SUBMISSIONS
tiff would not be entitled to statutory damages under the DMCA.
Third, Defendant's motion for summary judgment as to Plaintiff's claims for actual damages under the Copyright Act and DMCA is granted. The Copyright Act and the DMCA provide that a copyright owner may recover actual damages he or she suffers as a result of the copyright infringement. 17 U.S.C. § 504(a); 17 U.S.C. § 1203(c)(2). Defendant contends that Plaintiff is not entitled to actual damages because it has proffered no evidence that it sustained any losses due to the alleged infringement of its drawings. However, courts have construed the "actual damages" measure to include license fees that the copyright owner would have obtained for the infringer's use of the copyrighted material. See On Davis v. The Gap, Inc., 246 F.3d 152, 166 (2d Cir. 2001) (noting that, though a copyright "owner may be incapable of showing a loss of either sales or licenses to third parties," the owner may be able to recover as actual damages "owner's loss of the fair market value of the license fees he might have exacted of the defendant"). Plaintiff has offered, as evidence of the license fee it might have obtained from Defendant Thomas, Mr. Meijer's affidavit stating that Plaintiff would have charged $25,000 for each additional store or site for which its plans would be used. The Court has stricken this portion of Mr. Meijer's affidavit for the reasons explained in Part II.C.2, above. Plaintiff has offered no other evidence of the fair market value of license fees for its Architectural Drawings. Therefore, Plaintiff has failed to make a showing sufficient to establish an essential element of its claim for actual damages. Defendant is entitled to summary judgment on Plaintiff's claim for actual damages under the Copyright Act and the DMCA.
Fourth, Defendant's motion for summary judgment as to Plaintiff's claims for infringer's profits under the Copyright Act and DMCA is denied. A copyright owner is entitled to recover "infringer's profits" as a measure of damages for copyright infringement. "In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work." 17 U.S.C. § 504(b).
Plaintiff has offered evidence of Thomas's gross revenue in the form of the expert report of its damages expert, Walter Bratic. Though the Court excluded Mr. Bratic's expert opinion as to Defendant Thomas's gross revenue, Plaintiff has been allowed to provide another opinion as to the calculation of Defendant Thomas's gross revenue. (Doc. No. 175 at 12.) As a question of material fact exists as to Defendant Thomas's gross revenue attributable to the allegedly infringing activity, the Court will withhold judgment until Plaintiff's resubmission of its expert report regarding Defendant Thomas's gross revenue.
5. Fair Use
Plaintiff has moved for summary judgment on Defendant's affirmative defense of fair use. In determining whether use of copyrighted material constitutes fair use, courts must apply four factors: (1) the purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. 17 U.S.C. § 107; Campbell v. Acuff-Rose Music, 510 U.S. 569, 577 (1994).
The first factor weighs against a finding of fair use since Defendant's alleged use of Plaintiff's copyrighted material was strictly for commercial purposes. See Compaq Computer Corp. v. Ergonome Inc., 387 F.3d 403, 409-10 (5th Cir. 2004) (stating that commerciality generally weighs against a finding of fair use). Defendant has admitted that its use was for commercial purposes. (Doc. No. 121 at 11.) Where the primary use of the copyrighted work is for a commercial purpose, the use is "presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright," and the central question is "whether the user stands to profit from the exploitation of the copyrighted material without paying the customary price." Thomas M. Gilbert Architects, P.C. v. Accent Builders Developers, LLC, 629 F. Supp. 2d 526, 533 (E.D. Va. 2008) (omitting citations), aff'd, Case No. 08-2103, 2010 U.S. App. LEXIS 9299 (4th Cir. May 6, 2010).
The second factor — the nature of the copyrighted material — also weighs against a finding of fair use. Creative or fictional works receive more protection than non-fictional or factual works. Thomas M. Gilbert Architects, P.C. v. Accent Builders Developers, LLC, 629 F. Supp. 2d 526, 534 (E.D. Va. 2008). Architectural designs and drawings have been held to be creative works. Id. Defendant has not offered any factual or legal support for considering architectural works or drawings non-creative works. This factor also weighs against a finding of fair use.
The third factor — the amount and substantiality of the portion used in relation to the copyrighted work as a whole — cannot be applied one way or another because Defendant contends in its opposition to Plaintiff's motion for summary judgment on the fair use defense that it did not use Plaintiff's copyrighted work.
