Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 1 of 10
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`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLORADO
`Magistrate Judge Gudrun J. Rice
`
`Civil Action No. 06-cv-00249-WYD-GJR
`
`HOME DESIGN SERVICES, INC.,
`
`Plaintiff,
`
`v.
`
`B&B CUSTOM HOMES, LLC,
`DAVID BAGG, DENISE BAGG,
`BENNETT CONSTRUCTION, INC.,
`LARRY W. BENNETT, JOHN J. BENNETT,
`FRED BISHOP ENTERPRISES, INC.,
`FRED W. BISHOP III,
`INFINITY BUILDERS, INC. f/k/a CASTLE HOMES, INC.,
`WILLIAM J. FITZGERALD,
`MERRITT CONSTRUCTION, INC.,
`MERRITT L. SIXBEY, JR.,
`SUSAN MARIE SIXBEY,
`PAUL RIENSHE,
`SERRA CONSTRUCTION, INC.,
`GARY L. POUSH,
`SANDRA L. DORR,
`
`Defendants.
`_____________________________________________________________________________
`
`ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
`FOR RECONSIDERATION REGARDING THE DISCOVERABILITY OF
`PLAINTIFF’S LITIGATION REVENUE (Docket # 708)
`_____________________________________________________________________________
`
`THIS MATTER comes before the Court on Defendants’ Motion (docket # 708) for
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`Reconsideration Regarding the Discoverability of Plaintiff’s Litigation Revenue. The matter is
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`fully briefed and oral argument was heard in Grand Junction, Colorado on May 5, 2008.
`
`
`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLORADO
`Magistrate Judge Gudrun J. Rice
`
`Civil Action No. 06-cv-00249-WYD-GJR
`
`HOME DESIGN SERVICES, INC.,
`
`Plaintiff,
`
`v.
`
`B&B CUSTOM HOMES, LLC,
`DAVID BAGG, DENISE BAGG,
`BENNETT CONSTRUCTION, INC.,
`LARRY W. BENNETT, JOHN J. BENNETT,
`FRED BISHOP ENTERPRISES, INC.,
`FRED W. BISHOP III,
`INFINITY BUILDERS, INC. f/k/a CASTLE HOMES, INC.,
`WILLIAM J. FITZGERALD,
`MERRITT CONSTRUCTION, INC.,
`MERRITT L. SIXBEY, JR.,
`SUSAN MARIE SIXBEY,
`PAUL RIENSHE,
`SERRA CONSTRUCTION, INC.,
`GARY L. POUSH,
`SANDRA L. DORR,
`
`Defendants.
`_____________________________________________________________________________
`
`ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION
`FOR RECONSIDERATION REGARDING THE DISCOVERABILITY OF
`PLAINTIFF’S LITIGATION REVENUE (Docket # 708)
`_____________________________________________________________________________
`
`THIS MATTER comes before the Court on Defendants’ Motion (docket # 708) for
`
`Reconsideration Regarding the Discoverability of Plaintiff’s Litigation Revenue. The matter is
`
`fully briefed and oral argument was heard in Grand Junction, Colorado on May 5, 2008.
`
`
`
`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 2 of 10
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`For the reasons set forth below the Defendants’ Motion is granted in part and denied in
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`part.
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`BACKGROUND
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`Plaintiff Home Design Services (HDS) has sued numerous Defendants for alleged
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`copyright infringement. Plaintiff alleges that Defendants, home builders and their owners,
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`engaged in copyright infringement by building homes copied from HDS copyrighted plans.
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`Defendants previously sought to discover the amount of revenue Plaintiff generates from
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`litigation-related activities. Defendants requested a ruling regarding the discoverability of
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`information related to revenue Plaintiff receives from litigation in other copyright cases
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`throughout the country, including amounts received from any verdicts, judgments, court decrees,
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`and settlement agreements (“litigation revenue”). See Defendants’ Reply Brief (docket # 450 at
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`3-4) in Support of Discoverability of Plaintiff’s Actual Damages.
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`This Court denied Defendants’ request for inquiry into Plaintiff’s litigation revenue, by
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`Order dated July 19, 2007 (docket # 542), by restricting discovery of Plaintiff’s actual damages
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`solely to the plans at issue in Plaintiff’s Amended Complaint (docket # 353) from 2003 forward.
