Architectural firm Chicago Building Design, P.C. sued one of its former clients, Mongolian House, Inc., for copyright infringement. At the district court level, the parties and the court focused on the date on which the statute of limitations began to run. The district court dismissed the complaint as barred by the statute of limitations.
The Seventh Circuit reversed and remanded, stating: “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.” (Opinion pdf page 12).
My post on the Petrella case is Raging Bull Copyright Owner KO’s Film Studios.
- 2006 – Mongolian House hired CBD to design an upscale restaurant in Chicago (Plan B).
- June 2006 – CBD filed the Plan B blueprints with the City of Chicago to obtain a repair and replace permit.
- March 2007 – CBD completed renovation on the restaurant after receiving a repair and replace permit from the City.
- 2008 – A CBD employee saw blue prints at the City’s offices that looked like CBD blueprints but displayed the name of John A. Wilson, a non-CBD architect.
- 2008 – May 8, 2009 – CBD attempted, but did not succeed, in obtaining from the City a copy of the blueprints displaying Wilson’s name.
- May 1, 2009 – CBD filed its copyright registration in the Plan B blueprints.
- May 8, 2009 – The City issued a full building permit for Plan B based on the blueprints with Wilson’s name on them.
- May 8, 2009 – CBD learned that the City issued a full building permit based on the blueprints with Wilson’s name on them.
- July 27, 2009 through January 2012 – Mongolian House’s owners and Wilson used the infringing blueprints to pass building inspections.
- Mongolian House defaulted on its payments due to CBD.
- February 13, 2012 – CBD sued Mongolian House, its owners, and Wilson for copyright infringement.
CBD alleged that Mongolian House’s owners copied CBD’s Plan B blueprints and distributed them to Wilson. Wilson then used CBD’s blueprints, passing them off to the City as his own, to obtain a full building permit, as opposed to a repair and replace building permit.
The district court agreed with the defendants that CBD’s copyright claims were barred by the statute of limitations and dismissed the complaint. The Copyright Act contains a 3 year statute of limitations. The district court ruled that CBD was on inquiry notice no later than December 31, 2008 and that the statute started to run on that date, even though CBD could not verify on December 31, 2008 that infringement occurred. The district court ruled that CBD’s lawsuit (February 2012) was about six weeks too late. The district court also rejected CBD’s argument that continuing violations should be covered and dismissed CBD’s complaint.
17 U.S.C. §507(b) sets out the copyright statute of limitations:
No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.
The Seventh Circuit recognizes a discovery rule in copyright cases:
The copyright 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.
(Opinion pdf page 8).
The U.S. Supreme Court recently ruled in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014) that “an infringement claim accrues when an infringing act occurs.” (Opinion pdf page 8). A separate statute of limitations runs from each violation. Each infringing act starts a new statute of limitations period.
The Petrella court distinguished between the separate-accrual rule and the continuing violation doctrine.
When a defendant has engaged (or is alleged to have engaged) in a series of discrete infringing acts, the copyright holder’s suit ordinarily will be timely under § 507(b) with respect to more recent acts of infringement (i.e., acts within the three-year window), but untimely with respect to prior acts of the same or similar kind.
(Opinion pdf page 10).
The Seventh Circuit ruled that inquiry notice is not the same as actual or constructive discovery of infringement.
The concept of inquiry notice may help to identify the time at which a reasonable plaintiff can be expected to start investigating a possible violation of his rights, but it does not itself trigger the statute of limitations. Accordingly, the district court should not have used inquiry notice as the starting date for the statute of limitations.
(Opinion pdf page 12).
The Seventh Circuit indicated that the Petrella decision changes the analysis of this case.
More fundamentally, however, 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. Here, the answer to that question is plainly ‘yes.’ The complaint alleges that the defendants distributed the infringing blueprints to building inspectors during inspections in July 2009 and periodically thereafter, through January 2012. These acts fall within the three-year limitations period from the date of suit (February 13, 2012).
(Opinion pdf pages 12 – 13).
The Seventh Circuit pointed out, but did not resolve, an issue of first impression.
A copyright owner has the exclusive right to distribute his work ‘to the public by sale or other transfer of ownership, or by rental, lease, or lending.’ § 106(3). It’s an open question whether distributing an unlawfully copied architectural work to a building inspector qualifies as a violation of the author’s exclusive right to distribute his work ‘to the public by sale or other transfer of ownership, or by rental, lease, or lending.’ As far as we can tell, this is a question of first impression in this circuit and apparently in other circuits as well. As a more general matter, the scope of the exclusive right to distribute under § 106(3) is a difficult issue on which courts have disagreed.
The most we can say at this juncture is that the case should not have been dismissed on the pleadings based on the statute of limitations.
(Opinion pdf pages 15 – 17).
This case is Chicago Building Design, P.C. v. Mongolian House, Inc., No. 12-3037, Seventh Circuit Court of Appeals.