Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 1 of 24
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`UNITED STATES DISTRICT COURT
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`FOR THE DISTRICT OF IDAHO
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`Case No. 4:13-cv-00133-EJL-CWD
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`MEMORANDUM DECISION AND
`ORDER
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`INTRODUCTION
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`Plaintiff Keith Karlson, an artist, prepares drawings, or renderings, of residential
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`homes from blueprint plans to illustrate how a home will look once built. Karlson created
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`his renderings for use by Red Door Homes, LLC. Defendant Paul Scholes, a residential
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`contractor, acquired the renderings from a previous employer, Red Door Homes of Snake
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`River Valley, LLC, before reproducing Karlson’s renderings on his website,
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`Iamshomes.com. Karlson filed this lawsuit on March 19, 2013, claiming thirty-five
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`counts of copyright infringement on the grounds Scholes did not have permission to
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`reproduce Karlson’s copyrighted renderings.
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`MEMORANDUM DECISION AND ORDER - 1
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`KEITH KARLSON, an individual,
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`Plaintiff,
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`v.
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`PAUL SCHOLES, an individual, and
`IAMS HOMES, a business entity,
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`Defendants.
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 2 of 24
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`Plaintiff filed a motion for summary judgment on October 4, 2013, and the Court
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`conducted a hearing on March 11, 2014. After carefully considering the parties’
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`arguments, the relevant authorities, and the record before the Court, the Court finds there
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`are disputed issues of material fact that preclude summary judgment. The Court’s
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`analysis follows.
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`FACTS1
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`Beginning in March of 2008, Karlson created and sold original renderings to Red
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`Door Homes, LLC, a Florida company, which licenses packages of assets and services
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`that include home designs to home builders. The principal of Red Door Homes was
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`Patrick Miller. Karlson invoiced Red Door Homes for his artistic renderings, and
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`included a copyright notice on each invoice. The copyright notice stated,2 in relevant
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`part:
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`With delivery of your artwork, I transfer to you a limited copyright to
`reproduce the artwork I have produced for you in unlimited quantities on
`any media you choose, royalty-free, but only for use directly by you and
`may not be transferred to another business entity without my expressed
`permission. . . . By using the artwork in any way, you hereby agree to these
`terms and limitations to the copyrights transferred to you with delivery of
`your artwork.
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`1 The Court finds the following facts material and admissible in evidence for purposes of
`disposing of Plaintiff’s motion for summary judgment. If certain facts or documents are not mentioned
`herein, the Court found them either to be irrelevant; immaterial; inadmissible hearsay under Fed. R. Evid.
`801 and 802; or otherwise presented in a form that would not be admissible in evidence. See Fed. R. Civ.
`P. 56(c). Further, the Court notes the use of “text boxes” on several of Karlson’s .pdf images submitted to
`the Court. The Court cannot consider the statements, explanations, and argument set forth in the text
`boxes by counsel. Fed. R. Civ. P. 56(c). A witness must authenticate and describe the documents, and
`explain what the documents demonstrate.
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`2 Karlson’s affidavit, ¶¶ 15-17, (Dkt. 20-3), references the copyright notice, and refers to EX. B-1
`– B-6, which are attached to the Second Amended Complaint. (Dkt. 12.)
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`MEMORANDUM DECISION AND ORDER - 2
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 3 of 24
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`Karlson contends he did not grant Red Door Homes the right to transfer the copyright or
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`usage rights in his original artwork to other business entities without Karlson’s
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`permission and payment for the distribution.
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` Scholes was previously employed by Red Door Homes of Snake River Valley,
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`LLC (“Snake River”). Scholes was provided with a compact disc containing Karlson’s
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`renderings on it at a Red Door Homes meeting in Florida. Scholes believed that a
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`licensing agreement existed between Red Door Homes and Snake River, which permitted
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`him to use Karlson’s renderings. A licensing agreement, dated June 15, 2009, between
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`Red Door Homes and Snake River, purported to grant Snake River a license to carry on a
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`business using the Red Door Homes business system and intellectual property relating to
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`the business system in certain Idaho counties. Karlson Aff. Ex. Y.3 Scholes used
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`Karlson’s renderings to create web page content advertising Snake River’s services.