The fourth factor — the effect of the use upon the potential market for or value of the copyrighted work — weighs against a finding of fair use here. The parties correctly note that this factor is the most important of the four. Compaq Computer Corp. v. Ergonome Inc., 387 F.3d 403, 410 (5th Cir. 2004). "This factor requires courts to consider not only actual harm to the market for the original, but also whether widespread use of the work, like the sort complained of by the copyright-holder, would impair the potential market for the original work and any derivative works." Id. Defendant will have the burden at trial of showing that its alleged commercial use of Plaintiff's Architectural Drawings did not have a significant effect upon the market for or value of the drawings. However, Defendant has not shown that its use of Plaintiff's Architectural Drawings did not significantly impact Plaintiff's ability to sell or license its works. In fact, Defendant acknowledges that Plaintiff's primary business is the design of convenience stores. (Meijer I Depo. at 100-02.) Defendant's argument that Plaintiff's market was not harmed because it did not have the ability to handle its work is also unavailing. Even if Plaintiff was unable to draft new Architectural Drawings itself, Plaintiff would have been able to license the pre-existing Architectural Drawings to Defendant Thomas. Defendant Thomas's alleged commercial use of the plans — sharing them with Morris and Hermes — impaired Plaintiff's ability to derive licensing fees from Defendant Thomas for this use.
Considering all of these four factors together, the Court finds that Defendant Thomas has not shown the existence of essential elements of the fair use defense and that Plaintiff is entitled to summary judgment on this affirmative defense.
6. Estoppel
Plaintiff has moved for summary judgment on Defendant's affirmative defense of estoppel because of Defendant's failure to produce evidence regarding any of the elements of estoppel. Under the doctrine of estoppel, a plaintiff is barred from bringing a copyright infringement claim against a defendant if: (1) plaintiff knew about defendant's infringing conduct; (2) plaintiff must intend that its conduct shall be acted on, or must so act that the defendant has a right to believe that it is so intended; (3) defendant was ignorant of the true facts; and (4) defendant relied on plaintiff's conduct to its detriment. Carson v. Dynegy, Inc., 344 F.3d 446, 453 (5th Cir. 2003).
In order for Defendant to survive summary judgment, it must identify a genuine issue of material fact. Where, as here, the Defendant will have the burden of proof at trial on the essential elements of the estoppel defense, it must make a showing sufficient to establish the existence of the essential elements. Defendant has not shown sufficient evidence that Plaintiff was aware of Defendant Thomas's sharing of Plaintiff's Architectural Drawings with parties not involved on Plaintiff's projects. There is no genuine issue of material fact that exists regarding Plaintiff's specific knowledge of Morris's and Hermes's use of its Architectural Drawings. Therefore, Plaintiff is entitled to summary judgment on the first element of estoppel. Since all four elements of the estoppel defense are required, Plaintiff is entitled to summary judgment on the estoppel defense as a whole.
7. Laches
Plaintiff has moved for summary judgment on Defendant's affirmative defense of laches. "To establish that a cause of action is barred by laches, the defendant must show (1) a delay in asserting the right or claim; (2) that the delay was not excusable; and (3) that there was undue prejudice to the defendant." Goodman v. Lee, 78 F.3d 1007, 1014 (5th Cir. 1996). "Generally speaking, the relevant delay is the period from when the plaintiff knew (or should have known) of the allegedly infringing conduct, until the initiation of the lawsuit in which the defendant seeks to counterpose the laches defense." Jacobsen v. Deseret Book Co., 287 F.3d 936, 949 (10th Cir. 2002) (quoting Danjaq LLC v. Sony Corp., 263 F.3d 942, 952 (9th Cir. 2001)). The Fifth Circuit has not addressed whether the laches defense applies in a case where the copyright owner files suit within the three-year statute of limitations applicable to copyright infringement claims. However, other circuits have acknowledged that courts should defer to the statute of limitations rather than decide copyright infringement cases on the issue of laches. See, e.g., Jacobsen v. Deseret Book Co., 287 F.3d 936, 950 (10th Cir. 2002); Lyons P'ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 798 (4th Cir. 2001); Jack Preston Wood: Design, Inc., 2004 U.S. Dist. LEXIS at *45-*47. In rare cases, "a statute of limitations can be cut short by the doctrine of laches. . . ." Jacobsen v. Deseret Book Co., 287 F.3d 936, 951 (10th Cir. 2002).
