UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 08-2103

THOMAS M. GILBERT ARCHITECTS, P.C.,

Plaintiff - Appellee,

v.

ACCENT BUILDERS AND DEVELOPERS, LLC, a Virginia limited 

liability company; DESIGN CUSTOM BUILDERS, INCORPORATED, a 

Virginia corporation; MICHAEL TUMMILLO,

Defendants - Appellants.

Appeal from the United States District Court for the Eastern 

District of Virginia, at Richmond. James R. Spencer, Chief 

District Judge. (3:07-cv-00699-JRS)

Argued: October 28, 2009 Decided: May 6, 2010

Before MICHAEL, Circuit Judge, HAMILTON, Senior Circuit Judge, 

and Jane R. ROTH, Senior Circuit Judge of the United States 

Court of Appeals for the Third Circuit, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: James Edward Moore, CHRISTIAN & BARTON, LLP, Richmond, 

Virginia, for Appellants. Christopher E. Gatewood, HIRSCHLER 

FLEISCHER, PC, Richmond, Virginia, for Appellee. ON BRIEF:

David B. Lacy, CHRISTIAN & BARTON, LLP, Richmond, Virginia, for 

Appellants. R. Webb Moore, HIRSCHLER FLEISCHER, PC, Richmond, 

Virginia, for Appellee.
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Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:

Thomas M. Gilbert Architects, P.C. (Gilbert) sued 

Accent Builders and Developers, LLC (Accent), Design Custom 

Builders, Inc., and Michael Tummillo alleging infringement of a 

copyright in certain architectural plans (Plans). The district 

court granted summary judgment to Gilbert on liability. After a 

bench trial on damages, the district court awarded Gilbert 

$5,300 in actual damages, $224,894 in profits, and a permanent 

injunction enjoining defendants’ further use of the Plans. On 

appeal defendants argue that the district court improperly 

granted summary judgment on their affirmative defenses and 

improperly refused to subtract their operating expenses when it 

awarded damages for profits. We reject defendants’ arguments 

and affirm.

I.

The Plans were originally created pursuant to a 

written agreement between a third party, Aspect Properties, LLC 

(Aspect), and Gilbert. The agreement, entered into on July 26, 

2002, required Gilbert to provide the Plans to Aspect in two 

stages for the purpose of constructing 42 townhouses. In the 

first stage Gilbert would provide schematic drawings for three 

model townhouses for a fee of $7,500. In the second phase 

Gilbert would provide any remaining architectural documents 
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necessary for construction, including floor plans, front and 

rear elevations, and three foundation plans, all for a fee of

$17,700. The agreement specified that all documents comprising 

the Plans “remain the property of Thomas M. Gilbert, Architect, 

P.C.” J.A. 316. It also specified that “[t]he fee for reuse of 

the documents will be two hundred fifty dollars (250.00) per 

unit and any changes requested will be on an hourly basis.” 

J.A. 315. Gilbert delivered the Plans pursuant to the 

agreement, and Aspect paid Gilbert in full. The documents 

Aspect received contained the following copyright notice:

THOMAS M. GILBERT, ARCHITECT, P.C. EXPRESSLY RESERVES 

ITS COMMON LAW COPYRIGHT OR OTHER PROPERTY RIGHTS IN 

THESE PLANS. THESE PLANS ARE NOT TO BE REPRODUCED, 

CHANGED, OR COPIED IN ANY FORM OR MANNER WHATSOEVER, 

NOR ARE THEY TO BE ASSIGNED TO ANY THIRD PARTY, 

WITHOUT FIRST OBTAINING THE EXPRESS WRITTEN PERMISSION 

AND CONSENT OF THOMAS M. GILBERT, ARCHITECT, P.C.

J.A. 566-76.

Sometime in 2002 Tummillo partnered with Aspect to 

pursue the townhouse project. On May 29, 2003, Aspect’s owners 

formed Accent as a vehicle to complete the project, and Tummillo 

acquired an ownership interest in Accent the same year. In 2004 

Tummillo acquired complete ownership of Accent and the project. 

