Design Basics, LLC v. Ashford Homes, LLC

Design Basics, LLC, et al., Plaintiffs, v. Ashford Homes, LLC, et al., Defendants.

Case No. 1:17-cv-273

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

December 18, 2018

Judge Susan J. Dlott

Order Granting in Part and Denying in Part Motions for Summary Judgment

This matter is before the Court on Plaintiffs' Motion for Partial Summary Judgment (Docs. 58, 59) and Defendants' Motion for Summary Judgment (Doc. 60). Plaintiffs assert that Defendants copied and built homes using their copyrighted home designs. Defendants deny copying Plaintiffs' designs and deny that their home designs are substantially similar to Plaintiffs' designs. For the reasons that follow, the Court will GRANT IN PART AND DENY IN PART Plaintiffs' Motion for Partial Summary Judgment and GRANT IN PART AND DENY IN PART Defendants' Motion for Summary Judgment.

I. BACKGROUND

A. Factual History¹

1. Plaintiffs

Plaintiff Design Basics LLC ("Design Basics"), formerly known as Design Basics, Inc. ("DB Inc."), has been in the business of creating, marketing, publishing, and licensing the use of architectural works since the early 1980's. Patrick Carmichael and Myles Sherman purchasedDB Inc. in 2009 as an investment opportunity. Carmichael and Sherman restructured DB Inc. into Design Basics. Design Basics owns the assets and intellectual property of DB Inc.

For over three decades, Design Basics and its predecessor, DB Inc., marketed its original custom and ready-made home plans for single and multi-family homes through plan catalogs, home building industry publications, brokerage marketing partners, client-specific publications, and the internet. Design Basics' customers license the home plans for marketing and construction purposes. Design Basics also customizes home plans for its builder customers and helps them market to potential home buyers.

Plaintiff Plan Pros, Inc. also creates and markets single and multi-family architectural work within the United States. Like Design Basics, Plan Pros markets its original works through plan catalogs, home building industry publications such as Builder Magazine, brokerage marketing partners, client-specific publications, and the internet, including but not limited to the website www.designbasics.com. (Cuozzo Dec., Doc. 59-2 at PageID 1064.)

The parties do not spell out the formal relationship, if any, between Design Basics and Plan Pros. However, both companies are based in Omaha, Nebraska, and they share at least one key employee. (Id. at PageID 1063.) Carl Cuozzo is identified as a "Senior Designer" of Design Basics and as the "President" of Plan Pros. (Id.) Additionally, as stated immediately above, Plan Pros posts its designs on Design Basics' website.

DB Inc., Design Basics, and Plan Pros have created over 2,600 designs collectively. DB Inc., on average, received over $4 million annually from licensing revenues for its original home designs between 1998 and 2005. DB Inc.'s and Design Basics' revenue fell well below $1 million annually beginning in calendar year 2009, which resulted in the company laying off 75% of its employees. Plaintiffs' precipitous decline in revenue was co-incident to the rise of theinternet, and the easy availability of its plans. Theft of readily-available copyrighted works is believed to have become widespread in the home building industry. DB Inc., Design Basics, and Plan Pros had filed more than 110 copyright infringement cases by July 2018.

The possibility of pursuing copyright litigation influenced Carmichael's and Sherman's decision to purchase DB Inc. in 2009. Sherman and Carmichael invested in the company's infrastructure with a new database system, created new, ready-made house designs, increased marketing, continued to attend national home building expos, and started an internet blog. Design Basics continues to create and market new original home plans, but it has authored only approximately 350 new original architectural works that have been put into service since 2009.

Every work within Plaintiffs' residential house plan portfolios is registered with the U.S. Copyright Office before being marketed in any way. Among Plaintiffs' registered works are the six designs at issue in this case (the "Copyrighted Works"): "Kirby Farm," "Crawford," "Carriage Hills," and "Rosebury" by Design Basics and "Blaylock" and "Akers" by Plan Pros. (Doc. 59-3 at PageID 1069 to Doc. 59-8 at PageID 1146.) The Copyrighted Works—including both elevations and floor plans—have been displayed continuously on DB Inc.'s or Design Basics' website since at least the following dates:

A. Kirby Farm: January 29, 2000 to the present;

B. Crawford: March 23, 1998 to the present;

C. Carriage Hills: June 14, 2000 to the present;

D. Rosebury: September 24, 1999 to the present;

E. Blaylock: April 24, 2003 to the present; and

F. Akers: June 23, 2003 to the present.

(Cuozzo Dec., Doc. 59-2 at PageID 1067-68.)

