The Hidden Risk in Design-Build Project Negotiations: Copyrights

Anthony Chwastyk | Cohen Seglias Pallas Greenhall & Furman

Of the countless issues contractors face on a construction project, immediate problems like scheduling, workforce, payment, and materials supply often overshadow intellectual property concerns. But, they shouldn’t—especially for the design-build contractor. Given the resources the construction design process takes up, these builders need to protect investments from potential losses to the designer of record or the customer. Fortunately, copyright law provides mechanisms to address both of these risks.

The Designer Problem

A typical design-build project can create a unique risk for an architect or engineer seeking damages because of unauthorized use of drawings. U.S. copyright law gives ownership of a work to the author, including ownership of designs to the engineer or architect who prepared them. For a designer preparing plans as an employee of a design-build contractor, the designs would belong to the contractor. Sometimes, however, whether a designer qualifies as an employee is not always clear. Designers working as independent contractors, for example, would retain ownership rights to their designs unless the designer and design-build contractor agree otherwise. Regardless of the engagement, contractors would be prudent to secure such agreements

To prevent disputes about design ownership, contractors should require any professional providing architectural or engineering drawings to assign all their rights to the contractor. This critical measure removes any question of who owns the underlying work. For in-house designers, the employment agreement should have this provision. For outsourced work, the designer’s contract should have a similar provision, although some designers may resist, as standard design contract forms (such as those published by the AIA and EJCDC) often allocate intellectual property ownership to the design professional. By securing ownership for designs prepared, the design-build contractor ensures it can sell such drawings to clients and reduce the risk of ownership claims from designers.

The Customer Problem

Typically, the design-build project delivery method involves a contractor working with a customer through the design process, which often begins before the customer hires the contractor.

Savvy consumers like to perform due diligence before committing to a builder for their projects. Naturally, this pre-hiring vetting process will require the builder to share all kinds of drawings, plans and designs. In doing so, a contractor runs the risk that an owner will take those designs and hire another contractor to complete the project using those plans. Underhanded as that may seem, it has happened on more than one occasion to design-build contractors.

Thankfully, copyright law affords protection to design-build contractors in these situations. Copyright protection attaches the moment the author creates the design, so the “underhanded owner” has no right to use those designs without the contractor’s permission. To safeguard this interest, design-builders can officially register designs with the U.S. Copyright Office. This simple and affordable process involves only an application, a nonrefundable fee, and a submission of a copy of the work to the Library of Congress. Doing so satisfies a requirement for bringing a copyright infringement lawsuit in which the design-builder can seek statutory damages and attorneys’ fees.

Design-build contractors can further protect their designs used to pitch a client by attaching to them the “©” symbol, the word “Copyright,” or the abbreviation “Copr.” along with the year of publication and the owner’s name. This annotation puts others, including customers receiving these designs, on notice of the designs’ ownership and copyright protection.

Finally, design-builders can ask prospective customers, as a condition of showing any prospective designs, to sign a non-disclosure agreement to govern the negotiation process. Such an agreement should, at a minimum, require the customer to acknowledge that all designs and plans the builder prepares in the negotiation process belong solely to the builder and that the customer is not receiving any rights to those designs or associated copyrights. Further, the agreement should prohibit disclosing the designs to anyone other than the builder or other approved persons. The agreement should require that if the customer decides not to hire the builder, then the customer must immediately return all drawings to the contractor. If drafted properly, such an agreement provides more secure and clear ownership rights than a copyright registration but risks disrupting the trust relationship with the prospective client.

Successfully navigating copyright issues for design-build work depends greatly on properly prepared designer contracts and non-disclosure agreements. The stakes in play for such agreements demand design-builders work with knowledgeable legal counsel to get the terms right. The lawyers at Cohen Seglias have experience in preparing such contracts and counseling on copyright issues in the design-build context.

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