By that time Gilbert had already delivered the Plans, and 

Aspect’s owners required Tummillo to pay the balance owed 

Gilbert and to reimburse them for the amounts already paid.
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Tummillo later asked Gilbert to make certain changes 

to the Plans. The changes consisted mainly of moving the rear 

wall of the townhouses back three feet and relocating the 

fireplace from the corner to the rear wall. Gilbert had known 

of Tummillo’s association with the project for some time prior 

to the request, but it was not until Tummillo made the request 

for changes that he became aware that Tummillo had acquired full 

ownership. On September 11, 2006, Gilbert sent a proposal to 

Tummillo offering to make the requested changes and conduct a 

building code review for $14,000. Gilbert included a code 

review in his offer because, in his opinion, the original Plans 

could not have been used because of recent changes to the 

building code. Tummillo believed that Gilbert’s price was too 

high and made the changes himself by hand without further input 

from Gilbert. When Tummillo submitted the Plans for approval 

with the County, he removed all references to Gilbert on the 

Plans, including the copyright notice.

After the County approved the Plans, defendants began 

construction of the townhouses. Over the course of 

construction, defendants made copies of the Plans for various 

suppliers and contractors. In June 2007 Gilbert learned that 

construction had commenced using the modified Plans. He 

registered his original plans with the United States Copyright 

Office and, on September 14, 2007, sent a cease-and-desist 
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letter to defendants. After Gilbert was unable to resolve the 

dispute, he filed this lawsuit for copyright infringement on 

November 9, 2007.

The district court granted Gilbert summary judgment on 

infringement, rejecting defendants’ affirmative defenses of 

implied license, fair use, and copyright misuse. In the summary 

judgment order the district court excluded the proposed 

testimony of defendants’ architect-expert, who would have 

testified that Gilbert made an excessive fee proposal for 

modifying the Plans. The parties stipulated that Gilbert’s 

actual damages were $5,300 and agreed to a bench trial on the 

remaining issues pertaining to relief. At trial defendants

introduced testimony from Kevin Perlowski, their accountant. 

Although 42 townhouse units were planned, only one six-unit 

building had been completed and only two of those units had been 

sold. Perlowski testified that defendants had incurred $181,659 

in direct costs and $8,795 in closing costs for the first unit, 

which sold for $328,000. Similarly, defendants had incurred 

$189,620 in direct costs and $22,982 in closing costs for the 

second unit, which sold for $299,950. If profit is calculated 

by simply subtracting direct and closing costs from gross 

revenues, defendants’ profit on the two units would be $224,894. 

Defendants also incurred significant operating expenses, 

however, during construction. Perlowski testified that pursuant 
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to generally accepted accounting principles (GAAP) the entirety 

of these operating expenses, along with direct and closing 

costs, must be subtracted from gross revenue to calculate 

profit. After subtracting these operating expenses, defendants’

profits on the two units is reduced to zero, according to 

Perlowski.

The district court’s findings of fact and conclusions 

of law included (1) an award to Gilbert of $5,300 in statutory 

damages and $224,894 in infringing profits from defendants’ use 

of the Plans and (2) a permanent injunction against defendants’

further use of the Plans. In rejecting defendants’ calculation 

of zero profits, the district court held that defendants had 

failed to meet their burden of establishing their operating

expenses with sufficient precision. This appeal followed.

II.

Defendants argue that they should not be liable for 

infringement because the district court, at the summary judgment 

stage, improperly dismissed their affirmative defenses of (1) 

implied license, (2) fair use, and (3) copyright misuse. We 

review de novo the grant of summary judgment dismissing these 

defenses. Stonehenge Eng’g Corp. v. Employers Ins. of Wausau, 

201 F.3d 296, 301 (4th Cir. 2000).
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A.

Defendants’ primary argument is that “Gilbert 

implicitly granted a nonexclusive license to use, modify, copy 

and distribute the Plans as necessary to complete the Project.” 

Br. of Appellants at 21. “The existence of an implied 

nonexclusive license . . . constitutes an affirmative defense to 

an allegation of copyright infringement.” Nelson-Salabes, Inc. 

v. Morningside Dev., LLC, 284 F.3d 505, 514 (4th Cir. 2002). 

The grant of a nonexclusive license is essentially a promise not 

to sue for infringement. See U.S. Philips Corp. v. Int’l Trade 

Comm’n, 424 F.3d 1179, 1189 (Fed. Cir. 2005). When such a 

promise is implied, courts generally enforce it according to the 

rules governing quasi-contract and contracts implied-in-fact. 

See Wrench v. Taco Bell Corp., 256 F.3d 446, 456-57 (6th Cir. 

