Chicago Building Design, P.C., et. al. v. Mongolian House, Inc., et. al.

The U.S. Court of Appeals for the Seventh Circuit applied the Supreme Court of the United States’ May 2014 ruling in Petrella (IP Update, Vol. 17, No. 5) when it reversed an Illinois district court’s dismissal of a copyright infringement claim and confirmed that the applicable statute of limitations does not begin to run when a copyright owner has mere “inquiry notice” of infringing acts, but only once the copyright owner has actually discovered an act of copyright infringement.  Chicago Building Design, P.C., et. al. v. Mongolian House, Inc., et. al., Case No. 12-3037 (7th Cir., Oct. 23, 2014) (Sykes, J.)

The dispute between Chicago Building Design (CBD) and restaurant company Mongolian House arose “out of a failed business relationship between an . . . architectural firm and its client” over blueprints for an upscale Chicago restaurant.  Mongolian House hired CBD to design and renovate the interior of a restaurant space, and in 2006, CBD filed blueprints for the restaurant design with the city of Chicago to obtain a “repair and replace” permit.  The restaurant renovation project was completed in 2007, and the blueprints for the Mongolian House restaurant became the subject of a 2009 U.S. copyright registration owned by CBD.

In 2008, during a visit to the Chicago city offices, a CBD employee saw a set of blueprints that appeared to be a copy of CBD’s blueprints for the Mongolian House restaurant, but which bore the name of another architect.  In order to investigate the potential copyright issue, CBD immediately requested a copy of the blueprints from the city under the state’s Freedom of Information Act, but the request was refused when the city found the blueprints to be “exempt from disclosure.”

Shortly thereafter, the architect listed on the copy of CBD’s blueprints filed the copy with the city of Chicago in order to obtain a new permit for further renovations of Mongolian House’s restaurant space.  CBD then discovered a newly issued permit for the blueprints reported in the city’s May 8, 2009, Building Data Warehouse Report.  Just short of three years later, on February 13, 2012, CBD sued Mongolian House for copyright infringement alleging violation of CBD’s exclusive right to copy, distribute and create derivative works when Mongolian House passed CBD’s blueprints off as its own and used the infringing blueprints to obtain a new permit and to clear various city building inspections between 2009 and 2012.

The district court granted Mongolian House’s motion to dismiss based on the three-year statute of limitations period under §507(b) of the Copyright Act, holding that CBD was on “inquiry notice” of possible copyright infringement when its employee saw the duplicate blueprints in the city office in 2008, thereby putting the 2012 suit outside of the three-year window.  CBD appealed.

Citing Petrella, the Seventh Circuit explained that the Copyright Act establishes a “separate accrual rule” so that each infringing act starts a new statute of limitations period.  In reversing the district court’s dismissal, the court held that CBD’s February 2012 complaint alleged potentially infringing acts that occurred within the “three-year look-back period.”  Specifically, the court stated that “inquiry notice is not the same as actual or constructive discovery,” and determined that CBD’s actual discovery of the new building permit as well as Mongolian House’s occasional distribution of the infringing blueprints to building inspectors between 2009 and 2012 fell within the three-year limitations period for CBD’s infringement claims.

Mongolian House argued that any post-2008 distribution of the blueprints qualified as a “limited publication” outside of the Copyright Act.  The court noted, however, that the “limited publication” argument is addressed by the merits of the case rather than the statute of limitations.  The court made sure to clarify that its decision extended to the statute of limitations issue only, and reversed and remanded for further legal and factual development on the issue of copyright infringement for those acts of alleged infringement by Mongolian House that fall within the relevant three-year look-back period.