What's New in IP and Brand Management
August 2007
Greetings!
Hope you find the information within this newsletter informative. For any further information regarding any of the topics covered please contact us.
Sincerely,
Avaneesh Marwaha
In THIS ISSUE:
Architect has plans stolen-but house is still built
Costs of Intellectual Property Litigation...Continued
Recent IP Cases
Architect has plans stolen-but house is still built
In September, 2001 R. Wayne Galloway ("Galloway") began construction of his home on Lake Wylie, near Charlotte, North Carolina. In searching for the perfect house Galloway traveled to other local areas to see houses that he may like. He came across a house that was being built about 30 miles away that he wanted to replicate and got permission from the owner of the house to obtain a copy of the architecture plans.
The plans that he obtained had a copyright notice which stated:
© 2000 Copyright Christopher Phelps & Assoc., L.L.C. These plans are protected under the federal copyright laws. The original purchaser of this plan is authorized to construct one and only one home using this plan. Modifications or reuse of this plan is prohibited.
The original purchaser of the plans, from which Galloway had received a copy of the plans, paid Phelps $20,000 for the design.
In early 2003, Phelps learned, through rumors, that Galloway was constructing a house using its designs. After confirming the fact, Phelps sent Galloway a cease and desist letter and upon receipt of the letter Galloway stopped construction of the house. After sending the letter Phelps registered these plans with the Copyright Office and commenced an action against Calloway for copyright infringement.
In its suit, Phelps sough compensatory damages, disgorgement of Galloway's profits and injunctive relief. At the end of the trial, the jury returned a verdict in favor of Phelps, finding that Galloway had infringed Phelps' architectural design copyright; awarding Phelps $20,000 in actual damages and finding that Galloway had no profits to disgorge. Thereafter, "Phelps requested injunctive relief from the court (1) ordering that the infringing copy of the plans be returned or destroyed; (2) enjoining completion of the house; and (3) permanently enjoining the sale of or lease of the house".
The district court "in its discretion" denied all injunctive relief, finding that the $20,000 jury award made Phelps "whole". On appeal, Phelps contends that the district court erred in denying injunctive relief as a matter of law because it had proved a past infringement and a likelihood of future infringement.
On appeal the Circuit Court affirmed in part and vacated in part holding that Galloway cannot be enjoined from completing the house because the house was, at this point, already complete and that Galloway could not be enjoined from selling or leasing the house in the future.
At oral argument, Phelps stated that a future sale or lease of the house would violate the "first use doctrine" of 17 U.S.C. § 109(a). However, §109(a) creates an exception wherein "the owner of a particular copy [ ] lawfully made under this title, or any person authorized by such owner, is entitled, without authority of the copyright owner, to sell or otherwise dispose of the possession of that copy". Because Phelps received damages at trial for the infringement the court stated that the payment from Galloway to Phelps authorized Galloway to sell or otherwise dispose of the house in the future.
The Court stated, "thus, under the first sale doctrine, an infringer is entitled to sell, or otherwise dispose of any copy that the court does not order destroyed or otherwise disposed of, without further obligation, once he satisfies the judgment that remedied the infringement, even if the copy was originally pirated". By bringing an infringement action against Galloway, Phelps essentially sold him its interest in the house in exchange for the appropriate remedies under the Copyright Act.
It is important to note that this remedy under the Copyright Act does not resemble a compulsory license because the Copyright Act remedies are far broader. Under the Copyright Act, a copyright holder is entitled to both actual damages and disgorgement of profits, which may be immensely greater than the price of the license. 17 U.S.C. §504.
The Circuit Court did remand this case for further consideration of Phelps' request for injunctive relief with respect to the return or destruction of the infringing plans. The Court stated that the "risk of future infringement includes the possible use of the plans to build another house, publication of the plans, or other violations of the exclusive rights conferred by 17 U.S.C. §106.
Christopher Phelps & Assoc., LLC v. Galloway, 05-2266 (4th Cir. Feb. 12, 2007). To find out more information about registering copyrights, licensing or litigation contact Marwaha Law Office, LLC.