The Court has already issued summary judgment in favor of Plaintiff on the issue of whether Plaintiff filed its copyright infringement claim within the three-year statute of limitations. Defendant has not presented evidence of extraordinary circumstances that would warrant the imposition of the laches defense. Plaintiff discovered the alleged infringement in March 2006. Plaintiff wrote to Defendant Thomas in June 2006 about the alleged infringement and asked Defendant Thomas to refrain from releasing Plaintiff's Architectural Drawings to any other architectural firm without Plaintiff's written approval. (Doc. No. 104, Exh. O at 65.) Plaintiff registered its "architectural works" and "technical drawings" copyrights between June 2006 and October 2007. ( Id. at 103-08.) The approximately year-long delay between the copyright registration process and filing of suit appears due to Plaintiff's interaction with its counsel. (Meijer I Depo. at 25-27.) There is nothing remarkable in Plaintiff's conduct requiring the Court to shorten the statute of limitations by applying the laches defense. Finally, Defendant has not shown how it was prejudiced by Plaintiff's filing of suit in October 2008. Therefore, Plaintiff is entitled to summary judgment on this affirmative defense.
8. Innocent Infringement
Plaintiff has moved for summary judgment on Defendant's affirmative defense of innocent infringement. The use of the innocent infringement defense for claims brought under the Copyright Act differs from its use in alleged violations of the DMCA.
With respect to claims brought under the Copyright Act, innocent infringement is not an affirmative defense to liability for infringement of works created after March 1, 1989. Bryce Palazzola Architects Assocs. v. A.M.E. Group, 865 F. Supp. 401, 405 (E.D. Mich. 1994). Innocent infringement remains an affirmative defense to an award of statutory damages under 17 U.S.C. § 504(c) for copyright infringement. Here, Plaintiff has not asserted a claim for statutory damages for copyright infringement. Therefore, Defendant cannot assert innocent infringement as an affirmative defense to either liability or statutory damages for copyright infringement.
With respect to DMCA claims, innocent infringement can be an affirmative defense to the award of statutory damages under 17 U.S.C. § 1203(c)(5). Defendant has proffered sufficient evidence that a jury might reasonably conclude that its removal of Plaintiff's title block from its Architectural Drawings was done without knowledge that such removal constituted a violation of the DMCA. Therefore, Plaintiff is not entitled to summary judgment as to Defendant's affirmative defense of innocent infringement to Plaintiff's DMCA claims.
9. Unclean Hands
Plaintiff has moved for summary judgment on Defendant's affirmative defense of unclean hands. In order for the equitable doctrine of "unclean hands" to apply, the plaintiff's misconduct must "in some measure affect the equitable relations between the parties in respect of something brought before the court for adjudication." Mitchell Bros. Film Group v. Cinema Adult Theater, 604 F.2d 852, 863 (5th Cir. 1979), cert. denied, 100 S. Ct. 1277 (1980) (quoting Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245 (1933)). The plaintiff's conduct must personally injure the defendant. Id. (quoting Lawler v. Gilliam, 569 F.2d 1283, 1294 (4th Cir. 1978). "The defense is rarely effective and is properly denied when the "plaintiff's transgression is of an . . . inconsequential nature." Los Angeles News Service v. Tullo, 973 F.2d 791, 799 (9th Cir. 1992) (omitting citations). The application of the unclean hands doctrine raises primarily a question of fact. Id.
Defendant contends that Plaintiff's purposeful errors in the copyright registration process, failure to disclose that its work was copied from a third party, misstatements in authorship, and failure to disclose that its work was a derivative work are all wrongful acts that bar Plaintiff's recovery under the clean hands doctrine. The Court has already resolved all of these issues in favor of Plaintiff. Plaintiff is entitled to summary judgment on the unclean hands defense.
