United States District Court, E.D. Wisconsin
DECISION AND ORDER
RUDOLPH T. RANDA U.S. District Judge
Design Basics LLC, owner of copyrighted building plans,
alleges that the Defendants, competitors in the home design
industry, have infringed on 64 of its copyrighted plans. The
Defendants counterclaim that the copyrights are invalid.
Design Basics’ motions for costs and for partial
summary judgment on its copyright claims (ECF Nos. 128, 134)
and the Defendants’ motion for summary judgment
dismissing Design Basics’ claims (ECF No. 129) are
ready for resolution and addressed herein.
Basics asserts that the Defendants should compensate
investigators John C. White, John M. Pratt, and Norman
Barnard as experts for time spent preparing for and
participating in depositions taken by the Defendants. (ECF
No. 128.) The Defendants assert that Design Basics has not
provided legal authority to support its claim for additional
compensation beyond the mileage reimbursement and $40 witness
fees previously paid to the investigators.
Federal Rules of Evidence distinguish between lay and expert
testimony. Lay testimony is evidence consisting of opinions
or inferences "rationally based on the witness’s
perception, " Fed.R.Evid. 701(a), whereas expert
testimony is that evidence founded on "scientific,
technical, or other specialized knowledge." Fed.R.Evid.
702(a). In the context of criminal investigations, Seventh
Circuit case law has discussed lay and/or expert testimony of
investigators. See, e.g., United States v. Rollins,
544 F.3d 820, 832-33 (7th Cir. 2008); United States v.
Oriedo, 498 F.3d 593, 603 (7th Cir. 2007). When
testimony involves only an investigator’s "own
personal observations and perceptions derived from [the]
particular case" at hand, the testimony is lay
testimony. Rollins, 544 F.3d at 833. However, when
an investigator’s testimony is not "limited to
what he observed in [a given] search or to other facts
derived exclusively from [the] particular investigation"
at issue, and instead involves the investigator bringing his
"wealth of experience . . . to bear on those
observations, " the testimony is expert testimony.
Oriedo, 498 F.3d at 603.
Basics listed the investigators as potential lay witnesses;
they were not identified as experts. Design Basics has not
established that its investigators should be deemed expert
witnesses. Consequently, its motion for costs (ECF No. 128)
JUDGMENT AND PARTIAL SUMMARY JUDGMENT MOTIONS
Defendants assert that Design Basics’ action should be
dismissed as a sanction due to its spoliation of evidence by
intentionally destroying files that would have established
the authorship of the copyrighted building plans.
Alternatively, the Defendants assert that some claims should
be dismissed for lack of evidence or because the
infringements predate the effective date of the Digital
Millennial Copyright Act (DMCA), 17 U.S.C. § 1202.
Basics requests partial summary judgment finding that it is
the owner of valid copyrights in the 64 works at issue in
this litigation. It maintains that eleven affirmative
defenses should be dismissed.
judgment is appropriate only "if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986). Summary judgment should be granted when
a party that has had ample time for discovery fails to
"make a showing sufficient to establish the existence of
an element essential to that party’s case, and on which
that party will bear the burden of proof at trial."
Id. If the moving party establishes the absence of a
genuine issue of material fact, the non-moving party must
demonstrate that there is a genuine dispute over the material
facts of the case. Id. at 323-24. The Court must
accept as true the evidence of the nonmovant and draw all
justifiable inferences in his favor. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment
is appropriate only "where the factual record taken as a
whole could not lead a rational trier of fact to
find for the non-moving party." See Bunn v. Khoury
Enters., Inc., 753 F.3d 676, 682 (7th Cir. 2014) (citing
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986)). On cross-motions for summary
judgment, the Court assesses whether each movant has
satisfied the requirements of Rule 56. See Cont’l
Cas. Co. v. Nw. Nat’l Ins. Co., 427 F.3d 1038,
1041 (7th Cir. 2005); see also Laskin v. Siegel, 728
F.3d 731, 734 (7th Cir. 2013).
the early 1980s, Design Basics, an Omaha, Nebraska home plan
design company, has created, marketed, published and licensed
the use of architectural works. Sometime after its inception,
the business was established as a corporation, Design Basics,
Inc. In 2009, the business was purchased by Patrick
Carmichael and Myles Sherman, who created DBI Holdings, LLC,
a Nebraska limited liability company. They merged DBI with
Design Basics, Inc. and restructured the business into the
Plaintiff limited liability corporation, which owns all
assets of the previously separate pre-merger entities,
including all intellectual property of Design Basics, Inc.
