April 5, 2017
from the United States District Court for the Eastern
District of Wisconsin. No. 14-CV-1102 - William C. Griesbach,
Wood, Chief Judge, and Flaum and Hamilton, Circuit Judges.
Hamilton, Circuit Judge.
copyright suit shows the difficulty in finding protected
creative expression in a crowded field, in this case,
architectural design of single-family homes. The case also
shows the challenge in administering intellectual property
law to discourage so-called intellectual property
"trolls" while protecting genuine creativity.
Design Basics, LLC; Prime Designs, Inc.; and Plan Pro, Inc.
(collectively, "Design Basics") and their
affiliates claim rights to some 2700 home designs. They sued
defendants Lexington Homes, Inc. and related parties
(collectively, "Lexington") for copyright
infringement, contending that Lexington built homes that
infringed four of Design Basics' designs.
district court granted summary judgment to Lexington, finding
no evidence that Lexington ever had access to Design
Basics' home plans. Without access, the court reasoned,
there could be no copying and no copyright infringement. We
affirm. We agree with the district court that Design Basics
has no evidence of access. We also conclude that no
reasonable jury could find that Lexington's accused plans
bear substantial similarities to any original material in
Design Basics' plans.
Factual and Procedural Background
Design Basics and the Art of the Intellectual Property
Basics has been in the business of producing market-ready
designs for modest single-family homes for several decades.
In 2009, Patrick Carmichael and Myles Sherman purchased
Design Basics as an investment opportunity. Carmichael
acknowledged in his deposition that "potential copyright
infringement cases influence[d his] decision to become an
owner of Design Basics." He testified that proceeds from
litigation have become a principal revenue stream for Design
search of the Public Access to Court Electronic Records
(PACER) system reveals that Design Basics has been party to
over 100 federal lawsuits, the vast majority of which have
been filed since the 2009 change in ownership. Nearly all
involve copyright claims asserted by Design Basics. Design
Basics offers its employees incentives to scout out potential
copyright infringement cases, paying its employees a
finder's fee in the form of a percentage of the net
recovery relating to any home plans that they located. Design
Basics filed this lawsuit after employee Carl Cuozzo
discovered Lexington's website and its supposedly
infringing plans while investigating other Design Basics
cases on the Internet.
Basics' business model of trawling the Internet for
intellectual property treasures is not unique. In recent
years, opportunistic holders of copyrights, patents, and
other intellectual property have developed unsavory
reputations for "trolling, " bringing strategic
infringement claims of dubious merit in the hope of arranging
prompt settlements with defendants who would prefer to pay
modest or nuisance settlements rather than be tied up in
expensive litigation. Like the proverbial troll under the
bridge, these firms try to extract rents from market
participants who must choose between the cost of settlement
and the costs and risks of litigation.
business strategy is far removed from the goals of the
Constitution's intellectual property clause to
"promote the Progress of Science and useful Arts."
U.S. Const, art. I, § 8, cl. 8. Intellectual property
trolls have attracted much attention and derision in
scholarly literature and the mainstream media. See, e.g.,
Matthew Sag, Copyright Trolling, An Empirical Study,
100 Iowa L. Rev. 1105, 1108 (2015) ("The essence of
trolling is that the plaintiff is more focused on the
business of litigation than on selling a product or service
or licensing their IP to third parties to sell a product or a
service. The paradigmatic troll plays a numbers game in which
it targets hundreds or thousands of defendants, seeking quick
settlements priced just low enough that it is less expensive
for the defendant to pay the troll rather than defend the
claim."); see also David Segal, Has Patent, Will
Sue: An Alert to Corporate America, N.Y. Times (July 13,
441: When Patents Attack!, This American Life (July
are aware of these developments. See eBay Inc. v.
MercExchange, LLC, 547 U.S. 388, 396 (2006) (Kennedy,
J., concurring) ("An industry has developed in which
firms use patents not as a basis for producing and selling
goods but, instead, primarily for obtaining licensing
fees."); Malibu Media, LLC v. Doe, No. 15 Civ.
