August 29, 2018
Author: Jonathan J. Sweet
Organization: LAW OFFICES OF JONATHAN J. SWEET
Contracts for compensation of architects vary from simple to complex documents. A basic agreement may provide for hourly compensation of the architect, plus reimbursement for certain expenses. On more complex projects, other bases may be used to set the amount to be paid for the work of the architect.
1. Percentage of Construction Costs
The primary method of computing payment of the architect for basic services on larger projects sets the fee as a percentage of construction costs. Two issues to be negotiated between the owner and architect with respect to the percentage method of compensation are: (1) the percentage to be used, and (2) which costs are subject to the percentage. The percentage method is slowly being replaced or eroded by other cost-oriented methods of computing the architect=s fee. The advantages of using the percentage method include (1) architects are familiar with the method, (2) the method requires little bargaining up front as to price, and (3) the percentage method should reflect both the amount of work involved and the level of responsibility placed upon the architect. Significant variables affecting the architect=s responsibility include whether the architect is involved only in design, as opposed to helping during the construction phase. The disadvantage for the architect with the percentage method is that it penalizes the architect who uses his skill and experience to effect price reductions. It provides no incentive to the architect to implement cost-saving measures. Two ways exist to provide an incentive for the architect to keep costs down: (1) create a table of fees that decreases the architect=s fee as construction costs rise, or (2) set a higher fee on certain costs and reduce the architect fee on the other costs.
2. B101-2007 ON ARCHITECT COMPENSATION
AIA Document B101-2007 is now the primary AIA Owner-Architect Agreement. B101, Section 6.1, defines the cost of the work as the total cost to the owner to construction all elements of the Project, designed or specified by the Architect and shall include contractors= general conditions costs, overhead and profit. Section 6.1 states that the Cost of the Work does not include the compensation of the Architect, the costs of the land, rights of way, financing, contingencies for changes in the Work or other costs that are the responsibility of the Owner.
If the architect terminates the contract, and is not at fault, then the architect is entitled to be paid for services performed prior to written notice of abandonment, together with reimbursable expenses and termination expenses as defined in B101-2007, Section 9.7, plus an amount for the Architect=s anticipated profit on the value of services not performed by the architect. Under these circumstances, there is no need to look at construction cost, actual or estimated.
Under B101, Article 3, Scope of Architect=s Basic Services, there is no reference to the architect being responsible for revising the owner=s budget for the cost of the work, although B101, Article 1, Initial Information gives the parties the option of using Exhibit A, Initial Information, or setting forth at Section 1.1, various information from the owner to the architect, including the owner=s budget for the cost of the work.
B101, Section 11.10.3, states that states that there will be no deductions from the architect=s compensation to impose a penalty or liquidated damages on the architect, or offset sums requested by or paid to contractors for the cost of changes in the work unless the architect agrees or has been found liable for the amounts in a binding dispute resolution process.
Thus, amounts withheld from the contractor because of the contractor's breach should not reduce the architect's fee, even if they reduce the construction contract payout. At least one court has ruled in favor of the architect when the original construction contract price was renegotiated by the owner and contractor after the work was completed, resulting in a reduction in the cost of construction. The contract between the architect and the owner provided that the fee would be computed on the basis of the construction cost of the project. The owner contended that actual construction cost governed the fee, but the architect contended that the original contract price controlled.
The court held that the language should be given a fair and reasonable interpretation, and that the architect's use of the original cost figure to determine its fee was a fair and reasonable interpretation.
Conversely, if the total payout to the contractor was increased due to an impact claim, i.e., delay or disruption which is chargeable to the owner, and which resulted in the contractor performing work out of sequence, an amount may be paid out to the contractor for the claim. These constitute damages to the contractor, which the contractor should not have incurred, rather than being considered as part of the cost to build the project. These contractor damages should not be considered as falling within B101, Section 6.1 defining construction cost. Similarly, if the delay and additional costs were caused by architect negligence, an increase in the fee to the architect would not be warranted.
