Court Opinion

ID: 3035650
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:53:00.264604+00
Date Added: 2024-06-11T11:48:38.617069
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

LGS ARCHITECTS, INC., a Nevada         
Corporation; LGS NEVADA, a
                                            No. 04-16677
Nevada Corporation,
              Plaintiffs-Appellants,
                                             D.C. No.
                                           CV-04-00574-RCJ
                v.
                                              OPINION
CONCORDIA HOMES OF NEVADA,
              Defendant-Appellee.
                                       
        Appeal from the United States District Court
                 for the District of Nevada
         Robert C. Jones, District Judge, Presiding

                   Argued and Submitted
         April 13, 2005—San Francisco, California

                   Filed January 11, 2006

  Before: Robert R. Beezer, Diarmuid F. O’Scannlain, and
           Andrew J. Kleinfeld, Circuit Judges.

               Opinion by Judge O’Scannlain

                             343
346    LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA

                        COUNSEL

Michael J. McCue, Lewis and Roca LLP, Las Vegas, Nevada,
argued the cause for the appellants; W. West Allen, Lewis and
Roca LLP, Las Vegas, Nevada, was on the briefs.

John M. Naylor, Lionel Sawyer & Collins, Las Vegas,
Nevada, argued the cause for the appellee; Samuel S. Lionel,
Lionel Sawyer & Collins, Las Vegas, Nevada, was on the
brief.

                         OPINION

O’SCANNLAIN, Circuit Judge:

  We must decide whether an architectural firm is entitled to
a preliminary injunction prohibiting a client from using its
        LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA          347
copyrighted designs on projects that fall outside the scope of
their licensing agreement.

                               I

   In November 2001, LGS Architects, Inc. (“LGS”) and Con-
cordia Homes of Nevada (“Concordia”) entered into a licens-
ing agreement that authorized Concordia to use two of LGS’s
architectural plans to construct Arbor Glen I, a master-
planned community of eighty houses in northwestern Las
Vegas. The parties later signed two “Additional Service”
agreements, each of which authorized Concordia to use
another of LGS’s architectural plans in the construction of
Arbor Glen I. LGS has registered all four of these plans with
the United States Copyright Office.

  The licensing agreement is based upon the language of the
American Institute of Architects’ Standard Form of Agree-
ment for Residential Projects, and it provides that

    [a]ll architectural documents prepared by Architect
    pursuant to this contract are instrumentalities of the
    Architect’s services and are Architect’s property
    solely for use by the Client on this project and no
    other. Any other use of such architectural documents
    is prohibited unless the Client first obtains express
    written authorization from Architect. Such authoriza-
    tion may be subject to an appropriate reuse fee as
    determined be [sic] Architect.

Licensing Agreement (“Licensing Agr.”) Ex. A ¶ B.1. The
licensing agreement’s Standard Rate Schedule establishes a
“reuse fee” of “$3,600.00 plus $60.00 / unit plotted” “for
using plans developed under this contract in locations other
than the original location” and reiterates that the “Client must
procure the written permission of the Architect prior to the
commencement of such reuse of said plans.” Id. Ex. C. These
provisions are also applicable to the parties’ “Additional Ser-
348      LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA
vice” agreements. See Authorization for Additional Services
(Nov. 18, 2002) (“All other terms and conditions of the origi-
nal contract[ ]shall remain in effect as related to these Addi-
tional Services.”); Authorization for Additional Services
(Mar. 14, 2002) (same).

   In July 2003, Concordia decided to use LGS’s four Arbor
Glen I plans to construct houses in the adjacent Arbor Glen
II community. LGS requested that Concordia sign a new
licensing agreement before reusing its plans. Concordia was
unwilling to do so, however, because it believed that Arbor
Glen II was covered by the original licensing agreement’s
reuse provisions. Relying upon those provisions, Concordia
remitted a reuse fee of $10,860 to LGS, which represented
$60.00 for each of the 181 additional homes planned for
Arbor Glen II. LGS refused to accept this payment because
Concordia omitted the $3,600 “base reuse fee” for which the
licensing agreement provides.1 Concordia concedes that it
miscalculated this payment and alleges that it later attempted
to correct this error by offering LGS a $3,600 base reuse fee,
which LGS rejected. LGS contends that no such offer was
ever made.