2000) (noting that Michigan law governs a contract for 

copyrighted material that was implied-in-fact as distinguished 

from one that was implied-in-law); I.A.E., Inc. v. Shaver, 74 

F.3d 768, 776 (7th Cir. 1996). In this circuit an implied nonexclusive license exists and is enforceable when:

(1) a person (the licensee) requests the creation of a 

work, (2) the creator (the licensor) makes that 

particular work and delivers it to the licensee who 

requested it, and (3) the licensor intends that the 

licensee copy and distribute his work. 

Nelson-Salabes, Inc., 284 F.3d at 514 (quoting I.A.E., Inc., 74 

F.3d at 776). 
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The case law does not make clear whether the source of 

these rules is state or federal law. Nelson-Salabes is our only 

published decision to address the implied license defense to 

copyright infringement, and it does not trace the rules’ source 

to either body of law. The absence of citation to state law 

suggests that we assumed federal law applied. However, in Foad 

Consulting Group, Inc. v. Azzalino — a case cited in NelsonSalabes and applying the same rule — the Ninth Circuit expressly 

declared that state law governed “so long as it does not 

conflict with the Copyright Act.” 270 F.3d 821, 827 (9th Cir.

2001). Judge Kozinski, a member of the panel in Foad, concurred 

in the result, drawing a distinction between contracts impliedin-fact and those implied-in-law. He believed that implied 

licenses generally fell into the latter category as “incident[s] 

of copyright” and therefore should be governed by federal law. 

Id. at 832. 

We need not resolve the source-of-law issue to decide 

the case before us. First and foremost, we see nothing in state 

law that conflicts with the three-element test adopted in 

Nelson-Salabes. In evaluating the test’s third element when a 

written contract exists, we conclude the applicable rule —

whether under Virginia law or federal common law — is that: (1) 

quasi-contract principles do not govern, Nedrich v. Jones, 429 

S.E.2d 201, 207 (Va. 1993); WRH Mortgage, Inc. v. S.A.S. 
10

Assocs., 214 F.3d 528, 534 (4th Cir. 2000); and (2) the parties’

intent “should be ascertained, whenever possible, from the 

language the parties employed in the contract,” Virginia Elec. 

and Power Co. v. Norfolk S. Ry. Co., 683 S.E.2d 517, 525 (Va. 

2009). See also United States v. Kimbell Foods, Inc., 440 U.S. 

715, 728 (1979) (“[W]hen there is little need for a nationally 

uniform body of law, state law may be incorporated as the 

federal rule of decision.”). We note that in Nelson-Salabes we 

held that courts “should examine the totality of the 

circumstances” when determining intent. Id. at 515. But on 

this point Nelson-Salabes is distinguishable because there was 

no written agreement between the parties in that case. While 

the Nelson-Salabes standard for determining intent is eminently 

reasonable in the absence of a written agreement, the same 

cannot be said when one exists, as it did between Gilbert and 

Aspect. 

We first examine whether Gilbert granted Aspect a 

nonexclusive license to modify the Plans and use them as 

modified. The parties raise and discuss in varying detail the 

possibility that, because the original agreement was between 

Gilbert and Aspect, only Aspect could have had such a license. 

If, however, Aspect did not have a license to modify the Plans, 

defendants could not have had one. Accordingly, we consider 

whether Aspect had non-exclusive license.
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The parties dispute only the third element of the test 

adopted in Nelson-Salabes: whether Gilbert intended to grant 

Aspect a nonexclusive license to modify the Plans and use them 

as modified. As discussed above, the threshold question we must 

answer is whether Gilbert and Aspect’s intent can be ascertained 

from the text of the agreement. We conclude that it can and 

that Aspect’s license extended only to copying and using the 

original Plans for construction of the townhouses. Reading the 

document as a whole, it is clear that Gilbert must have at least 

granted Aspect a limited license to copy and use. The Plans 

would be utterly useless to Aspect unless it had permission to 

use the Plans for construction of the townhouses and to make 

copies for its contractors as needed. See Effects Assocs., Inc. 

v. Cohen, 908 F.2d 555, 558-59 (9th Cir. 1990) (finding an 

implied license when the absence of one would render the 

author’s contribution “of minimal value”). Moreover, to read 

the agreement as requiring Aspect to pay $25,200 in fees for 

useless documents would threaten the enforceability of the 

contract for failure of consideration. See Waskey v. Thomas, 

235 S.E.2d 346, 349 n.2 (Va. 1977). 

The agreement does, however, expressly reserve

ownership of Gilbert’s copyright in the Plans by declaring that 

they “remain the property of Thomas M. Gilbert, Architect, P.C.” 

