Joseph J. Legat Architects v. US DEVELOP. CORP.

• Decision Date: 22 January 1985
• Docket Number: No. 84 C 8803.,84 C 8803.
• Citation: 601 F. Supp. 673
• Parties: JOSEPH J. LEGAT ARCHITECTS, P.C., an Illinois Professional Corporation, Plaintiff, v. UNITED STATES DEVELOPMENT CORPORATION, an Illinois Corporation; Esper A. Peterson, an Individual; Seth Pines, an Individual; and Royal Oak Apartments Phase III, an Illinois Limited Partnership, Defendants.
• Court: U.S. District Court — Northern District of Illinois

601 F. Supp. 673

JOSEPH J. LEGAT ARCHITECTS, P.C., an Illinois Professional Corporation, Plaintiff, v. UNITED STATES DEVELOPMENT CORPORATION, an Illinois Corporation; Esper A. Peterson, an Individual; Seth Pines, an Individual; and Royal Oak Apartments Phase III, an Illinois Limited Partnership, Defendants.

No. 84 C 8803.

United States District Court, N.D. Illinois, E.D.

January 22, 1985.

Thomas A. Morris, Jr., Nick Anacherio, Brydges, Riseborough, Morris, Franke & Miller, Waukegan, Ill., for plaintiff.

Henry S. Kaplan, Dressler, Goldsmith, Shore, Sutker & Milnamow, Chicago, Ill., Thomas W. Gooch, III, Thomas R. Ruth & Assoc., Barrington, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

This is a suit between an architect and a developer, involving federal claims of copy-right and trademark infringement and pendent state claims of breach of contract and unfair competition. Defendants have moved to dismiss the case for lack of subject matter jurisdiction. For the reasons stated below, we deny this motion.

The following is a brief summary of the allegations of the complaint, which we assume to be true for the purposes of this motion. Plaintiff ("Legat") is a professional corporation which provides architectural services. Defendant U.S. Development Corp. ("USDC") is a real estate developer and contractor. Defendant Royal Oak Apartments ("Royal Oak") is a limited partnership which was involved in developing the apartment project ("the Project") at issue in this case. Defendant Seth Pines ("Pines") is an architect who works for USDC. Defendant Esper Peterson ("Peterson") is a general partner of Royal Oak and President of USDC.

On September 1, 1981, USDC and Legat signed a form contract under which Legat was to design the Project. Legat allegedly did so and gave the architectural papers to USDC in November 1981. Legat and his employees created these plans exclusively.

Construction was delayed, however, until 1983, apparently because the U.S. Department of Housing and Urban Development ("HUD") had not approved financing. During this delay, zoning regulations had changed, making Legat's design obsolete. In Spring 1983, at Peterson's request, Legat revised the design of the Project.

In August 1983, Peterson and USDC refused to pay Legat for revising the plans for the Project. They allegedly repudiated their contract with Legat, and then Peterson and Pines copied Legat's plans for the Project, erased Legat's name and substituted Pines' name. Following this alleged mischief, USDC and Royal Oak used the plans to obtain HUD financing, secure zoning and building permits and, finally, build the Project.

Legat filed this lawsuit on October 11, 1984. The complaint contains fifteen "counts," most of which allege state law claims for breach of contract, fraud and unfair competition. Counts VII through X, which allege copyright infringement by each of the defendants, are the focus of the pending motion to dismiss.

Defendants argue that these copyright claims must be dismissed because Legat has not fulfilled a condition precedent to maintaining a copyright suit, that is, obtaining a valid copyright registration. This condition is imposed by 17 U.S.C. § 411(a), which states:

Subject to the provisions of subsection (b), no action for infringement of the copyright in any work shall be instituted until registration of the copyright claim has been made in accordance with this title 17 USCS §§ 101 et. seq.. In any case, however, where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute an action for infringement if notice thereof, with a copy of the complaint, is served on the Register of Copyrights.