   Notwithstanding this dispute about whether Concordia
made a second payment attempt, the parties agree that LGS
never accepted a reuse fee from Concordia and that it never
gave Concordia written authorization to use the architectural
plans to construct Arbor Glen II. Concordia nevertheless pro-
ceeded with the construction of Arbor Glen II based upon
LGS’s architectural plans. The project, which was eventually
scaled back from 181 to 68 houses, was completed in August
2004, and all of the houses have now been sold.
  1
   The parties dispute the manner in which the base reuse fee should be
calculated. LGS argues that the $3,600 fee should be imposed on a per-
plan basis (thus totaling $14,400 for the four plans at issue), while Concor-
dia contends that the fee should be assessed at a flat rate of $3,600 that
does not vary with the number of plans used.
        LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA          349
   In May 2004, LGS filed suit against Concordia in the
United States District Court for the District of Nevada alleg-
ing copyright infringement and breach of contract. LGS
moved for a preliminary injunction 1) prohibiting Concordia
from constructing and selling houses based upon LGS’s archi-
tectural plans, 2) prohibiting Concordia from reproducing,
distributing, or publicly displaying those plans, and 3) order-
ing Concordia to return the disputed plans. Without setting
forth findings of fact or conclusions of law, the district court
denied the preliminary injunction motion on the ground that
LGS does not have a likelihood of success on the merits. LGS
timely filed this interlocutory appeal from the district court’s
denial of its preliminary injunction motion.

   Concordia thereafter filed a motion to dismiss the appeal on
the ground that the completion of Arbor Glen II has mooted
LGS’s preliminary injunction request. The motion was denied
by the Appellate Commissioner without prejudice to Concor-
dia raising the mootness issue before the merits panel.

                               II

  Concordia now renews its argument that this interlocutory
appeal is moot, and we therefore first determine whether we
possess jurisdiction to entertain this appeal.

                               A

   [1] Article III of the United States Constitution requires the
existence of a live case or controversy throughout all stages
of federal judicial proceedings. See Gator.com Corp. v. L.L.
Bean, Inc., 398 F.3d 1125, 1128-29 (9th Cir. 2005) (en banc).
Accordingly, “[w]here the activities sought to be enjoined
already have occurred, and the appellate courts cannot undo
what has already been done, the action is moot, and must be
dismissed” for lack of jurisdiction. Bernhardt v. County of
Los Angeles, 279 F.3d 862, 871 (9th Cir. 2002); see also Am.
Tunaboat Ass’n v. Brown, 67 F.3d 1404, 1407 (9th Cir. 1995)
350     LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA
(holding that an appeal from the denial of a preliminary
injunction prohibiting the federal government from temporar-
ily closing certain tuna fisheries was moot because the fish-
eries had reopened by the time the appeal was argued).

   [2] Here, one of the forms of relief sought by LGS is a pre-
liminary injunction prohibiting Concordia from constructing
new homes based upon its architectural plans. To the extent
that LGS is seeking to enjoin the construction of Arbor Glen
II, its request for relief is moot because that project has been
completed. We are powerless to undo such a fait accompli.

                                 B

   Concordia argues that not only is LGS’s request to enjoin
Arbor Glen II moot but that this entire appeal is moot because
Concordia has represented that it will not make future use of
the disputed architectural plans. To that end, Concordia states
in its answering brief that it “does not intend to use the Arbor
Glen I plans at any time in the future . . . and has no intent
to reproduce, prepare derivative works, distribute, or publicly
display the plans.” Ans. Br. 17. Concordia’s president submit-
ted an affidavit to the district court that included a nearly
identical statement.

