When a developer commissions the design of a building, the designers typically retain ownership of the copyright in the plans and drawings. The developer who commissioned the design will simply be granted a licence to use and reproduce the plans and drawings in the construction, repair, etc, of the building.
In many agreements, this licence is either made conditional on the developer paying the architect’s fees in full or can be terminated if these fees are not paid in full.
Without such a licence, the developer will not be able to construct and complete the building without infringing the designers’ copyright (this could expose the developer to a claim by the architects for an injunction and damages). Therefore, from the designers’ point of view, this provides strong leverage to ensure that all their fees are paid.
However, from the developer’s perspective, if it withholds payment because of a genuine dispute, it can effectively be held hostage by the designers. The developer must either pay money to which it believes the designers are not entitled (and then try to recover this money) or face having its project put on hold. A conditional licence could also, therefore, make it difficult for the developer to secure funding for its project from banks or other sources.
If designers insist on a conditional licence, one or more of the following compromises can be considered.
- Once the developer has paid a specified minimum amount or a certain stage of the project is reached, the licence becomes unconditional or cannot be terminated (this would not assist the developer if a dispute arises beforehand).
- The licence is unconditional and cannot be terminated but, in the event of a dispute, the developer pays the disputed amount into escrow to be released (to the developer or architects, as the case may be) once the dispute is resolved.
- If payment is withheld in the case of a genuine dispute, this will not delay the coming into effect of the licence or trigger the termination of the licence.