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`Karlson did not become aware that Red Door Homes had distributed Karlson’s
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`renderings to Red Door Homes’ licensees until November of 2009.
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`In December of 2009, Karlson applied for copyright registration and received a
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`certificate of registration on December 18, 2009, in his original artwork. Am. Compl. Ex.
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`A. The copyright registration certificate identifies the copyrighted work as “Red Door
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`Homes Art.” Id. The renderings comprising “Red Door Homes Art,” are not specifed in
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`the registration certificate, and the application submitted for the registration is not in the
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`record.
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`3 The Court considered Exhibit Y because, with the proper authentication, it would be admissible
`in evidence at trial.
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`MEMORANDUM DECISION AND ORDER - 3
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 4 of 24
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`The complaint lists, in counts one through thirty five, the titles given the
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`renderings, and in paragraph eleven, asserts that “these artworks make up a collection of
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`material known as the Red Door Homes Art, and the artworks that are the focus of this
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`action.” Scholes in his answer denies the factual assertion in paragraph eleven based upon
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`lack of information. Ans. (Dkt. 16.) In his affidavit, Karlson identifies thirty-five
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`renderings as his original work, but does not explicitly state that these thirty-five
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`renderings are the renderings covered by the copyright registration and identified as “Red
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`Door Homes Art.” Aff. of Karlson ¶ 4, Ex. W-01-W35 (Dkt. 20-3.)
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`In any event, shortly after obtaining the registration, Karlson ordered Red Door
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`Homes to discontinue using his artwork, and to inform Red Door licensees to discontinue
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`their use of his artwork. Karlson received a list from Red Door Homes of Red Door
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`clients that had used Karlson’s artworks, which list did not include Scholes or Iams
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`Homes. Red Door Homes reported to Karlson that it was not using any of Karlson’s
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`renderings “at the corporate or division level.” Karlson therefore understood that Red
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`Door Homes and its licensees had stopped using Karlson’s artwork as of January 2010.
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`Meanwhile, Snake River ceased operations in or about November of 2009 due to a
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`lack of revenue, and dissolved on September 7, 2010. Scholes then began his own
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`company, Iams Homes, sometime in 2010,4 and he created a website advertising Iams
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`4 Karlson includes numerous documents, including screen shots and archived files of the Iams
`Homes website, to document when Scholes purportedly began his business and when Scholes created the
`Iams Homes website. Absent authentication, and testimony about the process used to extract the archived
`files and how Karlson obtained the information, the Court cannot consider the evidence upon summary
`judgment. Moreover, the evidence would not necessarily be conclusive as to when Iams Homes opened
`its door to the public. Many steps might precede a business opening, including applications for a business
`(Continued)
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`MEMORANDUM DECISION AND ORDER - 4
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 5 of 24
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`Homes construction services sometime after August 11, 2010.5 Scholes later utilized
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`several of Karlson’s original renderings on the Iams Homes website. Scholes claims he
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`received permission from Patrick Miller of Red Door Homes to continue to use the
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`Karlson renderings on the Iams Homes website. According to Scholes, he and Miller
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`agreed that, “instead of paying an upfront licensing fee, which was the customary
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`practice of Red Door Homes, [Scholes] would pay a per use licensing fee for each
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`construction contract [he] sold.” Scholes contends he had “no knowledge that [Karlson]
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`had demanded Red Door Homes, LLC, or any of its affiliates, cease the use of” Karlson’s
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`renderings. Aff. Of Scholes ¶ 6 (Dkt. 21-1.)
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`Karlson found thirty of his renderings on the Iams Homes website on or about
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`October of 2010, and on January 3, 2011, sent correspondence demanding that Scholes
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`cease using the renderings on the website.6 Scholes claims that on March 4, 2011, he had
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`taken action to eliminate Karlson’s artwork from Iams Homes offerings and had
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`restricted all public access to the Iams Homes website. Karlson contends that the Iams
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`Homes website continued to display his artwork throughout 2011, offering “webarchive”
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`license or registration of a website URL. The Court discusses the evidentiary issues in further detail later
`in this opinion.
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`5 Scholes admits that the URL domain name “iamshomes.com” was registered on August 11,
`2010. By implication, the website was therefore created sometime later.