Design Basics owns copyrights in certain home plans/designs
published in various nationally-circulated home-design
Defendants sell raw building materials such as shingles,
siding, windows, lumber, flooring, cabinets and trim to
building contractors, retailers and their clients, and they
employ draftspeople for residential home designs. The
Defendants have five Wisconsin locations - Brookfield, Kiel,
Campbellsport, Berlin, and Wrightstown.
it was founded, Design Basics has been a major national
publisher of plan catalogs and no-cost magazine-styled
promotional mailers in which its copyrighted works are
marketed. Before the advent of the World Wide Web, Design
Basics was the nation’s largest publisher of home plan
catalogs, allowing customers to order catalogs by phone or by
direct purchase in many home improvement stores and
lumberyards across America. Since the popularity of the World
Wide Web, Design Basics’ plans have been widely
disseminated throughout the United States.
1996, Design Basics launched a website,
www.designbasics.com. However, not all its
copyrighted plans were added to the website until 1998 or
1999. Design Basics maintains the website to advertise and
market all of its copyrighted works by publishing designs in
user-friendly and easily accessible online storefront.
Determination of the precise date that any particular plan
was added to Design Basics website is not possible. The works
shown in Design Basics’ home design catalogs and its
website display its copyright management information (CMI),
giving notice to customers and potential customers that
Design Basics owns those copyrighted plans.
1988, Design Basics designated an architectural work the
"Trenton, " and registered it with the United
States Copyright Office on August 18, 1988. In 1989, Design
Basics designated an architectural work the "Rosebury,
" and registered it with the United States Copyright
Office on October 11, 1989.
copyright litigation prior to January 2010, Design Basics
produced copies of its original design files in discovery and
was aware that its original design files would be relevant
information in any copyright infringement litigation. Design
Basics knew that defendants in such lawsuits have a
legitimate interest in seeing original design files to
confirm authorship and originality and that it would be in
its best interest to preserve those files.
January 2010, Design Basics was replacing the flat roof of
its main facility. The melting of large snowfall accumulation
on that roof, followed by a heavy rainfall, created undue
pressure and compromised the roof’s integrity,
resulting in a severe breach of the roof/ceiling and damaging
the facility’s contents.
Murnane, Design Basics’ chief financial officer,
oversaw the clean-up process. Design Basics retained Terracon
Consultants, Inc. to perform an assessment of the general
health of the building, and Murnane served as liaison to
Tarracon’s industrial hygienist, Randy Milbrath.
Milbrath told Murnane that any porous materials such as
cellulose (paper, cardboard, etc.) that had been wet should
be removed from the building because they could negatively
impact the air quality.
also told Murnane that if the banker boxes (which contained
the original authorship records) were allowed to sit for 48
hours or longer, there was a greater likelihood that mold
would grow, and spread through the building.
effort to clear the building, Design Basics moved all the
water-damaged files/boxes out so that the water extraction
company could remove standing water from the building and the
mold inspection company could assess and test designated
areas of the facility. Affected files/boxes were relocated
based on the severity of damage. The most salvageable files
were moved to a garage and warehouse so that staff could sort
through their contents. The most damaged files were moved to
Design Basics’ previous Customer Call Center. Murnane
was not aware that Design Basics’ original authorship
records were stored in cardboard banker boxes marked with
"customer change order" numbers and bearing dates
indicating that their contents were at least five years old.
Basics destroyed those banker boxes and their contents. When
Design Basics destroyed its original design files,
they were not scanned onto a computer. Although the original
physical drawings were destroyed, Design Basics has produced
to the Defendants digital copies of its home plan designs,
plan catalogs, web advertisements, and deposit materials
submitted to the Copyright Office.
