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IP/Entertainment Case Law Updates

KBL Corp. v. Arnouts, et al.

The district court held that there is no right under the Copyright Act, federal common law or New York State law to contribution from a co-infringer and the Copyright Act does not provide for a claim of inducement to infringe among co-infringers.

Plaintiff KBL Corp., a residential home builder, hired defendant architects Robert Arnouts and Arnouts Associates Architects (the “Arnouts”) to review, modify for compliance with local building codes, and approve housing designs. Several of the housing designs provided to KBL by its clients and then modified by defendants were copyrighted by licensor Frank Betz Associates. After KBL raised the issue of the possible need to obtain a license from Betz, the Arnouts assured KBL that it did not need to obtain a license because the final designs would be significantly different from the Betz designs. KBL built several of the homes and Betz sued KBL for copyright infringement twice. KBL settled both suits before judgment was entered.

Betz did not name the Arnouts as a defendant in the first suit, but reached a settlement agreement with the Arnouts regarding the designs at issue in the first suit. Betz did name the Arnouts as defendants in the second suit but voluntarily dismissed the claims against them without payment of a judgment or settlement by the Arnouts after it settled with KBL.

After KBL settled both suits with Betz, it filed suit against the Arnouts for contribution, indemnification and inducement to infringe. KBL argued that New York state law provides a right to contribution among contributory infringers, although the law generally bars settling parties from raising contribution claims except in the case of post-judgment settlements. The court noted that “the threshold issue is whether there is a right to contribution under the Copyright Act.” The court held that a plain reading of the Copyright Act does not provide a right of contribution for copyright infringement and that the legislative history also reflects no intention to create a right to contribution and that no such right exists under federal common law.

In addressing KBL’s claim for contribution under state law, the court found that KBL “cannot use New York State common law as an end-around to make a claim for contribution that it could not make under the federal statutory scheme.” The court went on to say, even if it allowed KBL to invoke New York State law to support its claim for contribution among co-infringers, KBL failed to state a claim because New York law governing the right to contribution provides that “a tortfeasor who has obtained his own release from liability shall not be entitled to contribution from any other person.” N.Y. General Obligations Law § 15-108(c). Because KBL’s decision to settle was not involuntary, the court held that KBL cannot state a claim for contribution.

Regarding indemnification, the court noted that there was no contract between the parties providing a right of indemnification and declined to recognize an implied right to indemnification because KBL was not without fault in the alleged infringement. KBL knew the designs were copyrighted by Betz and asked defendants if it needed to obtain a license, then relied on defendants’ answer that it did not need to obtain a license.

Finally, the court also dismissed KBL’s inducement to infringe claim, stating that the Copyright Act does not provide for an inducement to infringe claim that is distinct from contributory infringement, and a claim for contributory infringement cannot lie among co-infringers.

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