Developers are beginning to revisit and dust-off schemes shelved at the beginning of the economic downturn. There is a temptation to use old designs, but not always with the original designers. Boodle Hatfield's David Johnson explains the legal position and the risks facing developers.
The question of ownership and the right to use and reproduce designs will always be key to whether a developer is legally entitled to dust-off and use drawings and designs that were prepared years ago. A developer cannot copy and use drawings and the designs comprised in them, whether in two dimensions (as working drawings) or in three dimensions (as the actual building), unless it owns the intellectual property in the design or has a valid licence to use and reproduce that design.
When a designer creates a design for a client, the starting point is always that the design is the intellectual property of the designer, subject to the terms of the contract under which the designer has been appointed.
Where the designer has been formally appointed, it is relatively simple to establish whether there is a right to use the old designs: a properly drafted design consultant's appointment will always deal with copyright and other intellectual property rights.
Intellectual property can be dealt with in two main ways. The appointment may provide that the ownership of the intellectual property in the design is to be transferred to the developer. This is extremely unusual: a design is very much a designer's stock in trade, and designers are always unwilling to part with this. Far more frequently, the appointment will provide for the grant of a licence by which the developer is entitled to use the design.
The appointment should spell out the limits of the licence: it is likely that the developer will only be entitled to use the design for a particular project and will not be entitled to use it on a future extension of that project, let alone on any further projects. Licences to use and reproduce designs are frequently subject to conditions. For example, a licence may be conditional on the designer having been paid in full or to the design or the project having progressed to a certain stage.
Unfortunately, designers are often appointed informally or by an inadequate fee letter, which does not contain or refer to any properly drafted terms and conditions and without any reference to intellectual property rights. This is particularly so where designers are appointed to prepare initial feasibility studies or concept designs. In this case, the correct approach is to either use the original designer for the project or, alternatively, to negotiate a licence to use and reproduce the design in return for an agreed fee.
Simply going ahead and using and reproducing the design without obtaining a licence is extremely risky. The designer will inevitably become aware of the dusted off project and will demand either that it is involved in this, or that a fee is paid in return for a licence. The designer may threaten, or commence, legal proceedings: where intellectual property rights are infringed, by unauthorized use and reproduction of a design, the designer is entitled to claim substantial damages or even, in certain cases, an injunction to prevent construction of the building, or sale of the finished product.
Almost the only defence available to a developer faced with legal proceedings is to argue that there is an implied licence to use and reproduce the design. However, this is not an easy argument and, even if successful, serious legal fees may be incurred and delay suffered whilst the position is resolved. It is far better to regularise the position before proceeding with the project.
This article by David Johnson first appeared in the January 2014 edition of UK Construction.