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First Circuit: Discovery rule not triggered in copyright case by parties' acrimonious split
July 07, 2008

In a recent decision, the First Circuit reversed a district court's decision dismissing a copyright infringement claim on statute of limitation grounds. The main issue was whether the statute of limitations for copyright infringement claims barred an architectural firm's action against a former client.

The court determined that no triggering event had occurred which would put the plaintiff on inquiry notice of the claimed infringement outside the three-year statute of limitations. The court said a frayed relationship between the client and the firm did not give rise "to a reasonable suspicion that skullduggery was afoot." Because the plaintiff was not on inquiry notice (and did not have actual notice outside the limitations period), the district court's dismissal of the copyright infringement claim was reversed.

The court then affirmed the district court's grant of summary judgment dismissing the defendant's counterclaims. These counterclaims were all based on the defendant having sole ownership of the plans. The court found no plausible way for the defendant to claim sole ownership, either under the work-for-hire doctrine or otherwise.

Interesting tidbits: The opinion was written by Senior Circuit Judge Bruce Selya, well-known for his extensive vocabulary. This opinion did not disappoint, using words such as "quondam," "tamisage" (a word so uncommon no online definition could be located, although Judge Selya has used it before), and "asseverate." Also, retired Supreme Court Justice Sandra Day O'Connor sat on the panel.More on Warren Freedenfeld Assocs., Inc v. McTigue after the jump.

In March 1998, the defendant, McTigue, hired the plaintiff, Warren Freedenfeld Associates, to design a veterinary hospital to be built in Gardner, Massachussets. The parties executed a design agreement using form language and which stated that WFA would be "deemed the author" of all the plans and drawings prepared for the project. WFA would also "retain all common law, statutory, and other reserved rights [therein], including copyright."The relationship between the parties soon soured. WFA complained of non-payment. McTigue countered that WFA had failed to perform required services and neglected to keep the project within budget. During the termination of the arrangement, WFA warned McTigue not to make use of the plans and drawings to complete the project. McTigue responded by calling the plans "useless" and that they have been "rolled up and discarded." On September 2, 1999, the parties entered into another agreement confirming the provision in the original agreement regarding WFA's copyright over the plans and drawings, and wherein McTigue agreed not "use any work solely produced by WFA." McTigue retained a different architectural firm to complete the facility and on June 9, 2000, the hospital opened for business. In 2004, after reading an article in a trade publication concerning the Gardner animal hospital and obtaining a copy of the plans for the completed building from the city, WFA concluded that its copyright had been infringed. WFA filed suit in September of 2005 alleging copyright infringement. McTigue asserted counterclaims of copyright infringement and various other claims premised on an assertion that McTigue had proprietary rights in the original plans under copyright and common law.At the district court level, McTigue moved to dismiss because the three-year statute of limitations in the Copyright Act had run. The district court granted this motion, and noted the "overwhelming" evidence that a "reasonable" person would have known that some infringement was afoot based on the parties' previous interactions. The district court also granted WFA's motion for summary judgment on McTigue's counterclaims. According to the district court, McTigue had not demonstrated he was a joint author of any portion of the copyrighted work. Both parties appealed.The First Circuit reversed the district court with regard to the dismissal of WFA's copyright claims. The court noted that the discovery rule applies to copyright claims, and as a result the Act's three-year statute of limitations began to run on the earlier of when WFA had actual notice of the infringement or when a "reasonably prudent person in the plaintiff's shoes would have discovered (that is, would have acquired awareness of) the putative infringement." This incorporates a duty of diligence, however. As the court put it: "The familiar aphorism teaches that where there is smoke there is fire; but smoke, or something tantamount to it, is necessary to put a person on inquiry notice that a fire has started."Here, the court held that while the circumstances of the 1999 separation could lead a party to suspect possible infringement, the circumstances were not such that, as a matter of law, a reasonable person would have suspected infringement at that time. According to the court:

A searching examination of the complaint and the documents annexed thereto reveals no facts, prior to Freedenfeld's chance encounter with a trade publication in 2004, sufficient to mandate a conclusion that a reasonable person would have suspected that the copyrighted material had been used in an unauthorized manner. In the absence of some triggering event — some sign of storm clouds gathering on the horizon — WFA cannot be charged as a matter of law with inquiry notice.

As a result, the court reversed the dismissal of WFA's copyright claims. The district court had also preemptively denied McTigue attorney fees on the copyright claims as he was the prevailing party after dismissal. With the copyright claims reinstated, this holding was vacated.

Regarding McTigue's counterclaims, the First Circuit agreed that summary judgment in favor of WFA was properly granted. The court noted that no copyright infringement action lies as between joint owners (and, thus joint authors) of the same copyright. Thus, it could not benefit McTigue to argue that he was a joint author. As a result, McTigue's only source of a claim against WFA would be that he was the sole owner of at least a portion of the copyrighted work. The court dispensed with this assertion quickly, noting it was based on the implicit assertion from the language prohibiting him from "use [of] any work solely produced by WFA." This assertion, according to the court, was groundless and weak. WFA's plans could not be a work made for hire, as there was never any mention in either of the two agreements that the work was to be treated as such, and there was no evidence that WFA was ever McTigue's employee. The Termination Agreement also specifically noted the copyright provision of the design agreement remained in full force, thus eliminating any other possibility that McTigue could be the sole owner of the work. The court therefore affirmed the district court's summary judgment on McTigue's counterclaims.To read the full decision in Warren Freedenfeld Assocs., Inc v. McTigue, click here.

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