19, 2010, while marketing its works to previous customers,
Design Basics discovered that a Wisconsin home builder,
Signature Homes, had been marketing and selling homes which
Design Basics asserts are three-dimensional copies of its
copyrighted works. Design Basics maintains that
Signature’s website shows an "Allister" plan
which is a three-dimensional copy of Design Basics’
copyrighted "Ambrose" plan and infringes on Design
Basics’ copyright, and that the "Allister"
plan contained the notation "Plans copyrighted by:
Campbellsport Building Supply." Subsequently, Design Basics
sent licensed private investigators to the Defendants’
locations to determine the nature and extent of infringement
activities. Design Basics claims the investigation revealed
that the Defendants immediately copied three of Design
Basics’ works, even while acknowledging that such
activity constituted copyright infringement.
result of its inspection of the Defendants’ computer
assisted design drawings and blueprints in this action,
Design Basics claims that the Defendants have infringed upon
an additional 61 of its copyrighted works by copying,
advertising, marketing, and distributing accused designs to
home builders who have constructed at least 146
houses. Four allegedly infringing works are dated
prior to October 28, 1998.
Basics claims that it is the original author of all plans the
Defendants allegedly infringed, and it denies that any of its
plans were based on any previous works. In discovery Design
Basics has denied that it destroyed any documents that relate
to or concern this litigation. It states that most of its
original design files were destroyed due to the January 2010
water damage, which prevents it from producing the original
design sketches for the plans that the Defendants allegedly
that Design Basics intentionally destroyed information it
knew was relevant to this litigation, the Defendants maintain
that this action should be dismissed based on spoliation.
Design Basics counters that (1) dismissal is an inappropriate
sanction for records lost due to a natural disaster; (2) when
the records were destroyed it had no duty to preserve them;
(3) the Defendants have not been harmed because it has
produced sufficient evidence of copyright validity; (4) its
conduct does not rise to the requisite level of culpability
to warrant dismissal; and (5) Design Basics, LLC v. Jim
Marhofer, et al., No. 12-14894 (E.D. Mich. June
15, 2015), relied upon by the Defendants, does not support
whether spoliation occurred is a two-part inquiry: (1)
"[C]ourts have found a spoliation sanction to be proper
only where a party has a duty to preserve evidence because it
knew, or should have known, that litigation was
imminent." Trask-Morton v. Motel 6 Operating
L.P., 534 F.3d 672, 681 (7th Cir. 2008); see also
Norman-Nunnery v. Madison Area Tech. Coll., 625 F.3d
422, 428 (7th Cir. 2010); (2) a showing of "bad
faith" is "a prerequisite to imposing sanctions for
the destruction of evidence." Trask-Morton, 534
F.3d at 681. "‘[B]ad faith’ means
destruction for the purpose of hiding adverse
information." Mathis v. John Morden Buick,
Inc., 136 F.3d 1153, 1155 (7th Cir. 1998); see also
Bracey v. Grondin, 712 F.3d 1012, 1019 (7th Cir. 2013).
for spoliation may not be imposed simply because evidence was
destroyed; instead, such sanctions are appropriate only if
the evidence was destroyed for the purpose of hiding adverse
information. See e.g., Park v. City of Chi., 297
F.3d 606, 615 (7th Cir. 2002) (citation omitted) ("[T]he
crucial element is not that evidence was destroyed but rather
the reason for the destruction."). The movant bears the
burden to make this showing. Bracey, 712 F.3d at
citation to authority, the Defendants maintain that in the
wake of the water damage, Design Basics had a duty to
preserve evidence that was relevant to this lawsuit. The
water damage occurred in January 2010. Design Basics was not
aware of an infringement relevant to this lawsuit until May
19, 2010 and it did not file this action until May 2013.
There is a genuine dispute of material fact regarding when
the original design files were destroyed. However,
considering the facts in the light most favorable to Design
Basics (the nonmovant on the spoliation ...