When Legat filed this suit, it had merely applied for copyright registration; the Register of Copyrights had not yet approved the registration. Thus, the precise issue raised in defendants' motion was whether an application for registration satisfied § 411(a) or whether that section requires final approval or denial of registration.¹ We need not resolve that issue, however, because it is now moot. While the motion was being briefed, Legat's copyright registration was approved, as defendants concede in their reply brief. Even if we were to grant defendants' motion, Legat would simply amend the complaint on the basis of the now-valid registration. Because the effective date of the registration is the date of application, see 17 U.S.C. § 410(d),² the outcome would be the same as if we had denied defendants' motion. Instead of resolving this moot issue, then, we grant Legat leave to amend its complaint to allege and attach its valid registration. See, e.g., Frankel v. Stein & Day, Inc., 470 F.Supp. 209, 212 n. 2 (S.D.N.Y.1979) (granting leave to amend complaint in copyright suit where registration requirements of Act had been completed while suit was pending), aff'd, 646 F.2d 560 (2d Cir.1980).

Apparently reacting to this now-valid registration, defendants in their reply brief mounted a second challenge to the Copyright claims. They argue that the Court lacks federal question jurisdiction because the claim does not "arise under" the Copyright Act, as required by 28 U.S.C. § 1338.³ The gist of defendants' argument is that the Court must, as a threshold matter, resolve a contract dispute under Illinois law. They claim that the "principal and controlling issue" in this case is a contract dispute over title to the architectural plans, and, thus, we lack jurisdiction. See T.B. Harms Co. v. Eliscu, 339 F.2d 823 (2d Cir.1964), cert. denied, 381 U.S. 915, 85 S.Ct. 1534, 14 L.Ed.2d 435 (1965); Peay v. Morton, 571 F.Supp. 108 (M.D.Tenn.1983); Elan Associates, Ltd. v. Quackenbush Music, Ltd., 339 F.Supp. 461 (S.D.N.Y.1972).

At the outset we find it difficult to accept defendants' assertion that there is a contract dispute as to title in the plans. The contract, which is attached to the complaint, on its face seems to vest title in Legat.⁴ Defendants do not say where their contract rights to title arise from. Legat characterizes defendants' position as this: The relevant contract provisions, see n. 4 above, are a license under which Legat relinquished its copyright to defendants. Although we are for now unsure about the nature of this contract dispute, we will assume for the purposes of this motion that there is some real dispute about title to the plans. Even under this assumption, this Court has jurisdiction.

T.B. Harms is the seminal case for the meaning of "arising under" in § 1338. In Harms, the complaint did not allege "infringement" of the copyright; indeed, the case did not involve use or threatened use of the copyrighted material. 339 F.2d at 824. Rather, the case involved a contract dispute over which party owned the copyright; resolution of this dispute would incidentally affect the value of the copyright. Writing for the court, Judge Friendly held that the case did not "arise under" the Copyright Act and thus the district court lacked jurisdiction. Judge Friendly relied in part on Justice Holmes' statement that "a suit arises under the law that creates the cause of action." See id. at 826, quoting American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S.Ct. 585, 586, 60 L.Ed. 987 (1916). He held that the claim at issue there stated a cause of action in contract and thus did not satisfy the Holmes "creation" test. However, noting that the Holmes test "is more useful for inclusion than for the exclusion for which it was intended," id. at 827, Judge Friendly wrote that a suit that fails the Holmes test may nevertheless "arise under" the Copyright Act if the complaint discloses a need for determining the meaning or application of the Act. Id. The complaint in Harms failed to satisfy this "pivotal federal question" test as well. Summing up his approach, Judge Friendly ended his opinion with the following test: "an action `arises under' the Copyright Act if and only if the complaint is for a remedy expressly granted by the Act, e.g., a suit for infringement ... or asserts a claim requiring construction of the Act...." Id. at 828.

We think this case satisfied the Harms test. First, regardless of any potential contract issues, this suit...