10. Failure to Identify Portions of Infringed Copyrighted Works
Plaintiff moves for summary judgment on Defendant's affirmative defense of failure to identify portions of infringed copyrighted works. Defendant acknowledges that "failure to identify portions of infringed copyrighted works" is not an affirmative defense but claim that it is Plaintiff's burden of proof at trial. Plaintiff contends that it is not required to identify portions of its copyrighted works because, under the substantial similarity test, the fact finder is required to review the work as a whole without dissection to judge the total concept and feel of the structure. In the Fifth Circuit, the "substantial similarity" test requires the plaintiff to "demonstrate that the copying is legally actionable by showing that the allegedly infringing work is substantially similar to protectable elements of the infringed work." General Universal Sys. v. Lee, 379 F.3d 131, 142 (5th Cir. Tex. 2004) (emphasis added). Therefore, Plaintiff bears a burden of identifying the protectable elements of its Architectural Drawings and presenting evidence that Defendant's Architectural Drawings are substantially similar to those elements. The Court withholds summary judgment on the issue of Plaintiff's failure to identify portions of infringed copyrighted works.
11. De Minimis Infringement
Plaintiff moves for summary judgment on Defendant's affirmative defense of de minimis infringement. "To establish that the infringement of a copyright is de minimis, and therefore not actionable, the alleged infringer must demonstrate that the copying of the protected material is so trivial as to fall below the quantitative threshold of substantial similarity, which is always a required element of actionable copying." Sandoval v. New Line Cinema Corp., 147 F.3d 215, 217 (2d Cir. 1998) (omitting quotations).
As stated above, genuine issues of material fact exist as to which technical drawings within Plaintiff's Architectural Drawings were copyrighted. Further, there are factual issues in dispute regarding the substantial similarity of Plaintiff's "architectural works" material and Defendant's Architectural Drawings. Therefore, the Court cannot conclude that Defendant has shown no evidence that its potential use of Plaintiff's protected material is below the de minimis level. Plaintiff's motion for summary judgment on this issue is denied.
12. Failure to Mitigate Damages
Plaintiff moves for summary judgment on Defendant's affirmative defense that Plaintiff failed to mitigate its damages. Plaintiff first suggests that courts have never recognized a failure to mitigate as a defense in a copyright infringement case. However, a brief search of the case law yields exactly such cases. See Tingley Sys. v. Healthlink, Inc., 509 F. Supp. 2d 1209, 1219 (M.D. Fla. 2007); Frank Betz Assocs. v. J.O. Clark Constr., L.L.C., Case No. 3:08-cv-00159, 2010 U.S. Dist. LEXIS 53437 (M.D. Tenn. May 30, 2010); Software Publrs. Ass'n v. Scott Scott, LLP, Case No. 3:06-CV-0949-G, 2007 U.S. Dist. LEXIS 59814 (N.D. Tex. Aug. 15, 2007).
Second, Plaintiff claims that Defendant has not adduced evidence to support this defense. In response, Defendant cites as evidence Plaintiff's discovery of the allegedly wrongful activity in March 2006 and failing to do anything for over two years until the initiation of this lawsuit in October 2008. The Court finds that a genuine issue of material fact exists regarding whether Plaintiff properly mitigated the damages it is requesting for copyright infringement, DMCA violations, and fraud claims. Therefore, Plaintiff is not entitled to summary judgment as to Defendant's affirmative defense of failure to mitigate damages.
13. Fraud on Copyright Office
Plaintiff moves for summary judgment on Defendant's defense of fraud on the Copyright Office. As explained in Part IV.C.1, above, Defendant has not been able to show that there are genuine issues of material fact relating to Plaintiff's errors in copyright registration, nor that, as a legal matter, Plaintiff committed fraud on the Copyright Office. Therefore, the Court grants Plaintiff's motion for summary judgment as to this defense.
14. Impermissible Taking
Plaintiff has moved for summary judgment on Defendant Thomas's defense of impermissible taking. Defendant Thomas has clarified that this defense would only be applicable in the event that a jury awards punitive damages on Plaintiff's fraud claim. The Court withholds summary judgment on this defense.
15. Failure to State a Claim
Plaintiff moves for summary judgment on the defense that Plaintiff has failed to state a claim under Rule 12(b)(6). This defense was raised by Hermes, which is no longer a defendant in this case. Therefore, Plaintiff is entitled to summary judgment on this defense.
16. Intervening Third Parties
Plaintiff is entitled to summary judgment on the defense of "intervening third parties" as this defense has no applicability to copyright infringement and was raised with respect to the now-dismissed trade secret misappropriation claims.