J.A. 316. While an express reservation of ownership in the 
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Plans’ copyright is not dispositive of the licensing issue, see

Foad Consulting Group, Inc., 270 F.3d at 830, at a minimum it 

evinces an intent to grant, at best, a limited license. Indeed, 

the limited nature of the license is evident in the agreement’s 

provision on reuse and changes: “The fee for reuse of the 

documents will be two hundred fifty dollars (250.00) per unit 

and any changes requested will be on an hourly basis.” J.A. 

315. 

The reuse and changes provision clearly evinces

Gilbert and Aspect’s intent that Aspect not have permission to 

modify the Plans and use the Plans as modified without Gilbert’s 

involvement. Were it not intended to circumscribe Aspect’s 

license to use the documents, it would have no meaning. If, for 

example, Gilbert had not intended to retain its rights to 

derivative works based on the Plans, it would not have needed to 

include a clause providing for changes. Aspect could have hired 

Gilbert to make the changes or not, but the choice would have 

been left entirely with Aspect. Similarly, it is hard to 

imagine that Gilbert would charge a fee for reuse of the Plans —

as for construction of townhouses besides the original 42 — but 

not expect compensation for modifications.

Defendants’ arguments to the contrary rest primarily 

on what the agreement does not say rather than what it does say. 

They rely largely on the factors mentioned in Nelson-Salabes for 
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assessing intent in the totality of the circumstances. As we 

have noted, Nelson-Salabes’s totality of the circumstances 

analysis does not apply when there is a valid, written agreement 

between the parties. The only argument that defendants make 

based on the text of the agreement is that it “lack[s] any . . . 

provision forbidding Aspect, or anyone else, from using the 

Plans to complete the Project without Gilbert’s involvement or 

express consent.” Br. of Appellants at 25. In making this 

argument, defendants appear to assume, wrongly, that a broad 

implied license is presumed in contracts for architectural 

plans. No such presumption exists, and even if it did, the 

agreement’s restrictive language concerning reuse and changes 

would overcome it.

Because Gilbert and Aspect’s intent is clear from the 

language of the agreement, no genuine issue of material fact 

exists. Aspect did not have a license to modify the Plans and 

use them as modified, and therefore could not have had such a 

license. Accordingly, we affirm summary judgment on defendants’

implied license defense.

B.

Defendants’ fair use and copyright misuse defenses are 

more easily dispatched. Long a common law doctrine, fair use 

was codified in the Copyright Act of 1976 under 17 U.S.C. § 107. 

Cambell v. Acuff-Rose Music, 510 U.S. 569, 577 (1994). Section 
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107 lists four factors for courts to consider in determining 

whether a particular use is fair use: 

(1) the purpose and character of the use, including 

whether such use is of a commercial nature or is for 

nonprofit educational purposes; 

(2) the nature of the copyrighted work; 

(3) the amount and substantiality of the portion used 

in relation to the copyrighted work as a whole; and 

(4) the effect of the use upon the potential market 

for or value of the copyrighted work. 

17 U.S.C. § 107. In their briefs defendants make no attempt to 

consider the first three factors, relying exclusively on the 

fourth. Defendants argue that a jury could have reasonably 

concluded that the changes Tummillo made to the Plans were 

“minor field changes.” Reply Br. of Appellants at 14-15. 

Because Gilbert admitted that it does not expect to be 

compensated for minor field changes, defendants contend that a 

jury could have concluded that there was no potential market 

upon which Tummillo’s changes could have had an effect. Based 

on this factor alone, defendants argue that the district court 

erred.

We reject this argument and adopt the district court’s 

more careful analysis. We agree with the district court that 

the first three factors weigh against fair use because 

defendants’ use of the Plans was entirely commercial, because 

architectural plans are generally regarded as creative works, 
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and because defendants’ use of the Plans was admittedly 

substantial. As for defendants’ argument that there was no 

potential market for the changes Tummillo made, defendants point 

to no evidence that these changes were in fact “minor field 

changes.” Bald characterizations are not evidence. What 

evidence does exist suggests that Gilbert regularly charged for 

the kind of changes Tummillo made and that Tummillo himself 

described them as “structural changes” for which he could be 

held liable if something went wrong. J.A. 225. Accordingly, we 

affirm the district court’s grant of summary judgment on 

defendants’ fair use defense.

