Rhein Bldg. Co. v. Gehrt, No. 97-C-205.

• Court: United States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin
• Writing for the Court: Curran
• Citation: 21 F.Supp.2d 896
• Parties: RHEIN BUILDING COMPANY and HGM Architecture, Inc., Plaintiffs, v. Herman GEHRT a/k/a Hy Gehrt, Quality Builders, Inc., Assurance Company of America, Shirley Bender-Gehrt, Hastings Mutual Insurance Company, Secura Insurance, A Mutual Company, Robert J. Acord d/b/a R.J. Acord and Tower Insurance Company, Inc., Defendants.
• Docket Number: No. 97-C-205.
• Decision Date: 17 September 1998

21 F.Supp.2d 896 RHEIN BUILDING COMPANY and HGM Architecture, Inc., Plaintiffs,
v.
Herman GEHRT a/k/a Hy Gehrt, Quality Builders, Inc., Assurance Company of America, Shirley Bender-Gehrt, Hastings Mutual Insurance Company, Secura Insurance, A Mutual Company, Robert J. Acord d/b/a R.J. Acord and Tower Insurance Company, Inc., Defendants. No. 97-C-205. United States District Court, E.D. Wisconsin. September 17, 1998.

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COPYRIGHT MATERIAL OMITTED

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Kent I. Carnell, Lisa Pierobon Mays, Lawton & Cates, Madison, WI, for Rhein Building Co., HGM Architecture, Inc.

Timothy F. Mentkowski, Raymond J. Pollen, Crivello, Carlson, Mentkowski & Steeves, Milwaukee, WI, David Winkle, Winkle Law Office, Neenah, WI, for Herman Gehrt.

Robert J. Lauer, Kasdorf, Lewis & Swietlik, Milwaukee, WI, Ronald G. Pezze, Jr., Peterson, Johnson & Murray, Milwaukee, WI, Charles D. Koehler, Herrling, Clark, Hartzheim & Siddall, Appleton, WI, for Shirley Bender-Gehrt.

Philip A. Munroe, DiRenzo & Bornier, Neenah, WI, Michael J. Pfau, Russell A. Klingaman, Hinshaw & Culbertson, Milwaukee, WI, for Robert J. Acord.

Timothy J. Mentkowski, Raymond J. Pollen, Crivello, Carlson, Mentkowski & Steeves, Milwaukee, WI, for Hy Quality Builders Inc.

DeVonna Joy, James G. Allison, Whyte, Hirschboeck & Dudek, Milwaukee, WI, for Hastings Mutual Insurance Co.

James W. Mohr, Jr., Mohr & Anderson Hartford, WI, for Tower Insurance Co., Inc.

Joseph P. Wright, Stafford, Rosenbaum, Rieser & Hansen, Madison, WI, for Assurance Co. of America, Inc.

DECISION AND ORDER

CURRAN, District Judge.

Rhein Building Company (RBC) and HGM Architecture, Inc. are suing Herman Gehrt, Hy Quality Builders, Inc., Shirley Bender-Gehrt, Robert Acord, and their insurers for copyright infringement¹ of architectural plans for an eight-family apartment building. See Title 17 of the United States Code. This court has federal question jurisdiction over this claim, see 28 U.S.C. § 1331, and supplemental jurisdiction over the state law insurance counterclaim and cross claims, see 28 U.S.C. § 1337. In addition, federal courts have original and exclusive jurisdiction over

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copyright actions pursuant to 28 U.S.C. § 1338(a). The Plaintiffs are seeking lost profits, actual money damages, statutory damages under the Copyright Act, 17 U.S.C. § 504, treble damages under the Lanham Act, punitive damages for common-law unfair competition, injunctive relief, costs, and attorney fees.

The Defendants have denied liability and have each moved for summary judgment. These motions are now fully briefed.

I. FACTS

In 1993, Rhein Building Corporation contracted with HGM Architecture to design plans for apartment buildings to be erected in Omro, Wisconsin and surrounding communities. The contract, dated June 22, 1993, provided that the architect would retain ownership of the copyright in the drawings and specifications for the project. HGM drafted the plans with input from RBC and the first building was completed in October of 1994. A second building was completed in 1995. On May 3, 1996, a federal copyright registration was issued to RBC and HGM for architectural drawings labeled "Omro Multi Family Housing Rhein Building Company Project No. 2493.00 HGM." The copyright registration, as supplemented,² named HGM and RBC as the joint authors of the architectural drawings and it named HGM and RBC as the joint claimants or owners of the copyright.

The Plaintiffs allege that the Defendants constructed two apartment buildings in Winneconne, Wisconsin, which are strikingly similar to their Omro buildings. Hy Gehrt and Hy Quality Builders, Inc. were the builders; Gehrt's wife, Shirley Bender-Gehrt, was the owner and developer; and Robert Acord was the architect for this project. Acord completed the plans on November 3, 1995. Construction of the first "infringing" apartment building was completed in July of 1996. The second building was completed in June of 1997. The Gehrts advertised rental units in both buildings to the general public.

The Plaintiffs believe that they are losing business because of the alleged infringement, so they have commenced this lawsuit.

