Chi. Bldg. Design, P.C. v. Mongolian House, Inc.

770 F.3d 610

112 U.S.P.Q.2d 1541

CHICAGO BUILDING DESIGN, P.C., and Jeremiah Johnson, Plaintiffs–Appellants

v.MONGOLIAN HOUSE, INC., Ryan Golden, Mark Perres, and John A. Wilson, Defendants–Appellees.

No. 12–3037.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 13, 2013.

Decided Oct. 23, 2014.

Nathaniel T. Cutler, Attorney at Law, Thomas D. Carroll, Fuksa Khorshid, LLC, Chicago, IL, for Plaintiffs–Appellants.

Mark Perres, an Individual, Chicago, IL, pro se.

Ty D. Laurie, Kendall Elizabeth Woods, Attorney, Laurie & Brennan, LLP, Shelly B. Kulwin, Kulwin, Masciopinto & Kulwin, Chicago, IL, for Defendants–Appellees.

Before BAUER, SYKES, and HAMILTON, Circuit Judges.

Opinion

SYKES, Circuit Judge.

This case involves claims of copyright infringement arising out of a failed business relationship between a Chicago architectural firm and its client. Chicago Building Design, P.C. (“CBD”), specializes in the design and construction of restaurants. Its client, Mongolian House, Inc., wanted to renovate an upscale restaurant in Chicago known as “Plan B.” CBD designed the interior of the restaurant and in June 2006 filed blueprints with the City of Chicago to obtain a “repair and replace” building permit for the project. Mongolian House retained CBD to do the construction work, and the firm completed the renovations in 2007.

Sometime in 2008 a CBD employee visited the City's offices on other business and chanced upon a set of blueprints for Plan B that appeared to be copies of the firm's designs but were labeled with another architect's name. CBD asked the City for a copy of the blueprints to determine if they were in fact copies of its own. The City denied the request, saying the blueprints were exempt from disclosure. In the meantime, Mongolian House defaulted on payments due CBD for the 2006–2007 work. On May 8, 2009, the City issued a new building permit for Plan B based on the 2008 blueprints. On February 13, 2012—not quite three years later—CBD sued Mongolian House, its owners, and its architect alleging copyright infringement and assorted state-law claims.

The defendants moved to dismiss the federal claims as time-barred under the Copyright Act's three-year statute of limitations. See 17 U.S.C. § 507(b). The district court granted the motion, holding that CBD was on “inquiry notice” of a possible copyright violation when its employee happened upon the 2008 blueprints at the City's offices, which occurred not later than December 31, 2008. The limitations clock started to run on that date, the court held, even though CBD was unable to discover whether the 2008 blueprints infringed its copyright. The court also rejected CBD's alternative argument under the “continuing violation” doctrine, holding that CBD failed to allege acts of infringement within the limitations period. The court relinquished jurisdiction over the state-law claims, and CBD appealed.

We reverse. The Supreme Court recently clarified that the Copyright Act's statute of limitations establishes a “separate accrual rule” so that “each infringing act starts a new limitations period.” Petrella v. Metro–Goldwyn–Mayer, Inc., ––– U.S. ––––, 134 S.Ct. 1962, 1969, 188 L.Ed.2d 979 (2014). CBD's complaint alleges potentially infringing acts that occurred within the three-year look-back period from the date of suit, so the case should not have been dismissed. To the extent that CBD seeks recovery for earlier infringing acts, the issue may have to be revisited on remand in light of Petrella.

I. Background

The plaintiffs are Chicago Building Design, P.C., an architectural and construction firm, and Jeremiah Johnson, its president. We refer to them collectively as “CBD” unless the context requires otherwise. The defendants are Mongolian House, Inc., a restaurant company; Ryan Golden and Mark Perres, its owners; and John A. Wilson, its outside architect. We refer to the defendants collectively as “Mongolian House” unless it's necessary to distinguish between them. The case was dismissed for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, so we take the following facts from the latest iteration of the complaint, accept them as true, and draw reasonable inferences in CBD's favor. Larson v. United Healthcare Ins. Co., 723 F.3d 905, 908 (7th Cir.2013).

In 2006 Mongolian House retained CBD to design Plan B, an upscale restaurant in Chicago that it sought to renovate. Mongolian House promised to pay CBD $15,000 for architectural services. After receiving CBD's design, Mongolian House awarded the firm the corresponding construction work. Under the construction contract, Mongolian House promised to compensate CBD in two ways: a cash payment of $259,100, plus 15% of the profits earned by Plan B.

