74 F.3d 768 (7th Cir. 1996), 95-2220, I.A.E., Inc. v. Shaver

Docket Nº:95-2220.
Citation:74 F.3d 768
Party Name:37 U.S.P.Q.2d 1436 I.A.E., INCORPORATED and Rama Talluri, Plaintiffs-Appellees, v. Paul D. SHAVER, Defendant-Third/Party Plaintiff-Appellant, v. H. Seay CANTRELL, doing business as H. Seay Cantrell & Associates, William Brewer, doing business as BEMI Construction, Incorporated and Gary Regional Airport Authority, Third/Party Defendants-Appellees.
Case Date:January 17, 1996
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 768

74 F.3d 768 (7th Cir. 1996)

37 U.S.P.Q.2d 1436

I.A.E., INCORPORATED and Rama Talluri, Plaintiffs-Appellees,

v.

Paul D. SHAVER, Defendant-Third/Party Plaintiff-Appellant,

v.

H. Seay CANTRELL, doing business as H. Seay Cantrell &

Associates, William Brewer, doing business as BEMI

Construction, Incorporated and Gary Regional Airport

Authority, Third/Party Defendants-Appellees.

No. 95-2220.

United States Court of Appeals, Seventh Circuit

January 17, 1996

        Argued Oct. 25, 1995.

Page 769

[Copyrighted Material Omitted]

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        Saul I. Ruman, William H. Tobin (argued), Linda R. Rietveld, Ruman, Clements, Tobin & Holub, Hammond, IN, for I.A.E., Inc., Rama Talluri, H. Seay Cantrell, William Brewer.

        Werner Sabo (argued), James Christopher Adamson, Sabo & Zahn, Chicago, IL, for Paul D. Shaver.

        Phyllis J. Senegal (argued), Gary, IN, for Gary Regional Airport Authority.

        Before CUMMINGS, COFFEY and RIPPLE, Circuit Judges.

        RIPPLE, Circuit Judge.

        Architect Paul D. Shaver appeals the district court's summary judgment ruling that there was no infringement of Mr. Shaver's copyrighted schematic design drawings. The court concluded that Mr. Shaver had granted an implied nonexclusive license to utilize his drawings in the completion of Gary Regional Airport's air cargo building. For the reasons that follow, we affirm the judgment of the district court.

        I

        BACKGROUND

A. Facts

        In July 1992, two construction companies formed a joint venture. I.A.E., Inc. and its president Ramamurty Talluri joined with BEMI Construction and its president William Brewer to become the I.A.E./BEMI Joint Venture ("Joint Venture"). On December 21, 1992, the Joint Venture entered into a contract with the Gary Regional Airport Authority ("Airport") to design and to construct an air cargo/hangar building. Under the contract, Joint Venture was to provide all of the civil, structural, mechanical and electrical engineering services and architectural design services needed to construct the air cargo building.

        In furtherance of that goal, Joint Venture subcontracted with Paul D. Shaver, an architect with extensive experience in designing airport facilities, to prepare the schematic design drawings for the airport building. The parties agree that there are four phases to the architectural design of a building: schematic design, preliminary design, final design and construction supervision. The schematic design documents are the product of the first phase of designing a building. They outline the scope of the project and are the basis of the owner's approval for the building design. Schematic design documents are often used as a reference base for further design development.

        Mr. Shaver's letter of January 14, 1993, to Mr. Talluri, which constitutes the written contract between the architect and Joint Venture, contained Mr. Shaver's agreement to prepare the schematic design drawings for the Airport building: "With the assistance of your office and the [Airport] staff, agreed design parameters can be established initially to permit the Project to proceed in a normal development manner." R. 43, Ex. 3. The contract price for his services was $10,000 plus reimbursable expenses, less deductions for the participation of I.A.E.'s staff. The contract specifically set forth the services Mr. Shaver intended to perform:

To prepare, with the assistance of your office and BEMI, Inc., staff, standard Design Documents (15%-19% of the total design work), which would describe the agreed scope of the Project, we estimate a 4-5 week period of time including two or three scheduled approval meetings with your office and [Airport] Authority personnel. These documents would consist of the following which are customarily prepared to describe the scope of the Project and also for general reference:

Drawings, 5, Title Sheet, Site Plan, Floor Plans, Elevations and Building Sections Preliminary Construction Cost Estimate

* * * * * *

[W]e are prepared to complete the required Schematic Design Document preparation for $10,000 subject to adjustment with deductions resulting from participation

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of staff from your office and your Architectural associate.

* * * * * *

... Please advise us if you need any additional data concerning our understanding of the scope of work.

        R. 43, Ex. 3. Mr. Shaver believed that, once a design had been approved, he would execute further written contracts for the remaining phases of the architectural work.