   [3] It is exceedingly rare, however, for a defendant’s volun-
tary termination of allegedly wrongful activity to render an
appeal moot. “Voluntary cessation of challenged conduct
moots a case . . . only if it is absolutely clear that the allegedly
wrongful behavior could not reasonably be expected to
recur.” Adarand Constructors, Inc. v. Slater, 528 U.S. 216,
222 (2000) (per curiam) (internal quotation marks omitted). In
Federal Trade Commission v. Affordable Media, LLC, 179
F.3d 1228, 1232 (9th Cir. 1999), for example, the district
court issued a preliminary injunction ordering the defendants
to cease their participation in a fraudulent telemarketing busi-
ness. On interlocutory appeal, the defendants argued that the
request for injunctive relief was moot because they had volun-
         LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA                    351
tarily discontinued their involvement in the business. Id. at
1237. We rejected the defendants’ mootness argument and
explained that “an action for an injunction does not become
moot merely because the conduct complained of was termi-
nated, if there is a possibility of recurrence, since otherwise
the defendant’s [sic] would be free to return to [their] old
ways.” Id. (internal quotation marks and emphasis omitted;
second alteration in original); see also Jacobus v. Alaska, 338
F.3d 1095, 1103 (9th Cir. 2003) (holding that a § 1983 action
challenging Alaska’s campaign finance laws was not moot,
even though the statutes in question had been repealed,
because the State’s voluntary cessation of its alleged wrong-
doing did not foreclose the possibility of future reenactment).

    Concordia’s representation that it has no intention to use
LGS’s architectural plans in the future does not make it “ab-
solutely clear” that Concordia will permanently refrain from
future infringement. If the opposite were true, any defendant
could moot a preliminary injunction appeal by simply repre-
senting to the court that it will cease its wrongdoing. Indeed,
it is not even apparent from the record whether Concordia has
presently discontinued its use of LGS’s copyrighted material.
Although all of the houses in Arbor Glen II have now been
sold, Concordia nowhere avers that it has ceased reproducing,
distributing, or publicly displaying the plans in connection
with that project.2

   The First Circuit’s decision in CMM Cable Rep., Inc. v.
Ocean Coast Properties, Inc.—the case upon which Concor-
dia principally relies—is not to the contrary. 48 F.3d 618 (1st
  2
    The representation of Concordia’s president that the company does not
intend to make future use of LGS’s copyrighted materials was made while
the construction of Arbor Glen II was ongoing. The affidavit did not indi-
cate when that representation of future noninfringement would go into
effect. Concordia’s reiteration of this representation in its answering brief
was premised upon the earlier statement by the company’s president and
likewise does not identify the point at which Concordia’s noninfringement
would commence.
352       LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA
Cir. 1995). There, the court concluded that an appeal from the
denial of a preliminary injunction was moot because the radio
contest that the plaintiff sought to enjoin had ended. Id. at
621. The plaintiff suggested that the possibility of the defen-
dant conducting another contest preserved a live controversy,
but the court rejected that argument because the defendant
had represented that it would not operate additional contests
until the litigation had ended. Id. at 622. The instant case is
distinguished from CMM Cable by the uncertainty as to
whether infringement is presently ongoing.3

   Furthermore, even if Concordia’s representation did moot
LGS’s request for a preliminary injunction prohibiting the
future use of the architectural plans, it would not moot LGS’s
request for a mandatory injunction ordering Concordia to
return the disputed plans. Indeed, in Affordable Media, 179
F.3d at 1237, we emphasized that the defendants’ voluntary
cessation of their fraudulent telemarketing scheme could not
conceivably have mooted the government’s request for a man-
datory injunction ordering the defendants to prepare certain
financial reports and to transfer their overseas funds to the
United States. See id. (the defendants’ cessation of wrongdo-
ing “has not rendered moot the Commission’s need for the
mandatory component of the preliminary injunction”). Thus,
whether or not LGS is ultimately entitled to mandatory
  3
    Moreover, the continuing validity of CMM Cable is called into ques-
tion by the First Circuit’s subsequent decision in American Board of Psy-
chiatry & Neurology, Inc. v. Johnson-Powell, 129 F.3d 1, 6 (1st Cir.
1997), where the court concluded that it would have been appropriate for
a district court to award a preliminary injunction against an alleged trade-
mark infringer even though the defendant had submitted an affidavit aver-
ring that she would not engage in future infringement. See id. (“on this
record, the court could undoubtedly have issued preliminary injunctive
relief had it been so inclined”). Although the First Circuit ultimately held
that the district court did not abuse its discretion by refusing to issue a pre-
liminary injunction, the court reached the merits of the appeal and did not
conclude that the defendant’s representation of future noninfringement
rendered the matter moot. Id.
        LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA            353
injunctive relief, its request for that relief continues to present
a live controversy.

