Edgenet, Inc. of Waukesha, Wisconsin had filed a copyright infringement lawsuit in the Eastern District of Wisconsin alleging that Home Depot of Atlanta, Georgia infringed the copyrighted work BIG HAMMER MASTER COLLECTION TAXONOMY , which has been registered by the US Copyright Office.
Home Depot had contracted with Edgenet to develop a “taxonomy” which is essentially a method of categorizing different types of products. The parties successfully worked together for several years, but at some point Home Depot decided to develop their own taxonomy in-house that was built upon Edgenet’s system. At that point, Edgenet caught wind and filed to copyright its taxonomy, calling it Big Hammer Master Collection Taxonomy. Home Depot offered Edgenet $100,000 for a perpetual license and informed Edgenet that it would discontinue using its services. Edgenet, however, declined the check and filed suit alleging copyright infringement. In an opinion by Judge Easterbrook, the Seventh Circuit Court of Appeals found that Home Depot had not infringed the copyrighted work. The court found Home Depot had a right to use the intellectual property pursuant the parties’ contract, which did not limit types of uses.
Practice Tip: In this case, the Court of Appeals asked for supplemental briefing because it was not sure whether the federal courts would have jurisdiction over the case. The court noted that federal jurisdiction is available if the case involves a federal question (28 U.S.C. 1331) or if there is diversity of citizenship. Since both corporations were registered in Delaware, diversity of citizenship was not available. The question the court was concerned with was whether this was simply a contract dispute, which would be a state law question, or whether the controversy was really copyright infringement, a federal question. The court noted the T.B. Harms doctrine, which states that “the fact that a copyright is a contract’s subject matter does not change the status of a claim that arises under the contract.” According to the court, the supplemental briefs confirmed that the controversy was a copyright infringement claim.