Court Opinion

ID: 4696087
Source: CourtListenerOpinion
Date Created: 2021-06-16 17:00:54.097434+00
Date Added: 2024-06-11T08:05:38.684513
License: Public Domain

In the

    United States Court of Appeals
                For the Seventh Circuit
                    ____________________
Nos. 18-3202, 19-3118 & 20-1515
DESIGN BASICS, LLC, et al.,
                                               Plaintiffs-Appellants,
                                 v.

KERSTIENS HOMES & DESIGNS, INC., et al.,
                                              Defendants-Appellees.
                    ____________________

        Appeals from the United States District Court for the
        Southern District of Indiana, Indianapolis Division.
         No. 1:16-cv-726 — Tanya Walton Pratt, Chief Judge.
                    ____________________

    ARGUED NOVEMBER 3, 2020 — DECIDED JUNE 16, 2021
               ____________________

   Before KANNE, SCUDDER, and ST. EVE, Circuit Judges.
    SCUDDER, Circuit Judge. Copyright law protects individual
expression while encouraging creativity and maintaining the
public interest in spreading ideas. In recent years, however, a
cottage industry of opportunistic copyright holders—earning
the derisive moniker “intellectual property trolls”—has
emerged, in which a troll enforces copyrights not to protect
expression, but to extract payments through litigation. Design
Basics, LLC fits that bill. The firm, which holds copyright in
2                              Nos. 18-3202, 19-3118 & 20-1515

several thousand single-family home floor plans, has brought
over 100 infringement suits against home builders in recent
years. But many defendants—the targets of the settlement-
extraction scheme—are starting to push back. This case is a
good example.
    We have aﬃrmed dismissal of Design Basics’s lawsuits
twice in recent years. See Design Basics LLC v. Signature Con-
struction, Inc., 994 F.3d 879 (7th Cir. 2021); Design Basics, LLC
v. Lexington Homes, Inc., 858 F.3d 1093 (7th Cir. 2017). We do
so again today. In dismissing Design Basics’s copyright in-
fringement suit against the Kerstiens family’s home building
business, the district court recognized that the firm has a thin
copyright in its plans because they consist largely of standard
features found in homes across America. We agree and aﬃrm.
                                I
                               A
    The Kerstiens family runs a collection of companies that
build single-family homes out of Jasper, Indiana. Plan Pros,
Inc. and Prime Designs, Inc. are home design companies that
license their plans through Design Basics, which acts as a plan
broker of sorts by serving as an intermediary between home
builders and design firms.
    Design Basics started out as a small residential design firm
in Omaha, Nebraska. It markets the thousands of plans it
holds copyright to through trade publications, promotional
materials placed in home improvement stores, and national
builder associations. In recent years—under new
ownership—Design Basics has become a serial litigant.
Indeed, litigation proceeds have become a principal revenue
stream for the firm. See Signature Construction, 994 F.3d at 883.
No. 18-3202, 19-3118 & 20-1515                                  3

The firm also draws income from a licensing scheme for its
designs, with fees ranging from $700 to $6,000 per use.
    In our two prior cases, we have underscored that Design
Basics, while holding itself out as a home designer, is a copy-
right troll. See id. at 882; Lexington Homes, 858 F.3d at 1096–97.
The firm seeks “to extract rents from market participants who
must choose between the cost of settlement and the costs and
risk of litigation.” Lexington Homes, F.3d at 1097. The model is
simple: Design Basics holds copyrights to thousands of home
floor plans, and its employees receive incentives to stalk the
Internet in hopes of finding a target for an infringement suit.
    Kerstiens was one such target. In 2013 a Design Basics
employee—ostensibly doing market research to develop
more business in Indiana—came across Kerstiens’s website
and saw a few design plans that he believed infringed the
firm’s copyrighted works. Design Basics and the two design
companies then brought this suit in 2016, alleging that ten
Kerstiens designs infringed seven copyrighted plans.
                                B
    In time Kerstiens moved for summary judgment. The dis-
trict court granted that motion and awarded costs and fees,
concluding that Design Basics could not show substantial
similarity between its copyrighted works and Kerstiens’s al-
leged infringing plans under the standards we announced in
Lexington Homes. The competing floor plans, the district court
explained, had some similar features. But that was not enough
under Lexington Homes to establish substantial similarity be-
tween the architectural works. The superficial similarities be-
tween the designs were not unique to the home plans before
the court. Indeed, the similarities could be found, the district
4                              Nos. 18-3202, 19-3118 & 20-1515

