Merit Homes, LLC v. Joseph Carl Homes, LLC

A nonexclusive license can be granted without a written conveyance.

Opinion (McNamee): Merit Homes was a member of Arboleda Ranch, LLC (“Arboleda”), the developer of a residential real estate project in Phoenix, AZ. To finance the development, Arboleda singed a loan agreement with National Bank of Arizona (“NBA”) that required Arboleda to give NBA its rights in the construction plans and specifications, as well as the right to take over and complete construction, as collateral. After obtaining financing, Merit contracted with the Felten Group (“Felten”) to design the plans and specifications for the development. Arboleda defaulted on the loan, and NBA auctioned the collateral with the bank being the highest bidder. Thereafter, Joseph Carl Homes (“Holmes”) entered into an agreement to finish the project. Ten months later, Merit filed and obtained a registered copyright on the plans, and sued Holmes for infringing that copyright. Recognizing that, unlike an exclusive license, a nonexclusive license can be granted without a writing if the owner’s conduct manifests an intent to grant the license, the district court applied a three part test to determine if a nonexclusive license had been granted by Merit to Arboleda. Finding that Merit contracted with Felten for the plans on behalf of Arboleda, and intended that Felten copy and distribute the work without the Arboleda’s further involvement, the court found that Arboleda had an implied, nonexclusive license to use the plans, which could be seized by the bank and transferred to Holmes following Arboleda’s default. It, therefore, GRANTED Holmes motion for summary judgment.