Wednesday, June 25, 2008

Phoenixes and Quondam Clients in the First Circuit

The redoubtable Judge Selya of the First Circuit has provided us with more of his literary smorgasbord in his latest copyright opinion. This opinion begins:

These appeals rise, like the mythical Phoenix, out of the ashes of a failed business relationship between an architectural firm and its quondam client. They present interesting questions concerning the application of … the discovery rule … in copyright infringement cases.

The OED gives this definition of “quondam”:

C. adj. Somewhat arch.

1. Of persons: former, one-time.

The case is Warren Freedenfeld Associates, Inc. v. Michael McTigue, 2008 WL 2469190 (1st Cir. June 20, 2008), and presents a rare reversal in a statute of limitations case. The defendant is a veterinarian who hired plaintiff to build a facility for him. After the usual falling out, there was the usual hiring of another architectural firm, which was alleged to have infringed the first architect’s work The veterinary hospital opened for business on about June 9, 2000. Four years later plaintiff, apparently an avid reader of the magazine “Veterinary Economics,” came across an article about the completed facility. The article “featured a drawing of the floor plan of the Gardner Animal Hospital and reported that the design had won a merit award.” Plaintiff obtained a copy of the building plans from the city, and sued. The defendants moved to dismiss, alleging the copyright claim was barred by the three-year statute of limitations in 17 USC 507 since the hospital has been opened for more than five years prior to the suit being filed. The court relied on plaintiff’s knowledge that defendant intended to complete the project and

that the plans for the construction were on file with the municipality and had become public records as early as the fall of 1999; that construction had proceeded using the same facade and on the same site as originally contemplated; and that after the veterinary hospital opened, it was at all times available for viewing by anyone who might be curious about its design.

The court of appeals discussion of the nature of accrual is noteworthy:

Th[e] date of accrual is not always determined mechanically; in certain circumstances, accrual contemplates application of the so-called discovery rule. Under the aegis of this rule, a claim accrues only when a plaintiff knows or has sufficient reason to know of the conduct upon which the claim is grounded. … The easy cases are those involving actual knowledge of an act of infringement. There, accrual begins with the acquisition of that knowledge; thus, computing the limitations period is simply a matter of checking the passage of time.

In the absence of actual knowledge-and there is no allegation of such knowledge in the complaint-the question becomes when a reasonably prudent person in the plaintiff's shoes would have discovered (that is, would have acquired an awareness of) the putative infringement. …

It stands to reason that determining when a reasonable person would have become aware of a copyright infringement is a fact-sensitive enterprise. Common sense suggests, therefore, that an inquiring court must explore the idiosyncratic circumstances of each individual case. One thing is clear, however: the reasonable person standard incorporates a duty of diligence. It is not a barrier to accrual that a plaintiff has failed to discover a cause of action if a reasonably diligent person, similarly situated, would have made such a discovery. In other words, a plaintiff can be charged with inquiry notice, sufficient to start the limitations clock, once he possesses information fairly suggesting some reason to investigate whether he may have suffered an injury at the hands of a putative infringer.
But the duty to investigate is not always in the wind. Typically, inquiry notice must be triggered by some event or series of events that comes to the attention of the aggrieved party. The familiar aphorism teaches that where there is smoke there is fire; but smoke, or something tantamount to it, is necessary to put a person on inquiry notice that a fire has started.

It is interesting that while the court noted (in footnote 3) the controversy about whether the discovery rule is still valid, it felt it didn’t have to address it. Why not?

In reversing the trial court, Judge Selya found that there was “no triggering event-some sign of storm clouds gathering on the horizon … .” This is surprising in light of the “frayed relationship” between the parties and defendant’s letter stating that he intended to complete the building. A counter, noted by Judge Selya, is that an intention to proceed did not mean an intention to proceed in an infringing way. Judge Selya also noted defendant has claimed that plaintiff’s plans the plans and drawings were “useless” and had been “discarded”- and that he would have to spend “tens of thousands of dollars” for a new architect.

Plaintiff could have easily discovered the infringement if it had reviewed the filed plans or viewed the completed structure, both of which would have represented the reasonable exercise of diligence. The case may have been close on the facts, but merely from reading the court of appeals’ opinion, I lean toward the district court’s view.

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