3. Personnel Multiplier
Large design firms choose, when they can, to use a personnel multiplier to compute their fee. This formula consists of a multiple of from one to three times the personnel expenses. These personnel expenses include direct salaries plus employee benefits. The amount of the multiple over one compensates the architect for overhead and profit. The difference between the cost of the personnel expense and the multiple over one provides mark-up or profit to the architect.
A personnel multiplier clause, or a fee plus expenses clause, minimizes the temptation of the architect to increase construction costs in order to increase the architect=s fee. However, there is also the potential for it to be an incentive to perform unnecessary design services or to spend more time than is needed, because increasing services means higher fees for the architect. To avoid this, owners often demand a budget, which can turn into a maximum fee, or a Anot to exceed@ fee.
This formula also requires the architect keep records showing who worked on the project, the duration and nature of the services, and an agreed-upon fee schedule.
The architect should include all fringe benefits in the formula together with a provision for annual increases. The fringe benefits should be specified and should include employment taxes, statutory employee benefits, insurance, sick leave, holidays, vacations, pensions and the other employer contributions and employee benefits.
4. Fee Plus Expenses
A fee plus expenses method of compensation is essentially the architect=s cost plus a fixed fee. This cost method has two advantages for the architect. First, the fee is not tied to construction cost, and second, there is no cap on the fee. However, this method involves separating compensable and noncompensable expenses. It requires the architect to keep more detailed cost records.
5. Fixed Fee
A fixed fee for the architect=s services requires a clear understanding of the scope of services to be rendered and an educated estimate of the work involved. A simple fixed fee helps to reassure an unsophisticated owner as to the amount of the architect=s fee. However, in a simple fixed fee arrangement, the architect bears the risk of underestimating the amount of work involved. A fixed-fee agreement should expressly indicate that the fee will be adjusted for additional services, as well as for reimbursable expenses incurred by the architect.
The architect who assumes the risk of accurately bidding the job, can benefit by its own efficiency and experience. However, this method can be disastrous where assumptions made by the architect prove inaccurate.
6. Compensation for Additional Services
One of the most problematic areas that an architect may encounter in its relationship with the owner relates to charges for additional services not covered by the basic fee. Additional services should consist of those services for which the architect is to receive a fee beyond the basic compensation.
In the last few decades, there has been a steady increase in the types of services that are not compensated by the basic fee. B101, Section 11.1 provides a space for the parties to insert how the architect will be compensated for basic services. Section 11.2 has the space for insertion of how additional services of the architect will be compensated. Under B101, Section 4.1 described additional services as those services no included in Basic Services, but which may be required for the Project. A grid is provided for a list of typical additional services such as programming, multiple preliminary design, measured drawings, existing facility surveys, site evaluation and planning, and many others. The grid at Section 4.1 calls for the parties to check for each listed additional service whether the responsibility for the particular additional service is that of the architect, owner, or Anot provided.@ The grid also provides a spot to insert an exhibit number which will describe the particular additional service in more detail.
B141-1997, Article 1.4 had addressed the scope of architect services. It had divided additional services into two categories: Contingent Additional Services, and Optional Additional Services. Contingent Additional Services are services that were required due to circumstances beyond the architect's control. These services were performed by the architect unless, after notification to the owner by the architect, the owner elected, in writing, that the services not be performed. Optional Additional Services require written authorization by the owner before the services are performed. Whatever contract form is used, what constitutes additional services should be spelled out in the agreement to avoid later disputes as to whether a service is extra or whether it falls within the scope of the basic fee. This is probably one of the most common disputes between architects and owners.
7. Consultants
The consultants that are to be hired and paid for by the architect out of the basic fee should be listed in the agreement, with a provision that the owner pay for all other consultants reasonably required for the project.
8. Long Term Design Contracts
In long-term design services contracts, the agreement should include an escalation of fee clause to avoid costly renegotiations. This clause should set forth in detail the formula by which a fee will escalate over a specified period of time.
