“It Wasn’t Me, It Was Lil Johnny!” Wisconsin District Court Holds Third-Party Publication Triggers Prior Publication Exclusion

In Design Basics LLC v. J & V Roberts Investments, Inc., No. 14-cv-1083-JPS, 2015 U.S. Dist. LEXIS 121372 (E.D. Wis. Sept. 11, 2015), the United States District Court for the Eastern District of Wisconsin determined, in pertinent part, that in a case involving allegations of copyright infringement, a commercial general liability insurer, Acuity A Mutual Insurance Company (Acuity), had no duty to defend because the prior publication exclusion barred coverage. The dispute arose when the plaintiffs, who are engaged in the business of publishing and licensing architectural plans and designs, sued J & V Roberts Investments, Inc. and James Roberts (collectively “the defendants”) for violations of the Copyright Act and Digital Millennium Copyright Act.  The defendants, who are in the business of marketing, constructing, and selling residential homes, allegedly infringed eight of the plaintiffs’ copyrighted architectural plans.  The defendants did not receive a license or authorization from the plaintiffs to use those architectural plans.  The homes built by J & V Roberts between 1989 and 2009 were based upon licensed plans received from Wausau Homes.  Notably, one of the plans licensed from Wausau was called the “Brookhaven,” an allegedly infringing plan.  The other seven plans were allegedly designed for J & V Roberts.  Plaintiffs, however, allege that the designs used by the defendants were in violation of their copyrights since 2002.  Plaintiffs first became aware of defendants’ violations in 2011 when they noticed that the website maintained by J & V Roberts prominently included their designs. Acuity, which had issued CGL and excess policies to J & V Roberts between 2001 and 2005, intervened in the action.  Acuity filed a motion for summary judgment seeking a ruling that it did not have the duty to defend or indemnify the defendants.  Significantly, plaintiffs only sought coverage for infringement of the “Brookhaven” plan in 2002 because the seven other infringing plans were not created until after the termination of the Acuity policies.  Acuity argued that the prior publication exclusion barred coverage because it was undisputed that Wausau Homes published the Brookhaven plan in 2000, before the inception of the first Acuity policy.  The plaintiffs countered that the exclusion was inapplicable since the publishing was done by Wausau Homes, an unrelated third-party.  The court, noting that this was an issue of first impression in Wisconsin, reviewed Seventh Circuit case law and determined that the exclusion was unambiguous and, therefore, did not except publishing done by a third-party.  This case has obvious tension with the groundbreaking Sony data breach decision out of New York, which holds that the insured, and not a third-party, must affirmatively and purposefully publish the offending material.  If appealed, how the Seventh Circuit resolves this question may have significant implications for Coverage B jurisprudence.

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