in its Objections its desire for - in fact, its belief in the necessity of - an evidentiary
hearing on its Motion for Preliminary Injunction.

A court need not conduct an evidentiary hearing before ruling on a motion for
preliminary injunction. Baxter Healthcare Corp. y. Med. Lab. Automation, No. 94 C
4558, 1994 WL 695521, at *2 (N.D. Ill. Dec. 9, 1994). When a party rests on affidavits
and other written submissions, it waives an evidentiary hearing. Id.

Ocean Atlantic did not request an evidentiary hearing before Magistrate Judge
Bobrick denied its motion for preliminary injunction. Ocean Atlantic manifested its
assent to the Court’s consideration of written submissions by participating fully in the
briefing schedule suggested by the Court and failing to request an evidentiary hearing.
Before Magistrate Judge Bobrick issued his R&R, Ocean Atlantic was content to rest on

its written submissions. As a result, Ocean Atlantic has waived an evidentiary hearing.

co) US)
For the foregoing reasons, this Court rejects Ocean Atlantic’s objections and
adopts Magistrate Judge Bobrick’s R&R in full. The Court hereby denies Ocean

Atlantic’s Motion for a Preliminary Injunction.

SO ORDERED ENTERED: = 9/, 29/0 3

HON. RONALD A.
United States Judge

13



made a prima facie showing of copyright infringement, and therefore an injunction
should issue without further inquiry. If, however, Defendants’ defenses must be consider
by the court - and they must - then Ocean Atlantic claims Defendants never properly
raised their defenses and, if they did, those defenses are unsupported by evidence
sufficient to cast doubt on Ocean Atlantic’s motion for preliminary injunction.

As previously stated, the law places the burden on the moving party to prove a
likelihood of success on the merits. Ty, Inc., 237 F.3d at 895; see Ocean Atlantic, 2003
WL 1720073, at *3, Although Ocean Atlantic argues that it must merely show a “better
than negligible chance of succeeding on the merits of its case” (Ocean Atlantic’s
Objections at 2-3), precedent continues to require a likelihood of success, measured in
relation to movant’s potential irreparable harm. See Ty, Inc., 237 F.3d at 895 (“the more
likely the plaintiff will succeed on the merits, the less the balance of irreparable harms
need favor the plaintiff's position”); Sofinet v. I.N.S., 188 F.3d 703, 707 (7th Cir. 1999)
(“[t}he less compelling the case on the merits, the greater the showing of irreparable harm
must be”).

Here, it is undisputed that Ocean Atlantic owns a copyright in the preliminary
plans and that Defendants may have copied portions of those plans. (Corrected Am.
Defs.” Joint Prelim. Resp. Opp’n to Pl.’s Mot. Prelim. Inj. at 8, 9-10.) The record in this
case, however, presents substantial issues which bear on Ocean Atlantic’s likelihood of
proving infringement, issues which, coupled with Ocean Atlantic’s failure to convince
this Court it will suffer irreparable harm if an injunction is denied, tip the balance in
favor of Defendants. See In re Aimster, 252 F. Supp. 2d at 648-662 (finding
infringement then considering mitigating effect of defenses before determining movant’s

4



%

Preliminary Injunction. In considering Ocean Atlantic’s motion to strike Defendants’
laches defense, this Court found that Defendants “clearly indicate[d] what actions of
plaintiff they consider dilatory” (see Ocean Atlantic, 2003 WL 1720073, at *7).
Defendants further raised the issue in their response to Ocean Atlantic’s preliminary
injunction motion, when it addressed conduct which prevents Ocean Atlantic from
obtaining equitable relief. In particular, Defendants rely on the fact that Ocean Atlantic
delayed acquiring the copyright in the preliminary plans for four years after it attached
the plans to the Annexation Agreement and seven months after Cambridge acquired the
property and began development as required by the Annexation Agreement. (Corrected
Am. Defs.’ Joint Prelim. Resp. Opp’n to Pl.’s Mot. Prelim. Inj. at 7.) During that time,
the plans were available to the public and part of the public record. Moreover,
Cambridge acquired the property and conducted extensive testing and studies to prepare
final engineering plans in accord with the Annexation Agreement. It completed the
storm water detention basin and a sanitary sewer, water main and storm sewer system,
undertook grading of streets, and began development of the school site, all as required by
the Annexation Agreement. (Jd, at 7, 9-10.) This Court, therefore, finds that Ocean
Atlantic’s failure to act promptly in enforcing any claim of copyright infringement it may
have had against Defendants likely unreasonably prejudiced Defendants by allowing
them to undertake extensive development pursuant to the preliminary plans before Ocean
Atlantic sought to halt such development through a preliminary injunction.