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`6 Scholes asserts in his affidavit that once Karlson informed him of the copyright in the
`renderings, Scholes talked to Miller, and “Miller informed me that [Karlson] had been hired by Red Door
`and had been paid by Red Door, and that Red Door had the authority to allow me to use the images on my
`website.” Aff. of Scholes ¶ 11 (Dkt. 21-1.) Scholes is testifying about an out of court statement by Miller,
`and asserting that it is true. The statement is hearsay, and cannot be considered by the Court upon
`summary judgment. Fed. R. Evid. 801.
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`MEMORANDUM DECISION AND ORDER - 5
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 6 of 24
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`files to illustrate what he observed on the Iams Homes website after March 4, 2011. Aff.
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`of Karlson Ex. JJ (Dkt. 20-3.)
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`In October of 2011, Scholes hired Kevin Whipple, an intern from BYU-Idaho,
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`who was given access to the Iams Homes website. Scholes states that Whipple added five
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`previously unused Karlson renderings to the website “claimed to be copyrighted by
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`[Karlson],” and that Whipple inadvertently opened access of the website to the public.
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`Aff. of Scholes ¶ 16 (Dkt. 21-1.) These five images are identified in counts thirty one
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`through thirty five of the Second Amended Complaint as the “Clarion A,”
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`“GeorgetownA,” “PhillipsburgA,” “fpGeorgetown,” and “fpPhillipsburg.” As soon as
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`Scholes became aware that the website could be accessed by the public, Scholes claims to
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`have shut down public access. Scholes asserts that he never wilfully or intentionally
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`published materials copyrighted by Karlson “without the belief that [he] was justified in
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`doing so pursuant to [his] agreement with Patrick Miller and Red Door Homes.”
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`Two other sets of facts bear mention. First are Scholes’s carefully chosen
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`admissions. Scholes does not deny that Karlson holds a Certificate of Registration in his
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`original art, but denies that the artworks that are the subject of the complaint make up the
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`collection the registration identifies as “Red Door Homes Art.” Second Am. Compl.
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`¶ 11, 12; Ans. ¶ 11, 12. And, in his brief, Scholes again admits that Karlson owns a valid
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`copyright, but does not indicate in what. Response at 2 (Dkt. 21.) Further, Scholes’s
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`written agreement to indemnify Whipple states that he “agrees to indemnify Kevin
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`Whipple’s actions listed in the complaint … namely actions taken by Mr. Whipple which
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`include the placing of pictures on Mr. Scholes, website, [sic] which have been alleged by
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`MEMORANDUM DECISION AND ORDER - 6
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 7 of 24
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`Keith Karlson to have been protected by a copyright.” Aff. of Karlson Ex. BB (Dkt. 20-
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`3.) (emphasis added).
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`Second is the Alabama lawsuit involving Red Door Homes. Karlson brought a
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`copyright infringement suit against Red Door Homes and other defendants in the United
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`States District Court for the Northern District of Alabama, claiming Red Door Homes
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`owed him $142,279 for its use of his artwork as provided to others. See Karlson v. Red
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`Door Homes, LLC, et. al.,7 No. CV-11-J-1511-NE, 2012 WL 1747845 (N.D. Ala. May
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`16, 2012). Defendants in the Alabama action moved for summary judgment, and Karlson
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`filed a cross-motion for summary judgment. Id.
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`The Alabama District Court rejected Karlson’s argument that the invoices
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`submitted to Red Door Homes protected his work, explaining that the invoices:
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`cannot be part of the contract between the parties to produce the work
`because they were sent after the renderings were provided to the
`defendants. . . Although the invoices contained language to the effect that
`by using his artwork, the defendants agreed to the terms listed in the
`invoices, the work was completed and sent to defendants prior to their
`receipt of an invoice. Thus, any statement regarding use of the renderings in
`the invoices could not form the basis of an agreement between the parties
`concerning plaintiff's production of those renderings. . . .
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`Karlson, 2012 WL 1747845 at *4 (internal citations omitted). Further, the court
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`explained that Karlson’s sole outlet for the renderings was the defendants, because the
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`renderings, in and of themselves, had no value and no market apart from the sale to the
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`defendants. Id.