17. Comparative Responsibility
Plaintiff moves for summary judgment on Defendant Thomas's affirmative defense of comparative responsibility. Both parties acknowledge that this defense is inapplicable to copyright infringement claims. As for the fraud claim, Defendant Thomas is correct in stating that comparative responsibility is an affirmative defense under Texas law. However, Defendant Thomas has not identified the facts that would support such a defense. See Celotex, 477 U.S. at 323-24 (the nonmoving party must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial). Therefore, the Court grants summary judgment to Plaintiff on the affirmative defense of comparative responsibility.
18. Sufficient Resources
Plaintiff has moved for summary judgment on the issue of "sufficient resources." Plaintiff and Defendant Thomas agree that there is no affirmative defense of "sufficient resources." Defendant Thomas states that the issue of sufficient resources relates to its defenses of limitations, estoppel and laches since Plaintiff knew that it did not have the manpower to meant Defendant Thomas's requirements and was on notice that other Speedy Stop stores would be built and other architects would be used. Insofar as "sufficient resources" is asserted as a separate defense, the Court grants summary judgment to Plaintiff on this defense.
19. Reasonable and Necessary Attorney's Fees
The parties agree that Defendant Thomas's defense of reasonable and necessary attorney's fees is not an affirmative defense. The Court grants summary judgment to Plaintiff as to the affirmative defense of reasonable and necessary attorney's fees.
20. Defenses Related to Trade Secret Misappropriation
The Court grants summary judgment to Plaintiff as to the affirmative defenses asserted by Defendant with respect to Plaintiff's trade secret misappropriation claims. These claims were dismissed by agreement and stipulation of the parties.
V. MOTION FOR DISCOVERY SANCTIONS
Plaintiff has moved for discovery sanctions against Defendant Thomas due to Defendant Thomas's alleged failure to cooperate in the production of documents, responses to interrogatories, and appropriate disclosures (Doc. No. 114). This motion was originally filed on April 13, 2010. Defendant Thomas responded on April 23, 2010. After a hearing on the motion, the Court issued on an order on May 5, 2010 permitting Plaintiff to conduct an additional deposition of Jeff Johanson, permitting Plaintiff to identify financial information it believed that Defendant Thomas previously had failed to make available, requiring Defendant Thomas to make such financial information available for Plaintiff's inspection, and allowing the parties to file supplemental briefs. The parties have filed supplemental briefs and the motion is ripe for disposition. The imposition of sanctions for failure to cooperate in discovery is within the sound discretion of the district court. See Tollett v. City of Kemah, 285 F.3d 357, 363 (5th Cir. 2002) (citations omitted). The Court turns to each of the discovery disputes raised by Plaintiff.
A. Production of Responses to Plaintiff's Interrogatories 1-4
Plaintiff seeks sanctions because Defendant's responses to Plaintiff's Interrogatories #1-4 occurred on March 30, 2010, over 30 days after this Court's order on February 25, 2010 requiring Defendant Thomas to turn over responsive information. Defendant Thomas correctly points out that the Court's February 25th order contained no deadline for response. Further, a review of Defendant Thomas's response suggests that the process of obtaining the information requested was intensive. Defendant Thomas's delay in producing responsive documents cannot serve as the basis for sanctions.
Plaintiff also seeks sanctions because Defendant Thomas's responses did not include information about how potentially-infringing architectural documents were used or modified, and the purpose of any modification. Defendant Thomas responds that the reason that such information was not included is because Defendant Thomas is not aware of any modification by third-parties of the architectural drawings it sent to those third parties. To the extent that Defendant Thomas wishes to rely on claims that third-parties, including Morris and Hermes, did or did not modify architectural drawings that they were sent by Defendant Thomas, it is barred from relying on such evidence since it has maintained that it does not possess information about the drawings' modification or lack thereof.
