Christopher Phelps & Associates, LLC v. Galloway

492 F.3d 532 (4th Cir. 2007)

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Nature of the Case

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Facts

Galloway (D), in anticipation of retirement, planned to build his 'dream home.' He liked a home owned by Mrs. Bridgeford. D contacted Mrs. Bridgeford, who gave D her consent for using the plans she had purchased from P 'as long as you don't build in our area.' Mrs. Bridgeford testified at trial, 'I felt with all we had paid, we owned the plans at that time.' P assured Mrs. Bridgeford that he would not build in the area. Each page of the plans included the copyright notice, in small print, of the designing architect as follows: (c) 2000 Copyright -- Christopher Phelps & Assoc., L.L.C. These plans are protected under federal copyright laws. The original purchaser of this plan is authorized to construct one and only one home using this plan. Modifications or reuse of this plan is prohibited. P is an architectural firm that designs upscale custom houses. It created the design for the Bridgeford Residence as a variation of its earlier design -- 'The Bell and Brown Residence.' Bell and Brown had commissioned and paid P for the earlier design, but ultimately decided not to build the house. P modified the Bell and Brown design somewhat for the Bridgefords by moving a dormer window, changing the front entry and reconfiguring part of the floor plan, and removing the basement. The Bridgefords paid P $20,000 for The Bridgeford Residence design, and the Bridgefords built their house in accordance with that design. D began construction of his house in September 2001, using the P plans for the Bridgeford Residence. Some of the subcontractors checked back with P for clarification, particularly with respect to the windows. P did not then know that the construction was being pursued without permission. D's framing contractor, who had been asked to do some work for D's brother-in-law using pirated Phelps & Associates plans, surmised that P did not have permission to use the plans and approached P to warn him that he could 'get in trouble constructing a copyright plan.' D 'shrugged his shoulders and said something to the effect: 'They've got to find me, catch me first.'' P learned in early 2003 that D was constructing a house using its designs. P sent D a cease and desist letter in July 2003. D stopped construction on his house. P registered its plans for The Bridgeford Residence with the Copyright Office and then commenced this action against D for copyright infringement. P sought compensatory damages, disgorgement of D's profits (claimed as the difference between the value of D's house and his provable expenses in constructing it), and injunctive relief. P testified at trial that if D had come to him and asked P to design 'a house like the Bridgeford house,' it would have charged $ 20,000. P presented expert testimony that D's house would be worth $ 1.1 million when completed. D would have realized over $200,000 in profits if he were to sell the completed house. D estimated that if he completed the house, he would show a loss of about $160,000. He introduced into evidence his receipts and ledger of expenditures for construction to date totaling approximately $660,000, and he estimated that it would cost an additional $ 250,000 to $ 300,000 to complete the house. He estimated that upon completion, the house itself would be worth $758,000. He also introduced into evidence the Mecklenburg County tax assessment of his house when half-completed, which evaluated the house in that state at $408,100. The jury awarded P $20,000 in actual damages finding that D had no profits to disgorge. P requested injunctive relief from the court (1) ordering that the infringing copy of the plans be returned or destroyed; (2) enjoining completion of the house; and (3) permanently enjoining the lease or sale of the house. The court refused. P appealed.