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`7 The other named defendants, SMA Operations Management, LLC and RDH Advising, LLC,
`were licensors of Karlson’s work. SMA hired Patrick Miller in 2008, and Miller also became a
`shareholder in Red Door Homes.
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`MEMORANDUM DECISION AND ORDER - 7
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`Having so concluded, the Alabama District Court held that the relationship
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`between Karlson and Red Door Homes “is one of a nonexclusive license from plaintiff to
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`defendant,” and found that Karlson had granted the defendants a “permissive, non-
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`exclusive license to use and reproduce [Karlson’s] renderings.” Id. at *5. The court based
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`its conclusion upon the circumstances and the relationship between the parties---because
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`Karlson created the works at Red Door Homes’ request and handed them over, the intent
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`must have been for Red Door Homes to be able to copy and distribute the work. Id.
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`Therefore, the court found no infringement occurred because the defendants’ use of
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`Karlson’s renderings was based upon an implied nonexclusive license. Id. at *6.
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`The Alabama District Court considered also Karlson’s breach of contract claim.
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`Karlson asserted he had “a binding agreement” with the defendants concerning the use of
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`his renderings. But the court found that the only writings submitted to the court regarding
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`any agreement between Karlson and the defendants demonstrated that, once Karlson
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`questioned what the parties’ agreement was, they were unable to come to any agreement
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`regarding the use of Karlson’s renderings, and the parties ceased their business
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`relationship. Id. at *7.
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`As part of its ruling, the court found that Karlson was entitled to judgment in his
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`favor on the issue of the validity of his copyright, and that defendants were entitled to
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`judgment in their favor on the issue of copyright infringement and on Karlson’s breach of
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`contract claim. The court found Karlson’s unjust enrichment claim to be without merit.
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`Id. at *7.
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`MEMORANDUM DECISION AND ORDER - 8
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 9 of 24
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`Karlson appealed the judgment to the United State Court of Appeals for the
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`Eleventh Circuit. The appellate court concluded that the district court erroneously granted
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`summary judgment on a ground raised sua sponte, and upon a ground the defendants had
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`not argued, without adequate notice to the defendants. Karlson v. Red Door Homes, LLC,
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`2014 WL 228697 (11th Cir. Jan. 22, 2014). The appellate court found that the failure to
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`give the parties notice and a reasonable time to respond before granting the motion on
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`grounds not raised by either party contravened Fed. R. Civ. P. 56(f). Id. at *1. Because
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`the district court failed to provide notice to the parties that it intended to address the
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`implied-license question, the appellate court on January 22, 2014, vacated the district
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`court’s grant of summary judgment and remanded the case for further proceedings. Id. at
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`*2.8
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`In the matter before this Court, Karlson alleges thirty-five separate counts of
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`copyright infringement against Scholes and Iams Homes. Karlson seeks summary
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`judgment on the issue of infringement, and requests an award of statutory damages for
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`each count of infringement plus the statutory enhancement for willful infringement. In
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`addition, Karlson asks for an injunction and an award of attorney fees under the
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`Copyright Act. Scholes argues that summary judgment against Defendants on Karlson’s
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`copyright infringement claim is improper, because genuine issues of material fact exists
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`8 Karlson noted the district court proceeding was on appeal, but failed to provide the Court notice
`that the district court opinion had been reversed and remanded. Nor did Karlson and Scholes consider the
`implications of the reversal upon this Court’s determination.
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`MEMORANDUM DECISION AND ORDER - 9
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 10 of 24
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`as to whether Scholes was given permission by Patrick Miller as a sub-licensee to use the
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`renderings, and whether the alleged infringements were willful.
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`DISPOSITION
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`Summary Judgment Standards
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`A principal purpose of summary judgment is to “isolate and dispose of factually
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`1.
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`unsupported claims ....” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). It is “not
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`a disfavored procedural shortcut,” but is instead the “principal tool[ ] by which factually
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`insufficient claims or defenses [can] be isolated and prevented from going to trial with
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`the attendant unwarranted consumption of public and private resources.” Id. at 327.
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`“[T]he mere existence of some alleged factual dispute between the parties will not defeat
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`an otherwise properly supported motion for summary judgment; the requirement is that
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`there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S.
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`242, 247–48 (1986).
