In Milankov Designs & Project Management Pty Ltd v Di Latte  WASC 14, the WA Supreme Court has handed down a cautionary copyright tale to all prospective home builders. The moral of the story? When it comes to working out what you can do with the plans you’ve paid for, and what you need to do to be an innocent infringer, there’s no substitute for reading the contract.
To build a home
Mr Milankov is a creative type whose company provides design and project management services usually for what Martino J calls the construction of “expensive houses”.
Mr and Mrs Di Latte are looking for someone to design and manage the construction of their expensive house. It’s a match! Come July 2010, Milankov and Di Latte enter into a contract for Milankov to design the expensive house.
For the first few months everything moves along swimmingly. It was just your run-of-the-mill design process for a multimillion dollar mansion on the Swan River with a boat ramp. So far so good.
Getting on like a house on fire
As we head into Christmas 2011 things start to get shaky. Di Latte cancels a few of the pair’s regular meetings. Milankov gets frustrated with his client. Di Latte says that his comments aren’t being incorporated into the design.
On 14 November the matter falls off the cliff. Di Latte cancels another meeting, and Milankov has stern words with Di Latte’s secretary. When Di Latte tries to reschedule, Milankov flips the script and refuses to come.
We’ll throw to Martino J to describe the subsequent chat between designer and client:
Mr Di Latte telephoned Mr Milankov and asked him if he refused to meet at Mr Di Latte’s office. The conversation was heated. In the conversation Mr Milankov called Mr Di Latte an idiot and preceded that word with a well-known offensive swear word. Mr Milankov’s evidence was that Mr Di Latte had sworn at him, which Mr Di Latte denies. I am unable to determine whether or not Mr Di Latte swore at Mr Milankov and I do not think it matters whether or not he did so. The telephone call ended abruptly.
All this swearing and alleged swearing is too much for the pair and there’s a cold silence for a few days.
Finally, Di Latte gets in touch to say he doesn’t think it’s going to work out, he’s terminating the contract and it would be great if he could swing by tomorrow to pick up a copy of the plans.
Unsurprisingly, Milankov says that his company owns the IP in the drawings, and that the development application can’t progress to stage 2, or be constructed as designed.
Di Latte’s lawyers write back with a different view.
Di Latte’s in a pickle. He’s paid a fortune to the designer he’s just fired, and now he has no plans and no expensive house. He needs to find another designer to finish the job.
Enter the second defendant, Scanlan.
Di Latte approaches Scanlan and asks him to progress the project, using the plans designed by Milankov.
Scanlan’s happy to get the work, but a little nervous about what’s just gone down in Act 1. He tells Di Latte he needs to make sure the copyright issues are all tickety-boo, and asks Di Latte if there’s anything in his contract with Milankov which required that he use Milankov for the rest of the job. Di Latte says no. Scanlan is thrilled, and says that so long as Milankov has been paid in full for the work then they were probably out of the copyright woods.
To make sure every T is crossed, Scanlan asks Di Latte to get some legal advice, meanwhile, he’ll give the Royal Australian Institute of Architects a bell as well as an old architect mate for good measure.
All the reports come back the same – if the client has paid for the plans, there would be no issues with the client and another architect using the drawings for the development of the site.
With green lights all round, Scanlan and Di Latte charge ahead with the rest of the design and build.
Presumably, Milankov was driving along the Swan River one sunny afternoon when he spotted a strangely familiar house emerging from a construction site. A few firmly worded letters later, everyone’s in the Supreme Court of Western Australia staring up at Justice Peter Martino.
Implied licence to build a home
First off, Martino J found that the plans submitted to the Council for development approval constituted original artistic works, that copyright subsisted in them on their production and that Milankov was the author.
The big question in dispute was: What was the extent of any implied licence given by Milankov to the Di Lattes to use the plans Milankov had prepared?
Martino J referred to a line of cases that states that payment for sketch plans includes a permission or consent to use those sketch plans for the purpose for which they were brought into existence. That is, when you buy a sketch of a house off a designer or architect, there is an implied permission to use the plans to build a building that looks a lot like the sketch.
However, the implication of permission or consent to use the plans in that way would not follow if the architect or designer could be regarded as having reserved a right in the contract to continue with the subsequent stages.
Milankov said that’s exactly what he had done; the contract with the Di Lattes reserved to Milankov the right to continue with subsequent stages of the contract and so a licence to use the plans to build a house was not to be implied.
Martino J agreed. Whilst the contract did not expressly exclude the licence, it would have been inconsistent with the terms of the contract to imply a licence to use the plans (which were prepared only for stage one of the project) to build the house. The implied licence went only as far as allowing the Di Lattes to submit the plans to the Council.
It was clear that Scanlan had reproduced the plans prepared by Milankov and had submitted those drawings to the Council for the Di Latte’s building licence. Accordingly, Martino J found that both Scanlan and the Di Lattes had infringed Milankov’s copyright.
If Scanlan was found to have infringed copyright, he claimed that he had done so innocently, and should have protection under s 115(3) of the Copyright Act. The Di Lattes didn’t try to put on this defence.
To make out innocent infringement, Scanlan needed to show:
- an active subjective lack of awareness that the act constituting the infringement was an infringement of the copyright; and
- that, objectively considered, he had no reasonable grounds for suspecting that the act constituted infringement.
As you’ll recall, Scanlan had taken the steps of:
- asking Di Latte to get legal advice;
- calling the Royal Institute; and
- sanity checking the situation with his architect mate.
However, Scanlan’s coup de grace was that he hadn’t read the contract between Di Latte and Milankov. He haven’t even asked for it. This writer has lost track of how many times he’s been reminded here at KWM that there’s no substitute for reading every page of a document. Scanlan learnt that the hard way.
Accordingly, Martino J said that Scanlan should have asked to see the contract, or else contacted Milankov and asked him what he thought about the copyright issue.
But without that document, no matter how many other people Scanlan had asked, his inquiries did not provide an objective basis for having no reasonable grounds for suspecting that his actions in using the plans prepared by Milankov constituted an infringement of copyright. Scanlan’s defence failed.
Martino J assessed Milankov’s loss resulting from the infringement at $157,825 and ordered that Milankov was entitled to the damages against both defendants (as both Scanlan and the Di Lattes had infringed his copyright). Martino J made no award of additional damages.
- Read the contract – that’s the only way to know how far your rights extend when you’re having plans drawn up for you.
- Read the contract – you can’t say you took reasonable steps to check that you weren’t infringing copyright if you didn’t read the document which would tell whether you were infringing copyright.
- Read the contract – it might save you $157,825.