9. Reimbursables
Reimbursables are expenses paid by the architect on behalf of the owner. In order to avoid dispute as to what constitutes overhead and what is a reimbursable expense, the agreement should itemize the types of expenses for which the owner will pay, including the amount of any mark-up that the architect is entitled to for advancing such costs. B101, Section 11.8.1 lists compensation to the architect for reimbursables, including transportation and authorized travel and subsistence, long distance services. Some architects do not claim transportation as a reimbursable expense except for out-of-town travel. The decision of whether travel expenses should be billed as reimbursables should be made on a project-by-project basis, taking into account the value of building and retaining good will with the owner.
B101, Section 11.8 defines and lists reimbursable expenses. It includes as a reimbursable the expense of additional insurance coverage requested by the owner in excess of that normally carried by the architect and his consultants. However, owner opposition is likely to be strong if the architect carries little or no professional liability insurance. There is a growing trend for the owner to bear the cost of that insurance. Probably, the better view is for the owner and architect to select whether the architect=s insurance is reimbursable on a project-by-project basis.
10. Equitable Adjustments of Fee
Equitable fee adjustment for architects is a concept that recognizes that contracts are based upon assumptions as to what is likely to occur on a project. When things do not go as planned, through no fault of the architect, the agreement should provide for an equitable adjustment of the fee. This is particularly true where the project's scope or the scope of the architect's services are substantially changed, or if, through no fault of the architect, the project has not been completed on time.
An equitable adjustment can reduce compensation just as readily as it can increase compensation. Generally, it is more likely that the architect will seek to recover additional expenses attributable to the change in scope or delay. Equitable adjustments plus providing a detailed list of additional services, can change a fixed-price formula or a percentage-of-construction-cost into a cost-based compensation.
B101, Section 4.3, states that additional services may be provided by the architect after execution of the agreement, and will entitle the architect to compensation pursuant to Section 11.3, and an appropriate adjustment to the architect=s schedule.
11. Architect Fee Limits
Owners are often concerned about the total compensation that they will pay the architect, including additional services, reimbursables, and equitable adjustments. Public owners in particular may seek to limit the fee to a specified amount. There is no provision in the AIA documents for a limitation of fees, although B101, Section Article 11, Compensation, provides a blank space for the basis for the architect=s compensation to be inserted. The parties could put a maximum fee amount in that space, if they chose. Those using AIA documents may wish to modify B101 to limit the architect=s fee. Owners may be willing to use B101 if the owner can cap the fees. An architect with a cap could argue that the cap was only an estimate. As is the case with contractors, scope changes, delays, and the similar issues should eliminate any cap on compensation.
12. Owner=s Right to Inspect Records
Cost-based methods of compensation require the owner to have access to the architect's cost records. This is equally true for additional services and reimbursables even when the contract is fixed price.
B101 does not appear to contain any reference to the bookkeeping system to be used by the architect. B141-1997, at Section 1.3.9.3 provided that records of reimbursable expenses shall be available to the owner and the owner=s representative at mutually convenient times. B101 does not appear to have a similar provision. The architect should keep good records in the event it becomes necessary to defend a claim made by an owner or an contractor years after a project is completed. Good record retention is more likely to help the architect, than to provide documents by which an attorney could establish professional negligence by the architect. A reasonable length of time for liability reasons to retain documents from a project is five years under current California law. The California Board of Architecture may mandate a different period of time, which should be followed to avoid professional discipline.
13. Progress Payments
It is common practice for the fee to be paid to architects in installments, as set forth in the contract. One example for suggested interim payments is as follows:
Schematic Design Phase 15%
Design Development Phase 20%
Construction Document Phase 40%
Bidding or Negotiation Phase 5%
Construction Phase 20%
Some believe this formula constitutes front-end loading, requiring payments to run ahead of the actual percentage of work performed in each phase. Others believe the 20 percent for construction is insufficient to take into account the increasing burden and risk the construction phase involves. Others recommend adding more phases of work, such as including a loan submittal phase to increase the accuracy of interim fee payments.
Including an interim fee payment provision is essential for needed cash flow and gives the architect warning of the owner's depleted financial resources if the owner fails to make an interim payment.