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`The moving party bears the initial burden of demonstrating the absence of a
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`genuine issue of material fact. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001).
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`To carry this burden, the moving party need not introduce any affirmative evidence (such
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`as affidavits or deposition excerpts) but may simply point out the absence of evidence to
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`support the nonmoving party’s case. Fairbank v. Wunderman Cato Johnson, 212 F.3d
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`528, 532 (9th Cir. 2000).
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`This shifts the burden to the nonmoving party to produce evidence sufficient to
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`support a jury verdict in its favor. Anderson, 477 U.S. at 256–57. The “party opposing
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`summary judgment must direct [the Court’s] attention to specific triable facts.” S. Cal.
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`MEMORANDUM DECISION AND ORDER - 10
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 11 of 24
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`Gas Co., 336 F.3d at 889. In other words, the nonmoving party must go beyond the
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`pleadings and show “by [its] affidavits, or by the depositions, answers to interrogatories,
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`or admissions on file” that a genuine issue of material fact exists. Celotex, 477 U.S. at
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`324. The Court must draw all justifiable inferences in favor of the nonmoving party,
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`including questions of credibility and the weight to be accorded particular evidence, and
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`must view the facts in the light most favorable to the nonmoving party. Kaelin v. Globe
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`Communications Corp., 162 F.3d 1036, 1039 (9th Cir. 1998).
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`The party bearing the burden of proof at trial “must establish beyond controversy
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`every essential element of its ... claim.” S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d
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`885, 889 (9th Cir. 2003) (adopting decision of district court “as our own”). A party who
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`does not have the burden “may rely on a showing that a party who does have the trial
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`burden cannot produce admissible evidence to carry its burden as to the fact.” Fed. R.
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`Civ. P. 56(c)(1)(B) (advisory committee’s note.)
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`2.
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`Copyright Infringement
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`A plaintiff bringing a claim for copyright infringement must demonstrate “(1)
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`ownership of a valid copyright, and (2) copying of constituent elements of the work that
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`are original.” Feist Pubs., Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991).
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`Copyright protection subsists in “original works,” and is created “every time people set
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`pen to paper.” Aerocon Eng., Inc. v. Silicon Valley Bank (In re World Auxiliary Power
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`Co.), 303 F.3d 1120, 1131 (9th Cir. 2002). Congress granted copyright protection to
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`architectural works and architectural drawings under 17 U.S.C. §§ 102(a)(8) and
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`102(a)(5), respectively.
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`MEMORANDUM DECISION AND ORDER - 11
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 12 of 24
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`Although most copyrights are unregistered, registration of a copyright bestows
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`additional protections. First, a copyright registration certificate constitutes prima facie
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`evidence of validity of a copyright, and the burden then shifts to the party challenging the
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`copyright to dispute its validity. Autoskill, Inc. v. Nat’l Educational Support Sys., Inc.,
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`994 F.2d 1476, 1487 (10th Cir. 1993). Second, registration bears greatly on recoverable
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`damages. Neither statutory damages nor attorney fees are recoverable for infringements
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`of copyright commenced after first publication of the work but before the effective date
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`of its registration, unless registration is made within three months after the first
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`publication of the work. 17 U.S.C. § 412. Therefore, a prerequisite to recovery of
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`statutory damages is a certificate of registration in the work. 17 U.S.C. § 412. A
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`copyright owner claiming statutory damages need not prove actual damages. 17 U.S.C.
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`§ 504(c). Instead, statutory damages are recoverable “in a sum of not less than $750 or
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`more than $30,000” for each infringement. 17 U.S.C. § 504(c)(1).
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`Enhancement of statutory damages is proper if the infringement was “willful.” The
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`provision governing willful infringement states:
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`In a case where the copyright owner sustains the burden of proving, and the
`court finds, that infringement was committed willfully, the court in its
`discretion may increase the award of statutory damages to a sum of not
`more than $150,000. In a case where the infringer sustains the burden of
`proving, and the court finds, that such infringer was not aware and had no
`reason to believe that his or her acts constituted an infringement of
`copyright, the court in its discretion may reduce the award of statutory
`damages to a sum of not less than $200.
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`17 U.S.C. § 504(c)(2).