                                C

  [4] Because it is not absolutely clear that Concordia has
permanently ceased all infringing activity and there exists the
possibility of awarding LGS mandatory injunctive relief, this
appeal is not moot.

                                III

   Having determined that we possess jurisdiction over this
appeal, we now turn to the merits of LGS’s request for a pre-
liminary injunction.

                                A

   [5] A district court must set forth findings of fact and con-
clusions of law supporting an order denying a preliminary
injunction. See Fed. R. Civ. P. 52(a) (“in granting or refusing
interlocutory injunctions the court shall . . . set forth the find-
ings of fact and conclusions of law which constitute the
grounds of its action”). We may “remand for further findings
of fact and conclusions of law where a district court’s findings
and conclusions . . . are not sufficient to permit meaningful
review.” Fed. Trade Comm’n v. Enforma Natural Prods.,
Inc., 362 F.3d 1204, 1212 (9th Cir. 2004).

   [6] Here, the district court’s only explanation for its denial
of a preliminary injunction was the statement that it did not
consider LGS to have a likelihood of success on the merits.
Dist. Ct. Tr. at 7. (“I’m going to deny your request, sir. I don’t
see your likelihood of success on the merit [sic].”). This con-
clusory observation does not adequately set forth the basis for
the district court’s denial of injunctive relief because it does
not provide any analysis of the likelihood-of-success issue.
354     LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA
Both parties acknowledge this deficiency, although neither
contends that remand is necessary.

   [7] We agree. LGS’s entitlement to a preliminary injunc-
tion hinges upon the legal interpretation of the parties’ licens-
ing agreement, rather than upon disputed factual issues. See
Farmers Ins. Exch. v. Neal, 64 P.3d 472, 473 (Nev. 2003) (per
curiam) (“Interpretation of a contract is a question of law
. . . .”). Because we consider legal questions de novo, the
absence of oral or written conclusions of law does not pre-
clude us from undertaking meaningful appellate review.
Remand for further findings of fact and conclusions of law is
therefore unnecessary. See Enforma Natural Prods., 362 F.3d
at 1212 (“A failure to comply with Rule 52(a) does not
require reversal unless a full understanding of the question is
not possible without the aid of separate findings.”).

                               B

   [8] “Preliminary injunctive relief is available to a party who
demonstrates either: (1) a combination of probable success on
the merits and the possibility of irreparable harm; or (2) that
serious questions are raised and the balance of hardships tips
in its favor. These two formulations represent two points on
a sliding scale in which the required degree of irreparable
harm increases as the probability of success decreases.” A&M
Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir.
2001) (internal quotation marks and citation omitted). In a
copyright infringement action, however, “a showing of a rea-
sonable likelihood of success on the merits raises a presump-
tion of irreparable harm.” Johnson Controls, Inc. v. Phoenix
Control Sys., Inc., 886 F.2d 1173, 1174 (9th Cir. 1989); see
also Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d
1115, 1119 (9th Cir. 1999) (“Under federal copyright law, . . .
a plaintiff that demonstrates a likelihood of success on the
merits of a copyright infringement claim is entitled to a pre-
sumption of irreparable harm.”). A copyright holder seeking
a preliminary injunction is therefore not required to make an
        LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA            355
independent demonstration of irreparable harm. See 4 M.
Nimmer & D. Nimmer, Nimmer on Copyright § 14.06[A]
(2004) (“the plaintiff’s burden for obtaining a preliminary
injunction in copyright cases collapses to showing likelihood
of success on the merits, without a detailed showing of danger
of irreparable harm” (footnotes omitted)). Accordingly, LGS
“need only show a reasonable likelihood of success on its
copyright infringement claim” to obtain a preliminary injunc-
tion. Johnson Controls, Inc., 886 F.2d at 1174.

