The US Court of Appeals for the Eighth Circuit affirmed a district court’s ruling that there was no actionable infringement where an uncompleted building sold under the authority of a bankruptcy court was later completed. Cornice & Rose International, LLC v. Four Keys, LLC et al., Case No. 22-1976 (8th Cir. Aug. 11, 2023) (Loken, Shepard, Kelly, JJ.) (per curiam). The Court explained that the architectural copyright claims were precluded by the bankruptcy court’s order approving the sale.
McQuillen Place Company retained Cornice & Rose, an architectural firm, to design a building. Cornice created technical drawings for the building and obtained copyrights for its drawings and for the building itself, the tangible embodiment of its design work. When the building was 90% complete, McQuillen halted construction and filed for bankruptcy. During liquidation proceedings, the trustee moved to sell the building to the lender, First Security Bank & Trust Company. Cornice objected to the sale on various grounds, including that its copyright protection in the building itself would be infringed by an order authorizing the sale. In response, First Security Bank suggested language to protect the parties, which the court incorporated into its order authorizing the sale of the uncompleted building, as follows:
Copyright: So long as the Purchaser, or its assignee, or its architect or agents do not use the Plans or Drawings or any work in which Cornice & Rose International, LLC (“C & R”) holds a valid copyright (the C & R Intellectual Property), the Purchaser, or its assignee, may use and occupy the Property, develop the Property, and complete the existing interior and exterior of the Property, free and clear of existing and future claims of C & R, whether for copyright infringement or otherwise. The Purchaser, or its assignee, or its architect or agents may not use the C &R Intellectual Property without first making arrangements satisfactory to C & R for the use of the C & R Intellectual Property. Nothing contained herein shall preclude future claims of copyright infringement resulting from the improper or unauthorized use of the C & R Intellectual Property by the Purchaser, or its assignee, or any third parties.
Cornice filed a motion to reconsider, arguing that under its contract with McQuillen, the license for the use of the building was conditioned on full, complete and timely payment. Because that had not occurred, there was no license for the construction of the building and, therefore, the building was an infringing copy of the architectural work. The following day the bankruptcy court denied the motion. Cornice filed an appeal, which the bankruptcy court dismissed under 1 U.S.C. §363(m) because the sale had been completed.
While the appeal was pending, the trustee sold the building, and First Security Bank assigned its interest to Four Keys, which hired various companies to finish the building. Cornice then sued First Security Bank, its president, Four Keys and others for copyright infringement by finishing the building as an infringing derivative work. Cornice sought a declaratory judgment that any rental or sale of the building without Cornice’s permission was a further act of copyright infringement. The district court dismissed both claims under the doctrine of res judicata and because Cornice failed to allege any copying and the building owner’s right to finish the building was protected from a claim of copyright infringement under 17 U.S.C. §120(b). Cornice also sued for copyright infringement of its technical drawings but lost on summary judgment. Cornice again appealed.
The Eighth Circuit addressed two issues on appeal: whether the lower court erred in dismissing the architectural works copyright and declaratory judgment claims and whether the court erred in granting summary judgment on the basis that Cornice did not have an opportunity to respond to new arguments that two defendants had raised in their reply brief. The appellate court found that res judicata applied to the claims that Cornice sought to relitigate because the bankruptcy court’s order was a final judgment and the district court properly granted the defendants’ motion to dismiss those claims.
Addressing Cornice’s argument that it did not have an opportunity to file a sur-reply, the Eighth Circuit concluded that the argument was frivolous, in part because it was not raised to the district court in a motion to reconsider. The Eighth Circuit explained that neither in the district court nor on appeal did Cornice explain what it would have argued in a sur-reply brief, and it made no showing on appeal that the district court would have reached a different result (i.e., denied summary judgment) had it been allowed to file a sur-reply. Accordingly, the Eighth Circuit found no abuse of discretion and affirmed the district court’s order.