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`MEMORANDUM DECISION AND ORDER - 12
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 13 of 24
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`Neither the Copyright Act nor its legislative history defines “willful.” However,
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`“[i]t seems clear that as here used ‘willfully’ means with knowledge that the defendant's
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`conduct constitutes copyright infringement.” Peer Intern. Corp. v. Pausa Records, Inc.,
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`909 F.2d 1332, 1336 n.3 (9th Cir. 1990) (quoting 3 M. Nimmer & D. Nimmer, NIMMER
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`ON COPYRIGHT § 1404[B], at 14–40.2–.3 (1989)). If there is evidence of willful
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`infringement, the infringer “must not only establish its good faith belief in the innocence
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`of its conduct, it must also show that it was reasonable in holding such a belief.” Id. at
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`1336 (citing 3 M. Nimmer & D. Nimmer, NIMMER ON COPYRIGHT § 14.04[B], at 14–40.3
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`(1989)). A defendant who ignores the revocation of a license to a copyrighted work and
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`continues to use the work after the revocation, willfully infringes that work. Peer Intern.
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`Corp., 909 F.2d at 1335-36 n.3 (9th Cir. 1990). Importantly, to obtain statutory damages
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`and enhancement of the same, the copyright owner must first prove copying of the works,
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`and next establish the copied works are registered.
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`A copyright owner has the exclusive rights to copy, distribute or display the
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`copyrighted work publically. 17 U.S.C. § 106. And, a copyright owner can sell or
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`license9 his rights to someone else, but a transfer of ownership, including an exclusive
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`license, in the work is invalid unless it is in writing. 17 U.S.C. § 204(a).10 Nonexclusive
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`licenses, however, do not need to be in writing, and may be granted orally, or implied
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`9 A licensee does not infringe the owner’s copyright unless the licensee’s use exceeds the scope
`of its license. S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir. 1989).
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`10 A transfer of copyright ownership is defined as an “assignment, mortgage, exclusive license, or
`any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights
`comprised in a copyright ... but not including a nonexclusive license.” 17 U.S.C. § 101.
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`MEMORANDUM DECISION AND ORDER - 13
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 14 of 24
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`from conduct. Effects Assoc., Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990) (citing 3
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`M. Nimmer & D. Nimmer, NIMMER ON COPYRIGHT § 10.03[A], at 10–36 (1989)). If an
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`artist creates a work at the defendant’s request and hands it over, intending that the
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`defendant copy and distribute it, and the work would have “minimal value” without the
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`right to copy and distribute, the court may find that the artist impliedly granted a
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`nonexclusive license to the defendant. Effects Assoc., Inc., 908 F.2d at 558-59.
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`Here, there is no dispute that Karlson obtained a Certificate of Registration of
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`copyright on December 18, 2009, and that Karlson owns a valid copyright in his original
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`works. Nor does Scholes dispute that he reproduced Karlson’s renderings on the Iams
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`Homes website during certain time periods. Scholes, however, claims he was granted a
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`sublicense by Patrick Miller of Red Door Homes to use Karlson’s renderings. But neither
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`party appreciates that March 4, 2011, marks a point of divergence. Scholes does not deny
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`Karlson informed him to stop using the images, and Scholes states he removed the
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`images from the website on March 4, 2011. Thus, any use after March 4 would be in
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`disregard of Karlson’s express demand to stop using the images. Accordingly, the Court
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`will address the issues in that fashion—use of the works before March 4, and use after
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`March 4.
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`A.
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`Use Before March 4, 2011
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`Prior to March 4, 2011, Scholes believed that Red Door Homes and its principal,
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`Patrick Miller, had the authority to allow Scholes to use the Karlson images via a
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`sublicense. Karlson wastes an inordinate amount of ink explaining to the Court the
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`inferences to be drawn from the evidence, arguing that based upon these inferences, no
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`MEMORANDUM DECISION AND ORDER - 14
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 15 of 24
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`reasonable juror could believe Scholes. But the Court must draw all reasonable inferences
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`in favor of the nonmoving party, Scholes.
