Getting a Multi-Million Dollar Settlement for Home Plan Designer
After a Developer Builds His Business Using Her Designs Without Her Knowledge or Permission
After years of an amicable working relationship, Barbara discovered Fred, a local homebuilder, used her copyrighted home plans without her consent to develop countless homes around the state. In addition, Fred altered her home plans without her approval, replaced her copyright with his own in his marketing material, and took credit for her home plans in a local design competition.
The JC White Law Group brought claims against Fred, his homebuilding company, and the other actors that facilitated Fred’s illegal conduct. These claims included copyright infringement, breach of contract, unjust enrichment, and unfair and deceptive trade practices, which provided complimentary avenues of liability.
After a legal battle, the JC White Law Group was able to ensure Barbara received compensation for her lost profits on each infringed home plan and punished the homebuilder with further financial damages for his flagrant violations of her intellectual property, totaling a three million dollar settlement.
In 2014, Barbara* started a home plan design company and began selling her nationally recognized home plans to developers, contractors, and individual homeowners. As part of her process, Barbara puts significant time and effort into understanding how people live in their day to day, how traffic flows affect the feel of the space, how light can make a room feel open, and, ultimately, what makes a house a home. She also has to consider building codes, customer costs, and local ordinances in ensuring her design is feasible and within a customer’s budget. Combining all these different aspects, Barbara is a skilled professional that takes her work, and the product she provides for her clients, very seriously.
As part of her services, Barbara offers clients custom home plan designs for individual customers or will sell a license to use one of her predesigned plans. If a customer chooses to license one of her predesigned plans, she will grant them a single-use license, and provide any further alterations needed to ensure the plan works with the customer’s needs. When Barbara works with developers who are building large residential complexes, she offers an unlimited license to build the home as many times as the developer wishes for an increased fee. She also offers re-use fees, which provides clients the ability to purchase subsequent licenses of home plans after a single use license. Barbara works diligently to ensure all of her clients understand the different products and services she offers and to provide customizations of her plans on an hourly rate.
Barbara began working with a new residential developer, Fred, who was starting his own home building company. They established a professional relationship that resulted in Barbara selling Fred single-use licenses of her home plans. Fred’s company became very successful, and Barbara and Fred worked closely together to build custom and stock homes across the state.
One day, Barbara and her husband, Sam, were driving through one of the neighborhoods in which Fred had built homes using some of Barbara’s home plans, and they noticed five homes that had been built based on her plans without Barbara’s permission and without a re-use license. Barbara immediately notified Fred of his infringement of her copyright and sent him a bill for all the re-use fees he would have been required to pay to build those homes. In addition, Barbara sent Fred a document that explained how she structured her fees, what each license entitled him to build, and an overview of how copyright legally protects her home plan designs from infringement. Fred paid the re-use fees and Barbara thought the issue had been resolved.
The next year Barbara discovered Fred had completed at least ten more unauthorized builds of her home plan designs. She again sent Fred a bill for the unpaid re-use fees. Frustrated, Barbara and Sam began scouring all of the neighborhoods where they knew Fred had built homes and discovered 61 unauthorized builds of Barbara’s designs. However, Fred’s copyright infringement went beyond the dozens of unauthorized builds. Barbara and Sam discovered that Fred had approached one of Barbara’s clients, asking if he could rebuild their customized home plan design in the couple’s same neighborhood. After the couple refused, Fred decided to build the home anyway, removing Barbara’s copyright and replacing it with his own. Barbara also discovered Fred had systemically removed her copyright from her designs and made it part of his marketing strategy to advertise the designs online as his own. Fred even went so far as to enter one of Barbara’s designs into a public competition under his own copyright.
Barbara again contacted Fred to inform him of his illegal behavior and seek the re-use payment. Fred initially responded that he would pay the re-use fees. However, after months of not receiving the payment and not hearing from Fred, Barbara formally revoked her offer to grant him re-use licenses for the home plans and sought out legal representation to hold Fred accountable.
After discovering Fred’s extensive infringement of her copyright, Barbara and Sam spoke with several different attorneys about the potential of a legal case against Fred. The first attorney turned them away, telling them they were overreacting to Fred’s behavior. The second attorney also informed Barbara and Sam that though she had expertise in intellectual property issues, Barbara and Sam should look for an attorney with experience litigating such complicated issues. The second attorney referred them to the JC White Law Group, and together they filed a civil lawsuit against Fred, his company, the draftsman who facilitated the copyright infringement, and his company.