In light of the defenses available to Defendants and the evidence presented to this
Court for consideration, this Court finds that Ocean Atlantic failed to established a
likelihood of prevailing on the merits of its case. Moreover, likelihood of success on the

9


Agreement. Therefore, when Ocean Atlantic acquired the copyright from Roake and
Lannert four years later, Ocean Atlantic took that right subject to the existing implied
nonexclusive license.

Moreover, one can take the application of this principle one step further. Ocean
Atlantic did not come into their copyright blind. Ocean Atlantic was a party to the
drafting of the preliminary plans and it was a party to the Annexation Agreement. (Mem.
in Supp. of Mot. Prelim. Inj. at 4.) It acquired its copyright in the preliminary plans four
years after it executed the Annexation Agreement to which it attached the plans and
notably several months after Defendants acquired the property and began development as
dictated by that Agreement. (Mem. Supp. Mot. Prelim. Inj., Exs. 3 & 4, Registrations of
Copyrights.) It could be argued then that Ocean Atlantic, when it executed the
Annexation Agreement, knowingly handed over the preliminary plans to Owners and the
Village, intending the plans to be copied into final plans by which the land would be
developed. Like the defendant in L.4.E. v. Shaver, 74 F. 3d 768, 776 (7th Cir. 1996), who
turned over his plans to builders under the mistaken belief that he ultimately would be the
architect on the project, Ocean Atlantic turned over its plans to Owners via the
Annexation Agreement, intending that Ocean Atlantic ultimately would acquire and
develop the land, That did not happen, however, Therefore, like the Shaver court, this
Court finds that Ocean Atlantic’s unrealized belief that it would be the developer does
not negate any implied nonexclusive license created by the Annexation Agreement. See
id. at 776-77, Further, in creating final engineering plans from the preliminary plans,
Defendants most likely did not exceed the scope of the license.

Ocean Atlantic also objects that the Annexation Agreement is ambiguous as to the

6


likelihood of success on the merits).

Ocean Atlantic objects that Defendants failed to show with sufficient certainty
that they acted pursuant to an implied nonexclusive license when they used portions of
the preliminary plans to draft their final engineering plans. This Court disagrees. The
owner of a copyright may, without transferring ownership in the copyright, grant a
nonexclusive license to another to use the copyrighted material. Kennedy v. Nat'l
Juvenile Det. Ass’n, 187 F.3d 690, 694 (7th Cir. 1999). A nonexclusive license need not
be in writing, but may be implied from conduct. Id.; LA.E. v. Shaver, 74 F.3d 768, 775
(7th Cir. 1996). By an implied nonexclusive license, the copyright owner “permits the
use of a copyrighted work in a particular manner,” and the licensee violates the copyright
only by exceeding the scope of the license. Jd. The existence of a license, exclusive or
nonexclusive, creates an affirmative defense to a claim of copyright infringement. Jd.

