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Triable Issues of Fact Remain in Case Over Ownership of Manipulable Virtual Rooms

Friday, November 1, 2013
By Anandashankar Mazumdar

Oct. 30 --Triable questions of fact existed as to whether a defendant in a copyright infringement proceeding had exceeded the terms of a one-year license to use digitally manipulable images of virtual rooms used to display the appearance of different kinds of carpeting and flooring, the U.S. District Court for the Eastern District of Tennessee ruled Oct. 23 ( Virtual Studios, Inc. v. Hagaman Indus., Inc., E.D. Tenn., No. 1:12-cv-00054-CLC-WBC, 10/23/13).

Largely denying the defendant's motion for summary judgment in favor of the defendant, the court did however grant summary judgment with respect to several state law claims that were found to be pre-empted by federal law.

Digital Rooms Used to Display Carpets, Floors

Virtual Studios Inc. of Dalton, Ga., supplies services to carpet and flooring manufacturers in the form of virtual images of rooms that display what the carpeting and flooring in question would look like in use. The graphics are based on photographs of rooms in studios and other places and then are manipulated by Virtual's graphic designers so that many different kinds of flooring or carpeting can be displayed without creating real-life scenes each time and photographing them.

Hagaman Industries Inc. of Fort Oglethorpe, Ga., is a carpet maker that engaged Virtual's services and Virtual offered Hagaman non-exclusive access to a room scene for a year, reserving to Virtual the exclusive right to manipulate the image. The conditions were set forth on the back of all invoices sent to Hagaman, the final one paid in December 2004.

In 2006, Virtual Studios discovered that Hagaman had continued to use the images online, in catalogues, and in in-store displays. Virtual contacted Hagaman setting forth its claim of copyright over the images, but Hagaman continued to use them through 2012. Virtual registered its copyright interest in the works in 2008.

Hagaman asserted that it retained the ownership of the images and that Virtual had agreed to this condition. Hagaman also said that it had been granted an unlimited access to the images, not just for a year.

In February 2013, Virtual Studios sued Hagaman, alleging copyright infringement, as well as breach of contract and unjust enrichment under Tennessee state law. Virtual conceded that the state law claims were pre-empted by the Copyright Act.

Hagaman moved for summary judgment, arguing that it had not agreed to a one-year license. Hagaman also argued that the claims were barred by the Copyright Act's statute of limitations. Furthermore, Hagaman argued that any infringement that might have occurred was innocent and not willful.

Outstanding Fact Questions Exist

Judge Curtis L. Collier first found that there was a triable outstanding question of material fact regarding whether Hagaman had agreed to a one-year license and thus could not resolve the matter at the summary judgment stage.

Regarding the statute of limitations, the court agreed with Virtual that it could seek recovery for any infringement that had taken place after February 2009. The court also rejected the laches argument, noting that Virtual did indeed have potential claims within the statute of limitations.

The court also declined to rule on whether statutory damages were unavailable with respect to some images because registration had taken place after the alleged infringement. Finally, the court found that a triable question existed regarding whether Hagaman's infringement, if it had indeed infringed, was innocent or non-willful.

Thus, the court granted summary judgment in favor of Hagaman only with regard to the state law claims, which were pre-empted by the Copyright Act.

Virtual Studios was represented by McKinley S. Lundy Jr. of Patrick, Beard, Schulman & Jacoway P.C., Chattanooga, Tenn. Hagaman was represented by Alicia Brown Oliver and Hugh J. Moore Jr. of Chambliss, Bahner & Stophel P.C., Chattanooga.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

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


Text is available at http://www.bloomberglaw.com/public/document/Virtual_Studios_Inc_v_Hagaman_Industries_Inc_Docket_No_112cv00054.

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