Arecent decisionof the British Columbia Supreme Court deals with an architect’s right to seekpayment from a purchaser of an apartment development constructed using thearchitect’s plans, after a foreclosure of the property had taken place.
The Facts
Theplaintiff, a small architectural firm, prepared architectural plans and relatedmaterial (Work Product) for an apartment development. The plaintiff continuedto own the copyright in its Work Product which was marked with its stampasserting copyright ownership.
Thearchitect’s initial task was to prepare a drawing package sufficient to applyfor a building permit application. Theproject encountered financial difficulties and at that time in excess of$190,000 was outstanding to the plaintiff. As a result, the plaintiff told the developer that it could not submitthe drawing package for the building permit until its invoice had beenpaid. Eventually the architect filed alien against the lands. The plaintiff’s claimwas eventually paid and the lien released.
Theproject started again and the plaintiff prepared additional workingdrawings. As a result, a developmentpermit was issued but again the plaintiff told the developer that it requiredfull payment of its outstanding accounts before it would release the drawingsto support an application for a building permit. An arrangement was arrived at where the plaintiffagreed to the submission of its drawings in exchange for an undertaking that itwould be paid from the first mortgage draw.
Thepermit was issued and construction commenced but the plaintiff was notpaid. The plaintiff filed an additionallien. Shortly afterwards the lendercommenced foreclosure proceedings against the developer. Pursuant to a court order, the project siteand all of the developer’s present and after acquired personal property wasconveyed to the defendant. Theplaintiff’s second lien was discharged but it was not paid.
Theplaintiff advised the defendant that if they wished to use its Work Product theplaintiff would have to be paid. However, the defendant hired a new architect whom they told that theplaintiff had no rights in the Work Product. The new architect used the plaintiff’s Work Product and the project wascompleted.
The Action
Theplaintiff commenced an action for copyright infringement against the defendantand the new architect.
Itwas clear that the plaintiff owned the copyright in its Work Product. In the typical situation where payment was made,the defendant developer would have acquired the right to use the plans for thepurpose of constructing the apartment development. It was agreed that the defendant’s rights, ifany, to use the plaintiff’s drawings and plans arose out of an implied licencefrom the plaintiff to the original developer. This licence was non-proprietary in nature and operated as a permissionto do that which would otherwise be infringing.
Thejudge applied the following statements from McKeown,Fox on Copyright and Industrial Design (drafted by the writer)
“….a non-proprietary licence, whereconsideration has not been given, can be revoked at will…. Where a licence has been given for consideration,it may only be revoked in accordance with the terms of the contract under whichit had been granted….”
Itappears that the standard form of contract, prepared by the ArchitecturalInstitute of British Columbia, provides that payment of all outstanding fees isan express precondition to the client’s use of an architect’s Work Product. However, in this case the plaintiff did notuse the standard form but used its own form of contract which was less clear. However, the agreement did give the plaintiffthe right to discontinue services if payment was not made.
Thejudge reviewed all the facts and concluded that the consent given by theplaintiff to the original developer for the use of its Work Product wasconditional on payment of the plaintiff’s fees in full. When the payment was not made the licenceended. The terminated licence was notcapable of being transferred to the defendant, who as a result used thedrawings without consent.
Whenthe plaintiff filed the second lien this signified that its Work Product couldnot continue to be used until its debts were settled. The judge said that the plaintiff had a rightto revoke its consent and did so before the defendant used the drawings. In addition, the judge was also prepared tofind that the implied licence granted to the original developer included, as acondition, of the continued use of the drawings, an implied condition that allthe plaintiff’s fees be paid in full.
Thedefendant was aware of all the material facts and the plaintiff’s rights beforeit completed the purchase and could not take the position that it was apurchaser for value without notice.
The judge did not agreewith the defendant that the purpose of the foreclosure proceedings was toenable the defendant to “complete the project free and clear of the claims of initialdeveloper’s creditors”. The purpose ofthe proceedings was to realize on the lender’s mortgage.
In the foreclosureproceedings, the title to the land was not transferred free and clear of allclaims but rather free and clear of the charges that have been registeredagainst title that subsequent in priority to the lender’s mortgage. The secondlien provided the plaintiff with a statutory right to encumber the landsbecause it had provided services in respect of the lands and in that wayprovided some security against the land for the plaintiff’s fees. After theplaintiff’s lien it had no right to claim against the lands, but this did notprevent it from pursuing other remedies.
Asa result, the defendant was ordered to pay damages to the plaintiffrepresenting the amount that the defendant would have been required to pay inorder for the new architect to provide services based on the Work Product. Thiswas based on time and expenses incurred by the plaintiff in generating the WorkProduct.
Comment
Theresult in the case is consistent with existing principles and case law but isstill may be somewhat surprising for those unaware of the rights associatedwith copyright.
John McKeown
Goldman SloanNash & Haber LLP
480University Avenue, Suite 1600
Toronto,Ontario M5G 1V2
Direct Line:(416) 597-3371
Fax: (416)597-3370
Email: mckeown@gsnh.com
These comments are of a general nature and not intended to provide legaladvice as individual situations will differ and should be discussed with alawyer.
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