As this governing principle applies to Roake and Lannert, the copyright owners at
the time the Annexation Agreement was executed and adopted by the Village, Magistrate
Judge Bobrick correctly found that “Roake and Lannert handed over the development
plans with the knowledge that the land would be developed in accordance with the
plans.” (R&R at 15.) Because the Annexation Agreement required that “OWNERS ...
develop the Subject Property in accordance with the Preliminary Plat prepared by The
Lannert Group dated 7/29/98 . . . and the Preliminary Landscape Plan prepared by The
Lannert Group dated 4/20/98 . . . attached hereto and made part of this Agreement”
(Mem. in Supp. of Mot. Prelim. Inj., Ex. 8, Annexation Agreement at 3), Defendants
present a strong argument that Owners acquired from Roake and Lannert an implied
nonexclusive license to use the preliminary plans as required by the Annexation

5


defense. (Ocean Atlantic’s Objections at 8.) This allegation is patently untrue. As this
Court ruled on Ocean Atlantic’s Motion to Strike Affirmative Defenses: “{ijt is clear
from the allegations supporting defendants’ affirmative defense that defendants rely on a
copyright misuse defense, which is inextricably intertwined with their unclean hands
defense.” Ocean Atlantic Woodland Corp. v. DHR Cambridge Homes, No. 02 C 2523,
2003 WL 1720073, at *6 (N.D. Ill. Mar. 31, 2003). This Court, therefore, adopts
Magistrate Judge Bobrick’s R&R as to Defendants’ copyright misuse defense in its
entirety without modification.

Finally, Ocean Atlantic objects to Magistrate Judge Bobrick’s finding that
Defendants’ laches defense casts doubt on Ocean Atlantic’s ability to prevail on the
merits of its case and argues that Defendants failed to raise this defense in response to
Ocean Atlantic’s Motion for Preliminary Injunction. Again, Ocean Atlantic’s assertions
are untrue.

To establish laches, a defendant must show an unreasonable lack of diligence on
behalf of the moving party and prejudice to the non-moving party arising from that lack
of diligence. Hot Wax v. Turtle Wax, 191 F.3d 813, 822 (7th Cir. 1999). Although a
presumption of laches arises if the claim is brought after the statute of limitations has run,
the doctrine “holds that even if the delay is for a shorter period of time than that of the
statute, it may still bar equitable relief it is unreasonable and prejudicial to the
defendant.” BLACK’s LAW DICTIONARY 879 (7th ed. 1999) (quoting John F. O’Connell,
Remedies in a Nutshell 16 (2d ed. 1985)).

Here, Defendants raised laches as an affirmative defense to Ocean Atlantic’s
complaint at law which was filed simultaneous with Ocean Atlantic’s Motion for

8



Minute Order Form (0697)

2 United States District Court, Northern District of Iinois
reais | Ronald A. Guzman | Sinn
CASE NUMBER 02 C 2523 DATE 9/23/2003
CASE Ocean Atlantic Woodland Corp. vs. DRH Cambridge Homes, Inc., et al
TITLE
{In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.)
DOCKET ENTRY:
(1) Oo Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion due eid
@) Oo Answer brief to motion due__. Reply to answer brief due
(4 ia) Ruling/Hearing on setfor _—__at
(5) o Status hearing[held/continued to] [set for/re-set for]on___setfor__—sat__.
(()) oO Pretrial conference[held/continued to] [set for/re-set forlon__—_setfor__—— ss at_
(e) a Trial[set for/re-set for]on__at
(8) Qa [Bench/Jury trial] [Hearing] held/continued to__at
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) CLocal Rule 41.1 COFRCP4I(a\1) CFRCP41(a)(2).

(10) MB [Otherdocketentry) ENTER MEMORANDUM OPINION AND ORDER: this Court rejects Ocean
Atlantic’s objections and adopts Magistrate Judge Bobrick’s R&R in full. The Court hereby denies Ocean
Atlantic’s Motion for a Preliminary Injunction.

ql) [For further detail see order attached to the original minute order.]
No notices required, advised in open court.

No notices required. umber of ions
Notices mailed by judge’s staff.
Notified counsel by telephone. StP e400 03

wo | Docketing to mail notices.

