Practice Management Member Conversations

This message has been cross posted to the following Discussion Forums: Housing Knowledge Community and Practice Management Member Conversations .
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I have a situation of concern and could benefit greatly from the collective wisdom of this forum.

Background: Our design + build firm is positioning itself to possibly become the (third and final) developer of a 250-unit zero-lot-line housing project that has gone through a number of ups and downs. Its original Planned Unit Development schematic design, site plan and plat were approved by the Authority Having Jurisdiction six years ago after a six to eight month review process and a development agreement was signed based on those documents. Developer #1 walked away from the project before groundbreaking. Developer #2 came in and went through the PUD process a second time (another six to eight months) four years ago, resulting in a new approved schematic design and a new associated development agreement. That developer either improved the property with roads and utilities or the AHJ cashed in the bond and did it themselves because the property is improved but still unbuilt. The banks financing the project foreclosed on 20 of the 250 lots. One of those banks donated its 16 lots to a non-profit affordable housing organization. The remaining bank approached us about buying and developing their 4 lots. The master HOA has been charging fees every month for the past 6+ years and the owners are eager to cut their losses and walk away. None of the owners are interested in developing their lots themselves but the majority owner and the bank are willing to sell us their lots and the affordable housing group is willing to sign an agreement allowing us to develop their lots, potentially putting all of the lots under our control.

Dilemma: It is still unclear who owns the copyright to the design that the AHJ has approved. The drawings bear the name of developer #2, who is no longer in business. They also bear the name of the developer's draftsman, but no architect's name. (The landscape design is another issue altogether.) As I see it, our options are:

1. Retain a lawyer to investigate the copyright issue and see if the design is an "orphan work" or if we need to buy the copyright or if it's already owned by one or all of our property owners (see "money"--the small amount of extra time to do this may not be a factor because we would work on the financing, the sales and marketing plan and the master HOA architectural review concurrently).
2. Spend six to nine months redesigning and obtaining a new development agreement with the AHJ (see "time"--and this property is in the heart of an area that's about to boom and currently has almost no real estate of this type in inventory).
3. Spend a few days revising the design just enough to avoid copyright infringement while still satisfying the AHJ's requirement to build according to the standing development agreement (probably an impossible tightrope walk).

I think it's worth a 30-minute meeting with the AHJ to test the viability of option 3. If it's not viable, I'm leaning toward option 1. For which option would you vote and why?

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Sean Catherall AIA
Integrated Property Services
Bluffdale UT
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Copyrights can be very tricky.  Under prevailing case law, Government approval of a design (site plan approval, PUD, etc.) does not constitute a license to employ that design.  Many have argued that after a government approval it is necessary to employ that design or seek another approval.  The answer has pretty uniformly been that employing the design even under those circumstances still constitutes a copyright infringement.

Understand also that the copyright statute is not dependent on licensing.  Even a non-architect can create what would qualify as an "architectural work", and since copyrights can be sold, anyone can own and enforce a copyright in an "architectural work".  I am not aware of any cases where a copyright was defeated because the author was not an Architect.
 
Understand also that making a few changes may not defeat a copyright.  A copyright holder owns not only the exclusive right to use and exploit the design, but also the exclusive right to use it as a base to create derivative work.  If you start with a protected work and you use it to create another work, you have made a derivative work, which is also a copyright infringement.  While that can be a matter of degree, it can also be difficult to determine at what point a work stops being a derivative work and becomes an original work. 

The best course is to get legal assistance knowledgable in that area of the law.  Even if you employ your third option you still risk a claim.  You may ultimately prevail, but the course will be far more expensive than your first option.



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Frederick Butters FAIA, Ask.
Attorney
AIA Detroit
Southfield MI
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What if the owner of that property has paid for the schematic design and contractually has a right to complete that schematic through constrction with another architect? ------------------------------------------- Richard Franklin AIA Franklin Associates, Architects/ Planners Franklin Associates New York NY -------------------------------------------
Original Message: Sent: 09-07-2012 10:11 From: Frederick Butters Subject: Copyright and incomplete projects Copyrights can be very tricky. Under prevailing case law, Government approval of a design (site plan approval, PUD, etc.) does not constitute a license to employ that design. Many have argued that after a government approval it is necessary to employ that design or seek another approval. The answer has pretty uniformly been that employing the design even under those circumstances still constitutes a copyright infringement. Understand also that the copyright statute is not dependent on licensing. Even a non-architect can create what would qualify as an "architectural work", and since copyrights can be sold, anyone can own and enforce a copyright in an "architectural work". I am not aware of any cases where a copyright was defeated because the author was not an Architect. Understand also that making a few changes may not defeat a copyright. A copyright holder owns not only the exclusive right to use and exploit the design, but also the exclusive right to use it as a base to create derivative work. If you start with a protected work and you use it to create another work, you have made a derivative work, which is also a copyright infringement. While that can be a matter of degree, it can also be difficult to determine at what point a work stops being a derivative work and becomes an original work. The best course is to get legal assistance knowledgable in that area of the law. Even if you employ your third option you still risk a claim. You may ultimately prevail, but the course will be far more expensive than your first option. ------------------------------------------- Frederick Butters FAIA, Ask. Attorney AIA Detroit Southfield MI -------------------------------------------

I'm not yet sure that the majority owner has "paid for" the schematic design. It was designed by the developer and the design may have been speculative in nature. That designer/developer is no longer in business, so any "right to complete" appears to be void.