B101, Section 11.10.2 provides for monthly payments to the architect, based on presentation of invoices. B101, Section 11.10.3, contains language seeking to limit, if not bar, the owner from using self-help withholding to compensate the owner for the architect=s negligence. Section 11.10.3 states that the owner Ashall not withhold amounts from the Architect=s compensation to impose a penalty or liquidated damages on the Architect, or to offset sums requested or paid to contractors for the cost of changes in the Work unless the Architect agrees or has been found liable for the amounts in a binding dispute resolution proceeding.@ This is essentially precluding withholding for design errors or even delay claims unless the architect has been found liable in arbitration or in litigation.
Self-help withholding can be a weapon that can be abused by the owner, because of the economic leverage the owner holds. It is common, in disputes between the owner and architect that the owner will withhold far more than is truly in dispute. The purpose of this withholding is to force the architect to complete work without additional compensation, or give up legitimate claims held by the architect. Good-faith withholding should be allowed if the architect has erred, and the withholding is not excessive relative to the architect error. Withholding should be barred, however, if the architect has performed properly.
14. Failure to Pay Progress Payments
The owner=s failure to make a progress payment raises the issues of what are the legitimate grounds for nonpayment. These might include a question of the date when payment is due, the rate of interest for late payment, and whether any contractual remedies are exclusive.
B101, Section 11.10.2, provides a blank space for the number of days after the invoice when interest becomes payable, at the legal rate, which in California is 10% annually. Section 11.10.2 also asks the parties to insert the rate of interest to be agreed upon. This would usually be in place of the legal rate of 10%.
In the event the owner fails to pay, the architect may wish to exercise the remedies of suspension or termination, if they are provided in the contract. The threat to stop work can be particularly effective, although it can also be very dangerous if it is found that the architect has wrongfully stopped work. To justify termination, the breach by the owner has to be Asubstantial,@ and the architect cannot be in default of its contract.
B101, Section 9.1 states that failure of the owner to pay is substantial nonperformance and is cause for termination or suspension of performance of services, at the architect=s option.
15. Lien-Related Information
Some states, such as California, grant mechanics liens rights to those whose services or labor have improved land. Liens are often the only protection that an architect has, if the owner defaults in payment and is otherwise not solvent. B101, Section 5.1 requires that the owner furnish on request Ainformation as necessary and relevant for the Architect to evaluate, give notice of or enforce lien rights.@ This information would include the legal title to the site, the owner's interest in the land, and any changes in title.
Some states also have a statutory scheme parallel to the mechanic=s lien law, which authorizes architects to file liens against real property before construction on the work of improvement has commenced. (E.g., California Civil Code Section 8300 et. seq.) Under '8300, those entitled to a design professional lien include any certified architect, registered professional engineer, or licensed land surveyor who furnishes services under a written contract with a landowner for the design, engineering, or planning of a work of improvement. The lien does not apply to single- family, owner-occupied residence with construction costs of less than $100,000 in value. Civil Code Sec. 8318.
One of the issues which may dictate whether or not to use an AIA Fee Agreement may be what state requirements exist for architect fee agreements. Some states, such as California, have both required and recommended elements for these fee agreements. Specific state laws or an attorney in your state should be consulted prior to an architect using a fee agreement which might be contrary to specific state laws or guidelines for architects. See the California Guide to Hiring An Architect, located that California State Board of Architecture Web site which includes required and recommended elements for architect fee agreements.
16. WHO OWNS DESIGN DOCUMENTS?
Confusion about ownership and use of design documents can create disputes between architects, owners and others involved in the construction process. The contract documents between the architect and the owner, and the wording on the design documents created by the architect, should clearly identify the intent of the parties regarding ownership of design documents. These contracts should also address how the owner, architects, contractors, subcontractors, and public entities may use the design documents. An architect is hired by an owner to design a project that meets the owner's needs. The finished construction project, based on the design documents, is accomplished by the architect preparing the design specified in the contract documents, by the owner selecting and hiring a contractor to build the project, and by the contractor's building the project in compliance with those documents.
