NOVA DESIGN BUILD, INC. V. GRACE HOTELS, LLC (July 26, 2011)

Grace Hotels entered into a contract with Nova Design Build to provide architectural services in connection with its construction of a Holiday Inn Express in Waukegan, Illinois. In addition to the architectural fees, Grace promised to pay a $15,000 penalty if it did not use Nova's construction affiliate to build the hotel. The parties' relationship soured during the design phase and Grace did not use Nova's affiliate to build the hotel. Nova completed the design and registered a copyright for it. Because its computers had been stolen, Nova had to create a duplicate of its designs to satisfy the Copyright Office’s requirement of submitting a copy of the designs. Nova then sued Grace, alleging federal copyright infringement as well as state law claims. The gist of Nova's allegations is that Grace infringed its copyright when it used Nova’s designs to construct the hotel. Judge Der-Yeghiayan (N.D. Ill.) granted summary judgment to Grace on the ground that Nova's design re-creation did not satisfy the Copyright Office requirements.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Kanne and Wood affirmed. The Court first addressed federal jurisdiction. Under the doctrine set forth in T.B. Harms Co., a federal court has jurisdiction under the Copyright Act only if the complaint seeks a remedy granted by the Act, as opposed to a contract remedy. In Harms, the issue concerned the ownership of the copyright, not its infringement. Here, however, Nova clearly alleges infringement and seeks a Copyright Act remedy. The fact that Grace has set forth a state contract law defense is immaterial. On the merits, the Court disagreed with the district court's resolution. The Copyright Act requires the registrant to submit a complete copy of the designs seeking to be registered. The submission must be "virtually identical" to the original designs. The Court concluded that the record supported Nova's claim that the submitted designs met the requirement and did not support the district court's speculation that Nova had to resort to employees’ memories to re-create its designs. Notwithstanding its disagreement with the district court on the registration requirement issue, the Court nevertheless affirmed. Before inquiring into whether the completed hotel infringed Nova's design, a court must identify the aspects of Nova's design that he can be protected. The only design aspects that can be protected are those that have originality. Here, Nova's designs were based on a Holiday Inn Express model. Although Nova added some features and changed others, there was not enough originality or creativity in the changes to qualify for Copyright Act protection. Grace was entitled to summary judgment.