In the
United States Court of Appeals For the Seventh Circuit ____________________ Nos. 23-1527 & 23-2566 UIRC-GSA HOLDINGS, LLC, Plaintiff-Appellant, v.
WILLIAM BLAIR & COMPANY, L.L.C., and MICHAEL KALT, Defendants-Appellees. ____________________
Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 15-cv-9518 — Robert W. Gettleman, Judge. ____________________
ARGUED OCTOBER 26, 2023 — DECIDED JANUARY 12, 2024 ____________________
Before FLAUM, BRENNAN, and KIRSCH, Circuit Judges. BRENNAN, Circuit Judge. UIRC-GSA Holdings acquires and manages properties occupied by the U.S. government. Wil- liam Blair is a financial services company. Blair was helping UIRC with a bond offering when a third company undertook a similar offering. Both UIRC and the third company used cer- tain documents during the offering process. UIRC showed Blair its documents, which UIRC had copyrighted. When UIRC learned that Blair was involved in the similar offering, 2 Nos. 23-1527 & 23-2566
UIRC sued Blair for copyright infringement. Blair prevailed at summary judgment and the district court awarded Blair at- torneys’ fees under the Copyright Act. UIRC now appeals, ar- guing the district court erred when it ruled that UIRC lacked the requisite originality for valid copyrights in the documents and by awarding fees to Blair. UIRC did not independently draft much of the text in the documents, and the new text it drafted consists entirely of un- copyrightable material. The district court was correct to grant Blair’s summary judgment motion, and that court did not abuse its discretion by awarding Blair fees. I. Background UIRC acquires and manages properties leased to the U.S. General Services Administration. To acquire these properties, UIRC needs to raise money. But finding outside sources of capital is challenging for UIRC, as government-occupied rental property presents unique risks. For example, although the government is unlikely to fail to pay its rent, it often occu- pies an entire building; if it decides to leave, the building emp- ties immediately. UIRC came up with a strategy to pool a dozen GSA prop- erties, use the pool as security for a bond, then offer the bond to the market. By spreading the risks out across numerous properties, UIRC hoped the bonds would present a more ap- pealing investment opportunity. To facilitate the offering, UIRC produced two documents: a private placement memorandum (PPM) and an indenture of trust. PPMs advertise the bonds; trust indentures govern the bond issuer’s relationship with anyone who buys them. UIRC did not draft these offering documents from scratch. Nos. 23-1527 & 23-2566 3
One of UIRC’s lawyers emailed UIRC executives a copy of of- fering documents prepared by the Idaho Housing and Fi- nance Association (“Idaho”). The UIRC executives then used language from the Idaho documents in their own drafts. When UIRC’s first transaction closed in the summer of 2012, UIRC submitted the corresponding PPM and indenture of trust to the U.S. Copyright Office. The Copyright Office asked UIRC to clarify which parts of the bond documents re- flected “the author’s original text or substantial revisions to the preexisting text,” noting that courts have limited copy- rights in contractual agreements that way. UIRC clarified it wanted a copyright only in the “additional and revised text” it drafted, not the “standard legal language.” The Copyright Office approved the application with the limiting language. After a second, less successful, offering, UIRC decided to hire a placement agent to help it market the bonds. Enter Wil- liam Blair. Blair worked with UIRC on the third and fourth transactions. UIRC also copyrighted the additional and re- vised text in, as relevant here, the fourth transaction’s associ- ated offering documents. But trouble ensued. While Blair and UIRC were working on the fifth transaction, another company hired Blair to draft bond documents and find investors for a similar transaction. According to UIRC, the bond documents the third party used were strikingly similar to UIRC’s documents from the first and fourth transactions. They were so similar, in fact, that ref- erences to UIRC remained in the final documents. When UIRC learned about the similar transaction, it sued. Among its claims, UIRC alleged Blair copied original portions of the first and fourth sets of UIRC’s offering documents, 4 Nos. 23-1527 & 23-2566
