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Laches Defense Bars Destruction of Condos for Copyright Violation, U.S. Court Holds
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October 6, 2008
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Howrey LLP
The plaintiffs, Detroit area real estate developers, worked with an architectural firm to design a “twelve-plex” condominium building that maximized space utilization in its projects. The fronts and backs of the buildings were identical so there was no “back” of a building. Each building contained 12 units, and each unit had direct indoor access to its garage. The design allowed for very compact layout of the buildings in a development, which reduced infrastructure costs. In 1997, plaintiffs obtained copyrights for the plans and for two constructed developments.
Plaintiffs alleged that in late 2000, the defendants, also Detroit area developers, began building a condominium development based directly on plaintiffs’ copyrighted plans and architectural works. Three months later, the plaintiffs filed suit in U.S. District Court alleging copyright infringement and seeking injunctive and monetary relief.
During discovery, plaintiffs learned that the defendants intended to build another development, known as the Jonathan’s Landing project, that allegedly was based on plaintiffs’ copyrighted plans. This time, however, the plaintiffs took no action for more than 2½ years, even after the defendants broke ground for the development in May 2002. Finally, in November 2003, plaintiffs filed a second federal lawsuit against the defendants. By that time, 168 of the planned 252 units had been constructed, 141 had been sold and 109 already were occupied by the buyers.
The defendants filed a motion for summary judgment in the second lawsuit, arguing that the plaintiffs’ attempt to recover for copyright infringement was barred by the equitable doctrine of laches. The plaintiffs opposed the motion, contending that their lawsuit was filed within the three-year statute of limitations provided in the Copyright Act at 17 USC §507 (b) and, therefore, was not subject to a laches defense. The U.S. District Court granted the defendants’ motion, ruling that the plaintiffs knew of the Jonathan’s Landing construction for at least 18 months before filing suit and that plaintiffs’ delay in acting caused undue prejudice.
The plaintiffs appealed, and the U.S. Court of Appeals for the 6th Circuit affirmed in part and reversed in part. It held that laches did not bar claims for money damages and injunctive relief. But, it held that laches did bar destruction of the allegedly infringing condominium complex, which plaintiffs had sought, and affirmed dismissal of that claim. Chirco v. Crosswinds Communities, Inc., 474 F.3d 227 (6th Cir. 2007), cert. den., 127 S.Ct. 2975.
The appeals court began its analysis by defining laches as a negligent and unintentional failure to protect one’s rights and as requiring a showing of lack of diligence by the plaintiff and prejudice to the defendant. The court wrote:
[L]aches does not result from a mere lapse in time but from the fact that, during the lapse of time, changed circumstances inequitably work to the disadvantage or prejudice of another if the claim is now to be enforced. By his negligent delay, the plaintiff may have misled the defendant or others into acting on the assumption that the plaintiff has abandoned his claim, or that he acquiesces in the situation, or changed circumstances may make it more difficult to defend against the claim.
The appeals court acknowledged that the federal appellate circuits are split on whether laches is available as a defense when Congress has set a limitations period by statute, as with the Copyright Act, with some circuits barring the defense and others allowing it. The appeals court held that in its circuit, the laches defense was available in unusual cases when the relief sought by plaintiffs would work an unjust hardship on defendants or on innocent third parties.
In the case before it, the appeals court noted that the plaintiffs had knowledge of the defendants’ intent to build the Jonathan’s Landing development but delayed taking action while the defendants obtained permits, commenced construction and marketed the development. The court noted that this conduct stood in stark contrast to the conduct of the plaintiffs after learning of alleged infringement at another of defendants’ developments, when plaintiffs filed suit within three months.
The appeals court held that the plaintiffs’ request for destruction of all architectural works that had been built using the copyrighted materials – that is, all portions of the allegedly infringing development that already had been constructed – was barred by laches. The appeals court held that plaintiffs’ inordinate delay in filing suit barred any effort to seek destruction of buildings already occupied, sold or substantially constructed because it would be unduly prejudicial to defendants.
However, the appeals court held that a laches defense could not be asserted against claims for injunctive relief pursuant to 17 USC §502 [allowing injunctive relief to prevent or restrain infringement of a copyright]; 17 USC §503 [permitting destruction or disposition of all copies made or used in violation of a copyright owner’s rights]; 17 USC §504 [providing for actual damages and profits or statutory damages for copyright infringement]; and 17 USC §505 [recognizing the right to recover costs and attorney fees].
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For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-848-4996 or at paulberning@howrey.com or contact your Howrey attorney. For more information about Howrey’s Construction Practice Group, click here.
©2008 Howrey LLP
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