Costs of Intellectual Property Litigation...Continued
Last months newsletter stated that the average litagation cost through appeal of a patent case is about $2,000,000, a trademark case is about $700,000, a copyright case is about $440,000 and a trade secret case is about $1,000,000. With these high costs associated with just the litigation of IP rights, many corporations are looking towards alternative dispute resolution (ADR) as an option.
With increasing demand, businesses are selecting ADR procedures of mediation and arbitration instead of the traditional route of the court system to handle IP litigation. Businesses are choosing trained mediators early in the dispute resolution process to help them handle the alleged IP dispute between the two parties.
Also, often in negotiating and drafting contracts the parties will agree to handle all future disputes through a private arbritrator so that they can limit the amount of money, time and exposure spent on alleged IP disputes.
What are some of the reasons businesses choose ADR over traditional litigation:
- cheaper than traditional IP litigation
- quicker results
- lessen the amount of exposure
- the results of the process are often better for both parties, and
- the end result can often be more creative than a traditional "big pay day" for the plaintiff.
When companies choose to use ADR as the process of resolving an IP dispute they can save lots of time and money. "A ratio of 3 or 4 to one, litigation versus arbitration, is a fairly realistic estimate and a reasonable expectation is that the cost of an arbitration will not be in excess of half the cost of litigating" (William G. Paul, Arbitration vs Litigation in Energy Cases, Presentation at the First Annual Energy Litigation Program (Nov 7-8, 2002).
With the difference in costs so high between traditional litigation and the process of ADR it is clear why many in-house counsels are pushing their businesses and out-of-house counsel to seek ADR as a valid option to handle their IP disputes.
To find out more on IP protection, litigation or ADR please contact Marwaha Law Office, LLC.
Recent IP Cases
Zomba Enterprises, Inc.; v. Panorama Records, Inc., Nos. 06-5013/5266 (6th Cir. June 26, 2007).
Purveyor of karoake discs ordered to pay plaintiff (music publishing company) for copyright infringement. In a copyright infringement action brought against a purveyor of karaoke discs, summary judgment and a monetary award for plaintiff-copyright holder is affirmed where the district court correctly concluded that defendant willfully infringed plaintiffs copyrights, and did not abuse its discretion: 1) by awarding plaintiffs $806,000 in statutory damages; 2) in denying defendant's motion to transfer venue; or 3) in awarding plaintiffs attorney fees.
Hansen Beverage Co. v. Nat'l Beverage Corp., 06-56390 (9th Cir. June 29, 2007).
Grant of a preliminary injunction prohibiting defendant from infringing upon the trade dress of Hansen Beverage Company's line of "Monster" energy drinks with defendant's line of "Freek" energy drinks is reversed where the district court abused its discretion in determining that plaintiff was likely to succeed on the merits, as a finding of a likelihood of confusion was clearly erroneous.
Central Mfg., Inc., v. Brett, 06-2083 (7th Cir. July 9, 2007).
In a suit for trademark infringement and unfair competition against a baseball bat manufacturer and a prominent former baseball player, summary judgment for defendant is affirmed where: 1) plaintiff produced no evidence of any use of the mark in commerce; 2) the district court did not abuse its discretion in cancelling plaintiff's mark; and 3) there was no clear error in the award of attorney's fees to defendant, since plaintiff's actions in bringing the lawsuit qualified as oppressive.
Tiseo Architects, Inc. v. B & B Pools Service and Supply Co. and Gary Olson, 06-1819 (6th Cir. July 27, 2007).
Plaintiff alleged that another architect, Olson, copied a design and site plan drawings that Plaintiff had prepared for Defendant. After a bench trial, the district court ruled in favor of Defendants. The Circuit Court affirmed where: 1) the district court properly analyzed the similarity of the works after filtering out the unprotectable elements of the original drawings; and 2) plaintiff's Lanham Act claim failed because it merely paralleled the copyright claim.
(Case summaries from www.FindLaw.com)
No Legal Advice or Attorney-Client Relationship: These materials have been prepared by Marwaha Law Office, LLC for informational purposes and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon this information without seeking advice from a lawyer licensed in your own state or country. Do not send us confidential information until you speak with one of our attorneys and receive our authorization to send that information to us.
Copyright 2007 Marwaha Law Office LLC.