2. Defendants

a. Jack Rupp and Ashford Homes, LLC

In 2002, Defendant Jack Rupp, a former sales representative and sales manager for Ryan Homes, sought financial backing to start Defendant Ashford Homes, LLC ("Ashford Homes"). Rupp was introduced by a third party to Carlos Todd, who had business experience in home construction. Todd and Rupp formed a partnership and began Ashford Homes. Rupp states that he had no involvement with Todd's other construction business. (Rupp Aff., Doc. 53 at PageID 728.) However, Ashford Homes shared office space, a corporate controller employee, and overhead expenses with the Todd Development Company and Todd Homes for several years. (Rupp Dep., Doc. 56 at PageID 843-48.) Ashford Homes and the Todd Development Company shared an address at 9650 Cincinnati-Columbus Road, Cincinnati, Ohio 45241 from June 2002 through December 2004. (Id. at PageID 843, 873-74.)

Likewise, Rupp attests that Todd was never an active participant in Ashford Homes. (Rupp Aff., Doc. 53 at PageID 728.) However, the initial Operating Agreement of Ashford Homes dated June 25, 2002 lists the Todd Development Company as a two-thirds owner of Ashford Homes and Jack Rupp as a one-third owner. (Doc. 59-13 at PageID 1180.) The Todd Development Company transferred its two-thirds ownership interest in Ashford Homes to Todd individually on December 31, 2004. (Doc. 59-14 at PageID 1181.) Plaintiffs point out that Ashford Homes touts the involvement of Todd on the company website, stating in relevant part as follows:

The strength behind Ashford Homes is Carlos Todd, Jack Rupp, and Mike Hoff. Ashford's roots date back to the early 1970's when Carlos Todd started as a land developer in the Greater Cincinnati area. They have over 40 years of experience building some of Southwest Ohio's most sought after homes. They have developed many desirable communities, with numerous design and marketing awards to their credit. They have earned, along with Ashford's Home Team, anenviable reputation for featuring open and innovative designs that are as affordable as they are appealing!

http://www.ashfordhomesohio.com/about_us.php.

Jack Rupp testified at his deposition that he developed the approximately forty plans that Ashford Homes markets to the public. (Doc. 56 at PageID 854.) He created the design plans after examining what other local and national builders were doing. (Id. at PageID 852-54.) He incorporated floor plans and design flow ideas from other designers. (Id. at PageID 853.) He told customers who brought in home design plans they found on the internet that he "can't build it exactly the way that it is" and that he "[had] to change it up." (Id. at PageID 858.) He understood that he had to "basically change [design plans] up 25 to 35 percent." (Id. at PageID 860.) He testified that he sometimes took two designs from other local builders and would blend them together taking some features from one design and some features from the other design. (Id. at PageID 861-62.) Regarding national builders, Rupp testified that he looked at "Builder Magazine Top 100 Builders." (Id. at PageID 872.) Rupp never purchased a license from another company for a home plan. (Id. at PageID 863.)

Nonetheless, on April 28, 2014, Plaintiffs discovered what they considered to be infringing copies, or knockoff house designs, of the Kirby Farm, Crawford, Carriage Hills, Blaylock, and Akers designs on the website, www.ashfordhomesohio.com. (Cuozzo Dec., Doc. 59-2 at PageID 1064.) Later, during this litigation, Plaintiffs discovered what they consider to be an infringing copy, or knockoff house design, of the Rosebury design. Copies of the relevant design plans can be found in the record as follows:

Defendants' Design

PageID

Ashford Homes' Allegedly

Infringing Design

Page ID

DB's Kirby Farm

Doc. 59-3 at

1069-1083

Columbia

Doc. 48-7 at

275-276

DB's Crawford

Doc. 59-4 at

Oakhurst

Doc. 48-7 at

   1084-1103   277-278  DB's Carriage Hills  Doc. 59-5 at1104-1119  Manchester  Doc. 48-7 at279-280  DB's Rosebury  Doc. 59-6 at1120-1136  Glenwood  Doc.48-8 at287-288  Plan Pros's Blaylock  Doc. 59-7 at1137-1143  Avalon  Doc. 48-7 at281-282  Plan Pros's Akers  Doc. 59-8 at1144-1146  Sonoma and Sonoma II  Doc. 48-7 at283-286 

Ultimately, Plaintiffs discovered that Ashford Homes constructed forty-four houses between 2003 and 2017 which Plaintiffs allege infringe upon the Copyrighted Works. (Doc. 56 at PageID 894; Doc. 56-13 at PageID 1009.)

The Todd Development Company was a customer of Plaintiffs since 1989. Carlos Todd, on behalf of the Todd Development Company, ordered nineteen catalogs and purchased blueprints for four home designs from Plaintiffs.² (Foresman Dep., Doc. 52-1 at PageID 687, 712.) All of the Copyrighted Works at issue in this case, except for the Rosebury, were featured within one or more of the catalogs ordered and received by the Todd Development Company and received at its office at 9650 Cincinnati-Columbus Road, Cincinnati, Ohio 45241 between 1989 and 2014. (Doc. 59-10 at 1153-1155; Doc. 59-11 at PageID 1057-1164.)...