infringing its copyrights in violation of the Copyright Act, 17 U.S.C. §§ 101 et seq. After discovery, Blair and UIRC moved for summary judgment. The district court granted Blair’s motion, deciding that UIRC’s offering documents could not be subject to copy- right protection. Key to the district court’s decision was that UIRC’s documents were “incredibly similar” to the Idaho documents. And the non-trivial language UIRC added—facts, short phrases, and functional language—could not be copy- righted. After final judgment, Blair as the prevailing party moved to recover its attorneys’ fees, permitted under 17 U.S.C. § 505. The district court applied the factors the Supreme Court en- dorsed for § 505 fees motions in Fogerty v. Fantasy, Inc., con- cluding at least three of the four factors weighed toward Blair. See 510 U.S. 517, 534 n.19 (1994). So, the district court granted Blair’s motion. UIRC filed separate appeals from the summary judgment and fees orders, which we have consolidated for considera- tion and decision. II. Copyrightability A plaintiff must prove two elements to establish copyright infringement. First, he must demonstrate he owns “a valid copyright.” Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). Second, he must show the defendant copied “constituent elements of the work that are original.” Id. Be- cause we resolve UIRC’s claim on the first element, we do not discuss the second. The Constitution empowers Congress to “secur[e] for lim- ited Times to Authors … the exclusive Right to their Nos. 23-1527 & 23-2566 5
respective Writings … .” U.S. CONST. art. I, § 8, cl. 8. Congress has exercised this copyright power, restricting the exclusive right of protection to “original works of authorship fixed in any tangible medium of expression … .” 17 U.S.C. § 102(a) (2023). To qualify for copyright protection, a work must be origi- nal to the author. Feist, 499 U.S. at 345. Originality is the glue holding copyright law together. An original work is one the author “independently created” and “possesses at least some minimal degree of creativity.” Id. But originality cannot bind everything. Ideas, methods of operation, concepts, and the like, no matter how independent and creative, are not copy- rightable. See, e.g., 17 U.S.C. § 102(b). UIRC did not independently create most of the language in the documents at issue. Instead, it copied much of the lan- guage from the Idaho materials. We agree with the district court that the language UIRC did draft lacks the creative ex- pression required for copyright protection. It is either facts, fragmented phrases, or language dictated solely by functional considerations. A. To support a valid copyright, a writing must be inde- pendently created. Feist, 499 U.S. at 345. There must be “suffi- cient nontrivial expressive variation” in the writing in ques- tion, so as “to make it distinguishable from [an] underlying work in some meaningful way.” Schrock v. Learning Curve Int’l, Inc., 586 F.3d 513, 521 (7th Cir. 2009) 1; see Nova Design
1 Schrock is a derivative-use case. See id. at 518. When an author com-
bines “preexisting material in which copyright subsists” and some “mate- rial contributed by the author,” the author’s additions can support a 6 Nos. 23-1527 & 23-2566
Build, Inc. v. Grace Hotels, LLC, 652 F.3d 814, 818 (7th Cir. 2011). Outright copying, thus, obviates originality. Feist, 499 U.S. at 345. Independent creation is a short hurdle, but it still matters. For example, consider photographs of Thomas & Friends train characters, which this court held were distinguishable from the characters themselves. Schrock, 586 F.3d at 522. The photographer’s “angle, perspective, lighting, and dimension” supplied the variation making them copyrightable. Id. The copyright was “narrow,” but it was a copyright nonetheless. Id. An influential treatise uses a different visual art form— painting—to explain distinguishable variation. See 1 NIMMER ON COPYRIGHT § 2.01(A)(1). Suppose an art student creates a master copy of a Rembrandt. His canvas mirrors the original to the last brushstroke (an artistic accomplishment on its own). But “he has not produced anything that ‘owes its origin’ to him … .” Id. (quoting Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 58 (1884)). Authorship is what copyright demands. Id. Or, consider the Supreme Court’s tale of two poets. See Feist, 499 U.S. at 345–46. “[E]ach ignorant of the other,” they write identical poems. Id. at 346. Both are copyrightable even though neither is novel. Unlike the Rembrandt imitator, the