court emphasized, in many homes—kitchens near dining
rooms, master bedrooms with large bathrooms, and on and
on. So Design Basics could not succeed on its copyright in-
fringement claim. In a later order, the district court awarded
Kerstiens $518,457.80 in costs and fees. Design Basics appeals
both orders.
                               II
    Our two recent decisions—Lexington Homes and Signature
Construction—aﬃrming judgments against Design Basics
more fully describe the copyright law framework and how it
relates to the firm’s questionable business model. Lexington
Homes guided the district court’s conclusions, and we more
recently decided Signature Construction, which again fore-
closed much of Design Basics’s claims. Those decisions all but
resolve this appeal.
    Copyright protection exists, the Constitution makes clear,
to “promote the Progress of Science and useful Arts, by secur-
ing for limited Times to Authors and Inventors the exclusive
right to their respective Writings and Discoveries.” U.S.
Const. art. I, § 8, cl. 8; see also Google LLC v. Oracle America,
Inc., 141 S. Ct. 1183, 1195 (2021). The Copyright Act codifies
that principle. Among the mediums protected by copyright
are “architectural works.” See 17 U.S.C. § 102(a)(8). Encom-
passed in that definition are the “overall form as well as the
arrangement and composition of spaces and elements in the
design, but [it] does not include individual standard fea-
tures.” Id. § 101.
   To establish copyright infringement, Design Basics must
prove “ownership of a valid copyright” and that Kerstiens
“cop[ied] constituent elements of the work that are original.”
No. 18-3202, 19-3118 & 20-1515                                     5

Feist Publ’ns, Inc. v. Rural Tele. Serv. Co., Inc., 499 U.S. 340, 361
(1991). This appeal concerns only the second element. Embed-
ded within that element are two distinct questions: whether
the defendant copied the protected work and whether the
copying constituted an improper appropriation. See Signature
Construction, 994 F.3d at 887; see also 4 Nimmer on Copyright
§ 13.0[B] (Rev. ed. 2020). The first question asks whether the
defendant actually duplicated the work. The second inquiry,
which is dispositive for our purposes, concerns the degree of
unlawful appropriation. We separate the protected elements of
a work from unprotected elements and then assess whether
the protected elements were improperly appropriated. Im-
proper appropriation, or wrongful copying as the lingo goes,
“requires substantial similarities between the defendant’s
work and protected elements in the plaintiﬀ’s copyrighted
work.” Signature Construction, 994 F.3d at 888.
    We employ the ordinary observer test to assess substantial
similarity—assesing “whether the accused work is so similar
to the plaintiﬀ’s work that an ordinary reasonable person
would conclude that the defendant unlawfully appropriated
the plaintiﬀ’s protectable expression by taking material of
substance and value.” Id. (quoting Wildlife Express Corp. v.
Carol Wright Sales, Inc., 18 F.3d 501, 509 (7th Cir. 1994)). In
fields defined by common features and dictated by functional
concerns, however, copyright protection is very weak. The
suburban single-family home design industry, we have ob-
served, is one such field where copyright protection is thin,
such that “proving unlawful appropriation takes more than a
substantial similarity between the plaintiﬀ’s work and the de-
fendant’s work.” Id. at 890.
6                             Nos. 18-3202, 19-3118 & 20-1515

    As we explained in Signature Construction, “only a
virtually identical plan infringes the plaintiﬀ’s copyrighted
plan.” Id. We drew this conclusion in part from two copyright
doctrines—scènes à faire and merger. French for “scenes of
action,” scènes à faire refers to the standard elements of a
genre, which get no copyright protection. See id. at 889 n.4.
And, for its part, the doctrine of merger helps separate out the
weaker protection in copyright from the stronger protection
of a patent. Copyright protects expression, whereas a patent
protects ideas, concepts, and functions. When something can
be expressed in only a limited number of ways, “the
expression ‘merges’ into the idea and cannot receive
copyright protection.” Id. at 889.
                              III
    With these principles of copyright law in place, we can
make quick work of Design Basics’s claims. Just as we did in
Lexington Homes and Signature Construction, we conclude
again today that Design Basics did not prove an infringement
claim. Design Basics failed to show that its copyrighted de-
signs and the allegedly infringing Kerstiens designs are “vir-
tually identical.” Design Basics cannot make a case of copy-
right infringement because the many similarities it points to
are standard features not strongly protected by copyright.
The Design Basics plans at issue are just that—basic, common,
and standard designs entitled to very little copyright protec-
tion.
    Consider just one of the allegedly infringing designs. The
top floor plan is the Kerstiens 704 Plan, which Design Basics
alleged infringes on its Duncan Plan, the bottom of the two
floor plans.
No. 18-3202, 19-3118 & 20-1515                  7

