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Copyright Problems for the Unwary Real Estate Developer

Real estate lawyers take head. Waiting in the tall grass of your client’s real estate development project may be a thorny copyright issue that could cost your client all of the profit it earned on the project, and would probably buy you a serious malpractice claim.

In the course of developing a real estate project, whether it is a residential community or a commercial project, a central component of the project is the architectural plan. Unless the developer (and the developer’s counsel) are aware of how the Copyright laws affects what the developer can (and more importantly, can’t) do with the plan, the developer may find itself on the receiving end of a Copyright infringement lawsuit. Why? Because an architectural plan, as well as other architectural works, are protected under Copyright laws, and these laws govern who owns the plans and what can and can’t be done with the plan.

Scope of Protection Granted Architectural Works

In 1990, Congress enacted the Architectural Works Copyright Protection Act (the “Act”). The Act increased the scope of protection architectural works are entitled to under United States Copyright laws. The Act was passed in efforts to make United States Copyright laws more compatible with the Berne Convention For The Protection of Literary And Artistic Works.

According to a report prepared by the then Register of Copyrights, pre Act copyright laws provided adequate protection for architectural blueprints, plans, drawings and models. However, the adequacy of protection under Berne Convention standards for the constructed design of architectural structures was in doubt. Although the Act, when it was in Bill form, was intended to address this perceived gap, the legislative history provides us with insight into the intended scope of protection accorded to architectural works, including blueprints and plans.

The Act amended the definition section of the Copyright Act (17 USC 101) by adding the following definition of “architectural works:”

An ”architectural work” is the design of a building as embodied in any tangible medium of expression, including a building, architectural plans, or drawings. The work includes the overall form as well as the arrangement and composition of spaces and elements in the design, but does not include individual standard features.

The House Report on the Copyright Amendments Act of 1990 (which includes the Act) (the “Report”) provides a section by section analysis and discussion of the Act. In discussing the definition of architectural works, the Report identifies the elements of a protected architectural work. The Report states that “protection does not extend to individual standard features, such as common windows, doors and other stable building components.” The Report makes clear, however, that the provision is not intended to “exclude from copyright protection any individual feature that reflects the architect’s creativity.”

Commenting on the meaning of “arrangement and composition of spaces and elements in the design” the Report noted that this phrase recognizes that creativity in architecture frequently takes the form of selection, coordination or arrangement of unprotectable elements into an original, protectible whole, and that a architect may incorporate new, protectible elements into standard features that might not otherwise be protectable and create an original, protectible whole.

The Report sets out a two step analysis to be engaged in when determining the scope of protectability for an architectural work.

First, an architectural work should be examined to determine whether there are original design elements present, including overall shape and interior architecture. If such design elements are present, a second step is reached to examine whether the design elements are functionally required. If the design elements are not functionally required, the work is protectible without regard to physical or conceptual separability.

Protection would be denied for the functionally determined elements, but would be available for the nonfunctional elements. The Report states that courts must be free to decide the level and scope of protection, and evidence that there is more than one method of obtaining a given functional result may be considered in evaluating the scope of protection. The Report notes that the Act incorporates the general standards of originality applicable for all other copyrightable subject matter, and the determination of infringement is to be made according to the same standard applicable to all other forms of protected mater.

How Issues of Infringement Can Arise and How to Avoid Them

Poor planning and a lack of understanding can lead to a developer finding itself in hot water with regard to architectural plans. Just because a developer paid an architect to come up with drawings does not mean that the developer can do whatever it wants with the drawings. Granted, case law has held that in certain circumstances the developer may have an implied license to perform the acts that are the subject of the infringement suit. However, defending an infringement claim can be quite expensive. Preventing the situation from arising will be much easier on the pocketbook.

Anytime your client is working with an architect, make sure that there is an engagement letter in place and it is clear on exactly what can and can’t be done with plans or other drawings created by the architect. Also, make sure that the engagement letter is crystal clear on exactly who owns the plans. I have seen engagement letter from architects that state that the architect is the owner of the copyright in the plan and that any contributions by the developer to the plan is a work made for hire and made on the architect’s behalf. As long as the developer understands the implication of these provisions, major problems can be avoided. Representing developers, I would rather have my client own the rights to its contributions. I can just imagine the horror a developer would experience upon finding out that the architect he worked with in developing a completely unique floor plan is now selling the plans to all the other major builders in the area.

Developers can find themselves facing copyright infringement issues if they change architects mid project and continue to use the drawings created by the first architect. To preserve the right to do this, the developer should make sure that this right is specifically reserved in the engagement letter. Usually most reasonable architects will allow the developer this right in exchange for being indemnified against any claims related to work performed by the new architect.

Some engagement letters I have seen from architects allow a developer to freely reuse a plan or other drawing without having to pay a reuse fee as long as it is being used for the same development. If a developer wishes to reuse a drawing for multiple developments, the developer should bring that up as soon as possible and make sure that it finds its way into the engagement letter.

The real estate developer and his counsel should give serious consideration of how to incorporate the requirements of the Copyright laws into the company’s best practices. While hand shake deals are still commonplace in the real estate and construction industries, they just won’t cut as far as the Copyright laws are concerned.

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