New Intellectual Property Case

The Seventh Circuit has decided a very interesting case involving the intellectual property rights in a design-build case.  Nova Design Build, Inc., v. Grace Hotels, LLC, ___ F.3d. ___, 2011 WL 3084929  (CA7 July 26, 2011).  Grace Hotels hired Nova Design Build, Inc., to perform architectural services in the design of a Holiday Inn Express in Waukegan, Illinois.  The designs were to be based on the Holiday Inn Express prototype.  The parties also contemplated that Nova would perform the construction work; however, the contract provided that Grace would have the right to use Nova’s design even if Nova did not perform the construction, provided that Nova was paid in full, including an additional $15,000 fee.   The parties’ relationship became strained. Grace terminated Nova hired another company to construct the hotel. 

Nova registered a copyright for the designs and then sued Grace for copyright infringement, arguing that it was not paid the fee required for Grace to utilize the drawings without Nova performing the construction work.  (The parties disputed this issue, but it became irrelevant given the court’s order.)  The court found that Grace had the right to use the drawings because they were not protectable under copyright law.  The court noted that to be protectable, the drawings had to be original.  “The protectable elements are those that possess originality.  Originality requires that the elements be independently created and possess at last some minimal degree of creativity.”  Id at p. 4.  Because the designs were based on the Holiday Inn Express prototype, Nova did not identify “anything in these particular designs that was original and thus protectable.”  Id.  Nova argued that the drawings had added features such as an extra floor, larger meeting area, different closet and door placements and a different pool, laundry and exercise area.  The court didn’t buy the argument.  “Though Nova’s designs do possess added features (and these additional are the only elements that may be protectable), they are devoid of originality.  Merely adding an extra floor, identical to the floor layout of the prototype is not original.”  The other features, noted the court, were specifically requested by Grace.  Therefore, the plans were insufficiently original to qualify for copyright protection.

What is the take away for design-builders?  There remained a contract claim on Nova’s right to the $15,000 payment.  What Nova lost was the hammer present in copyright infringement cases, the ability to stop the project through an injunction.   Parties may still contract for these types of payments; however, a party attempting to enforce copyright claims should objectively review the designs to see if there are any elements that can, in fact, be copyrighted.