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`By the terms of the July 19, 2007 Order, Defendants were granted leave to petition the court for
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`reconsideration of the Order, upon additional evidence or argument presented by Defendants
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`supporting further inquiry into Plaintiff’s actual damages substantiation.
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`Defendants have now, by this Motion (docket # 708) before the Court, moved for
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`reconsideration regarding the discoverability of Plaintiff’s litigation revenue. Defendants
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`request that this Court reconsider the July 19, 2007 Order and grant Defendants leave to inquire
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`2
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`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 3 of 10
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`at depositions into Plaintiff’s litigation revenue from 1996 forward, require Plaintiff to produce
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`documents, including settlement agreements, sufficient to identify with certainty Plaintiff’s gross
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`litigation-related revenue from 1996 forward, and require Plaintiff to produce documents
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`sufficient to identify with certainty how much of Plaintiff’s gross income is litigation related..
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`In support of this Motion and their request for reconsideration of the discoverability of
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`Plaintiff’s litigation revenue, the Defendants bring to the Court’s attention these additional
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`arguments: 1) evidence of Plaintiff’s litigation revenue bears on Defendants’ affirmative
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`defense of copyright misuse; 2) evidence of Plaintiff’s litigation revenue bears on the credibility
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`of Plaintiff’s potential witnesses.
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`STANDARD OF LAW
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`Federal Rule of Civil Procedure 26(b)(1) allows parties to:
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`obtain discovery regarding any nonprivileged matter that is relevant to any
`party’s claim or defense, including the existence, description, nature, custody,
`condition, and location of any documents or other tangible things and the
`identity and location of persons who know of any discoverable matter. For
`good cause, the court may order discovery of any matter relevant to the
`subject matter involved in the action. Relevant information need not be
`admissible at the trial if the discovery appears reasonably calculated to lead to
`the discovery of admissible evidence.
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`“Relevancy is to be construed more broadly during discovery than at trial.” Centurion
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`Industries, Inc. v. Warren Steurer and Associates, 665 F.2d 323, 326 (10th Cir. 1981) “Relevancy
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`is broadly construed at the discovery state of litigation and a request for discovery should be
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`considered relevant if there is any possibility that the information sought may be relevant to the
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`subject matter of the action.” Flour Mills of America, Inc. v. D.F. Pace, 75 F.R.D. 676, 680 (10th
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`Cir. 1977)
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`3
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`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 4 of 10
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`DEFENDANTS’ AFFIRMATIVE DEFENSE OF COPYRIGHT MISUSE
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`Defendants have raised the affirmative defense of copyright misuse. The copyright
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`misuse doctrine is an equitable defense to a copyright infringement action that forbids the use of
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`a copyright to secure an exclusive right or limited monopoly not granted by the copyright office
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`and is contrary to public policy to grant. See 185 ALR Fed 123, citing Alcatel USA, Inc. v. DGI
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`Technologies, Inc. 166 F.3d 772, 792 (5th Cir. 1999).
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`Plaintiff has the burden of establishing that it holds a copyright and that Defendants
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`infringed the copyright by advertising, designing or constructing and participating in the
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`construction of a residence which was copied largely or was an exact duplicate of a design or
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`plan of Plaintiff.
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`Defendants bear the burden of establishing their affirmative defense of copyright misuse.
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`Defendants must prove that Plaintiff “illegally extended its monopoly beyond the scope of the
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`copyright or violated the public policies underlying the copyright laws.” In re Indep. Serv. Orgs.
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`Antitrust Litig., 85 F.Supp.2d 1130, 1175 (D.Kan 2000).
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`Defendants argue that Plaintiff is unlawfully extending its purported monopoly by
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`seeking protection over non-protectable elements of its plan, such as common layouts and floor
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`plans. Defendants contend that Plaintiff’s plans contain largely generic, unoriginal elements and
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`thus are not afforded protection under copyright law. Defendants further assert that Plaintiff is
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`violating public policy underlying the copyright laws by using its purported copyright as a
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`mechanism to generate more revenue through litigation than through the actual plan sales.
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`Defendants apparently find it difficult to comprehend that a particular arrangement of
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`4
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`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 5 of 10
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`three bedrooms, living room, kitchen and bath, for example, is subject to the protection of the
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`federal copyright laws. But protection for architectural plans and designs is afforded by the
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`federal copyright laws.