   A plaintiff must meet two requirements to establish a prima
facie case of copyright infringement: (1) ownership of the
allegedly infringed material and (2) violation by the alleged
infringer of at least one of the exclusive rights granted to
copyright holders. See Napster, Inc., 239 F.3d at 1013; see
also 17 U.S.C. § 106 (granting copyright holders the exclu-
sive right to reproduce the copyrighted work, to distribute
copies of the work, and to display the work publicly).

   [9] When a licensee exceeds the scope of the license
granted by the copyright holder, the licensee is liable for
infringement. See Sun Microsystems, Inc., 188 F.3d at 1121
(“If . . . a license is limited in scope and the licensee acts out-
side the scope, the licensor can bring an action for copyright
infringement.”); see also 3 Nimmer & Nimmer, supra,
§ 10.15[A] (“when a license is limited in scope, exploitation
of the copyrighted work outside the specified limits consti-
tutes infringement”). In S.O.S., Inc. v. Payday, Inc., 886 F.2d
1081, 1083-84 (9th Cir. 1989), for example, a software
designer that had granted a payroll company a license to use
its copyrighted software alleged that the licensee had
infringed its copyright by preparing and duplicating a modi-
fied version of the program. We observed that a “license must
be construed in accordance with the purposes underlying fed-
eral copyright law. Chief among these purposes is the protec-
tion of the author’s rights.” Id. at 1088 (citation omitted). We
concluded that the payroll company, which possessed the
right to use the software but had not acquired any ownership
356     LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA
rights, had exceeded the scope of its license by modifying and
copying the program. Id. at 1089. The case was remanded for
the district court to consider whether the payroll company had
any valid defenses to the infringement action. Id. at 1089 &
n.11.

   Similarly, in Frank Music Corp. v. Metro-Goldwyn-Mayer,
Inc., 772 F.2d 505, 511 (9th Cir. 1985), a hotel obtained a
license to present public performances of copyrighted music.
The license specifically excluded “songs [accompanied by]
visual representation of the work from which the music is
taken.” Id. (alteration in original). We concluded that the hotel
exceeded the scope of its license—and thereby committed
copyright infringement—when it held a performance that
included both music and representations of movie scenes
because the licensing agreement expressly prohibited such
activity. Id. at 512.

   [10] Here, Concordia does not dispute that LGS owns a
valid copyright in the four architectural plans, and thus LGS’s
likelihood of success on the merits depends solely upon
whether Concordia exceeded the scope of its license. LGS
granted Concordia a license to use its four architectural plans
to construct the eighty homes in the Arbor Glen I community.
The licensing agreement explicitly provided that “[a]ny other
use of such architectural documents is prohibited unless the
Client first obtains express written authorization from Archi-
tect. Such authorization may be subject to an appropriate
reuse fee as determined be [sic] Architect.” Licensing Agr.
Ex. A ¶ B.1; see also id. Ex. C (establishing a reuse fee of
“$3,600.00 plus $60.00 / unit plotted” “for using plans devel-
oped under this contract in locations other than the original
location”). The scope of Concordia’s license was therefore
limited to the construction of Arbor Glen I, unless LGS gave
Concordia written authorization to utilize the plans in other
projects and received a reuse fee for such additional use.
Because LGS never authorized Concordia to reuse its plans in
the construction of Arbor Glen II—and Concordia never paid
          LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA                       357
the reuse fee upon which such authorization was conditioned
—Concordia exceeded the scope of its license when it used
the four architectural plans in the construction of Arbor Glen
II.4

