Building on another’s work: copyright infringement of architectural designs

Copyright – Infringement – Innocent infringement – Damages

Milankov Designs & Project Management Pty Ltd v Di Latte [2018] WASC 14
Milankov Designs provides design, drafting and project management services for the construction of expensive houses.  Milankov Designs was engaged by Mr Di Latte, no doubt over a coffee or two, to design a house on Mr Di Latte’s property.  Mr Milankov did so and the plans were submitted to council for approval.  The agreement was terminated.  In a development that seems to surprise only in its frequency, Mr Di Latte then met an architect, Mr Scanlan, and told him that he had development approval for the home but that he did not want to proceed with Mr Milankov.

Mr Scanlan said that if Mr Milankov had been paid in full for the work he had done then Mr Milankov had given Mr Di Latte the right to use the drawings on the site as Mr Di Latte saw fit.  To his credit, Mr Scanlan recommended that Mr Di Latte get legal advice on his position and said that he would seek some advice from the Royal Australian Institute of Architects or another architect to confirm Mr Scanlan’s view.  Mr Scanlan in fact sought and obtained confirmation of his view – unfortunately not from a lawyer.  However, Mr Di Latte told Mr Scanlan that he had obtained legal advice and there were no problems.

The first question was whether Milankov Designs owned the copyright in the original designs, in particular, whether Mr Milankov was employed by the company to do so.  The facts concerning employment were vague to say the least.  For example “Mr Milankov said that he was still employed under the contract of employment with his mother [not the plaintiff], that he was employed by his mother in 2010, that he was not employed by his mother, but had a power of attorney from her, that he was a bit confused about it all, that the administrative arrangements of the employment were handled by the plaintiff in the sense that tax was remitted to the Australian Taxation Office through the plaintiff rather than through his mother and that he was not able to produce any notice of termination of his contract of employment with his mother.

However, Justice Martino observed that courts have adopted the position that they are entitled to take a wide view of the alleged employment relationship, beyond the terms of the contractual documentation, to examine how the parties conducted themselves in practice and whether, where there is contractual documentation, the reality of the situation accords with the terms of that documentation or whether it points to another entity being the employer.  After repeating the principles to be applied, his Honour concluded that Mr Milankov was employed by the plaintiff, rather than his mother, notwithstanding the fact that the contract of employment was expressed to be between Mr Milankov and his mother.

Then the defendants asserted that they held an implied licence to use the original house plans.  While contracts between architects and clients are contracts of the class to which a licence to build according to the copyright plans is implied, where the architect could be regarded as reserving a right to himself in the contract to continue with the subsequent stages of building the term may not be implied.  That was the case here.  Justice Martino concluded that, while the contract had no express clause regarding the existence or not of a licence to build a home according to the plans:

“The contract provided for the plaintiff to prepare plans ready for development application approval in stage one and then, in stage two to prepare working drawing and specification documentation. The plans prepared in stage one were to be used for development approval. Then the plaintiff was to prepare working drawing and specification documentation. In my view it is inconsistent with the provisions of the contract for the plaintiff to have given the first defendants a licence to use the plans prepared for stage one for the building of a house. The implied licence given by the plaintiff to the defendants was to use the plans prepared in stage one for the submission to the City of Nedlands for development approval. It was not an implied licence to use the plans to build a house, because that is inconsistent with the terms of the contract which provided that the plaintiff was to prepare working drawing and specification documentation.”

Given the above and the fact that it was not in issue that the original plans were used by the defendants, the only remaining question on liability was whether, as Mr Scanlan pleaded, he was an innocent infringer.  While his Honour accepted Mr Scanlan’s evidence regarding the efforts he took to satisfy himself that the proposed use of the plans would not infringe copyright, the objective test for innocent infringement was not satisfied.  His Honour found that the responses received by Mr Scanlan to his enquiries of Mr Di Latte, the unnamed architect whose name Mr Scanlan had forgotten and another architect, did not provide an objective basis for Mr Scanlan having no reasonable grounds for suspecting that his actions in using the plans prepared by the plaintiff constituted an infringement of the plaintiff’s copyright.

Finally, on the question of damages, the defendants contended that any infringement of copyright had not caused any loss because the contract between the plaintiff and the first defendants had been validly terminated before there was any infringement of copyright.  Mr Milankov was not a registered architect when he produced the original house plans.  Milankov Design’s engagement letter said that its fee was to provide “architectural design and documentation”.  However, the Architects Act 2004 (WA) provided that where a contract provides that “architectural” work will be done by persons who are not registered architects, the contact can be terminated without damages for repudiation.  His Honour observed that this would not excuse the defendants for damages for breach of copyright.

His Honour observed that the better statement of principle regarding damages is that a plaintiff entitled to damages for infringement of copyright is entitled to such damages as would as far as possible put the plaintiff in the position it would have been in if there had been no infringement.  Notwithstanding the poor relationship between the parties, His Honour concluded that, if the first defendants had no alternative but to continue to work with the plaintiff if the house were to be built using the plaintiff’s drawings, then they would have done so.  While it was clear that the lost profit was 5% of the construction value of the project, there was some debate about the proper way of calculating the value of that construction.  Ultimately, a fee of just over $230,000 was determined.  A detailed debate also ensued regarding the costs that Milankov Designs would have incurred in drafting the relevant plans, which were ultimately determined as just under $60,000.  After taking into account fees in fact paid, damages were assessed as about $150,000.  His Honour concluded that additional damages were not warranted because the defendants believed they were entitled to engage in the conduct they did.

 

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