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Publications:
How to avoid litigation over architectural drawings
Chicago Daily Law Bulletin
04/22/11
This is bad news for owners, design professionals, contractors, lenders and tenants and virtually everyone else involved in a construction project.
Despite the best efforts of the major players, some disputes are hard to predict and prevent. Disputes concerning architectural drawings, however, are clearly foreseeable and frequently preventable.
They continue to arise with some regularity due in part to one fundamental misunderstanding. Some owners assume that if they pay for the architectural drawings, they own them, regardless of what the contract provides or whether they even have a written contract with the design professional. More often than not, this assumption proves incorrect.
In understanding this area, vocabulary is extremely important. Commonly used forms in the construction industry use the term “Instruments of Service” to describe the architect’s work product. Instruments of Service include more than the final construction drawings and specifications. They also include the design professional’s preliminary work product as well as refinements to the construction drawings as the project progresses.
In avoiding conflicts over the Instruments of Service, it is also helpful to have some knowledge of copyright law. The Copyright Act provides that the “author” of the copyrightable work, who may not always be the party who commissioned it, owns its copyright. It doesn’t matter who paid for it.
If the creator of the work is an employee of the owner, however, then it is most likely a work-made-for-hire, and the employer is the author and, thereby, the owner of the copyright. While this sometimes happens, it is uncommon on construction projects.
Likewise, the commissioning party will be the author and owner of the copyright as a work-made-for-hire if the parties sign such a work-made-for-hire agreement and the work falls into certain categories. Architectural drawings, however, do not.
The right of the owner to use the Instruments of Service will be dictated by the agreement between the owner and the design professional. The parties may sign a written agreement that vests ownership of the copyright in the Instruments of Service in the owner. However, most design professionals refuse to part with the copyright and prefer to use forms like the American Institute of Architects (AIA) Owner Architect standard agreements (for example, the AIA B100), which provides that the architect owns the copyright in the Instruments of Service.
AIA is a professional association of architects. Naturally, this form provides that the architect owns the copyrights in his work product.
It is not unusual for design professionals to begin rendering services and even providing copies of drawings to the owner without a written agreement. If the parties never consummate a written agreement, the rights of the owner in the Instruments of Service are, at best, murky.
Yet, some owners delay or even refuse to sign any agreement relying on the false assumption that payment equals ownership of the copyrights to the Instruments of Service. In some cases, the parties may have a written agreement, but the owner’s rights are unclear or incomplete. In such cases, what can the owner do with those drawings? Principally, can the owner reproduce the Instruments of Service and provide copies to contractors, subcontractors and material suppliers or permit a replacement design professional to finish them?
If the parties don’t have a clear written agreement, the owner, nonetheless, may have an oral or implied, nonexclusive license to use the Instruments of Service. An owner who refuses or neglects to pay the design professional’s fee probably has no rights to use the Instruments of Service.
Not surprisingly, implied license cases reach different results depending on individual facts and circumstances. In these cases, the courts generally analyze what the design professional intended; not what the owner expected. For example, in one 7th U.S. Circuit Court of Appeals case, the court found an implied license where the dismissed architect wrote a letter expressing his wish that his work product be incorporated into the final project.
Cases with such facts are rare and owners who proceed without a clear written contract do so at their own peril. An owner without a right to use the Instruments of Service, or who exceeds the grant of a licensed use, may be guilty of copyright infringement.
Copyright infringement cases are notoriously expensive to litigate and sometimes lead to attempts to shut down the project.
Everyone in the construction process benefits if the owner and design professional negotiate and sign an agreement, which coherently addresses the legitimate and, sometimes, competing interests of both parties.
While most owners and design professionals probably agree that they need a contract, they don’t always agree on its terms. Many architects start with the AIA forms. The basic AIA B100 form, published in 2007, for example, provides that (1) the architect owns the copyright in the Instruments of Service and (2) the owner (who has paid the architect’s fee) has a license to use them to complete, maintain and alter the project.
The AIA revises its forms every 10 years. The 1997 version of a similar form made no mention of an owner’s right to use the Instruments of Service to construct an addition to the project. For many owners, this was a glaring omission which has now been corrected.
The owner, under neither the 1997 or 2007 versions may use the Instruments of Service on other projects. Obviously, this would be inappropriate for an owner who wanted to use the Instruments of Service as a prototype, say for a chain of substantially similar restaurants, retail stores or hotels.
While the owner under the current version may terminate the architect for “convenience” (which means for any reason), the form provides that the owner pay the architect a fee for the right to use the Instruments of Service to complete and maintain the project. The form provides a space to insert the agreed upon amount. Payment of the fee, however, does not give the owner the right to use the Instruments of Service to construct an addition.
Sometimes the parties omit the fee amount. This may result from inadvertence or possibly an inability to agree on the fee. If the parties are unable to agree while negotiating the contract, it will likely be many times more difficult after the owner has fired the design professional.
While the AIA forms prohibit the owner from using the Instruments of Service on other projects, they impose no similar restriction on the architect. This may come as an unwelcome surprise to an owner who thought he was getting a one of- a-kind building.
The AIA approach may be well suited for many projects, but it may present significant difficulties for others. The parties need to analyze their needs and make sure they are addressed in an appropriate contract. A motivated owner, by offering a proper incentive, may be able to overcome the design professional’s reluctance to grant a more expansive license or even copyright assignments of the Instruments of Service.
Owners must also realize that design professionals have legitimate concerns where their Instruments of Service are used by someone else to complete the project. These concerns are generally addressed by an indemnification and hold harmless provision.
Reprinted with permission of the Law Bulletin Publishing Company.
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