Mail AO 450 form. yunod Agiaisia’sn
Ve

docketing

o | Copy to judge/magistrate judge. 12
a7 WY nz d35 C0

TM ina Getta pdusid

Date/tiipe Rickived in
central Clerk's Office trailing deputy inkials

date mailed notice

courtroom



In this case, in order to prevail on its motion for preliminary injunction, Ocean

Atlantic had to make a strong showing of irreparable harm. It did not. In fact, Ocean

Atlantic failed to convince this Court that it would b
i £ |

preliminary injunction is denied;

injunction standard and further finds Ocean Atlant

unreasonable in light of an adequate remedy at law.

c.
Finally, Ocean Atlantic objects to Magistrate

balance of harms tips toward Defendants and argues

It also has failed re

reparably harmed at all if the
nvince this Court that a monetary
This Court, therefore, finds that
two prongs of the preliminary

request for equitable relief

The Balance of Harms Tips in Favor of Defendants and the Public Interest.

Judge Bobrick’s R&R that the

that its interest in protecting a

copyright in plans specific to one particular parcel of land outweighs Defendants’ interest

in development of its property, the interest of individuals with contracts pending on new

homes in completion of the development, and the community’s interest in public services

available at the development.

This case is determined in the balancing test,

and the law is clear:

If the balance of harms tips toward the plaintiff, but only slightly, then a
greater likelihood of prevailing is required; if the balance tips toward the
defendant, of course, the injunction must be denied, whatever the
plaintiff's chance of winning on the merits. Thus the trial court [may]
require a fairly clear-cut probability of success if [it] did not find that
harm to the plaintiff outweighed harm to the defendant to a significant

degree.

(R&R at 18-19 (quoting Maxim’s Ltd. v. Badonsky, 772 F.2d 388, 391 (7th Cir. 1985));

see Ty, Inc., 237 F.3d at 895; Sofinet, 188 F.3d at 707.

11


merits is only one factor a court must consider in determining whether to issue a

preliminary injunction.

B. Ocean dani Failed to De monstrate ir {

parable Harm and Inadequate

Remedy i |
|
Ocean 3 iia R&R that Ocean Atlantic
failed to show itp th law and argues that irreparable

J iL
harm is presumed upon a showing o o

The Copyright Act allows j injunctive relief here it is reasonable for the purpose
of preventing copyright infringement. 17 U.S.C. § 502(a); see In re Aimster, 252 F.
Supp. 2d at 647. Although irreparable harm may normally be presumed from a showing
of copyright infringement, it is a rebuttable presumption. Atari, Inc. v. N. Am. Philips
Consumer Elec, Corp., 672 F.2d 607, 620 (7th Cir. 1982), superseded by statute on other
grounds as stated in Scandia Down Corp. v. Euroquilt, Inc., 772 F.2d 1423, 1429 (7th
Cir. 1985); In re Aimster, 252 F. Supp. at 647. The applicability of the presumption is
effected by the degree of likelihood of success on the merits. Ty, Inc., 237 F.3d at 895;
Sofinet, 188 F.3d at 707; Atari, Inc., 672 F.2d at 620.

Although it is undisputed that Ocean Atlantic owned the copyright in the
preliminary plans and Defendants likely copied portions of those plans (supra at 4),
Defendants rebut Ocean Atlantic’s claim of infringement with the affirmative defenses of
implied license, laches, and misuse, which cast grave doubt on Ocean Atlantic’s ability to
prevail on the merits of its case. Accordingly, any presumption of irreparable harm is
adversely effected by these affirmative defenses which greatly decrease plaintiff's
likelihood of success.