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`Copyright protection is currently embodied in the Copyright Act of 1976. It was not until
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`1990 that the Copyright Act was amended to extend its protection to the overall shape of three-
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`dimensional works of architecture. Amended section 101 defines “architectural work” as “the
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`design of a building as embodied in any tangible medium of expression, including a building,
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`architectural plans, or drawings. The work includes the overall form and elements in the design,
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`but does not include individual standard features.” The amended statute now makes it an
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`infringement to construct a building that copies from another’s protectable two-or three-
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`dimensional design.
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`The Honorable Wiley D. Daniel, in the case cited by the Defendants, Medias & Co, Inc.
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`v. Ty, Inc., 106 F.Supp.2d 1132 (D.Colo. 2000), discussed the difficulties inherent in separating
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`the ideas, and basic utilitarian functions, which are not protectable, from the particular
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`expression of the work, which is protectable and copyrightable.
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`The Medias v. Ty case, supra, dealt with an alleged infringement of a Beanie Baby plush
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`toy, specifically a yellow duck with a bright orange bill and bright orange feet named
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`“Quackers.” Judge Daniel found that the idea of a plush duck is not protectable. Neither is the
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`fact that the duck has a bill, bright yellow plush fabric for the head and body, two webbed feet
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`and two eyes. However, the particular way in which Ty expressed the idea of a duck was
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`protected. Medias v Ty, supra, at 1137
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`5
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`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 6 of 10
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`Judge Daniel found that the particularized expression of the Beanie Baby “Quackers”
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`included “the unique shape of Quackers’ head and body, combined with bright yellow plush
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`fabric for the head and body, combined with a bright orange, less plush flared bill, combined
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`with the same bright orange, less plush webbed feet attached directly to the body without
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`intervening legs, combined with two round black shiny eyes made of hard plastic, placed on the
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`front of the face rather than the sides of the head; combined with eyebrows made out of black
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`thread; combined with no wings,....” Id. at 1137 Judge Daniel found that the particularized
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`expression of “Quackers” was protected by the Copyright Act.
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`The Plaintiff seeks to establish that the particular way in which rooms, their sizes, their
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`orientation, their arrangement have been placed in a plan or design is copyrightable and
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`protectable. The Plaintiff seeks to establish that the particular expression contained in the HDS
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`plans, made up of elements common to all plans, such as doors and windows and kitchens and
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`dining rooms and living rooms and bedrooms and bathrooms, is original, copyrightable and
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`protectable.
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`The fact that the Plaintiff has been successful in protecting copyrighted designs and has
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`generated revenue through litigation would not appear to pertain to the elements of the defense
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`of copyright misuse. The fact that the Plaintiff has litigated claims under the federal Copyright
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`Act and has been successful in that litigation fact does not indicate to this Court that the Plaintiff
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`has engaged in copyright misuse. The Defendants must establish that the Plaintiff extended its
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`purported monopoly beyond the scope of the copyright. I find that litigation revenue of the
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`Plaintiff in other cases around the country does not tend to show that the Plaintiff illegally
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`6
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`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 7 of 10
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`extended its monopoly beyond the scope of the copyright laws. I find that the information
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`sought by Defendants with regard to Plaintiff’s litigation revenue from around the country is
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`unlikely to lead to the discovery of admissible evidence regarding the Defendants’ affirmative
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`defense of copyright misuse, based on an extension of a purported monopoly.
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`Nor does the fact that the Plaintiff has recovered more in litigation revenue than the cost
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`of the plans tend to show that the Plaintiff has violated the public policy underlying copyright
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`law.
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`Section 504(b) of the Copyright Act protects the copyright holder by allowing the copy
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`right holder to recover not only the actual damages but also any of the infringer’s profits. As the
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`Plaintiff states in its brief, damages are awarded to compensate the copyright owner for losses
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`from the infringement and profits are awarded to prevent the infringer from unfairly benefitting
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`from a wrongful act. Section 504(b) is punitive in nature because it is designed to deter
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`copyright infringement. See H.R.Rep. No. 94-1476, 94th Cong., 2nd Sess., 161 (1976), U.S. Code
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`Cong. & Admin. News 1976, pp. 5659, 5777 as cited in Plaintiff’s Response (docket # 746 at
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`page 3 of 6). Damages are awarded to compensate the copyright owner for losses from the
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`infringement, and profits are awarded to prevent the infringer from unfairly benefitting from a
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`wrongful act.