B. Preclusion Order barring Defendant Thomas's Affirmative Defenses
The Court again declines to award sanctions on the basis that Defendant Thomas's identification of the factual bases of its affirmative defenses was late, because the Court did not set a deadline for response in its February 25th order. As for Plaintiff's argument that Defendant Thomas did not respond in good faith, the Court's order simply required Defendant Thomas to "identify the primary documents on which [Defendant] rely to support the identified affirmative defenses. It will be understood that the documents identified will not be an exhaustive list, but should provide Interplan with notice of the factual basis for these affirmative defenses." (Doc. No. 93 at 2.) Therefore, Defendant Thomas's provision of a list of Bates-numbered documents comports with the Court's order. To the extent that Defendant Thomas raises an affirmative defense not based on the list of Bates-numbered documents provided to Plaintiff on March 30, 2010, the Court will strike such defenses.
C. Order in Limine Barring Defendant Thomas from Relying on Financial Summaries
Plaintiff argues that Defendant Thomas should be prevented from presenting and relying upon the financial summaries Thomas prepared as evidence of deductible expenses related to the gross revenue of the Speedy Stop Stores. Plaintiff's first basis for this request is unsupported by fact. Plaintiff claims that Defendant Thomas did not make the "backup" or documents underlying the financial summaries available in a timely manner. Plaintiff refers to an email dated March 22, 2010 in which it requested production of the underlying documents. However, this Court's February 25th order denied Plaintiff's motion to compel the production of documents and stated that, if Plaintiff wished to inspect the summaries' underlying documents, the Defendant only had to make these documents available at its offices for Plaintiff's inspection and limited duplication. Plaintiff's March 22nd email makes no request to access and inspect Defendant Thomas's underlying documents and instead asks for production of these documents. It appears that Plaintiff, not Defendant Thomas, is the party who has not complied with the Court's February 25th order. Plaintiff's inability to conduct a meaningful audit of Defendant Thomas's invoices appears to be due to its own failure to go to Defendant Thomas's offices rather than any purported deficiency in Defendant Thomas's financial summaries.
Plaintiff's second basis for barring Defendant Thomas's introduction of the financial summaries at trial is that these summaries are, in fact, summaries of summaries of summaries and inadmissible under Federal Rule of Evidence 1006. In response to Plaintiff's request for intermediate summaries, Defendant Thomas produced "intermediate level" summaries after this Court's order on May 5, 2010. Plaintiff contends that these "intermediate level" summaries are still improper under Rule 1006. The Court fails to understand what is improper about these summaries and will withhold ruling on this issue until Defendant Thomas attempts to introduce such evidence at trial.
D. Preclusion Order Barring Defendant Thomas from Offering Evidence of Attribution of Revenue to Third-Party
Plaintiff argues that Defendant Thomas should be prevented from offering any evidence that the gross revenues from the Speedy Stop stores are captured by a third-party, such as Speedy Stop Food Stores, LLC, that is not a party to this case. Defendant Thomas has argued in its Motion for Summary Judgment that Thomas only designed and constructed the Speedy Stop stores, but that they are actually owned and operated by Speedy Stop Stores, LLC, a non-party to this litigation. Therefore, Defendant Thomas attempts to disclaim any gross revenue obtained by Speedy Stop Food Stores, LLC, as a way to calculate Defendant Thomas's "infringer's profits" under the Copyright Act and DMCA.
Plaintiff's first argument, that Defendant Thomas failed to timely disclose the existence of Speedy Stop Food Stores, LLC, does raise concerns about Defendant's behavior. On December 5, 2008, Defendant Thomas filed its original answer, in which it clearly stated, "Defendant does not operate Speedy Stop Food Stores. Speedy Stop Food Stores, LLC ("Speedy Stop" herein), formerly known as Speedy Stop Food Stores, Ltd. is in the business of operating Speedy Stop Food Stores. C.L. Thomas, Inc. is Speedy Stop's Manager. Speedy Stop is in the business of designing and constructing convenience stores, and C.L. Thomas, Inc. acts in its role as manager." (Doc. No. 12 at ¶ 19.) Its corporate disclosure statement, made on December 10, 2008, stated, "Defendant, C.L. Thomas, Inc. is not aware of any other entities that are financially interested in the outcome of this litigation. Other than Speedy Stop Food Store, LLC, a Texas limited liability company, of which C.L. Thomas, Inc. is the Manager." (Doc. No. 13 at ¶ 3.) Despite these earlier disclosures, Defendant Thomas stated in response to a question on the Joint Discovery/Case Management Plan ("List anticipated additional parties that should be included, when they can be added, and by whom they are wanted.") that "Defendant is unaware of any additional parties at this time." Similarly, in its responses to Plaintiff's motion to compel information about the gross revenues of the Speedy Stop stores, Defendant Thomas did not mention that this gross revenue was actually captured by Speedy Stop Food Stores, LLC. (Doc. Nos. 35, 38.) In September 2009, Plaintiff filed a motion for leave to file a first amended complaint, but did not seek to include Speedy Stop Food Stores, LLC as a new defendant. (Doc. No. 51.) Subsequently, Defendant Thomas produced financial information that clearly stated "Speedy Stop Food Stores, LLC" on top of each page. In November 2009, Defendant Thomas filed its first amended answer, in which it once again stated that it did not own the Speedy Stop stores, but that Speedy Stop Food Stores, LLC operated the stores. (Doc. No. 70 at ¶ 19.) Both the expert reports of Defendant's financial experts, James Mandel and Jeff Johanson, referred to financial summaries that contained the words "Speedy Stop Food Stores, LLC" on top of each page. After reviewing these events in detail, the Court concludes that Defendant Thomas's behavior, while less than forthcoming, did not constitute active concealment or delay that is sanctionable.