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Sean Catherall AIA
Integrated Property Services
Bluffdale UT
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Original Message:
Sent: 09-10-2012 11:40
From: Richard Franklin
Subject: Copyright and incomplete projects


What if the owner of that property has paid for the schematic design and contractually has a right to complete that schematic through constrction with another architect?
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Richard Franklin AIA
Franklin Associates, Architects/ Planners
Franklin Associates
New York NY
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That is a common misconception.  Many owners think because they paid for the design they can use it however they like.  Unless the Owner acquires either the copyright itself or a license for the subject project, the Owner has the right to use the design only so long as the Architect remains engaged on the project.  Almost every Owner will tell you "I paid for it I can use it as I like" and every Owner who thinks that is wrong.  Paying for the design does not confer the right to use the design.

Any transfer or license of the copyright must be in writing.  Unless there is a writing, any transfer is void.  The contract could do that - to answer that would of course require a close look at the contract.

On the question of use of the documents for the completion of the project for which they were intended there is a split of authority.  Some federal circuits have rules that use of the drawings in that manner is still a copyright infringement while others have ruled that it isn't.  As a result, that area of the law is extremely contentious and muddled.  All the more reason you need a Attorney familiar with the law in whatever circuit in which you practice.  That isn't free of course, but it is far cheaper than defending an infringement claim

 

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Frederick Butters FAIA, Esq.
Attorney
AIA Detroit
Southfield MI
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Original Message:
Sent: 09-10-2012 11:40
From: Richard Franklin
Subject: Copyright and incomplete projects


What if the owner of that property has paid for the schematic design and contractually has a right to complete that schematic through constrction with another architect?
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Richard Franklin AIA
Franklin Associates, Architects/ Planners
Franklin Associates
New York NY
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Dominick Ranieri
Dominick Ranieri Architects, PC
Guilderland NY
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As an Architect and Developer I deal with this issue often.  I am not a lawyer therefore you should consult a Copyright lawyer first, however It is my understanding that the copyright laws protect all intellectual property from the moment it is placed into a permanent medium such as a drawings, sculpture, buildings etc. It also covers any artistic, technological or literary work. The authors of these works can be anyone and therefore not exclusive to an architect in your case. It further covers these designs whether they author placed a copyright designation on them or not. Since you are aware of the potential that these are copyrighted works you could be exposed to a claim if you use them without the authors written permission.
Solutions: 1) Approach the authors and or owners of the copyrighted designs (I say this because the  previous developer may not be the author but could be the owner of the designs. (Confer with your copyright lawyer for further explanations). You may be able to negotiate a reasonable fee for the limited use of the designs for the completion of this project.
               2) Negotiate and purchase of the copyrights to these designs which will allow you to use them on this project and any future projects as well as modify them as you see fit.

There may be other options available that your lawyer could explain however these are the only ones that I am aware of that would be your fastest and safest legal solutions. If you take the path of trying to "Tweak" the existing designs without permission and you use them in your construction and subsequent sales you could be putting yourself in a position where the true author and owner of these original designs which you based your designs on can sue you for copyright infringement. If the author wins this case and proves that you intentionally used their designs in your work, (This proof is not complicated or difficult either. They would only need to prove that you had access to the work, that you used the work partially or substantially and that it looks similar to the original works in elevation, plan and built form. This analysis need only be from a lay-man's opinion.) then they would be entitled to ALL of your profits from the use of these copyrighted works. This would include your construction profit and retail sales profits.

This is my experience and understanding of the law.
You can find much of this information on the government website www.copyright.gov
I hope that this helps and good luck.


Original Message:
Sent: 09-06-2012 19:38
From: Sean Catherall
Subject: Copyright and incomplete projects

This message has been cross posted to the following Discussion Forums: Housing Knowledge Community and Practice Management Member Conversations .
-------------------------------------------
I have a situation of concern and could benefit greatly from the collective wisdom of this forum.