Although the owner pays for the completed project, the architect may take the position that, although the owner has hired and paid the architect for design services, the owner has not acquired ownership of the design documents. The owner has only purchased the right to a limited use of the design documents to build that particular project. The AIA documents, such as B101-2007, the primary owner-architect agreement, attempt to support this position by characterizing the construction documents as Ainstruments of service.@ This is a term of art the AIA has used for many years to refer to the design documents. The AIA contracts specifically attempt to have the architect continue to own the design documents, to control their use and distribution through construction of the project, and to continue to own them after completion of the project.
The architect=s retention of ownership of the design documents may be counter to the owner=s expectations. The owner may believe it has purchased the design created by the architect, as well as the design documents for the project, when it paid the architect for its services. The AIA documents, and many other design contracts, use contract language intended to have the architect retain ownership of the design documents, and to limit the owner=s rights to use the design documents during or after construction, or to reuse the design embodied in the documents for other projects. Disputes and lawsuits can result over ownership and use of the design documents unless these issues are clearly addressed by the agreements between the owner and the architect.
The price charged for design services should, to some degree, reflect the economic value of the service provided by the architect to the owner. Reuse by the owner should be compensated by a higher fee to the architect.
In construction, if an architect designs a house for an owner, is the owner entitled to reuse those construction documents to build a new, identical house in a different location? Under the AIA documents, and many design services contracts, the architect=s position would be that the owner does not have that right. To support that argument, the architect maintains that it would have charged additional money for the design if the architect had known that the design would be used for more than one house. Where the owner does not have unlimited rights of use and ownership of the design documents, the architect may advise the owner reusing the design that it owes the architect a license fee for the owner=s new use.
If the compensation of the architect has been calculated based on a percentage of the construction cost, additional construction using the design would have earned the architect more fees if the cost of the new construction had been included in calculating the original design fee. If the architect=s compensation had been a personnel multiplier, the architect would have used a higher multiple.
Countering this, the owner=s position would be that the cost for the architect to provide the design services is identical, regardless of how many times the design is used by the owner, and that the owner should have unlimited use of the design and design documents in exchange for the money it has paid to the architect for design services. Problems can arise if an owner reuses design documents without input or permission from the architect.
17. AIA APPROACH TO OWNERSHIP OF DESIGN DOCUMENTS
A201-2007, subparagraph 1.5.1, addresses ownership and use of the architect's drawings, specifications, and instruments of service. One change from pre-1997 AIA documents is the addition, where appropriate, of the words Aor the Architect's Consultants,@ to protect the consultants' instruments of service, along with the instruments of service of the architect.
The language addressing ownership of design documents had been drastically altered in AIA B141-1997, and continued in B101-2007. It is worth noting that in the 1997 documents, for the first time B141 explicitly referred to payment of the architect as a condition precedent to the owner's use of the instruments of service. Also, the use granted to the owner by the architect of the instruments of service is for the first time called a Anonexclusive license.@ An additional change with B141-1997, and carried forward to B101-2007 is that the document contains no explicit language forbidding use by the owner of the instruments of service to complete the project with Aothers.@
B101, Article 7 addresses Copyrights and Licenses, and ownership of design documents. The AIA documents had made major changes in 1997 regarding ownership of design documents. These changes in language were significant. In B101, carried forward from B141-1997 the AIA attempted to more clearly define the owner's right to use or reproduce the instruments of service. The deletion of the prohibition against the owner's using the instruments of service to complete the project without the architect was litigated in certain cases, and the AIA may have simply determined that the attempt to so control the owner was more trouble than it was worth. See Joseph J. Legat Architects v. United States, 625 F. Supp. 293 (N.D. Ill. 1985), and I.A.E. v. Shaver, 74 F.3d 768, 775 (7th Cir. 1996).
B101, Section 9.1 expressly makes nonpayment of the architect a ground for the architect to suspend performance of services under the agreement.