Plaintiff next claims that the corporate formalities that distinguish Defendant Thomas from related business entities, such as Speedy Stop Food Stores, LLC, and Speedy Stop Food Stores, Ltd., should be ignored. Prior to June 29, 2007, Speedy Stop Food Stores, Ltd., a limited partnership, existed to own the real estate and capture the revenue from the Speedy Stop stores. Defendant Thomas was the sole general partner in Speedy Stop Food Stores, Ltd. Though Plaintiff correctly pointes out that, as a general partner, Defendant Thomas would be liable for any damages or obligations incurred by Speedy Stop Food Stores, Ltd., Plaintiff has not provided legal support for the opposite principle — that Speedy Stop Food Stores, Ltd. is responsible for the obligations of its general partner. It is the latter legal rule that is applicable here. Liability for copyright infringement, DMCA violations, and fraud in the present lawsuit turn on Defendant Thomas's conduct. Therefore, any award of damages will be awarded against Defendant Thomas, for which Speedy Stop Food Stores, Ltd. is not responsible.
On June 29, 2007, Speedy Stop Food Stores, Ltd. was merged into Speedy Stop Food Stores, LLC. Defendant Thomas is a manager and member of Speedy Stop Food Stores, LLC and owns 1% of the limited liability company. Plaintiff argues that the court should disregard the distinction between Defendant Thomas and Speedy Stop Food Stores, LLC because both are considered a combined entity, have combined financial reporting, have the same employees, and are ultimately both owned by Cliff and Cathy Thomas. However, two of the three cases that Plaintiff cites in support of the alter ego doctrine are no longer good law, having been superseded by statute. Rather, application of the alter ego theory in Texas requires a showing that the owner "caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the . . . owner." See Tex. Bus. Corp. Act Ann. art. 2.21(A)(2) (Vernon 2003); Tex. Bus. Org. Code ¶ 21.223; Solutioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 387 (Tex. App. Houston 14th Dist. 2007). After taking the additional deposition of Mr. Johanson, Plaintiff has not offered evidence that Speedy Stop Food Stores, LLC was created for the purpose of wrongful conduct. At most, its creation appears to have been for the purpose of "reduc[ing] franchise taxes." (Deposition of Jeff Johanson on May 14, 2010 at 133.) The Court cannot attribute the revenue of Speedy Stop Food Stores, LLC to Defendant Thomas on the basis of the alter ego theory.
The Court notes, however, that Plaintiff's claim for infringer's profits may not be completely foreclosed. In his deposition, Mr. Johanson acknowledged that Defendant Thomas possesses a 1% ownership interest in Speedy Stop Food Stores, LLC that is reflected on K-1 IRS form since the LLC is treated like a partnership.
E. Attorneys' Fees and Expenses
The Court has not found any of Plaintiff's requests for discovery sanctions to be meritorious and therefore declines to award attorneys' fees and expenses.
VI. MOTIONS FOR RULE 11 SANCTIONS AND ATTORNEYS' FEES AND COSTS
The Court defers Defendant's Motion for Sanctions Pursuant to Rule 11 (Doc. No. 157) and Defendant's Rule 54(d) Motion for Attorney's Fees and Costs Under the Texas Theft Liability Act (Doc. No. 105).
