John G. Danielson, Inc. v. Winchester-Conant

Decision Date06 March 2003
Docket NumberNo. 02-1533.,No. 02-1452.,02-1452.,02-1533.
PartiesJOHN G. DANIELSON, INC. Plaintiff, Appellee, Cross-Appellant, v. WINCHESTER-CONANT PROPERTIES, INC.; The Willows at Winchester, LLC, Defendants, Appellants, Cross-Appellees.
CourtU.S. Court of Appeals — First Circuit

Gary S. Matsko, with whom Paul L. Feldman, Judith Ashton, and Davis, Malm & D'Agostine, P.C. were on brief for appellants and cross-appellees.

Anthony E. Battelle, with whom Construction Law Services, Charles R. Heuer, and Heuer Law Group were on brief for appellee and cross-appellant.

Before LYNCH, Circuit Judge, STAHL, Senior Circuit Judge, and HOWARD, Circuit Judge.

LYNCH, Circuit Judge.

This copyright case involves unusual facts, many dating to the mid-1980s, which greatly influence its result. A real estate developer acquired a parcel of land covered by a 30-year restrictive covenant to which a previous owner had agreed. The covenant required that any residential development conform with site plans submitted by the previous owner. The new owner tried to modify these restrictions; when it failed to do so it built a condominium subdivision that adhered to the site plans in the covenant. The architectural firm that had earlier designed those plans then sued for copyright infringement and unfair competition, and eventually won a jury verdict and a judgment in the district court for over $1.3 million — essentially all the profits from the now-complete condominium project.

The corporation that built the condominiums, Winchester-Conant Properties, Inc. ("WCP"), appeals the dismissal of most of its affirmative defenses. We affirm these dismissals, although in some instances our reasons for affirmance differ significantly from the district court's rationale. The plaintiff architectural firm, John G. Danielson, Inc. ("Danielson") appeals some of the court's rulings dismissing its unfair competition claims. We affirm these rulings as well. Finally, both parties appeal aspects of the damages award. WCP argues that the district court gave erroneous instructions to the jury concerning the apportionment of profits between the infringing design and other aspects of the development. We agree, vacate the damage award, and remand for a determination of damages using the correct standards.

I. Background
A. Facts

In the mid-1980s, Louis Farese was co-trustee of a trust that owned a 7.4 acre parcel of land in Winchester, Massachusetts (the "site"). Danielson had worked on other projects for Farese, and Farese hired Danielson to develop plans for the site. Danielson in turn retained Donald Tellalian, of Tellalian Associates Architects and Planners ("Tellalian Associates"), as a subcontractor to assist it in its work on Farese's project.

Danielson, Tellalian Associates, and Farese consulted with each other, Winchester town officials, and residents who lived near the site to determine the best course for developing the land. They settled on a condominium development, and showed some early drafts of their plans to these stakeholders, some of whom suggested various changes. This process culminated in the production of seven drawings, dated June 11, 1987, depicting a 70-unit condominium development with four residential buildings and a "clubhouse" for community activities.

Four of these drawings are subjects of Danielson's infringement claims. Three are site plans (labeled SP-1, SP-2, and SP-3) which show the layout of the site from a bird's eye view, including footprints of buildings, roads, parking, and green spaces; they bear the logos of both Danielson and Tellalian Associates. The fourth is an unlabelled artist's rendering of the buildings (designated A-3). None of these drawings had a copyright notice on them.

At the time, the site was not zoned for residential development and was covered by a restrictive covenant between a previous owner and the Town of Winchester (the "Town"). The condominium plan could only be completed if both the zoning and the covenant were amended, and only the Winchester Town Meeting could approve either change. On June 11, 1987 — the same date that is on the seven drawings — the Winchester Planning Board voted to recommend that the Town Meeting amend the site's zoning to allow residential development. The Board also entered into a new restrictive covenant with Farese, subject to Town Meeting approval. This covenant would run with the land for 30 years, could be altered only by a two-thirds vote of the Town Meeting, and required that any residential development be in accordance with the seven drawings. (These drawings are therefore referred to by the litigants as the "covenant drawings.") At the Town Meeting on June 15, 1987, Tellalian showed several of the covenant drawings on an overhead projector as part of his presentation; some were also displayed on easels in the lobby. The Town Meeting followed the Board's recommendations and approved both the rezoning and the replacement of the previous covenant with the restrictive covenant signed by Farese and his co-trustee.

