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When an architect’s drawings were used to complete a project by a different architect when the original project developer transferred the project to a new developer, the original architect successfully sued the new developer for the unauthorized use of his design documents. The original architect (“NSI”) performed professional services for the original developer (“Strutt”) in three separate phases. In the first phase, NSI delivered to Strutt a proposed letter agreement under which NSI agreed to develop a schematic building footprint for an assisted living center called Satyr Hill. Although Strutt never executed the agreement, both Strutt and NSI fully performed according to its terms.

Next, NSI submitted a proposed letter agreement to provide additional architectural services to develop the exterior elevations for the project and attend a zoning exception hearing. Again, all terms of this proposed agreement were performed by Strutt and NSI although Strutt never actually signed the agreement. After this, NSI created four architectural drawings depicting the building footprint, the floor plans, and the exterior elevations. These were incorporated by Strutt’s civil engineer into the development plan for the project and submitted to the zoning board which granted the request for a zoning exception.

While the zoning application was pending, NSI submitted a third proposed letter agreement to Strutt offering to create the design and working drawings for the remaining development of the project. This proposal stated,“If the above is acceptable, we will prepare a Standard AIA Agreement.” Consistent with its record, Strutt did not execute the letter agreement. Several months later, NSI submitted a revision to this proposed agreement along with a “revised AIA Contract for Satyr Hill Catered Living per our recent discussions.” The AIA Contract provided in relevant part that: “[t]he Architect’s Drawings, Specifications or other documents shall not be used by the Owner or others on other projects, for additions to this Project, or for completion of this Project by others unless the Architect is adjudged to be in default under this Agreement, except by agreement in writing and with appropriate compensation to the Architect.” Once again, Strutt failed to sign this agreement. One month later, Strutt advised NSI to cease performing services because Strutt’s potential business partner had backed out of the project and Strutt lacked sufficient expertise to go forward with the project alone.

In an interesting twist, Strutt asked NSI if it might know of any potential buyers of the project that could complete it. NSI then successfully solicited buyers on behalf of Strutt and as a result a group called “Morningside Development” took over. Ironically, however, Morningside decided to consider different architects to complete the project. NSI advised Morningside that if it did so it had no authority to use the NSI drawings without its express written consent. Morningside thereafter entered into a design-build contract for construction of the project and provided the design-builder (“Hamil Commercial”) with a copy of the NSI drawings. The design-builder in turn gave the drawings to its subcontracted architect (“EDG Architects”). Morningside then met with EDG and instructed it to avoid any modifications to the original plans and drawings that would necessitate obtaining a new zoning exception. After the project was completed, NSI Architects filed suit against Morningside alleging copyright infringement for unauthorized use of NSI’s design documents.
In their defense, the defendants argued that they could not be held liable because they had an “implied nonexclusive license” to use the NSI drawings. They argued that the totality of NSI’s conduct implied the existence of such a license. In analyzing whether such an implied license had been created, the court concluded that an implied license is created when three conditions are met, including “(1) a person (licensee) requests the creation of a work, (2) the creator (licensor) makes that particular work and delivers it to the licensee who requested it, and (3) the licensor intended that the licensee copy and distribute the work.”

The third element of this test was not met in this case, said the court, because NSI did not intend that its copyrighted drawings be used on the project for which they were created independent of NSI’s continued involvement. Nothing about NSI’s representations or conduct suggested that it intended either the original developer or Morningside to use its plans without NSI’s future involvement or express consent. In fact, NSI specifically advised Strutt to the contrary. The court made particular note of the fact that NSI submitted an AIA agreement to Strutt that stated NSI’s intention that its drawings not be further used without its express consent. For these reasons, the court held that NSI did not grant a implied license to the defendants to use its drawings.
Nelson-Salabes v. Morningside Development, 284 F.3d 505 (4th Cir. 2002).

Risk Management Note: Several lessons are learned from this case. It demonstrates the importance of using agreement forms such as those of the AIA that preserve the copyright interest of the architect. It demonstrates the importance of getting things in writing but shows that even when written agreements are not signed, the actions of the parties in performing in a manner consistent with the terms and conditions of the unsigned contract may be evidence of the contractual intent of the parties. Another issue is the importance of choosing clients that are financially sound and have experience with similar projects and contracts so that expectations may be managed and the project may be completed as anticipated by the design professional. Finally, it is somewhat surprising that the architect here apparently did not obtain any written assurances from Strutt before it assisted Strutt in finding another developer to buy the project, and that it likewise did not obtain any written assurances of the new developer, Morningside, before introducing it to the project.

This question of who owns the copyright is so important that it will be covered in greater detail in either a future issue of the ConstructionRisk.com Report or in the new Arch Insurance Group, “Design Professional Briefings.”

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 4, No. 8 (Sep 2002).

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