Clients do not retain design firms to produce documents such as plans and specifications; design firms perform services expressed through instruments of service such as reports, studies, plans, and specifications. This is an important distinction and one that often confuses both design firms and their clients.
If the client requests a transfer of both the ownership of the instruments of service and the copyrights for the documents and designs, it could expose the design firm to claims from future use of the instruments of service or from “patent or latent defects” in the design. Perhaps of even greater concern is that transferring the design firm’s rights may impede the firm from future use of derivative design concepts and details of those instruments of service on subsequent projects for other clients. Design professionals, clients, and even third parties, such as contractors, have specific needs to use the documents and the information contained in those documents. The standard industry documents establish a system of ownership and licensing that accommodates these interests. Calling the instruments of service “works for hire,” however, could be argued by a client as transferring the design firm’s rights and may result in unintended financial or liability difficulties.
The Copyright Act of 1976 and the Architectural Works Copyright Protection Act of 1990 recognize that design professionals have more than one interest in the instruments of service created during the performance of design services for a client. Under copyright law, “works for hire” arrangements transfer the rights of the originator of the documents to the party paying for the services that create those documents, but the creation of design instruments of service is not within the scope of the “works for hire” exception. The standard documents follow the Copyright Act by indicating that all the rights in the design and design documentation belong to the originator, but the contracts authorize the client to retain a copy of the information and to use the licensed information in its normal activities. Therefore, the design firm owns the design and the instruments of service that express that design as well as the legal right to control the use of those instruments of service in all instances except the case of the limited license assigned to the client. With architectural designs, copyrights exist separately for the actual design and accompanying documentation.
In most cases, clients use plans and specifications for maintenance or facility management purposes and do not attempt to use them inappropriately for other projects or for changes to the original project without appropriate modifications. Still, the design firm should clearly indicate the ownership and appropriate use of plans, specifications, and other documents in the professional services agreement, and should only transfer those rights clearly identified in exchange for appropriate compensation and legal protection.
A firm can transfer its instruments of professional service to a client and can protect both the client and itself through a careful transfer of any or all of the design firm’s rights, rather than blindly transferring all of the rights, title, or use of the documents by referring to such instruments of service as “works for hire.” The concept that anything a design firm produces for a client automatically transfers under copyright law has not applied to plans and specifications since the Copyright Act of 1976. Under the standard contracts, the design firm retains the design, the ownership of the documents expressing that design, and the right to use the information contained in the instruments of service. The client has the right to retain copies for informational and reference purposes in connection with the use and occupancy of the project, but the standard documents clearly state that the client and others cannot reuse the documents for modifications to the project or on any other project.
Both the client and design firm must understand the design firm’s ownership rights regarding its instruments of service, its control over their use and copying, and its ability to reuse the details expressed in the documents. The design firm can transfer all rights, but carefully negotiate any transfer to recognize and accommodate the interests of all parties. One of these interests is the design firm’s liability exposure that might occur from the misapplication of the instruments of service. A contractual provision can protect the design firm and client by reserving the right to reuse information contained in the drawings and specifications and disclaiming any warranties that might exist if the plans are considered a product. The provision should also commit the client to take sole responsibility for any future use of the documents and to indemnify the design firm for any claims, costs, losses, or damages resulting from any future use.
Standard contract forms provide a “nonexclusive license” for the client’s use of the documents “for purposes of constructing, using and maintaining, altering and adding to the Project.” Usually, contractual provisions provide two options:
- The design firm retains ownership with a limited, but broad license to the client for the client’s project and project-related purposes.
- The client acquires ownership with the design firm retaining certain rights to the documents.
Using these options can provide the control the client wants without jeopardizing the design firm from meritless, but costly claims.