10


parties’ intent as to subsequent owners. This Court, however, finds that issue need not be
resolved in its determination whether to grant or deny a preliminary injunction. At the
time Ocean Atlantic executed the Annexation Agreement, it could have insisted that
development pursuant to the preliminary plans be limited to Ocean Atlantic, and not
extended to “Owners” generally. It did not. Indeed, the fact that Ocean Atlantic signed
the Annexation Agreement granting “Owners” the right to develop the property in accord
with the preliminary plans is strong evidence that Ocean Atlantic intended the implied
nonexclusive license to transfer to subsequent Owners, which Owners would have been
Ocean Atlantic had the deal closed as planned. But, through no fault of anyone but
Ocean Atlantic, Ocean Atlantic never acquired ownership of the property. Moreover,
Ocean Atlantic originally intended to resell the property to Cambridge after acquiring it
from Owners. (Defs.’ Resp. to Ocean Atlantic’s Objections at 9.) That contract between
Ocean Atlantic and Cambridge was silent as to the copyright issues Ocean Atlantic now
raises against Defendants. (Jd.) Indeed, intent as to subsequent owners became an issue
only once Ocean Atlantic decided to tie up the land in litigation. (Corrected Am. Defs.’
Joint Prelim. Resp. Opp’n to Pl.’s Mot. Prelim. Inj., Ex. B, 04/15/03 Dep. of M.
Ferraguto at 23-24.) Although, as acknowledged by Magistrate Judge Bobrick, an open
issue exists as to the parties’ intent as to subsequent owners, the foregoing evidence
weighs strongly in Defendants’ favor in assessing whether a preliminary injunction
should issue against Defendants. (R&R at 15.)

Next, Ocean Atlantic objects to Magistrate Judge Bobrick’s finding that Ocean
Atlantic’s copyright misuse “cast[s] the gravest doubts on [Ocean Atlantic’s] likelihood
of success” on the merits and argues that Magistrate Judge Bobrick manufactured the

7


adopted by ordinance on August 17, 1998, to which copies of the preliminary plans were
attached.

“A preliminary injunction ‘is an extraordinary and drastic remedy.” Jn re
Aimster Copyright Litigation, 252 F. Supp. 2d 634, 647 (N.D. Ill. 2002) (quoting
Mazurek v, Armstrong, 520 U.S. 968, 971 (1997)). “Its purpose is to minimize the
hardship to the parties pending the ultimate resolution of their lawsuit.” Jd. In order to
succeed on its motion for a preliminary injunction, the moving party must demonstrate:
(1) its likelihood of prevailing on the merits; (2) no adequate remedy at law exists; and
(3) it will suffer irreparable harm if the injunction is not granted. Ty, Inc. v. Jones
Group, 237 F.3d 891, 895 (7th Cir. 2001); see Ocean Atlantic Woodland Corp. v. DRH
Cambridge Homes, No. 02 C 2523, 2003 WL 1720073, at *3 (N.D. Ill. Mar. 31, 2003).
Once these conditions have been met, the court then must balance the irreparable harm
the non-moving party will suffer if the injunction is granted against the irreparable harm
the moving party will suffer if the injunction is not granted. Jd. Finally, the court must
consider the public interest in determining whether to grant or deny the injunction. /d.
In weighing these factors, the court employs a sliding scale analysis (i.e., the less likely
the moving party will succeed on the merits, the greater irreparable harm need favor the
moving party’s position), which analysis is not fixed but rather is “subjective and
intuitive.” Ty, Inc., 237 F.3d at 895-96.

A. Ocean Atlantic Failed to Meet Its Burden of Proving a Likelihood of Success
on the Merits of Its Case.

Ocean Atlantic objects to Magistrate Judge Bobrick’s R&R that Ocean Atlantic is

unlikely to succeed on the merits of its case. Specifically, Ocean Atlantic claims that it

3



FACTS
The facts of this case as well as the facts of the underlying dispute have been set
out in detail in Magistrate Judge Bobrick’s R&R and in Ocea Atlantic Woodland Corp
v. DRH Cambridge Homes, Inc., No. 02 C 2523, 2003 WL 1720073 (N.D. Ill. Mar. 31,
2003). This Court will not rehash them here. Moreover, in considering Ocean Atlantic’s
Objections, this Court reviewed anew only that evidence available to Magistrate Judge
Bobrick at the time he issued his R&R.