copyright. 17 U.S.C. § 103(a), (b) (2023). We do not discuss that nook of copyright law here. Instead, we end the analysis by holding that UIRC’s copyright is invalid. Regardless, for purposes of independent creation, the fact that Schrock is a derivative-use case is not important—“the originality requirement for derivative works is not more demanding than the origi- nality requirement for other works … .” 586 F.3d at 521. Nos. 23-1527 & 23-2566 7
poets have established authorship by creating something en- tirely of their own. UIRC and Idaho are unlike these two poets. UIRC has ad- mitted to knowing the Idaho documents existed. And if Idaho is Rembrandt, UIRC is the art student: much of the language UIRC highlights in its copyrighted documents is indistin- guishable from language Idaho created. 2 Where they differ, most of UIRC’s nuances are “[]trivial … variations,” wholly unlike the toy photographer’s perspective and lighting. Schrock, 586 F.3d at 521. Consider three highlighted sections from UIRC’s docu- ments. First, UIRC highlighted Article V, Section 5.01 in its indenture of trust for the fourth bond offering. The only dif- ferences (besides formatting) between Section 5.01 in Idaho’s indenture of trust and that same section in UIRC’s document are nine substitutions of “Project” for “Properties”; a change from “Borrower” to “Issuer”; and a new clause reading, “and initial funding of reserves for the Bonds.” Even the section number is the same. Second, in the final PPM for its fourth offering, UIRC high- lighted Sections 3(b), 4, and 5 (among others) under “Pledge of Trust Estate.” Again, UIRC uses the highlighter to lasso every word composing these paragraphs. But here UIRC made only one change to Idaho’s version: it ended section 5 with a period, and Idaho used a semicolon. Third, consider the “Application of Revenues” sections— specifically, the paragraphs of UIRC’s PPM for its first
2 In its filings in the district court, UIRC used a highlighter to indicate
the copyrighted sections of its documents. 8 Nos. 23-1527 & 23-2566
transaction concerning the order of payments. In this section, UIRC describes how the trustee will distribute money to the various accounts or funds and for what purposes and how the trustee and issuer can use the remaining money. UIRC ex- plains it had to draft the payment flow exactly as it did to as- sure bondholders that “problems at one of the … properties would not materially affect” their security. Idaho has a similar section. As UIRC explains it, this is the most important aspect of its bond structure. Although this is perhaps UIRC’s best claim to originality, it still fails. See also infra II(B). The trivial variations persist in the version of the Applica- tion of Revenues section in the PPM for UIRC’s first transac- tion. In one paragraph, UIRC deletes one deadline; switches out “following” for “after” and “with” for “in”; and swaps a second deadline with its own. In another paragraph, it simply replaces “Expense Fund” with “Administrative Expense Fund” and “S&P” with “NAIC.” Small variations aside, UIRC did contribute new, substan- tive material to this Application of Revenues section. Rather than disqualify the whole document, copyright law may still protect what UIRC contributed. Nova Design Build, 652 F.3d at 818; Pickett v. Prince, 207 F.3d 402, 405 (7th Cir. 2000); Merritt Forbes & Co. Inc. v. Newman Inv. Sec., Inc., 604 F. Supp. 943, 951, 953 (S.D.N.Y. 1985) (considering copyrightability of a bond document, but denying summary judgment motion because originality is genuine issue of material fact, and explaining that “new elements” of a copied work are the only ones “pro- tected by copyright”). In Nova Design Build, Inc. v. Grace Hotels, a design company claimed that a hotel conglomerate infringed its copyrights in its architectural designs. 652 F.3d at 815–16. Grace Hotels and Nos. 23-1527 & 23-2566 9