   [11] Concordia’s defense that LGS breached the covenant
of good faith and fair dealing by refusing to authorize reuse
is unavailing. Even if it is consistent with copyright law to
imply such a covenant into the licensing agreement (a ques-
tion that we need not decide), there is no evidence in the
record that Concordia ever tendered the correct reuse fee to
LGS. Although Concordia did remit a $10,860 payment, LGS
returned the check because this amount did not include the
requisite base reuse fee. The parties’ dispute over whether this
base fee should be calculated at a flat rate (as Concordia
claims) or on a per-plan basis (as LGS claims) is irrelevant
because—at least as far as the current record reveals—
Concordia never tendered any base reuse fee.5 In light of Con-
   4
     Concordia alleges that the plan it received under the parties’ second
“Additional Service” agreement was intended exclusively for Arbor Glen
II; LGS contends that this plan was designed for Arbor Glen I. On the
record before us, it is impossible to resolve this factual issue authorita-
tively because discovery has not yet taken place. Our task is further hin-
dered by the fact that the relevant “Additional Service” agreement
ambiguously refers to the project in question as “Arbor Glen.” Neverthe-
less, that agreement does specify that it is subject to “[a]ll . . . terms and
conditions of the original contract,” Authorization for Additional Services
(Nov. 18, 2002), which suggests that the permissible uses of this addi-
tional plan are coterminous with the original licensing agreement’s scope.
We therefore find for purposes of this appeal that Concordia was only
authorized to use the additional plan in the construction of Arbor Glen I.
The district court is free to revisit this factual issue with the benefit of full
discovery.
   5
     Concordia contends that, after it realized its error in calculating the fee,
it offered to pay LGS a $3,600 base reuse fee. LGS disputes this assertion
and alleges that Concordia never offered to pay any base reuse fee. On this
undeveloped record, we are unable to resolve this factual dispute with cer-
tainty. It is probative, however, that while the record does contain both
correspondence and a check evidencing Concordia’s initial $10,860 offer
of payment, Concordia has not proffered any evidence to support its asser-
tion that it later tendered a second payment that included the base reuse
fee. Accordingly, for purposes of this appeal, there is no basis for finding
that Concordia tendered a second payment to LGS.
358     LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA
cordia’s failure to pay the fee that was an explicit contractual
prerequisite to the architectural plans’ reuse, LGS did not act
in bad faith when it refused to authorize Concordia to use the
plans in the construction of Arbor Glen II.

                               C

   [12] Because Concordia exceeded the scope of the licens-
ing agreement, LGS is likely to succeed on the merits of its
copyright infringement claim. LGS is therefore entitled to a
preliminary injunction prohibiting Concordia from reproduc-
ing, distributing, publicly displaying, or creating derivative
works based upon LGS’s architectural plans. See Johnson
Controls, Inc., 886 F.2d at 1177 (affirming the entry of a pre-
liminary injunction in a copyright infringement action upon
concluding that the copyright holder was likely to succeed on
the merits). Such an injunction will preserve the status quo
until the district court resolves the merits of this case.

   At this stage of the proceedings, however, LGS is not enti-
tled to a mandatory injunction requiring Concordia to return
the plans. “A mandatory injunction goes well beyond simply
maintaining the status quo pendente lite [and] is particularly
disfavored.” Stanley v. Univ. of S. Cal., 13 F.3d 1313, 1320
(9th Cir. 1994) (alteration in original). Mandatory relief is
unnecessary in this case because it will not further the “pur-
pose of a preliminary injunction, [which] is merely to pre-
serve the relative positions of the parties until a trial on the
merits can be held.” Univ. of Tex. v. Camenisch, 451 U.S.
390, 395 (1981). If LGS prevails on summary judgment or
after a trial on the merits, the district court should then con-
sider whether to award LGS a mandatory injunction requiring
Concordia to return the plans.

                               IV

   Because LGS is likely to succeed on the merits of its copy-
right infringement claim, the district court is directed to enter
       LGS ARCHITECTS v. CONCORDIA HOMES OF NEVADA        359
a preliminary injunction prohibiting Concordia from repro-
ducing, distributing, publicly displaying, or creating deriva-
tive works based upon LGS’s architectural plans.

  REVERSED and REMANDED for further proceedings
consistent with this opinion.