In June 2006 CBD filed blueprints for the Plan B renovation with the City in order to obtain a “repair and replace” building permit for the project. The City issued the permit authorizing the work to begin, and CBD completed the renovation in March 2007. CBD registered its copyright in the blueprints on May 1, 2009.

The complaint alleges that sometime in 2008, Golden and Perres, Mongolian House's owners, copied CBD's blueprints and distributed them to Wilson, who placed his name on the copies and filed them with the City with the intention of passing the blueprints off as his own. The purpose was to obtain a “full” building permit for Plan B. In contrast to a “repair and replace” permit, a “full” permit authorizes certain additional interior alterations and an increase in occupancy on the premises. On May 8, 2009, the City issued the full permit, and in accordance with customary practice, distributed two copies of the approved 2008 blueprints to Mongolian House. To comply with the City's regulations, Mongolian House was required keep the blueprints on the premises. Golden, Perres, and Wilson thereafter used the infringing blueprints to pass an inspection on or about July 27, 2009, and used them again in other periodic inspections through January 2012.

Sometime in 2008, a CBD employee visited the City's offices on unrelated zoning business and happened to see documents that looked like the firm's blueprints but bore Wilson's name. At this point CBD “did not know ... whether the Blueprints were the ones Plaintiffs filed with the City of Chicago to secure a repair and replace permit for the Premises, some modified version of the Blueprints submitted for other purposes, or a wholly different non- infringing set of blueprints copyrighted by Wilson.” To get more information, CBD filed a complaint with the Illinois Department of Financial and Professional Regulation, which responded by letter explaining that it may open an investigation. CBD next asked the City's Buildings Department for a copy of the 2008 blueprints under the Illinois Freedom of Information Act. The Department responded that the blueprints were exempt from disclosure. Finally, CBD periodically consulted Chicago's Building Data Warehouse Report, in which the City announces the issuance of building permits. CBD reviewed the May 8, 2009 report and learned that the City issued a building permit that day based on the 2008 blueprints Wilson had submitted.

Meanwhile, Mongolian House defaulted on payments due CBD under the parties' contracts. To date, Mongolian House has paid CBD $11,000 on the design contract and just $45,000 on the construction contract.

On February 13, 2012, CBD sued Mongolian House, Golden, Perres, and Wilson alleging various forms of copyright infringement under the Copyright Act. See 17 U.S.C. §§ 101 et seq. The infringement allegations cluster into the following categories: (1) when Golden and Perres copied the original blueprints without authorization, they violated CBD's exclusive right to copy, see id. § 106(1); (2) when they gave the blueprints to Wilson, they violated CBD's exclusive right to distribute, see id. § 106(3); (3) when Wilson put his name on the blueprints to pass them off as his own, he violated CBD's exclusive right to create derivative works, see id. § 106(2); and (4) when the defendants used the infringing blueprints to pass periodic city inspections, they again violated CBD's exclusive right to distribute, see id. § 106(3). The complaint also alleged state-law claims based on Mongolian House's failure to pay what it owed CBD for design and construction work.

The defendants moved to dismiss the copyright claims under Rule 12(b)(6), invoking the Copyright Act's three-year statute of limitations. See § 507(b). The district court granted the motion, holding that CBD was on “inquiry notice” of a possible violation of its rights when its employee visited the City's offices on other business and “saw the blueprints, which happened no later than Dec. 31, 2008.” The limitations period began to run on that date, the judge concluded, and this was so even though CBD “could not at that time verify that infringement had occurred.” Starting the limitations clock on that date meant that CBD's suit—filed on February 13, 2012—was about six weeks too late.

CBD argued in the alternative that the infringing acts constituted a “continuing violation” that extended into the three-year limitations period. The judge rejected this argument as well, holding that the “post–2008 acts” did not amount to infringement because distributing an architectural work to a building inspector is a “limited publication” not covered by the Copyright Act.

Having dismissed the copyright claims, the court relinquished jurisdiction over the state-law claims. See 28 U.S.C. § 1367(c)(3). The court entered final judgment, and this appeal followed.

II. Discussion

When a defendant charges noncompliance with the statute of limitations, “[d]ismissal under Rule 12(b)(6) [is] irregular, for the statute of limitations is an affirmative defense.” United States v. N. Trust Co., 372 F.3d 886, 888 (7th Cir.2004). Because “complaints need not anticipate and attempt to plead around defenses,” id., a motion to dismiss based...