Nova had agreed to work together on a new Holiday Inn Express, with Nova supplying the designs. Id. at 815. The agreement fell apart, and, after Grace built the hotel, Nova sued, alleging Grace used its designs anyway. Id. at 816. This court sided with Grace. Id. at 818. Nova’s designs were gener- ally based on the Holiday Inn Express prototype. But some of its designs contained “added features,” such as an extra floor, which lacked originality. Other features “were specifically re- quested by Grace.” The court concluded that “there was no creative element to these features” warranting copyright pro- tection. Id. This is the approach we take here. UIRC cannot use the highlighter to make Idaho’s contributions disappear. But cop- ied language does not de facto taint the whole work. Thus, we next consider whether the Copyright Act can protect the un- copied material. B. After excising the copied language, what remains is a mix- ture of fragmented phrases, facts, and language dictated solely by functional considerations. Fragmented phrases and facts are not copyrightable. Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539, 547 (1985) (facts); Alberto-Culver Co. v. Andrea Dumon, Inc., 466 F.2d 705, 711 (7th Cir. 1972) (short phrases and expressions). Language dictated solely by function is not copyrightable either. Publ’ns Int'l, Ltd. v. Mere- dith Corp., 88 F.3d 473, 480, 481 (7th Cir. 1996). As above, we return to the Application of Revenues sec- tions of the PPM for UIRC’s first transaction. Some of UIRC’s more substantive contributions are facts or fragmented phrases. For example, it replaced some of Idaho’s language 10 Nos. 23-1527 & 23-2566
with “Mortgage,” “Assignment of Lease,” and “Collateral As- signment of Rents” in a list of legal documents in the opening paragraph of the section. Elsewhere, it added the phrase “the Loan Agreement obligates the Borrower to (and the Issuer shall cause the Borrower to)” to Idaho’s language in the first paragraph of the section. Other contributions are more sub- stantial. For example, although UIRC used some of Idaho’s language for the payment order section discussed above, UIRC re-sequenced the paragraphs, creating a different order. And the order matters. But here, and wherever UIRC made substantive additions, it was not creative expression. Rather, UIRC was responding to the demands of function. Two key cases illustrate how functional additions differ from creative additions. First, in Publications International, Ltd. v. Meredith Corp., a publisher argued that it had a copyright in a series of recipes, but the recipes amounted to a list of ingredients and step-by- step instructions for making the dishes. See 88 F.3d at 475, 480. This alone could not support a valid copyright. Id. at 480. Without any “expressive elaboration upon [their] functional components,” the recipes were “barebones,” nothing more than “the directions for producing a certain dish.” Id. at 480, 481; see 1 NIMMER, supra, § 2A.13. Considering the definition of a “recipe,” this court concluded that, at its most fundamen- tal, a recipe is an uncopyrightable “‘procedure, process, [or] system.’” Publ’ns Int'l., 88 F.3d at 481 (quoting 17 U.S.C. § 102(b)) (alteration in original). Had the publisher com- mented on the history of the recipe or provided wine pairings, for example, it could copyright the recipe. See id. So too here. UIRC included no expressive elaborations, choosing instead to present its idea to potential investors with Nos. 23-1527 & 23-2566 11
the formal technicality common to bond documents. Bond documents are, at their foundation, barebones descriptions of the offering and terms and conditions. See, e.g., Prospectus, BLACK’S LAW DICTIONARY (11th ed. 2019); Indenture/corporate indenture, BLACK’S LAW DICTIONARY (11th ed. 2019). 3 Without any elevating creativity, the documents consist of little more than an uncopyrightable “method of operation” or “process.” 17 U.S.C. § 102(b) (2023). UIRC gives some insight into its drafting process. Even though there were other ways UIRC could explain the pay- ment of order flows provision, it wrote the provision exactly as it did to assure bondholders that their security would be safe. For example, when the second bond offering was less successful, UIRC cited “changes it made to its bond docu- ments.” An author’s decision to phrase things one way may in some cases be evidence of creative expression. In American Dental Ass’n v. Delta Dental Plans Ass’n, for example, the crea- tivity in a taxonomy of dental procedures was the author’s classification and explanation after “the fundamental scheme ha[d] been devised.” 126 F.3d 977, 979 (7th Cir. 1997). But in American Dental, and unlike here, functional demands did not constrain the taxonomist’s prosaic choice. In the second key case, Incredible Technologies, Inc. v. Virtual Technologies, Inc., this court rejected a copyright infringement