        After Mr. Shaver attended several meetings with the Airport, he prepared his schematic design drawings of the proposed Airport building. He then delivered copies of his schematic drawings to the Airport, Joint Venture, and other parties involved in the Project. These drawings were submitted with a notice of copyright. The copyrights of those drawings, both as technical drawings and as architectural works, were effective June 2, 1993. Their validity has not been challenged. Mr. Shaver and Mr. Talluri later presented to the Airport the completed schematic designs. On February 22, 1993, the Airport approved one of them. Mr. Shaver was paid $5,000 of his fee on that date.

        On March 1, 1993, Joint Venture retained H. Seay Cantrell & Associates ("Cantrell") to perform the remaining architectural work for the air cargo building. When Mr. Shaver realized that he and his firm were no longer involved in the Project, he took two actions. On March 3, 1993, Mr. Shaver wrote to the Airport's Executive Director, Levelle Gatewood, acknowledging that he and his staff were, "under the circumstances, no longer in a position to participate or contribute to the development of the east Air Cargo Building Project." R. 54. The letter, with enclosed copies of Mr. Shaver's schematic design drawings, also stated:

We trust that our ideas and knowledge exhibited in our work will assist the Airport in realizing a credible and flexible use Cargo/Hangar facility.

        R. 54.

        Mr. Shaver's second act, one week later, was to seek collection of the amount that Joint Venture still owed him for the services he had rendered and to notify Joint Venture that he intended to enforce his copyrights if necessary. Mr. Shaver, by his attorney, claimed that he was owed an additional $5,000 fee, plus his out-of-pocket expenses ($887.29), plus (a new claim) a $7,000 payment for the purported "assignment" of his copyright on the schematic design documents. The attorney's letter of March 10, 1993 offered Mr. Talluri a settlement of Mr. Shaver's claim against Joint Venture for $12,887.29. 1 Mr. Talluri agreed to pay the contract costs, $5,887.29, as final payment. According to Mr. Talluri, Mr. Shaver "had never previously raised the issue of copyright, copyright infringement or his alleged entitlement to moneys, in addition to the contract amount, for 'assignment' of his copyright on the schematic design drawings." R. 48.

        Once it was clear that Mr. Shaver and Joint Venture would not reach an accord concerning any amount still owing to Mr. Shaver under the contract, on August 5, 1993, I.A.E. and Mr. Talluri filed this action. They sought a declaratory judgment that they did not infringe any copyrights owned by Mr. Shaver and that they had a right to use Mr. Shaver's drawings; they also sought damages. Mr. Shaver counterclaimed against I.A.E. and Mr. Talluri, seeking damages for copyright infringement and breach

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of contract. He also filed third-party complaints against Cantrell, BEMI and its president Mr. Brewer, and the Airport, alleging that all the named defendants had infringed his copyrights in the schematic design documents or that they had conspired to do so by copying and using elements of his design in the final bid documents for the Airport Project. Joint Venture and the Airport responded that they had used Mr. Shaver's drawings only as Mr. Shaver had intended their use, to build the Airport's air cargo building. All parties then filed cross-motions for summary judgment.

B. Decision of the District Court

        The district court focused on what it termed the "heart of the dispute"--whether Mr. Shaver has a valid claim of copyright infringement. The court noted that a copyright owner may sell or license his ownership rights only in writing. However, a "nonexclusive license" in a copyrighted work may be given either "orally, or ... by law to effect the intent demonstrated by the parties' conduct." R. 78 at 8. It then determined that the facts in this case are very similar to those in Effects Associates, Inc. v. Cohen, 908 F.2d 555 (9th Cir.1990), cert. denied, 498 U.S. 1103, 111 S.Ct. 1003, 112 L.Ed.2d 1086 (1991). Just as the plaintiff in Effects "created a work at defendant's request and handed it over, intending that defendant copy and distribute it," in exchange for $56,000, id. at 558, Mr. Shaver created, for a fee of $10,000, designs for the Airport's air cargo building and handed them over to Joint Venture and the Airport. The court noted that Mr. Shaver contracted to prepare standard design documents that would describe the scope of the Project. In a later letter, Mr. Shaver acknowledged that he would no longer be contributing to the development of the building, but trusted that his ideas, as incorporated in his drawings, would help the Airport to realize its air cargo building. The district court concluded that, just as the Ninth Circuit had found in Effects that the plaintiff had conveyed an implied nonexclusive license to the defendant to use its work, id. at 559, Mr. Shaver's January 14, 1993 letter contract created an implied nonexclusive license allowing the Airport to use Mr. Shaver's drawings when constructing the air cargo building:

        As a matter of law, only one conclusion can be drawn...

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