False Designation Claim Revived Against ‘Designer' of World's Second Tallest Building

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By Tamlin Bason

Aug. 22 — Dastar does not foreclose a false designation of origin claim grounded in allegations that a defendant falsely claimed to have designed a number of high-profile architectural structures, the Seventh Circuit held Aug. 21.

The Seventh Circuit accepted that the Supreme Court's decision in Dastar prevents a plaintiff from extending copyright protection through a Lanham Act claim. But, unlike in that case, the plaintiff here had actually asserted a false designation of origin claim and so Dastar could not be used to dismiss the complaint out of hand, the court said. 

“The opinion goes to one of the real unanswered questions of Dastar, which is what happens to affirmative misrepresentations about authorship or credit,” Rebecca Tushnet, a law professor at Georgetown University, told Bloomberg BNA.

Does Dastar Apply to Services?

Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 66 U.S.P.Q.2d 1641 (2003), established when a plaintiff can maintain a Lanham Act false designation of origin claim if the underlying goods that the defendant is alleged to have falsely identified are—or were—protected by copyright.

In such cases, a Section 43(a) claim can survive only if it is based on allegations that the defendant took the plaintiff's physical copyrighted goods and then repackaged those unaltered goods and put its own name on it, the high court said.

Judge Ronald A. Guzman of the U.S. District Court for the Northern District of Illinois determined that, under Dastar, any allegation pertaining to claims of false authorship must be construed as a plea for relief under copyright law.

The district court accordingly dismissed Arthur Gensler Jr. & Associates Inc.'s false designation of origin claim, which was premised on allegations that its former employee, Jay Marshall Strabala, was committing a form of “reverse passing off” by claiming on his new firm's website that he “designed” a number of Gensler's high-profile projects.

The Shanghai Tower, which will be the second tallest building in the world when it is completed, is among the projects that Strabala took credit for on his new firm's website.

Since the Section 43(a) claim related to services, and not physical goods, it was barred by Dastar, the district court held.

“That conclusion misreads Dastar,” Judge Frank H. Easterbrook said. For one thing, Dastar's fixation on goods, rather than services, was due to the fact that the suit itself only involved goods. “The Supreme Court did not read ‘services' out of the Lanham Act,” the Seventh Circuit said.

Moreover, the Supreme Court's determination that there was no actionable Section 43(a) claim in Dastar was because the origin of the physical goods in question—video tapes—were correctly designated, the Seventh Circuit noted.

“Gensler, by contrast, does assert there has been a false claim of origin—though of services rather than goods,” the court said. “Nothing in Dastar forecloses such a claim.” The court said:

The district court thought that Gensler should have relied on copyright law rather than the Lanham Act, but Strabala did not make or sell copies of any plans or drawings in which Gensler claims a copyright. A false claim of authorship, without the making of copies (or some other act covered by 17 U.S.C. §106), is outside the scope of copyright law. Gensler's only plausible federal claim rests on §43(a).

Tushnet suggested that the court may have oversimplified the case.

“I don't think the Seventh Circuit deals head-on with the fact that the Supreme Court explicitly said that ‘origin' means physical origin, which in the case of services would seem to mean performing the services,” she said.

Policy Favors Affirming Dismissal

After determining that Gensler's Section 43(a) claim was not barred by Dastar, the court spent the remainder of its opinion proffering policy reasons for why Gensler probably should not ultimately prevail. Specifically, the court expressed concern that perhaps “this suit represents an effort by Gensler to conceal the fact that a designer of Shanghai Tower (and other big projects) has flown the coop.” The court said:

That fact is known, to be sure, but if Gensler wins this case other architects who leave will be required to keep mum about their accomplishments—and then it will be Gensler, not the departing architect, that is in a position to make a misleading presentation to a future client. If only “Gensler” and not any real person designs a building, the firm can never suffer from the departure of talented designers, because Gensler the corporation remains.

The court's skepticism was grounded in its belief that only highly sophisticated clients would contract for the complex designs on which both Gensler and Strabala specialize.

“People who pay millions for substantial projects (Shanghai Tower will cost more than $4 billion by the time it is finished in 2015) know full well that it takes an architectural team to design and execute the plans,” the court said. Thus, those clients are not likely to be mislead by statements that Strabala “designed” a particular high profile project, the court said. Rather, the clients will likely understand that Strabala was merely one of many individuals who assisted in the design of those projects, the court said.

The Seventh Circuit suggested that Gensler can only succeed if on remand the district court determines that the complaint established that Strabala's statements were fraudulent under the particularity requirements of Fed. R. Civ. P. 9(b).

“I agree with the policy rationales given in the opinion, but I note that most courts don't apply Rule 9(b) to 43(a)(1)(A) claims,” Tushnet said. “Arguably they should do so, but that's the legal holding that really deserved more attention in this opinion.”

Judges Richard Posner and Diane S. Sykes joined the opinion.

Gensler was represented by Susan Baker Manning of Bingham McCutchen LLP, Washington, D.C. Strabala was represented by Thomas D. Rosenwein of Glickman, Flesh & Rosenwein, Chicago.

Text is available at http://www.bloomberglaw.com/public/document/M_Arthur_Gensler_Jr_and_Ass_v_Jay_Strabala_Docket_No_1202256_7th_

To contact the reporter on this story: Tamlin Bason in Washington at tbason@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com