IP Law Daily, COPYRIGHT—8th Cir.: Does the completion of a building constitute a permitted `alteration' of it?, (Aug 14, 2023)

By Matthew Hersh, J.D.

The court of appeals tantalizingly sidesteps an open question of copyright law.

Neither the bank that purchased an unfinished building out of bankruptcy nor the developers it engaged to complete the construction could be held liable for infringing the exclusive rights held by the initial architect of the building, a three-judge panel of the U.S. Court of Appeals for the Eighth Circuit has held. But the panel majority, in issuing its ruling, rested largely on collateral estoppel and other procedural issues and avoided reaching an important but little-litigated provision over the scope of copyright protection for architectural works (Cornice & Rose International, LLC v. l Four Keys, LLC, August 11, 2023, per curiam).

The dispute arises out of the development of a mixed-use residential and commercial building in Charles City, Iowa. The building, originally to be called McQuillen Place (for the name of its developer), was the subject of considerable drama before its completion. Construction started in 2013 but stalled just short of completion in 2017 over a funding issue. A local financial institution acquired the building out of bankruptcy, passed it off to an affiliate, and eventually engaged new developers to complete the project. (The building finally received its first tenants at the end of 2021).

But while the completion of the building may have been applauded by North Central Iowa homebuyers, it was an unwelcome development to Cornice & Rose, the Illinois-based architectural firm that had designed the original plans for the building. The architectural firm contended—and nobody appears to have disputed—that the license it granted to the initial developer was revoked once that developer failed to pay. The firm therefore protested the sale of the building out of bankruptcy as well as its eventual completion by a different set of developers. When those protests failed, the architectural firm then brought a three-part copyright infringement complaint against virtually all parties involved in the acquisition and completion of the building.

The district court dismissed two of the counts of the complaint in a 2021 order and granted summary judgment against the architectural firm on the third count in a 2022 order. The firm appealed, leading to this opinion.

Infringement of the architectural work. The court of appeals affirmed the dismissal of the two counts of the complaint relating to the alleged infringement of the architectural work. In doing so, the court of appeals acknowledged—but in the end did not find it necessary to resolve—important an open question of law.

The question that the court sidestepped was the scope of the Architectural Works Copyright Protection Act of 1990, or AWCPA. That law expressly granted copyright law protection to architectural works, resolving what had then been a long-running dispute over whether copying the design of a building itself—as opposed to copying merely its plans and blueprints—constituted infringement. But the law also made clear that the owner of a building, regardless of whether it owns the underlying designs, may still make “alterations” to the building or “destroy or authorize” its destruction. Here the bank and its team of developers arguably did neither—instead, they completed the unfinished building. Did that fall within the statutory authorization for making “alterations”? The district court found that it did. The Act “does not expressly contain any limitation upon the manner or means by which a homeowner may exercise his [or her] right to alter the structure,” the court noted. Thus, any alteration—even one as extensive as completing an unfinished building—would still qualify.

But the panel majority found it unnecessary to address this question of copyright law because it found that the district court’s second rationale—that of collateral estoppel—was sufficient to affirm. The district court was not the first tribunal to address the application of the AWCPA. The issue came up at the time the building was initial sold in bankruptcy as well. And the bankruptcy court had issued an order expressly stating that as long as the purchaser of the building did not use the architectural firm’s plans or designs, it was free to complete the development “free and clear of existing and future claims” from the architectural firm. To be sure, as the architectural firm correctly noted, the bankruptcy court’s sale order was not statutorily eligible for appeal under federal law. But that would not matter. “Denying sale orders full preclusive effect would negate the purpose of [the Bankruptcy Code],” the court of appeals noted, which is “to ensure the finality of bankruptcy sales.” Thus, the claims based on the alleged infringement of the building design were properly dismissed.

Infringement of the plans and drawings. The court also affirmed the grant of summary judgment over the alleged infringement of the architectural firm’s plans and drawings. Here the dispute between the parties was largely factual. The bank and its development team contended that in finishing up the building, it had been careful not to use the original designs but had instead taken measurements of the already-built portions of the building in order to create blueprints for the rest of the building. But the architectural firm came up with evidence suggesting that a wall structure as well as the design of some laundry closets may have in fact been copied from the plans itself rather than the existing building. Did that matter? The district court found that it did not—and the court of appeals affirmed, albeit on narrower grounds.

The district court found against the firm for two principal reasons. First, the district court noted, the small amount of copying shown “appear[ed] fairly minimal to meet the substantially similar standard for copyright infringement” particularly where, as here, the new development team could point out over one dozen differences between the original plans and the eventual finished work. Second, even if there was substantial copying of the plans, the district court noted that too would be covered by the ACWPA’s exemptions for building alterations. To be sure, the court noted, the claim here was infringement of the underlying plans themselves, not merely the building design. But “whether the alteration is accomplished by measuring the existing structure or by copying the original plans for the existing structure is simply immaterial,” the court concluded.

But while these may well have been interesting issues for an appellate court, they would not be resolved in this opinion. The architectural firm did not rest its appeal on those rulings, but rather on the narrower ground of the district court’s failure to allow the firm to file a sur-reply (apparently to a filing in which the development companies pointed out differences between the finished building and the original plans). But “neither in the district court nor on appeal does [the firm] explain what it would have argued in a sur-reply brief,” the court noted, and it “makes no showing on appeal that the district court would have reached a different result.” Thus, the argument was “entirely procedural” and one on which the district court would be granted significant latitude.

Concurring opinion. Circuit Judge James Loken concurred in the opinion but added that he would have also agreed with the district court on the scope of the ACWPA’s exemptions for building alterations. “Legislative history,” Judge Loken noted, “confirms the logically compelling inference that Congress in the AWCPA did not give copyright owners the power to enjoin completion of buildings that have already been substantially built.” Thus, like the district court, Judge Loken noted, he agreed that the bankruptcy court properly rejected the architectural firm’s argument.

The case is No. 22-1976.

Attorneys: Patrick Joseph Riley (Tom Riley Law Firm) for Cornice & Rose International, LLC. Eric W. Lam (Simmons Perrine Moyer Bergman PLC) for Four Keys, LLC.

Companies: Cornice & Rose International, LLC; Four Keys, LLC

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