of its designs.
the Court believes that Design Basics' motivation for
filing this and other similar suits hues more closely to
Defendants' explanation, it nonetheless finds that the
truth is likely somewhere in the middle. There is no question
in the Court's mind that some of Design Basics'
designs have been copied. This Court found actual evidence of
copying in the Big C Lumber case. Id., ECF
No. 78 at 11-15. The widespread distribution of Design
Basics' plans,  and the apparent ease of turning those
plans into construction drawings, all ...