3 See also Boyle v. Stephens, Inc., No. 97 Civ. 1351 (SAS), 1998 WL 80175,
at *5 (S.D.N.Y. Feb. 25, 1998) (“[P]laintiff’s copyright does not preclude others from also describing … fund characteristics … . Otherwise, plaintiff could prevent competitors from fully describing the mutual fund concept in a prospectus or other selling materials … .”). 12 Nos. 23-1527 & 23-2566
claim in the markings on an arcade cabinet’s control panel. 400 F.3d 1007, 1014, 1013 (7th Cir. 2005). Incredible Technolo- gies made the Golden Tee arcade game. Id. at 1009. Virtual Technologies decided to make a competing arcade game— PGA Tour Golf. Id. Virtual Technologies wanted to make a game very similar to Golden Tee. Id. at 1010. So it purchased a Golden Tee cabinet and hired a firm to design a game that could fit seamlessly within IT’s preexisting system. PGA Tour Golf’s control panel, unsurprisingly, turned out “nearly iden- tical” to Golden Tee’s. Id. The panels consisted of a trackball in the center (a “golfer” “swings” by rolling it), arrows around the trackball, a horizontal graphic demonstrating flight paths (indicating the direction the “ball” would move), five buttons around the trackball, and textual instructions. Id. at 1010, 1013. This court ruled that IT’s control panel was not subject to copyright protection because practical, non-creative reasons governed IT’s choices. Id. at 1013. First, the control panel’s lay- out was “dictated by functional considerations.” Id. at 1014. The trackball must have been in the middle so both left- and right-handed golfers could use it. Second, IT situated the but- tons “for purposes of convenience”; this choice “cannot be said to be expressive.” Third, an arrow is not “imaginative or creative,” even though “something other than an arrow could have been used to indicate direction.” Id. Here, UIRC may have chosen its language carefully, but as in Incredible Tech- nologies, its choices were driven by convenience and function, not creativity. So, we hold that UIRC’s documents are not en- titled to copyright protection. Nos. 23-1527 & 23-2566 13
C. Before turning to attorney’s fees, we review four final points. First, UIRC’s bond documents could resemble advertise- ments, which “are clearly copyrightable.” 1 NIMMER, supra, § 2A.08(G)(4). Even if the bond documents were advertise- ments, the fact that a writing advertises a product does not make it per se copyrightable. The question remains whether the work has some spark of creative expression. See id. (whether content is dictated solely by functional considera- tions is still relevant issue in advertising context). As an ad- vertisement or as a legal instrument, the uncopied parts of the bond documents are not creative enough. Second, just as Publications International did not hold that recipes are per se uncopyrightable, we do not hold that bond documents are per se uncopyrightable. See 88 F.3d at 482. Le- gal documents could be copyrightable just as paintings are. See generally 1 NIMMER, supra, § 2A.11. And although legal documents are hardly works of art, the Supreme Court di- vorced meritoriousness and creativeness more than 100 years ago. See Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 251–252 (1903). Third, UIRC relies on Seng-Tiong Ho v. Taflove to argue it can copyright the “arrangement, expression and manner of presentation” of its documents. 648 F.3d 489, 499 (7th Cir. 2011) (quotations omitted). In Taflove, a professor and a grad- uate student sued another professor and graduate student, claiming copyright infringement of a mathematical model. Id. at 493–94. The plaintiffs in Taflove argued that the model’s equations and figures, as well as the text describing the 14 Nos. 23-1527 & 23-2566