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`For example, Karlson notes that Scholes did not specify the date when Miller gave
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`permission to use the images. Then, Karlson argues that because Iams Homes was not
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`formed until September of 2010, well after Miller affirmed in January of 2010 that Red
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`Door Homes and its affiliates ceased using the images, the facts support an inference that
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`Miller could not have given permission to Scholes until after Red Door Homes was on
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`notice that it could not give anyone permission to use Karlson’s images. But an equally
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`supportable inference is that Miller may have turned his nose up at Karlson, lied to
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`Scholes, and gave Scholes what Scholes understood was permission to use the images.
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`Further, Karlson fails to appreciate that Scholes was given the disc with the
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`images while he worked for Snake River, and that Scholes contends he understood Snake
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`River was permitted to use the images. Scholes, perhaps strategically, does not tell the
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`Court when Miller gave him permission to further use the images for Iams Homes, and
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`only stated that “I received permission from Patrick Miller to continue to use the subject
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`MEMORANDUM DECISION AND ORDER - 15
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 16 of 24
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`materials on iamshomes.com.”11 The undisputed facts show that, although Snake River
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`did not formally dissolve until September of 2010, Snake River shut down long before
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`that—in November of 2009, before Karlson had contacted Red Door Homes. Thus, even
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`though the Iams Homes website was not created until after the domain name was
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`registered in September of 2010, the conversation Scholes had with Miller (and the
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`concept of iamshomes.com) could have occurred long before the website was created.
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`Because of the facts, a reasonable inference can be drawn that the initial conversation
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`between Scholes and Miller occurred when Snake River shut down in 2009, and Scholes
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`was out of work. Perhaps Scholes created the concept of Iams Homes then, but did not
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`implement his business plan until much later.
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`Karlson makes much ado over the conspicuous absence of Iams Homes from the
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`list Red Door Homes provided Karlson of Red Door affiliates using Karlson’s images. He
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`argues that this omission supports the inference that Miller never granted a sublicense to
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`Scholes, because if Miller had done so, Iams Homes would have been included on the
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`list. But the lawsuit between Karlson and Red Door Homes involves Red Door and its
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`11 At the hearing, Karlson argued that, even if Miller had granted Scholes an oral sublicense,
`Scholes did not inquire about the validity of the sublicense until Karlson contacted Scholes in
`January/February of 2011. The problem here is that Karlson wants this Court to draw an inference from
`the inadmissible hearsay in Scholes’s affidavit, in which Scholes stated that after Karlson contacted
`Scholes in January 2011, Scholes in turn contacted Miller, asked about the license, and was told by Miller
`that Red Door had the authority to allow Scholes to use the images on Scholes website. Karlson argues
`this statement supports his theory that Scholes never inquired about or was granted the sublicense,
`because he failed to ask about it until February of 2011. However, not only is the statement hearsay, but if
`the statement is eventually admitted in evidence, the inference is not supported based upon the evidence
`before the Court. Scholes never states in his affidavit, nor is there other information in the record,
`indicating when Scholes was initially granted the sublicense. The statement, if admissible, supports the
`inference that Scholes called Miller in February of 2011 to inquire whether Red Door had a license at
`some point in time.
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`MEMORANDUM DECISION AND ORDER - 16
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`Case 4:13-cv-00133-CWD Document 29 Filed 03/14/14 Page 17 of 24
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`affiliates, not Scholes. The record before the Court does not indicate Iams Homes was an
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`affiliate or client of Red Door Homes. Thus, the absence of Iams Homes on Red Door
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`Homes’s list of “clients” to whom it distributed Karlson’s images is meaningless. If Iams
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`Homes was not a “client” or an “affiliate,” then Miller, as part of the discovery in
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`Karlson v. Red Door, or at any time prior, did not necessarily need to disclose that he had
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`given permission to Scholes to use the images. Or maybe Miller forgot the conversation
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`he had with Scholes, which would alternately explain why Miller failed to disclose Iams
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`Homes on the list. Consequently, Karlson’s argument is unpersuasive.
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`Conspicuously absent is Miller’s affidavit, or any deposition testimony, regarding
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`what Miller told Scholes and when, and why Miller failed to identify Scholes and Iams
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`Homes as an entity to whom it had given permission to use the images. Karlson points
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`out that Scholes did not supply Miller’s affidavit to corroborate Scholes’s testimony. But
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`it was not Scholes’ obligation, as the nonmoving party, to do so.12 As the moving party,
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`Karlson