II. LEGAL STANDARDS FOR SUMMARY JUDGMENT

Summary judgment may be granted when the record reveals that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Federal Rule of Civil Procedure 56(c). All facts and inferences must be viewed in the light most favorable to the nonmoving party. See Oates v. Discovery Zone, 116 F.3d 1161, 1165 (7th Cir.1997). Summary judgment is appropriately entered against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. See McKenzie v. Illinois Department of Transportation, 92 F.3d 473, 479 (7th Cir.1996); Williams v. Ramos, 71 F.3d 1246, 1248 (7th Cir.1995).

III. INSURANCE DEFENSE AND COVERAGE

Tower Insurance Company, Inc., which issued "Business Owners" liability policies to Robert J. Acord; Assurance Company of America (ACA), which issued a "Specialty Contractors" liability policy to Hy Quality Builders, Inc.; and Hastings Mutual Insurance Company, which issued "Business Owners" liability policies to Shirley Bender-Gehrt, a "Commercial Package" policy to Shirley Bender-Gehrt and Hy Quality Builders, and a "Commercial Umbrella" policy to Shirley Bender-Gehrt and Herman Gehrt, have moved the court for declarations that they have no duty to defend or to indemnify their insureds for the copyright claim at issue in this case. The movants have been defending their insureds under a reservation of rights.

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The construction of an insurance policy is particularly amenable to summary judgment because it presents a question of law. See Employers Insurance of Wausau v. Stopher, 1998 WL 614644 *2 (7th Cir. September 15, 1998); John Deere Insurance v. Shamrock Industries, 929 F.2d 413, 417 (8th Cir.1991); Raby v. Moe, 153 Wis.2d 101, 109, 450 N.W.2d 452, 454 (1990). In this case, the law of the forum, Wisconsin, applies to the substantive insurance issues because the contracts were drafted and purchased in Wisconsin. See Erie Insurance Group v. Sear Corporation, 102 F.3d 889, 891 (7th Cir.1996).

Before proceeding, the court must note that the parties have not cited, and the court has not located, any Wisconsin case analyzing issues of insurance coverage for a copyright claim. This is not surprising, because the Copyright Act of 1976 (effective January 1, 1978), as amended to comply with international treaties, preempts all state and common-law copyright protection. See 17 U.S.C. § 301. Federal courts have exclusive jurisdiction over copyright claims, see 28 U.S.C. § 1338, so most insurance coverage questions are resolved in federal court. Federal cases addressing issues of insurance coverage for copyright infringement of architectural works are also scarce because statutory protection was conferred only recently. After the passage of the 1976 Act, courts extended federal copyright protection to architectural plans, but not to buildings constructed from those plans. See, e.g., Robert R Jones Associates v. Nino Homes, 858 F.2d 274, 280 (6th Cir.1988). In 1990, the Architectural Works Copyright Protection Act codified copyright protection for both architectural plans and completed buildings within its coverage for "architectural works."³ See Pub.L. No. 101-650, Tit. VII, 104 Stat. 5133 (1990) (codified in scattered sections of 17 U.S.C).

Ownership of a copyright confers a bundle of statutory rights upon the owner which are enumerated in 17 U.S.C. § 106. These intangible rights are not the same as those rights conferred upon the owner of a patent or trademark. Therefore, cases involving insurance coverage for other forms of intellectual property cannot automatically be applied to a copyright claim. It is instructive to note, however, that most courts have concluded that general liability insurance policies do not cover liability for patent infringement, see, e.g., Heil Company v. Hartford Accident and Indemnity Company, 937 F.Supp. 1355 (E.D.Wis.1996), misappropriation of trade secrets, see, e.g., Winklevoss Consultants, Inc. v. Federal Insurance Company, 991 F.Supp. 1024 (N.D.Ill.1998), trademark infringement, see, e.g., Advance Watch Company, Limited v. Kemper National Insurance Company, 99 F.3d 795 (6th Cir. 1996), antitrust, see, e.g., Curtis-Universal v. Sheboygan E.M.S., Inc., 43 F.3d 1119 (7th Cir.1994), or other tort-type conduct that involves intentional acts.⁴ In Curtis-Universal, Chief Judge Posner explained that:

As far as we have been able to determine, insurance companies will not insure against liability for antitrust violations, a liability based on deliberate rather than inadvertent actions, cf. Harley-Davidson, Inc. v. Minstar, Inc., 41 F.3d 341, 343 (7th Cir.1994), and for this and other reasons impossible to predict by the actuarial methods on which insurance companies base their determination of premiums.

Curtis-Universal, 43 F.3d at 1123. Guided by these general observations, the court will now examine each of the Defendant's insurance policies using Wisconsin contract principles.

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A. WISCONSIN PRINCIPLES OF INSURANCE POLICY CONSTRUCTION

Interpretation of insurance policies is governed by the same rules of construction that apply to other contracts. See Sprangers v. Greatway Insurance Company, 182 Wis.2d 521, 536, 514 N.W.2d 1, 6 (1994); Smith v. Atlantic Mutual Insurance Company, 155 Wis.2d 808, 810, 456 N.W.2d 597, 598 (1990). In Wisconsin, the interpretation of contracts of insurance is made with an aim toward effecting the true intent of the parties and the extent of policy coverage. See Limpert v. Smith, 56 Wis.2d 632, 640, 203 N.W.2d 29, 33 (1973). In construing an insurance policy, the clear and unambiguous language of the policy must be given the plain and...