model, were subject to copyright protection. Id. at 494, 500. Because their idea could be expressed in only one way, a cop- yright over that expression is invalid, so the court ruled for the defendants. Id. at 498, 500. But UIRC focuses on a different part of the opinion. The Taflove plaintiffs relied on a Seventh Circuit case ensuring au- thors protection over the “arrangement, expression and man- ner of presentation” of mathematical data. Id. at 499; see Flick- Reedy Corp. v. Hydro-Line Mfg. Co., 351 F.2d 546, 548 (7th Cir. 1965). But the Taflove court found that case to be about the style of the writing, not its words. Taflove, 648 F.3d at 499. And the Taflove plaintiffs did not argue that “the defendants ap- propriated their creative presentation” of their research, but that the defendants “copied the substance of the equations, fig- ures and text.” Id. The same is true here. UIRC focuses not on “such aspects as the color or font” of its documents but on the language it used. Id. It cannot shoehorn substance into caselaw addressing style. Fourth, UIRC points out that witnesses described the doc- uments as “creative,” which it bears as a stone and sling sure to outmatch our precedent. But “an expert may not offer legal opinions,” so we need not consider this testimony further. Jimenez v. City of Chicago, 732 F.3d 710, 721 (7th Cir. 2013). Having decided that the district court did not err by awarding summary judgment to Blair, we turn to UIRC’s ap- peal of the district court’s fees decision. III. Attorneys’ Fees UIRC disagrees with the district court’s award of $1,531,611.75 in attorneys’ fees to Blair under the Copyright Act’s fees provision. “In any civil action” under the Copyright Nos. 23-1527 & 23-2566 15
Act, a court “in its discretion” may “award a reasonable attor- ney’s fee to the prevailing party … .” 17 U.S.C. § 505 (2023). Accordingly, we will reverse only if the district court abuses this discretion. Sullivan v. Flora, Inc., 936 F.3d 562, 575 (7th Cir. 2019). An abuse of discretion is “an erroneous conclusion of law, a record that contains no evidence rationally supporting the court’s decision, or facts that are clearly erroneous as the district court found them.” LHO Chicago River, L.L.C. v. Rosemoor Suites, LLC, 988 F.3d 962, 967 (7th Cir. 2021). The Supreme Court has permitted courts to use four fac- tors to “guide [their] discretion.” Fogerty, 510 U.S. at 534 n.19. The factors are: (1) the frivolousness of the suit; (2) the losing party’s motivation for bringing or defending against a suit; (3) the objective unreasonableness of the claims advanced by the losing party; and (4) the need to advance considerations of compensation and deterrence. Live Face on Web, LLC v. Cremation Soc’y of Illinois, Inc., 77 F.4th 630, 631 (7th Cir. 2023) (citing Fogerty, 510 U.S. at 534 n.19)). Ultimately, “there is a strong presumption that prevailing defendants may recover costs.” Design Basics, LLC v. Kerstiens Homes & Designs, Inc., 1 F.4th 502, 508 (7th Cir. 2021). When we have reversed a district court’s entry of § 505 fees, we have done so because the district court failed to consider the Fogerty factors or reached an obviously wrong result when consider- ing them. See Mostly Memories, Inc. v. For Your Ease Only, Inc., 526 F.3d 1093, 1099 (7th Cir. 2008); Eagle Servs. Corp. v. H2O Indus. Servs., Inc., 532 F.3d 620, 623 (7th Cir. 2008). 16 Nos. 23-1527 & 23-2566
The district court considered all four factors and did not abuse its discretion in awarding fees to Blair. First, the court held UIRC failed to rebut the presumption in favor of Blair on the first factor (frivolousness). Second, the court assumed that UIRC won the second factor (improper motive) without much discussion. Third, the court sided with Blair on the third fac- tor (objective unreasonableness of the claim). The district court found UIRC’s decision not to be forthcoming about the Idaho documents, either earlier in the litigation or before the Copyright Office, problematic. Fourth, similarly, the court sided with Blair on the fourth factor (advancing considera- tions of compensation and deterrence) because of UIRC’s fail- ure to disclose. Finally, Blair has requested that we extend the district court’s fee order to the attorneys’ fees it incurred defending this appeal. We invite Blair to move for those fees with the appropriate substantiation within 30 days of the date of this decision, after which UIRC will have 15 days to respond. IV. Conclusion UIRC did not have a valid copyright in the bond docu- ments it alleges Blair copied. Much of its language is indistin- guishable from the language Idaho used in its documents, and the nontrivial additions are not copyrightable. To boot, the district court properly weighed the Fogerty factors, so it did not abuse its discretion in awarding fees to Blair. We therefore AFFIRM the district court’s decision to enter summary judgment for Blair and to award Blair fees.