Background: Our design + build firm is positioning itself to possibly become the (third and final) developer of a 250-unit zero-lot-line housing project that has gone through a number of ups and downs. Its original Planned Unit Development schematic design, site plan and plat were approved by the Authority Having Jurisdiction six years ago after a six to eight month review process and a development agreement was signed based on those documents. Developer #1 walked away from the project before groundbreaking. Developer #2 came in and went through the PUD process a second time (another six to eight months) four years ago, resulting in a new approved schematic design and a new associated development agreement. That developer either improved the property with roads and utilities or the AHJ cashed in the bond and did it themselves because the property is improved but still unbuilt. The banks financing the project foreclosed on 20 of the 250 lots. One of those banks donated its 16 lots to a non-profit affordable housing organization. The remaining bank approached us about buying and developing their 4 lots. The master HOA has been charging fees every month for the past 6+ years and the owners are eager to cut their losses and walk away. None of the owners are interested in developing their lots themselves but the majority owner and the bank are willing to sell us their lots and the affordable housing group is willing to sign an agreement allowing us to develop their lots, potentially putting all of the lots under our control.

Dilemma: It is still unclear who owns the copyright to the design that the AHJ has approved. The drawings bear the name of developer #2, who is no longer in business. They also bear the name of the developer's draftsman, but no architect's name. (The landscape design is another issue altogether.) As I see it, our options are:

1. Retain a lawyer to investigate the copyright issue and see if the design is an "orphan work" or if we need to buy the copyright or if it's already owned by one or all of our property owners (see "money"--the small amount of extra time to do this may not be a factor because we would work on the financing, the sales and marketing plan and the master HOA architectural review concurrently).
2. Spend six to nine months redesigning and obtaining a new development agreement with the AHJ (see "time"--and this property is in the heart of an area that's about to boom and currently has almost no real estate of this type in inventory).
3. Spend a few days revising the design just enough to avoid copyright infringement while still satisfying the AHJ's requirement to build according to the standing development agreement (probably an impossible tightrope walk).

I think it's worth a 30-minute meeting with the AHJ to test the viability of option 3. If it's not viable, I'm leaning toward option 1. For which option would you vote and why?

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Sean Catherall AIA
Integrated Property Services
Bluffdale UT
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First, I would verify that in fact the demand for this housing stock is what your gut feel is. You don't want to become defunct Developer #3 because you are afraid of the "time" issue - and where in fact there may be a logical reason that this project has not ever taken off. I have made decisions before based on my own instincts of the marketplace with poor results. Get reputable market feasibility professionals involved - it's worth it.

That said, it sounds like testing the AHJ's requirements is the easiest to do first: if you changed the design but kept the square footage of the units - would that suffice to maintain the current development plan?

Seems like the answer to those issues would start to fill in the unknowns.........
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Robert Kohler, AIA
Architect
Kohler Design Office, Inc.
Fayetteville AR
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Original Message:
Sent: 09-06-2012 19:38
From: Sean Catherall
Subject: Copyright and incomplete projects

This message has been cross posted to the following Discussion Forums: Housing Knowledge Community and Practice Management Member Conversations .
-------------------------------------------
I have a situation of concern and could benefit greatly from the collective wisdom of this forum.

Background: Our design + build firm is positioning itself to possibly become the (third and final) developer of a 250-unit zero-lot-line housing project that has gone through a number of ups and downs. Its original Planned Unit Development schematic design, site plan and plat were approved by the Authority Having Jurisdiction six years ago after a six to eight month review process and a development agreement was signed based on those documents. Developer #1 walked away from the project before groundbreaking. Developer #2 came in and went through the PUD process a second time (another six to eight months) four years ago, resulting in a new approved schematic design and a new associated development agreement. That developer either improved the property with roads and utilities or the AHJ cashed in the bond and did it themselves because the property is improved but still unbuilt. The banks financing the project foreclosed on 20 of the 250 lots. One of those banks donated its 16 lots to a non-profit affordable housing organization. The remaining bank approached us about buying and developing their 4 lots. The master HOA has been charging fees every month for the past 6+ years and the owners are eager to cut their losses and walk away. None of the owners are interested in developing their lots themselves but the majority owner and the bank are willing to sell us their lots and the affordable housing group is willing to sign an agreement allowing us to develop their lots, potentially putting all of the lots under our control.

Dilemma: It is still unclear who owns the copyright to the design that the AHJ has approved. The drawings bear the name of developer #2, who is no longer in business. They also bear the name of the developer's draftsman, but no architect's name. (The landscape design is another issue altogether.) As I see it, our options are:

1. Retain a lawyer to investigate the copyright issue and see if the design is an "orphan work" or if we need to buy the copyright or if it's already owned by one or all of our property owners (see "money"--the small amount of extra time to do this may not be a factor because we would work on the financing, the sales and marketing plan and the master HOA architectural review concurrently).
2. Spend six to nine months redesigning and obtaining a new development agreement with the AHJ (see "time"--and this property is in the heart of an area that's about to boom and currently has almost no real estate of this type in inventory).
3. Spend a few days revising the design just enough to avoid copyright infringement while still satisfying the AHJ's requirement to build according to the standing development agreement (probably an impossible tightrope walk).

I think it's worth a 30-minute meeting with the AHJ to test the viability of option 3. If it's not viable, I'm leaning toward option 1. For which option would you vote and why?

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Sean Catherall AIA
Integrated Property Services
Bluffdale UT
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