The civil lawsuit was based on several different types of claims, including violation of copyright, breach of contract, unfair and deceptive trade practices, and an advertisement injury under federal copyright laws. The combination of these claims provided expansive liability for Fred and the other defendants, including multiple types of elevated damages. For example, liability under the Unfair and Deceptive Trade Practices Act could entitle Barbara and Sam to triple their actual damages or liability under Federal copyright law could force the guilty defendants to pay Barbara the profits Fred made from selling the homes.
The Legal Claims
Though the JC White Law Group brought a suite of claims against Fred and his co-defendants, the crux of the case ultimately came down to the claims under federal copyright law. Works that are fixed in a tangible expression, such as art, writing, or home plan designs, can be protected under federal law. If an owner of such expression follows the process to obtain a federal copyright, it is protected from other people attempting to use that expression without the owner’s permission. The law provides strict punishment for individuals that violate another’s copyright, including the entitlement to the violator’s profits that he/she obtained from using the copyright.
At the beginning of a case, each party is required to make certain disclosures to the other side and the court. One of these requirements mandated disclose of any insurance coverage. However, Fred stated that neither he, nor his companies, had any insurance. Barbara was aware that Fred’s contractor’s license required him to maintain insurance coverage. Based on this industry knowledge, the JC White Law Group pressed Fred and his attorneys further, sending several types of discovery requests to obtain information regarding insurance. However, despite these efforts, Fred failed to provide the requested information.
After these discovery requests and a failed mediation attempt, the parties decided to move the litigation forward to the next step – depositions of the parties. Depositions are a kind of discovery tool where each party gets to question the other side under oath. Each side exercised its right to depositions and questioned several people involved in the case, including Barbara. However, Fred’s deposition opened wide the case and provided direct evidence of his infringement. When questioned by the JC White Law Group, Fred openly admitted to having relevant insurance, knowledge that Barbara owned the copyright to her home plans, awareness that he only paid for a single-use fee for the plans, and that he built the plans repeatedly without Barbara’s consent.
Based on the admissions in Fred’s deposition, the JC White Law Group filed a motion for partial summary judgment on the issue of copyright infringement. A motion for summary judgment allows a judge to determine certain issues, or in some instances the entire case, if the judge finds there are no disputes regarding the facts and the law entitles one party to resolution without needing a trial. Barbara’s motion proved that Fred’s open admissions to knowingly using Barbara’s copyright without her permission entitled Barbara to a judgment that Fred was liable for copyright infringement. In the opposing side’s response to the motion, they failed to raise any defense beyond the statute of limitations. Statute of limitations is a defense that a party can raise that would bar a plaintiff’s claims if they failed to bring a lawsuit within a certain number of years from when the harm occurred. In the end, the judge granted Barbara’s motion, establishing that Fred was liable to Barbara for copyright infringement and leaving the amount Fred owed Barbara as the only issue to be addressed.
Instead of proceeding with a trial to determine how much Fred would pay Barbara, the parties decided to try another mediation. However, in this mediation, Fred’s insurance companies were represented by their own lawyers and the parties hired a different mediator that specialized in insurance claims. After eight hours of grueling mediation between Barbara, Fred, and his insurance companies, the parties ultimately agreed to a multi-million dollar settlement, which would be paid by both Fred and his insurance companies.
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This case was a significant victory for Barbara and other businesses that are often taken advantage of based on their generosity. Fred was forced to pay significantly more than if he had simply followed the law or attempted to meet Barbara halfway. Instead, his consistent disrespect for Barbara and her rights cost him significantly. However, this case also provides important lessons for small businesses and the litigators who try to protect their rights.
Setting up your business to protect yourself
When engaging in any type of business, it is crucial to understand your rights and ensure you have structured your operations in a manner to protect yourself. This process will be specific to each type of business and individuals’ needs. For some, this may take the form of ensuring your entity formation is set up in a way that shields the business owner from himself/herself being personally liable. For example, using corporations or limited liability companies can protect business owners and their families from being forced to use their personal assets to pay company debts. For others, this could include ensuring their business has procedures in place to communicate clear expectations to their customers. For example, it is important to understand what conduct creates a binding agreement and to have processes in place to solidify contracts that include terms to protect your business.
For Barbara, it was necessary that she take the time and care to understand how her works were protected by copyright laws. The process of getting works of expression copyrighted is fairly straight-forward and relatively inexpensive, but by taking the few necessary steps she ensured her works had legal protection and she was able to obtain a seven-figure settlement for Fred’s violations.
While Fred’s liability for violating Barbara’s copyright was clearly established through discovery and upheld in the order for partial summary judgment, Barbara and Sam’s ability to collect the damages was a central issue of the case. From the beginning, Fred maintained that he would not be able to pay Barbara and Sam the amount of damages they were seeking, and they would be forced to obtain payment through an extended bankruptcy process. As part of Fred’s threats, he repeatedly stated that he did not have insurance, forcing him to pay the entire costs of litigating and any potential damages from his own assets.