A201-2007. the General Terms and Conditions Document, at Section 1.5.1 repeats much of the wording contained in B141-1997, and imposes restraints on those who will come in contact with the documents, such as the contractor, subcontractors, or suppliers.
18. OWNER REUSE OF DESIGN DOCUMENTS
Problems can arise for the architect if the owner uses the design on another project, or if the original project is abandoned and the owner sells the design to a new owner to recover some of the cost of design fees the owner has paid to create the design. The design may be used by the new owner in a manner which creates an unsafe structure. These acts can expose the architect to a claim or lawsuit by someone who suffers harm due to uses of the design documents unforeseen by the architect. If the architect is sued, the architect may win, but the defense costs may be substantial and non-recoverable.
A part of implementing a construction design usually includes some control by the architect over the construction process. If the design contains errors, the architect can detect these design errors and correct design errors during construction. However, if the construction is not being supervised by the original architect because the design is being reused by the owner without the original architect, the architect=s opportunity to timely and properly correct the design errors may be lost. This is a concern for the architect. Payment by the owner of a license fee to the architect for reuse is one way to address this additional risk for the architect.
19. COPYRIGHT PROTECTION FOR DESIGN DOCUMENTS
Express contract language stating that the architect retains ownership of the design documents, as opposed to the owner acquiring ownership of the design documents, is one way for the architect to protect its rights in the design documents as between itself and the owner. Another method for the architect to protect the right to retain use and ownership of the design documents as to the owner and others is through copyright law.
Express contract language stating that the architect retains ownership of the design documents, as opposed to the owner acquiring ownership of the design documents, is one way for the architect to protect its rights in the design documents as between itself and the owner. Another method for the architect to protect the right to retain use and ownership of the design documents as to the owner and others is through copyright law.
20. HOLDER OF COPYRIGHT TO DESIGN DOCUMENTS
The architect=s position, particularly on projects where an AIA document such as B101 is used, is that the architect is the author of the design documents, and it is the owner of any copyright in the documents. Under this position, the performance of design services by the architect for the owner of the project does not transfer ownership of the design documents to the owner.
The owner of a project may argue that because it paid for the design it purchased the design documents, and that after the owner has fully paid the architect for its services, the owner of the project acquired ownership and copyright of the design documents. A legal doctrine called the Afor hire@ doctrine states that the employer of the author of a work is deemed to be the author of the work for copyright purposes. However, cases in most states have held that the owner of a construction project is generally not allowed to use the Afor hire@ doctrine to claim ownership of the copyright to design documents. The rationale is that the architect is an independent contractor rather than a traditional employee, preventing vicarious authorship vesting in the property owner.
Historically, the AIA has emphasized state common-law copyrightCthe right of an author to decide how, when, and in what form the author's works are to be published. This right was lost if the material were Apublished,@ (shown to persons, or otherwise distributed) or the appropriate copyright notices were not affixed to the work. What constitutes publication is a complex legal doctrine which looks at the purpose, breadth, and control of dissemination of the work.
The common-law (non-statutory) method of protecting intellectual work has been supplanted by federal statutory copyright, under the Federal Copyright Act,which was enacted in 1976 and effective in 1978. Even though architectural plans were protected under earlier copyright laws as ideas reduced to a fixed medium, copyright protection did not extend to the completed structure under the original federal copyright laws. Congress did not believe that protecting the completed structure was necessary to generate architectural creativity. An exception to allowing copyright protection is if the article sought to be protected is a useful article. Congress prevented copyright protection for completed structures because the buildings were considered Auseful articles.@
Under the Architectural Works Copyright Protection Act of 1990, architectural works were added as those entitled to copyright protection under the 1976 act. Architectural work is defined as:
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.
To determine the copyrightability of work under the Architectural Works Copyright Protection Act of 1990, a two-step test may be used to determine if the structure qualifies for protection. An architectural work should be examined to determine whether there are original design elements present, including overall shape and interior architecture. If these design elements are present, a second test examines whether the design elements are functionally required. If the design elements are not functionally required, the work is protectable without regard to physical or conceptual separability.
