Design Furnishings and Zen Path sold wicker furniture from the same manufacturer on eBay. Zen Path, the defendant, sent a cease and desist to Design Furnishings, the declaratory judgment plaintiff, stating that Design Furnishings’ sale of the furniture infringed Zen Path’s exclusive rights granted under the Copyright and Patent Acts, and that the photos Design Furnishings used to market the furniture on Ebay infringed Zen Path’s copyrights. Design Furnishings stopped using the photos, but continued to sell the furniture.

Zen Path then allegedly sent a series of sixty-three takedown notices to Ebay, claiming that the sale of the furniture infringed its exclusive rights. Zen Path also filed copyright registration applications for four different furniture collections. Zen Path filed the registrations as “sculpture/3-D artwork, Ornamental Design” and attached pictures of the furniture. (A picture of one of the deposits is below.)

Design Furnishings filed an action in state court, which was later removed to federal court, which included claims for (1) misrepresentation of intellectual property infringement in violation of 17 U.S.C. § 512(f) of the Digital Millennium Copyright Act (“DMCA”), (2) tortious interference with a contract, (3) tortious interference with prospective economic advantage, (4) a violation of California’s Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200-17210, and (5) declaratory and injunctive relief.

Knowing misrepresentation

17 U.S.C. 512(f) of the DMCA provides, inter alia, that any person who knowingly materially misrepresents that “material or [an] activity is infringing,” “shall be liable for any damages, including costs and attorneys’ fees, incurred by the alleged infringer.” The Court noted, citing Rossi v. Motion Picture Ass’n of Am., Inc., 391 F.3d 1000, 1005 (9th Cir. 2004), that “Liability does not extend to when “an unknowing mistake is made, even if the copyright owner acted unreasonably in making the mistake. Rather, there must be a demonstration of some actual knowledge of misrepresentation on the part of the copyright owner.”

The Court, nonetheless, granted Design Furnishings’ motion for a temporary restraining order that barred Zen Path from issuing additional DMCA takedown notices. The Court found that it could draw an inference of “knowing misrepresentation” from contradictions in the defendant’s copyright registration applications:

Here, defendant’s applications for copyright protection claimed the works were sculptures or 3-D artwork or ornamental designs, indicating that defendant knew the limits of copyright protection. The pictures of the furniture, though, suggest that defendant impermissibly sought protection of the “industrial design” of the furniture. Moreover, the internal contradiction in the applications raises a strong inference that defendant subjectively knew it did not have a copyright infringement claim when it notified eBay. Accordingly, the court finds that plaintiff has a likelihood of success on the merits.

The owner and developer of a $400 million multiphase project, currently being constructed (or not constructed) in San Antonio, engaged an architectural firm to provide designs for a portion of the project. The firm provided a proposal for five different sections, each of which contained language that stated that the parties would, after approval, enter into the standard American Institute of Architect’s agreement. Of the five proposals, however, only two were executed. And the two proposals that were executed contained notations replacing the standard AIA agreement with a “mutually acceptable agreement.”

According to the plaintiff developer, it paid the architectural firm over 2.7 million dollars for its services. Things went sour. The developer claimed the architectural firm was late in submitting designs; the architecture firm claimed its tardiness was due to the late submission of essential documentation by the developer.

The architectural firm refused to provide the developer access to the designs, claiming that it was owed $491,000 for its services. The developer claimed that it offered to place the money for the counter-claim into escrow pending final decision by the Court — but that the offer was rejected by the architectural firm.

The developer filed a breach of contract action against the architectural firm seeking, among other things, $2 million in damages and a declaratory and injunctive relief that the the architectural firm must provide access to the designs, and that it had a license to build the development from its designs. The developer claimed that the entire construction project would be delayed, if not shut down, without the plans.

Non-exclusive implied license

The question of whether the architectural firm granted the developer a non-exclusive license to use its copyright in the architectural designs formed a backdrop to the case. Even if the developer were to obtain a copy of the designs, it would not be able to start building without committing copyright infringement unless the Court were to find that it was granted an implied non-exclusive license.  The architectural firm argued that it did not intend to grant an implied license that would permit the developer to use the designs after it was no longer involved in the construction. The firm used Nelson-Salabes v. Morningside Dev., LLC, 284 F.3d 505, 516 (4th Cir.2002) as precedent:

(explaining that implied nonexclusive license exits where (1) the parties engaged “in a short-term discreet transaction as opposed to an ongoing relationship”; (2) the architect used a written contract, such as a standard AIA, which provides that the copyrighted materials could not be used without the architect’s involvement in project or without express permission; and (3) the parties conduct “during the creation or delivery of the copyrighted materials” shows that the parties permitted continued use of the materials after the architect was no longer involved and without his consent).

The TRO

The Court noted that both parties made compelling arguments about the breach of contract and implied license arguments, and that it did not have a developed record that would allow it to grant a TRO. The Court, however, made it clear that it’s denial of a TRO should not be read as predictive of a denial of a preliminary injunction.