                     Kerstiens’s 704 Plan

                  Design Basics’s Duncan Plan
8                             Nos. 18-3202, 19-3118 & 20-1515

    Kerstiens’s 704 Plan (on the top), to be sure, bears many
similarities with Design Basics’s Duncan Plan (on the bottom).
But those similarities are bound up in standard features and
functions found in many homes. It is of no moment that both
have a garage or a laundry room oﬀ the garage. Nor is it con-
cerning that both designs feature three standard bedrooms on
the second floor. No one would expect a house to have its
kitchen on the second rather than the first floor.
    Count the diﬀerences, too. The layouts are distinct—for
example, the Duncan garage is on the right side of the house,
whereas the Kerstiens 704 garage is on the left. And as the dis-
trict court pointed out, most of the room dimensions are dif-
ferent. The Duncan model includes a fireplace in the living
room and a desk in the third upstairs bedroom. Neither fea-
ture can be found in the Kerstiens 704 Plan. The Kerstiens 704
Plan has some distinctive features of its own: an outside entry
side door into the garage, a back patio, and a second closet in
the master bedroom, to name a few.
    We could spill more ink explaining the standard similari-
ties and the many diﬀerences across all of the allegedly in-
fringing designs. But doing so is unnecessary. Just this one
representative sample comparison suﬃces to show why the
district court was right to reject Design Basics’s infringement
claim at summary judgment.
   Pick any ordinary neighborhood in the Chicagoland area.
The same observation follows. Similarities abound between
the selected homes and the plans that Design Basics seeks
exclusive claim to. The industry standard suburban single-
family home is rife with common features for many reasons,
but copyright infringement is not among them. Developers
cater to vast numbers of potential homebuyers wanting
No. 18-3202, 19-3118 & 20-1515                                  9

homes with lasting market value, so they build houses
broadly attractive to all comers. And as we have observed,
“form follows function so closely” in the market for
aﬀordable single-family homes. Lexington Homes, 858 F.3d at
1101. “There are only so many ways to arrange a few
bedrooms, a kitchen, some common areas, and an attached
garage, so not every nook and cranny of an architectural floor
plan enjoys copyright protection.” Id. at 1103 (quotation
marks omitted). Design Basics oﬀers over 2,800 floor plans.
We would be hard-pressed to find a standard American home
bearing no similarities to at least one of those floor plans.
    In cases involving fields in which copyright protection is
thin, “only extremely close copying is actionable as unlawful
infringement.” Signature Construction, 994 F.3d at 882. Design
Basics has not satisfied that exacting standard. A design that
shares similar standard features, when taken together to form
a whole, may look like potential infringement at first blush.
Copyright law rewards original expression and innovation. It
does not protect rent-seekers looking to score a quick settle-
ment rather than compete.
                               IV
    Having successfully fought oﬀ a dubious lawsuit, Ker-
stiens Homes was entitled to an award of costs and fees under
the Copyright Act. See 17 U.S.C. § 505. The district court
awarded $518,457.90, and we aﬃrm that award.
    In copyright infringement suits, there is a strong presump-
tion that prevailing defendants may recover costs. See
Hyperquest, Inc. v. N’Site Solutions, Inc., 632 F.3d 377, 387 (7th
Cir. 2011). Still, that presumption and a district court’s discre-
tion must be moored to sound legal principles that look to
10                            Nos. 18-3202, 19-3118 & 20-1515

“the large objectives of the relevant Act.” Kirtsaeng v. John
Wiley & Sons, Inc., 136 S. Ct. 1979, 1986 (2016). The Supreme
Court instructs district courts to look to several factors when
exercising their broad discretion to shift fees in copyright
cases, including “frivolousness, motivation, objective unrea-
sonableness … and the need to advance considerations of
compensation and deterrence.” See Fogerty v. Fantasy, Inc.,
510 U.S. 517, 534 n.19 (1994). The district court exercised
sound discretion in awarding Kerstiens costs and fees, care-
fully considering the Fogerty factors and concluding that
awarding fees would discourage Design Basics from manipu-
lating the copyright laws to extract quick settlements. The dis-
trict court’s evaluation of Kerstiens’s cost request was just as
thorough. We see no abuse of discretion.
     For these reasons, we AFFIRM.