Having cleared this obstacle, Farese and Danielson signed a written contract for the project on June 29, 1987. The document is a standard form contract furnished by the American Institute of Architects (AIA), with some modifications made by the parties. The contract specifies that all plans remain Danielson's property, that plans are not to be used on other projects or by other parties without Danielson's written consent, and that "[s]ubmission or distribution to meet official regulatory requirements... is not to be construed as publication in derogation of the Architect's rights."

As work continued, Danielson created numerous construction drawings; four of these, labeled C-1, C-3, C-4, and L-1, are also subjects of this litigation. These four drawings are marked with several revision dates in 1987 and 1988; they depict the site layout with some modifications and additions, particularly engineering details. They all bear logos of both Danielson and Tellalian Associates but lack copyright notice; two of them also include the logo of another Danielson subcontractor, Medford Engineering ("Medford").

Soon after construction began in 1988, Farese encountered serious financial difficulties. The project was abandoned and lay dormant until 1994. Danielson has never collected over $226,000 that Farese owes it for work completed under the contract.

In 1993, Robert Pace became interested in buying and developing the site. He formed WCP and acquired the site in a foreclosure sale in April 1994.1 Over the next few months, WCP considered a range of possible development options, including townhouses, single-family homes, and housing for the elderly. Several versions of a condominium plan like the one Farese had pursued were also "on the table." Representatives of WCP met three times in mid-1994 with Edmond Danielson, by then the only full-time architect at the Danielson firm, to discuss ideas for the site. At Edmond Danielson's suggestion, Donald Tellalian joined the second and third of these meetings. The WCP representatives brought the disputed drawings to these meetings and the participants looked at them, but WCP expressed concern that Farese's plan would not be profitable. WCP commissioned Danielson and Tellalian Associates to draft a proposed design for the elderly housing concept. By August 1994, WCP chose to pursue a townhouse plan designed by another architect instead.

WCP did not have the same luck as Farese in removing preexisting covenants, however. After failing in several attempts to persuade the Town to alter the covenant established with Farese, WCP decided in mid-1995 to develop the site according to the covenant specifications after all. WCP provided its architects and engineers (including some, like Medford, who had worked for Danielson on the earlier project) with construction drawings that are the subject of this lawsuit. These agents removed the Danielson and Tellalian Associates logos and produced plans very similar to the drawings Danielson claims were infringed. These copied drawings were in turn used to obtain permit approval from the town in December 1995. WCP included a simplified site plan in a sales brochure, and also placed a copy of the artist's rendering, covenant drawing A-3, on its signs. Construction began on the development, called "The Willows at Winchester," in 1996, and was finished in 2000.

The parties disagree about some aspects of their communication at this juncture, but clearly they stopped doing business together after the elderly housing design was rejected in August 1994. Sometime in late 1995 or early 1996, a representative of WCP telephoned Donald Tellalian and told him that the company now planned to use the site layout embodied in the covenant. Neither WCP nor Tellalian informed Danielson; WCP says it thought that Tellalian spoke for Danielson. In any event, Edmond Danielson says he was unaware of WCP's intent to use the old design until August 1997, when one of the firm's former employees happened to drive past the site, noticed the buildings under construction, and informed him. Danielson swiftly contacted attorneys, who sent a letter to WCP stating Danielson's claim. Danielson also registered the covenant drawings and construction drawings for copyright in 1999. Finally, Danielson requested and received from Tellalian written statements indicating that Tellalian Associates made no claim on the copyright interests in the drawings.2

B. Procedural History

After settlement discussions yielded no fruit, Danielson filed a complaint in the U.S. District Court for the District of Massachusetts in May 2000. The suit asserted a claim of copyright infringement under 17 U.S.C. § 501 (2000). It also asserted three unfair competition claims: conversion under state law; false designation of origin under...

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