The Architectural Works Copyright Protection Act of 1990 puts the United States in full compliance with the Berne Convention for the Protection of Literary and Artistic Works, which is generally adopted internationally to protect intellectual property rights. The act covers only designs for buildings that are habitable structures, such as houses and office buildings, as well as structures that are used but not inhabited by human beings, such as churches, pergolas, gazebos, and garden pavilions. The act does not include engineering projects such as highway bridges, canals, dams, and pedestrian walkways.
There are some limitations on the act's protection. It does not protect the functional features, nor does it protect individual standard features, such as common windows and doors. Even if copyright exists in the design embodied in the structure, the owner of the copyright cannot prevent anyone from taking pictures of buildings so protected, if the buildings are ordinarily visible from a public place. On the issue of infringement of the copyright of the structure itself, the statute states that the effective date of inclusion for protection of structures is December 1, 1990.
21. AIA TREATMENT OF COPYRIGHT
With that background in copyright law, we can look at some of the details of A201-2007, Section 1.5.1. In addition to the usual language that A[d]rawings, Specifications and other documents . . . are instruments of service,@ Section 1.5.1 states that the architect and the architect=s consultants shall be deemed the authors, and that the contractor and subcontractors will not assert a copyright. Section 1.5.1 seeks to limit distribution, again a throwback to common-law copyright. Limiting distribution reduces the likelihood of infringement.
Also, there is a specific bar to reuse by those into whose hands the drawings and specifications may fall. Without the written consent of the architect, such reuse can be the basis for a contractual or tortious claim against third parties for wrongful use, apart from copyright law. Those who have the drawings and specifications for limited use are granted a license to use and reproduce them. If they do reproduce them, under A201-2007, Section 1.5.2, copies made must include the copyright notice, if, any, shown on the instruments of service. Is all this control and standardized language in A201-2007, Sections 1.5.1 and 1.5.2 needed? If read and followed, these restrictions can operate as a deterrent to infringement.
Owners sometimes broaden the scope of material for which they claim ownership by the use of language that can encompass ownership of all correspondence and even internal communications, some of which could not be obtained otherwise from the architect even by court-compelled discovery. This further demonstrates the drafting problems connected to the apparently simple Aownership of documents@ topic.
B101, Section 7.2 provides that the architect and the architect=s consultants are deemed the authors of their respective instruments of service. This statement would act to contradict any claim of joint authorship by the owner or others.
B141-1997, Section 1.3.7.7, had stated that the architect had the right to include Aphotographic or artistic representations of the design of the Project among the architect=s promotional and professional materials.@ This language has been dropped from B101-2007, Article 7.
22. UNAUTHORIZED USE OF DESIGN DOCUMENTS BY THIRD PARTIES
What if a contractor, subcontractor, or supplier wrongfully copies protected documents? This copying would infringe any statutory copyright. In conjunction with a copyright infringement claim, can a breach of A201 be the basis of a claim by the architect? B101, Section 7.4, prohibits use by the owner Aor others.@ Similarly, A201-2007, subparagraph 1.5.1, prohibits use by the contractor, subcontractors, or suppliers, except as specifically authorized. B101-2007 would give the architect a claim against the owner for any wrongful use by the owner. If others copied the contract documents, a claim against the owner could be based upon an implied promise by the owner to police use under A201-2007, subparagraph 1.5.1, and to protect the architect. The owner would then have an indemnification claim against the wrongful user.
In Foad Consulting Group, Inc. v. Musil Govan Azzalino, 270 F.3d 821, 2001 U.S. App. LEXIS 23402 (9th Cir. Cal. 2001), the Ninth Circuit ruled that an engineering firm had granted an implied non-exclusive license to a developer to have a later architect use and modify the plans and drawings prepared by the original engineering firm.
