J. Kent Holland, Jr.

The question of who will own a design professional’s instruments of service is one issue of great concern when I review professional services contracts that design professionals are being pressed to sign by project owners.  Standard form agreements such as those of the AIA and EJCDC state that designer maintains ownership and copyright of the documents – with a license being granted to the project owner to use them for its project.  When project owners draft their own agreements, however, they sometimes change the normal language concerning the plans and drawings (Instruments of Service) to state that copyright will be given exclusively to the project owner instead of to the design firm.   When confronted with this request, parties need to carefully consider what is really appropriate, and what protections, including payment and indemnification will be granted to the design firm in the event of reuse of the documents.  Two federal circuit court cases decided in 2006, which are briefly discussed below, provide practical guidance concerning copyright infringement of design documents.

Ordinary Observer Test to Determine Substantial Similarity

A firm, T-Peg, Inc.,  that sells complete packages for timber frame homes (including design plans and construction materials) provided preliminary plans for construction of a house to its client, landowner, which were used by the owner to obtain a building permit. After receiving its building permit the owner advised T-Peg that it was not going to purchase the package and it failed to pay the balance of what it owed for the preliminary plans.  Subsequently, the owner had another firm that had no in-house architects build a timber frame house using a design that looked similar to T-Pegs plans.   T-Peg sued the owner and its new firm for copyright infringement.  Summary judgment was granted for the owner by the trail court but this was reversed on appeal, with the court holding that the trail court had failed to make an appropriate comparison of the designs.  According to the Court, “the overall form as well as the arrangement and composition of spaces and elements in the design” could be considered by a reasonable jury to find substantial similarity.  This is called the “ordinary observer” test.  T-Peg, Inc. v. Vermont Timber Works, Inc., 459 F.3d 97. (1st Cir. 2006).

Owner Violated License Agreement by Reusing Plans without Prior Approval

A developer’s licensing agreement with its architect allowed it to use the architect’s plans for a single project, with reuse permitted only by first obtaining the architect’s written authorization and paying a reuse fee, plus a per unit fee.  When the developer subsequently asked the architect for permission to reuse the plans on another project, the architect asked the developer to execute a new licensing agreement for the reuse.  The developer refused to sign the new agreement and asserted that it would instead rely on the original agreement, paid the “per-unit fee” and proceeded to use the plans for its new development.  The developer did not pay the “base reuse” fee referenced in the original agreement, nor did it obtain the architect’s express written approval for reusing the plans.  The architect sought a preliminary injunction which was denied by the trial court in part because the new development was already complete and the developer stated it would not reuse the plans in the future.  In reversing the trial judge’s decision, the appellate court focused on the failure of the developer to obtain the required written permission for reuse and the apparent lack of good faith in proceeding with construction prior to obtaining that permission.  LGS Architects, Inc. v. Concordia Homes of Nevada, 434 F.3d 1150 (9th Cir. 2006).

Copyright 2007, ConstructionRisk.com, LLC

Publisher & Editor:
J. Kent Holland, Jr., Esq.