Defendants’ copyright misuse argument amounts to a

claim that Gilbert demanded too high a price for the changes 

Tummillo requested. Defendants cite no authority for this 

proposition apart from a passage, taken out of context, from the 

Ninth Circuit’s decision in Foad. Nowhere in Foad does the 

Ninth Circuit discuss the defense of copyright misuse, and we 

have found no precedent lending support to defendants’ argument. 

Accordingly, we affirm the district court’s grant of summary 

judgment on defendants’ copyright misuse defense.*

 * We note that defendants’ copyright misuse defense would 

fail regardless of the testimony of their expert J. Baxter 

Bailey because the defense is legally incoherent in these 

circumstances. Because Bailey’s testimony was relevant only to 

(Continued)
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III.

The sole issue that the parties dispute with regard to 

damages is whether the district court should have deducted 

defendants’ operating expenses from gross revenue when 

calculating the award for infringing profits. Section 504 of 

the Copyright Act provides that 

In establishing the infringer’s profits, the copyright 

owner is required to present proof only of the 

infringer’s gross revenue, and the infringer is 

required to prove his or her deductible expenses and 

the elements of profit attributable to factors other 

than the copyrighted work.

17 U.S.C. § 504(b). We have previously held that § 504 “creates 

an initial presumption that the infringer’s profits . . . 

attributable to the infringement are equal to the infringer’s 

gross revenue.” Bouchat v. Baltimore Ravens Football Club, 

Inc., 346 F.3d 514, 520 (4th Cir. 2003) (internal quotations and 

citations omitted). “Once the copyright owner has established 

the amount of the infringer’s gross revenues, the burden shifts 

to the infringer to prove either that part or all of those 

revenues are deductible expenses . . . .” Id. (internal 

quotations and citations omitted). If the infringer wishes to 

establish that its operating expenses are deductible expenses,

 

defendants’ copyright misuse defense, we also affirm the 

district court’s exclusion of his testimony.
17

it has the “burden of proving that each item of general expense 

contributed to the production of the infringing items, and of 

further offering a fair and acceptable formula for allocating a 

given portion of overhead to the particular infringing items in 

issue.” In Design v. K-Mart Apparel Corp., 13 F.3d 559, 565-66 

(2d Cir. 1994) (quoting 3 Melville B. Nimmer & David Nimmer, 

Nimmer on Copyright § 14.03[B] (1993)).

We agree with the district court that defendants 

simply failed to carry their burden of allocating that portion 

of their operating expenses attributable to the two units that 

were sold. In fact, Perlowski specifically admitted that he 

made “no attempt to allocate operating expenses to a particular 

unit.” J.A. 469. Defendants respond that Perlowski was merely 

following GAAP in deducting the entirety of defendants’ 

operating expenses from their revenues on the two units sold. 

GAAP, however, is not the law here. There are likely many good 

reasons why the GAAP rules are as they are, but those reasons do 

not necessarily coincide with the reasons bearing on assessing 

damages for copyright violations. As Gilbert notes, for 

example, some of defendants’ operating expenses went towards 

developing the land on which the 42 townhouses were to be built 

and have no relation to defendants’ infringing acts. Because 

each item of deductible expense must contribute to the 
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infringing products, at least some of defendants’ operating 

expenses as calculated cannot be deducted from gross revenues.

Finally, we reject defendants’ argument that the 

district court should have assumed the burden of allocation 

itself. Section 504 is clear that the burden of proving 

deductible expenses lies with defendants. Despite defendants’

assertions, the Second Circuit’s decision in In Design does not 

hold otherwise. In that case, the infringers did provide a 

formula for allocating overhead, and the Second Circuit affirmed 

the district court’s acceptance of that formula. In Design, 13 

F.3d at 566. While we do not go so far as to hold that it would 

have been error for the district court to have allocated on its 

own initiative, we cannot say that failing to do so was error. 

Accordingly, we affirm the district court’s award of infringing 

profits in the amount of $224,894. 

IV.

For the reasons stated above, the judgment of the 

district court is

AFFIRMED.