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`Even if revenue from litigation exceeds the cost of the plans, there is nothing in this fact
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`that would tend to show that the Plaintiff has acted in violation of the public policies underlying
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`copyright law. I find that litigation revenue is not reasonably calculated to lead to the discovery
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`of information tending to show that the Plaintiff has violated the public policies underlying
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`7
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`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 8 of 10
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`copyright law. I consequently find that the information sought by the Defendants with regard to
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`the Plaintiff’s litigation revenue from cases brought around the country is unlikely to lead to the
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`discovery of admissible evidence in support of the Defendants’ copyright misuse defense based
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`on violation of public policy.
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`LITIGATION REVENUE AS BEARING
`ON CREDIBILITY OF PLAINTIFF’S WITNESSES
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`Defendants also assert that information with regard to Plaintiff’s litigation revenue would
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`tend to show that Plaintiff’s potential witnesses have a pecuniary interest in the outcome of this
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`litigation. Here I find the Defendants’ arguments more persuasive. Defendants should be
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`allowed to make limited inquiry into Plaintiff’s litigation revenue to discover how much is at
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`stake for the witnesses. I find that for this limited purpose litigation revenue is discoverable
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`pursuant to Fed.R.Civ.P. 26(b) in so far as the witnesses have received litigation bonuses or
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`litigation related income. The Plaintiff has stated that it is willing to produce, by way of
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`supplemental
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`interrogatory answer,
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`the aggregate amount received
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`through
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`litigation.
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`(Plaintiff’s Response - docket # 746 at page 4 of 6) The Plaintiff shall do so. The Defendants
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`shall be allowed to inquire of Plaintiff’s potential witnesses, including Plaintiff’s CEO, experts,
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`and fact witnesses, with regard to their pecuniary interest in litigation revenues. The Defendants
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`may seek to discover exactly how much is at stake for the witnesses by reviewing how much
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`money the witnesses have made as a consequence of litigation revenue in the past. The litigation
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`revenue is discoverable as being reasonably calculated to lead to impeachment evidence. The
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`Defendants are not, however, entitled to the discovery of particular verdicts, judgments, court
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`8
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`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 9 of 10
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`decrees and settlement agreements. Nor shall the Defendants be permitted to obtain the
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`documents, including settlement agreements, which would identify Plaintiff’s gross litigation
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`related revenue from 1996 forward.
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`CONCLUSION
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`I find and conclude that discovery of information related to revenue Plaintiff has received
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`from litigation in other copyright cases throughout the country is not reasonably calculated to
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`lead to the discovery of admissible evidence with regard to the Defendants’ affirmative defense
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`of copyright misuse. I find and conclude that discovery of limited litigation related revenue is
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`reasonably calculated to lead to the discovery of admissible evidence with regard to the bias of
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`the Plaintiff’s potential witnesses and with regard to potential impeachment of Plaintiff’s
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`witnesses.
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`ORDER
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`It is hereby ORDERED that Plaintiff will produce, by way of a supplemental
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`interrogatory answer, the aggregate amount of money received through litigation from 1996
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`forward.
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`It is hereby ORDERED that the Defendants’ Motion for Reconsideration regarding the
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`discoverability of Plaintiff’s litigation revenue is GRANTED to the extent that the Defendants
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`shall be permitted to inquire at depositions with regard to the pecuniary interest of Plaintiff’s
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`potential witnesses in the outcome of the litigation, by reviewing how much money Plaintiff has
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`made in litigation revenue in the past.
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`9
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`Case 1:06-cv-00249-CMA-GJR Document 770 Filed 05/30/08 USDC Colorado Page 10 of 10
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`It is ORDERED that the Defendants’ Motion is DENIED with regard to the request to
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`require Plaintiff to produce documents, including settlement agreements, sufficient to identify
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`Plaintiff’s gross litigation-related revenue, in support of the Defendants’ affirmative defense of
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`copyright misuse.
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`Dated this 30th day of May, 2008.
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`BY THE COURT:
`
`s/ Gudrun J. Rice
`______________________________________
`Gudrun J. Rice
`U.S. Magistrate Judge
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`10
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