4369(AKH), 2015 WL 4092417, at *2 (S.D.N.Y. July 6, 2015)
("Recent empirical studies show that the field of
copyright litigation is increasingly being overtaken by
'copyright trolls' ... ."); cf. Renaissance
Learning, Inc. v. Doe No. 1, No. 11-cv-166-slc, 2011 WL
5983299, at *4 (W.D. Wis. Nov. 29, 2011) ("Remember Mark
Antony's funeral oration in Julius Caesar?
That's how an experienced business executive or lawyer
would view [a patent holder's] assertions that 'we
are focused on addressing ... issues without the need for
costly and protracted litigation' and 'our
client's preferred approach is to conclude licensing
discussions without resorting to litigation. We hope you
share this objective.' The implied 'or
else!' oozes from this letter like lye from
The Claims Against Lexington
to its federal complaint, Design Basics first learned of a
possible copyright infringement claim against Lexington on
September 11, 2011. Design Basics waited until September 10,
2014-one day before the three-year limitations period would
certainly have expired-to bring suit. See 17 U.S.C. §
507(b); Gaiman v. McFarlane, 360 F.3d 644, 653 (7th
Cir. 2004) (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
Basics filed a complaint alleging that four Lexington home
plans-the Carlisle, Oakridge, Ash wood, and Easton-infringed
four Design Basics plans: the Aspen, Kendrick, Taylor, and
Womack, respectively. Lexington chose not to settle. After
discovery, Lexington moved for summary judgment. In response,
Design Basics offered little evidence to try to show that
Lexington's agents and employees had ever seen its plans,
let alone copied them. Instead, Design Basics offered a
declaration by its draftsman, Carl Cuozzo. He opined in
conclusory terms that Lexington's four accused plans are
"substantially similar" to the four Design Basics
plans "in too many ways to have been the product of
independent creation." Cuozzo added that Design
Basics' plans have been "widely disseminated"
via the firm's website, www.designbasics.com, since 1996,
though he admitted in his deposition that he had no idea when
the particular plans at issue in this case were first
uploaded to the website.
by contrast, offered a detailed report by Dr. Robert
Greenstreet, Dean of the School of Architecture and Urban
Planning at the University of Wisconsin-Milwaukee. Dr.
Greenstreet compared the accused plans with Design
Basics' plans, identifying dozens of differences between
the paired designs and ultimately finding "no evidence
... of substantial similarity between the designs claimed by
Design Basics and those created by Lexington." Lexington
also relied on its shareholders' and employees'
unrebutted declarations that they had never seen the plans at
issue prior to this litigation.
granting summary judgment for Lexington, the district court
focused on the question of access. The court observed that
there was no evidence Lexington or its agents received or
reviewed any of the plans at issue. See Design Basics,
LLC v. Lexington Homes, Inc., No. 14-CV-1102, 2016 WL
8116897, at *2 (E.D. Wis. Sept. 30, 2016). Also, the accused
plans and Design Basics' plans were not so strikingly
similar as to permit an inference of copying without separate
proof of access. Id. at *4. There was evidence that
Lexington's employees were generally familiar with Design
Basics and may have seen some of its other designs. But the
court found the evidence of access to other designs was not
sufficient to infer access to the designs claimed in this
case. Id. at ""5. The court entered
judgment for Lexington. Design Basics appeals.
review de novo the district court's grant of
summary judgment, viewing the evidence in the light most
favorable to Design Basics. See Arlington Specialties,
Inc. v. Urban Aid, Inc., 847 F.3d 415, 418 (7th Cir.
2017). A non-moving party is entitled to all reasonable
inferences in its favor, but "inferences that are
supported by only speculation or conjecture will not defeat a
summary judgment motion." Herzog v. Graphic
Packaging Int'l, Inc., 742 F.3d 802, 806 (7th Cir.
2014), quoting Tu-bergen v. St. Vincent Hospital &
Health Care Center, Inc., 517 F.3d 470, 473 (7th Cir.