DISCUSSION

Rule 72(b) provides that the court “to whom [a] case is assigned shall make a de
novo determination upon the record . . . of any portion of the magistrate judge’s
disposition to which specific written objection has been made” by a party. FED. R. Civ. P.
72(b). The court in its discretion may “accept, reject, modify, in whole or in part, the
findings or recommendations made by the magistrate.” 28 U.S.C. § 636(b)(1); Feb. R.
Civ. P. 72(b). “The district court is not required to conduct another hearing to review the
magistrate judge's findings or credibility determinations.” Goffman v. Gross, 59 F.3d
668, 671 (7th Cir. 1995).

The issue before this Court is whether Ocean Atlantic met its burden of proving
that no adequate remedy at law exists for its claim that Defendants infringed Ocean
Atlantic’s copyright of certain preliminary plans for the development of a specific parcel
of land in Plainfield, Ilinois, when Defendants relied on those plans to develop said

parcel of land in accord with the Annexation Agreement filed with the Village and



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

OCEAN ATLANTIC WOODLAND
CORPORATION, a Virginia Corporation,

Plaintiff,
02 C 2523
v.
Judge Ronald A. Guzman
DRH CAMBRIDGE HOMES, INC., a
California Corporation, COWHEY,
GUNDMUNDSON, LEDER, LTD., an Illinois
Corporation, and PUGSLEY & LAHAIE,
LTD., an Illinois Corporation,

DOCKETED

SEP 24 2003
Defendants.

ad

MEMORANDUM OPINION AND ORDER

On April 9, 2002, Plaintiff Ocean Atlantic Woodland Corporation (“Ocean
Atlantic”) sued and moved for preliminary injunction against Defendants, DRH
Cambridge Homes, Inc. (“Cambridge”); Cowhey, Gundmundson, Leder, Ltd. (“CG&L”),
and Pugsley & Lahaie, Ltd. (“Pugsley”). On April 10, 2002, this Court referred the
Motion for Preliminary Injunction to Magistrate Judge Edward Bobrick. Following
briefing by the parties and submission of documentary evidence, Magistrate Judge
Bobrick issued a Report and Recommendation dated September 25, 2002 (“R&R”),
denying Ocean Atlantic’s Motion for Preliminary Injunction. Ocean Atlantic has now
filed Objections to Magistrate Judge Bobrick’s R&R (“Ocean Atlantic’s Objections”).
For the following reasons, this Court rejects Ocean Atlantic’s Objections and adopts

Magistrate Judge Bobrick’s R&R without modification.



Ocean Atlantic alleges Defendants’ use of its preliminary plans violates its
“fundamental intellectual property rights, namely the right to exclude others from
copying and using its drawings” and holds that right superior to all others. (Mem. Supp.
Mot. Prelim. Inj. at 24.) In so doing, Ocean Atlantic ignores the affirmative defenses
taised by Defendants and dismisses the substantial harms to both Defendants and the
public interest.

If a preliminary injunction is granted, Cambridge ould be prohibited from
completing development of the land in accord with the Annexation Agreement. All
construction would stop. It could be years before this litigation is resolved; it could be
years before new plans are created and approved by the Village for development. In the
meantime, the work stoppage would effect Cambridge’s already substantial investment of
time and money in the development as well as its use of its land. It would put contractors
and employees at the site out of work. It would bar the closing of individual contracts
pending on new homes in the development and would halt completion of the new school
district due to open this fall. (Corrected Am. Defs.’ Joint Prelim. Resp. Opp’n to Pl.’s
Mot. Prelim. Inj. at 22.) Ocean Atlantic requests such complete disruption in the name of
pursuing its claim which, in the event it is proved, could be satisfied with a monetary
award.

In light of the above, this Court finds the greater harm tips toward Defendants and

the public interest. The preliminary injunction, therefore, must be denied.

D. Ocean Atlantic Waived Its Right to an Evidentiary Hearing.

After fifteen months of briefing this issue, Ocean Atlantic raised for the first time

12