Collectability is an often overlooked, yet very important aspect of litigating. Though a moral victory that condemns a defendant’s bad behavior has value in itself, the purpose of lawsuits is to make the plaintiff whole again, which includes compensation for his/her harm and covering the costs of litigation. Most parties will have corporate or individual insurance that may fill in some gaps of the collectability of a defendant. However, an insurance policy may have exclusions or limitations in what type of bad behavior by the defendant is covered. Furthermore, just like Fred, some defendants may purposefully or negligently fail to disclose the existence of an insurance policy, which risks plaintiffs settling for a lower amount than their case is worth or choosing not to bring claims entirely. Finally, some companies may structure their business to shield it from being forced into paying judgments in lawsuits. In determining if a lawsuit is the appropriate avenue after a plaintiff has suffered a significant harm, it is important to take a hard look at the collectability of the defendants. Similarly, just as Barbara and Sam did in their case, having industry knowledge of standard practices regarding insurance coverage or how company assets are held can be very powerful in knowing where to look to find collectability.
When parties litigate a dispute, they are entitled to engage in a process that is called discovery. As part of this process, each party has codified rights and duties regarding access to information that is relevant to the dispute. The purpose of these rules is to ensure both the plaintiff and the defendant have a fair trial and that one side is not prejudiced by the other side withholding key facts. Specifically, discovery allows each party to ask written questions that the opposing party must answer under oath, request for the other side to produce physical documents, and/or sit for a recorded interview whereby a party questions witnesses or the opposing individuals themselves while under oath.
Barbara’s case against Fred demonstrates the important role of discovery in ensuring disputes are resolved fairly. From the very beginning of the dispute, Fred maintained he had neither insurance nor sufficient assets to cover the sought damages, which was a crucial factor as it relates to the collectability of the case, discussed above. In the end, Fred did have insurance coverage that ultimately paid out a seven-figure settlement, and Fred had significant personal assets he contributed as well. However, Fred failed to disclose the existence of insurance coverage at the beginning of the case, as required under the procedural rules. In addition, he repeatedly failed to provide the information in response to specific interrogatories and requests for production that required directly answering questions regarding insurance coverage or turning over any other documents relevant to potential coverage. It was not until Fred was in a deposition, being asked directed questions by the JC White Law Group under oath, that Fred finally admitted that he had insurance coverage.
While discovery offers a wide range of tools to extract information from the other side, it is important to use those tools strategically. Different tools of discovery can be used to gather certain types of information and should be used together or alone in different ways. In this case, based on Barbara’s industry knowledge, the JC White Law Group knew that Fred was not sufficiently answering the interrogatories and requests for production. So, rather than accepting that Fred did not have insurance or sufficient assets, they made it a point to use a deposition to pressure Fred into finally admitting the coverage existed.
Find the right advocate
As demonstrated by Barbara’s case, finding the right advocate for your particular needs is another important part of resolving a dispute. This principle extends to selecting a mediator to try and resolve the dispute outside of the court room or finding a lawyer to represent you in a lawsuit.
In North Carolina, both state and federal courts require that parties attempt to mediate their dispute before it goes to trial. Who you choose as the mediator can have a profound impact on the success of the mediation and the tone of the litigation itself. Mediators often specialize in different areas of law or with different types of parties in a lawsuit. For example, in Barbara’s case, the parties went through multiple mediations and two different mediators. While other factors contributed to the successful final mediation, part of the settlement can be attributed to the new mediator who was more specialized in insurance laws. The JC White Law Group advocated for the second mediator because his experience allowed him to speak the insurance companies’ language, point out the flaws in the arguments of both parties under the laws relevant to insurance coverage, and provide a realistic picture of potential liability.
When searching for an attorney to bring a case, it is important to analyze the attorney’s legal background and litigation experience. Attorneys that specialize in litigation often end up choosing specific areas of law in which they develop an expertise. Similarly, some attorneys develop experience with different types of cases, such as complex litigation. While it’s not necessary to find an attorney with an identical background and experience to your case, it can be an advantage. Though it took multiple consultation meetings, Barbara and Sam eventually found the JC White Law Group which used its experience in complex litigation to recognize the value of their case and used this to its advantage in the court proceedings.
* Names have been changed to protect confidentiality, but the results are real.
Case studies do not represent this law firm’s or our lawyers’ entire records. Each case is unique and factors outside the control of attorneys and clients can produce very different results . This case study is not intended as a guarantee that the same or similar results can be obtained in every matter and you should not assume that a similar result can be obtained for you.
This post was co-written with Mallory Miller, JD.
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