In Foad, a developer hired an engineering firm to prepare a preliminary plot plan for a shopping center. The developer submitted these plans to the city for approval of the construction project. The developer and the engineer then entered into a second contract to create final engineering drawings for the project. The further work was to include a revised plot plan, and to obtain city approval for the project. These design documents were prepared, and the city did approve the project based on these plans and drawings. The developer transferred its right to develop the project to another company, which retained a different architectural and engineering firm. The new firm obtained copies of the revised plot plan, and other documents from the city. Using these documents, the new firm prepared final site plans. It had traced the original firm=s plot plan onto an overlay.
The original engineer claimed that the new developer had infringed on the plaintiff=s copyright in the revised plot plan by copying and modifying it, by filing it with the city, by circulating it among prospective tenants, and by using it to build the project. The district court granted summary judgment to the developer, denying the plaintiff=s claim.
The Ninth Circuit affirmed the trial court=s grant of summary judgment to the developer. The Ninth Circuit held that the contract between the original developer and the original engineering firm impliedly granted the developer a license to use the plans to complete the project. This license included the right to hire the second design firm to creative derivative works of the plaintiff=s work for the purpose of completing the project, and to publish the finished work.
An owner of copyright has the exclusive right to reproduce, adapt, publish, perform and to display the work. 17 U.S.C. Sec. 106. A transfer of these rights must be in writing. 17 U.S.C. Sec. 204(a). A writing is not required, however, to transfer nonexclusive copyright licenses. 17 U.S.C. Sec. 101 excludes from Atransfer of copyright ownership@ transfer of non-exclusive licenses.
The contract between the original developer and the original design firm called for the firm to create maps, drawings and plans for the project and to submit these documents to the city for approval. The parties did not intend, and the contract did not specify, that the developer be required to obtain the design firm=s permission before using the plans to build the project.
The plaintiff argued that the copyright legend on the plans created an obligation on the part of the developer to obtain permission before using the plans. The legend stated:
AAll ideas, designs, arrangements, and plans indicated or represented by this drawing are owned by, and the property of the [firm] and were created, evolved and developed for use on, and in connection with the specified project. None of such ideas, designs, arrangements or plans shall be used without written permission of the [firm].@ The court held that the defendant developer did not exceed the scope of the license granted by the engineering firm by using the revised plot plan to create the final site plan, build the project, and publish the final site plan.
23. ARCHITECT REUSE
If the architect seeks to reuse the drawings to build a similar project that will diminish the value of the original project, there is no express provision in B101-2007 limiting the architect's reuse. However, obligations of good faith and fair dealing might prohibit the architect from reusing the design in any way that would substantially reduce the value of the original project.
24. USE AND DISTRIBUTION OF DESIGN DOCUMENTS DURING PROJECT
During construction, a number of parties other than the owner and the architect will need access to the documents. Issues which arise as a result of this need for access include questions as to:
1. The number of sets to be given the contractor
2. The logistics of where they are to be kept and their accessibility
3. Limitations on reuse
A201-2007. Section 2.2.5 states that the contractor will be furnished one copy of the contract documents for purposes of making reproductions pursuant to Section 1.5.2. A201-2007, Section 3.11.1, requires the contractor to maintain Aone copy of the Drawings, Specifications, Addenda, Change Orders, and other Modifications@ at the site for the owner. The sets must be in good order and marked currently to record changes. The sets are to be available to the architect, probably during working hours, and are to be delivered to the architect for submittal to the owner at completion.
CONCLUSION
It may be difficult to preserve a good relationship between the architect and the client/owner. Natural tension exists between the client/owner and the architect because the architect wants to be compensated highly for its work, and the owner usually wants to pay the lowest amount possible for the architect services. Using compensation agreements which clarify the basic price, the procedures for addressing changes in the work, and those events which can trigger additional compensation for the architect can reduce the tension between the owner and the architect.
On ownership of design drawings, an owner may intuitively believe that it should own the design documents, because it paid the architect to create the design documents. The architect may be concerned about unauthorized or unforeseen uses of its design documents by owners or others that affect both its liability and its compensation. All parties to the construction process should use well-drafted contracts to address the issue of design document ownership and use. Using copyright notices on the design documents provides an additional layer of protection for the architect, and helps to address the use by persons other than the owner who may come into possession of the design documents.