VII. CONCLUSION
Based on the foregoing, it is hereby ORDERED that:
1. Plaintiff's Motion for Partial Summary Judgment for Infringement of Technical Drawings Copyrights (Doc. No. 108) is DENIED; 2. Plaintiff's Motion for Partial Summary Judgment (Ownership of Valid Architectural Works Copyrights (Doc. No. 110) is DENIED; 3. Plaintiff's Motion for Partial Summary Judgment on Defendant's Affirmative Defenses (Doc. No. 111) is GRANTED IN PART and DENIED IN PART: a. Plaintiff is entitled to summary judgment on the defenses of lack of copyrightability, statute of limitations, estoppel, laches, unclean hands, fair use, fraud on Copyright Office, failure to state a claim, intervening third parties, comparative responsibility, sufficient resources, reasonable and necessary attorney's fees, and defenses related to trade secret misappropriation claims; b. Plaintiff is not entitled to summary judgment on the defenses of lack of originality, joint authorship, implied nonexclusive license, innocent infringement, failure to identify portions of copyrighted works, de minimis infringement, failure to mitigate damages, and impermissible taking; 4. Plaintiff's Objections to and Motion to Strike Defendant's Summary Judgment Evidence (Doc. No. 131) is GRANTED IN PART and DENIED IN PART: a. Mr. Labefff's opinions on the copyrightability of Plaintiff's architectural designs and technical drawings, Mr. Labeff's conclusions about derivative works, Mr. Meijer's testimony about violations of the DMCA, and Mr. Urfi's statements about Mr. Meijer's permission to use third-party drawings are stricken; 5. Plaintiff's Objections to and Motion to Strike Defendant's Summary Judgment Opposition Evidence (Doc. No. 143) is GRANTED IN PART and DENIED IN PART: a. Mr. Meijer's testimony about violations of the DMCA and Mr. Morris's testimony about the originality of Plaintiff's drawings are stricken; 6. Plaintiff's Motion for Discovery Sanctions Against Defendant C.L. Thomas, Inc. (Doc. No. 114) is DENIED; 7. Defendant's Motion for Summary Judgment (Doc. No. 104) is GRANTED IN PART and DENIED IN PART: a. Defendant is entitled to summary judgment with respect to Plaintiff's claim that fraudulent misrepresentation was made in November 2004; b. Defendant is entitled to summary judgment with respect to Plaintiff's claim for actual damages under the Copyright Act and the DCMA; 8. Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction All Claims Based on Unregistered Copyrighted Works (Doc. No. 119) is DENIED; 9. Defendant's Motion to Dismiss for Lack of Standing All Copyrights Registered and Owned by Marcel Meijer, Individually (Doc. No. 119) is DENIED; 10. Defendant's Motion to Strike Declaration of Marcel Meijer (Doc. No. 119) is GRANTED IN PART and DENIED IN PART: a. Exhibits B-J to the First Meijer Declaration are stricken; 11. Defendant's Motion to Strike Exhibit V to Plaintiff's Opposition to Defendant's Motion for Summary Judgment (Doc. No. 138) is GRANTED IN PART and DENIED IN PART: a. Paragraph 9 of Exhibit V is stricken; 12. Defendant's Motion to Strike Plaintiff's Motions for Summary Judgment (Doc. No. 155) is DENIED; 13. Defendant's Motion for Sanctions Pursuant to Rule 11 (Doc. No. 157) is DEFERRED; 14. Defendant's Rule 54(d) Motion for Attorneys' Fees and Costs Under the Texas Theft Liability Act (Doc. No. 105) is DEFERRED; 15. Morris's Motion for Partial Summary Judgment on Plaintiff's DMCA Claims (Doc. No. 109) is DENIED AS MOOT; 16. Hermes's Motion for Summary Judgment on Plaintiff's Copyright Act Claim (Doc. No. 102) is DENIED AS MOOT; 17. Hermes's Motion for Partial Summary Judgment (Doc. No. 101) is DENIED AS MOOT; and 18. Hermes's Motion for Order Regarding Joint Several Liability (Doc. No. 103) is DENIED AS MOOT. IT IS SO ORDERED. SIGNED at Houston, Texas, on this the 27th day of October, 2010.