Architectural Firm Entitled to Preliminary Injunction To Stop Unauthorized Use of Copyrighted Plans that Exceeded the Scope of License

Case: LGS Architects, Inc. v. Concordia Homes of Nevada, No. 04-16677 (9th Cir. 1/11/06).

The One Sentence Summary: An architectural firm was entitled to preliminary injunctive relief because it was likely to succeed on the merits of its copyright infringement action where its client used its copyrighted architectural plans on projects that fell outside of the parties' licensing agreement.

What They Were Fighting About: LGS Architects, Inc. ("LGS") and Concordia Homes of Nevada ("Concordia") had entered into a licensing agreement that authorized Concordia to use two of LGS's architectural plans to construct the Arbor Glen I community, a master-planned community of eighty houses in northwestern Las Vegas. Without obtaining LGS's consent, Concordia used the same architectural plans to construct a neighboring development, the Arbor Glen II. LGS sued Concordia in the United States District Court for the District of Nevada alleging copyright infringement and breach of contract and moved for a preliminary injunction to prohibit Concordia from using the disputed plans and for an order requiring Concordia to return the plans. The district court summarily denied LGS's request for a preliminary injunction and LGS appealed.

Ninth Circuit Holdings:

• After rejecting Concordia's argument that the interlocutory appeal was moot because it would not make future use of the disputed plans, the Court turned to the merits of LGS's request for a preliminary injunction.
• Rule 52(a) of the Federal Rules of Civil Procedure requires that a district court set forth findings of facts and conclusions of law supporting an order denying a preliminary injunction. Although the district court's only explanation for its denial of the preliminary injunction was the statement that it did not consider LGS to have a likelihood of success, the Court agreed with the parties that this deficiency did not make remand necessary. The Court observed LGS's entitlement to a preliminary injunction depended upon the legal interpretation of the parties' licensing agreement, rather than upon disputed factual issues.
• Preliminary injunctive relief is available to a party if it can show either: (1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) that serious questions are raised and the balance of hardships tip in its favor. The Court explained that in a copyright infringement action, however, "a showing of a reasonable likelihood of success on the merits raises a presumption of irreparable harm." Therefore, a copyright holder seeking a preliminary injunction is not required to make an "independent demonstration of irreparable harm" and only needs to show a reasonable likelihood of success on its copyright infringement claim.
• When a licensee exceeds the scope of the license granted by the copyright holder, the licensee is liable for copyright infringement. Because it was undisputed that LGS owned the copyright in the architectural plans, LGS needed only to establish that Concordia exceeded the scope of the license to make the required showing of likelihood of success on the merits.
• The license agreement granted Concordia the right to use the architectural plans to construct the eighty homes in the Arbor Glen I community. The license explicitly provided that any other use of the plans was prohibited unless express written authorization was obtained from LGS. In addition, such authorization was conditioned on the payment of a reuse fee. Concordia's unauthorized use of the plans to construct Arbor Glen II exceeded the scope of the license and therefore the Court found that LGS was likely to succeed on the merits of its copyright infringement claim.
• On that basis, the Court held that LGS was entitled to a preliminary injunction prohibiting Concordia from reproducing, distributing, publicly displaying, or creating derivative works based upon LGS's architectural plans.
• Because of the early stage of the proceedings, however, the Court ruled that LGS was not entitled to a mandatory injunction required Concordia to return the plans noting that a mandatory injunction goes well beyond simply maintaining the status quo and is generally disfavored.