Australia: Plans and Drawings, Copyright and Implied Licences

It's not unusual for the copyright in commissioned works to remain with the creator; the person who commissioned it is usually assumed to have an implied licence to use the work. A common example of this is in the construction industry, where architects are often part of the development consortium and provide the plans for the project without charging professional fees. But is this assumption wrong? A recent decision of the full Federal Court of Australia suggests it is, with troubling implications not only for the construction industry but also anyone who commissions work.

The decision in Parramatta Design & Developments Pty Ltd v Concrete Pty Ltd [2005] FCAFC 138 arose from a falling out among property developers. The owner of the plaintiff architectural firm, a Mr Fares, formed a company, Landmark Building Developments, with a solicitor Mr Barrak. Landmark and other company, Toyama, bought a property in Nelson Bay for $565,000.

For the purpose of obtaining planning approval, Parramatta Design created architectural plans for a 14-unit development of the property. There was no agreement for any specific payment for these plans (although Parramatta Design had been paid $27,000 for a previous set of plans for a smaller development for the same site) – the parties were, in effect, co-venturers.

Planning approval having been obtained for the 14-unit development specified in the plans, the parties fell out, as a consequence of which Toyama applied for and obtained orders in the Supreme Court for the appointment of trustees, in whom the property was vested for the purposes of sale. The trustees were unclear about their rights over the plans created by Parramatta Design, and Parramatta Design had made clear to the trustees its view that the plans, in which copyright undoubtedly belonged to it, were not available for use by any third party. The trustees made clear to the purchaser in due course that a dispute existed as to "the existence of any licence to make use of the copyright in those plans …" and accordingly gave no warranty in that regard.

The property was sold in due course to another developer, Concrete, for $2,760,000. Concrete argued that, notwithstanding that the claim of Parramatta Design had been brought to its attention, it paid the price it did in the belief that Parramatta Design's claim was unjustified, and that a licence to use the plans was included in the price it paid.

The trial judge was most dissatisfied with the evidence of the architect, Mr Fares, and the solicitor, Mr Barrak, that was to the effect that no licence was granted to use the plans, even though the development approval for the land was obtained in reliance upon them, and that Parramatta Design should be paid a further fee for such licence, in addition to the substantial profit they had made upon the sale of the land to Concrete, with the development approval.

The trial judge concluded:

• there was an implied licence granted by the architect to Landmark and Toyama to use the plans to construct the buildings for which development approval was obtained; and
• even though the trustees did not necessarily have the benefit of that licence (after all, they were not entitled to use the plans to carry out the development, they were only empowered to sell the land), the trustees "stood in the shoes" of the licensee so as to assign it. Alternatively, the implied licence followed the development approval as the development approval followed the land.

In a somewhat surprising decision, the Full Court disagreed with the trial judge on just about every issue.

First, the Full Court assumed that the express terms of the contract between the architect and Landmark for the creation of the plans had to be known in order to decide the question before it. This is strange because there is no reason why the bare permission to use the plans should be found in a contract at all, provided it does not contradict the express terms of a contract between the parties. There is very substantial authority for the existence of an implied licence when an architect is commissioned to create plans for construction, in the absence of any express or implied term in that regard in the contract between the architect and the client (even if there is one). It was common ground that the express contract between the parties, if there was one, was not decisive on this issue.

Furthermore, the Full Court was influenced by the fact that there had been no payment of the architect in this case: "If the architect has not been paid for the work or has only been paid a nominal fee, there is no reason why the client should be allowed to take the full benefit of that work". However, this is plainly inconsistent with well-regarded and long-standing authority, such as Ng v Clyde Securities Ltd [1976] 1 NSWLR 443, in which the failure to pay the architect's fees did not terminate the implied licence to construct the building in accordance with the plans supplied. Anyway, in this case, the architect profited handsomely from the improvement in the value of the land with the benefit of the development approval which, while not exactly as it may have intended in the first place, was of the same kind of exploitation.

What about the scope of the permission? It is well established that the scope of the permission granted may be impliedly extended to acts beyond those anticipated by the parties to the transaction. This may occur when commercial necessity requires such a licence to make use of goods supplied.

The Full Court also seems to have suggested that there had to be an implied right to assign the benefit of the implied licence. Under the general law, a licence is assignable, unless there is an agreement, express or implied, to the contrary or if the licence is tied to a contract for the provision of personal services. In Ng v Clyde Securities Ltd, for example, the benefit of an implied licence in architects' drawings commissioned by a property developer was transferred under the terms of a mortgage to the mortgagee in possession of the property, so that the mortgagee, or its assignee, could complete the construction of a building in accordance with the drawings.

The Full Court was on somewhat firmer ground when it observed that the trustees for sale did not purport (and made this clear) to assign the benefit of a licence in the architect's plans, and indeed the right to do so was not necessarily vested in them by the orders of the Supreme Court appointing them. The trial judge's conclusion that the relevant licence could exist and be transferred independently was criticised by the Court, suggesting that such an implied licence must be one given "to the world at large". However, there seems no reason, in principle, why the trial judge's reasoning – that the land was assigned with the development approval, and the development approval comprised the architects' plans (upon which it is based) – should be found to be incorrect. The licence granted was not "to the world at large", but to the holder of the development approval only, and in the circumstances could not be terminated.

Furthermore, the Court said, "Even if, by some new doctrine, there were such a licence, in the absence of any consid-eration or preclusion, it would be revokable at will". Even an implied copyright licence, while terminable at will, will need reasonable notice to be given, and that such reasonable notice might be very long indeed. For example, in Bourke v Filmways Australasian Distributors Pty Ltd (unrep, 9/10/1979, SC NSW), an author who had been engaged to create a scenario for a film was found to be unable to terminate the licence given for the general distribution and public screening of the film, notwithstanding that a dispute had arisen regarding the payment of his fees. The same was found in respect of architect's plans in Ng v Clyde Securities.

For the construction industry, this is a surprising and troubling decision. It's not uncommon for architects to be part of a development consortium, and for their plans to be used in the project without the payment of a specific professional fee. If the Full Court is right, the consortium might not have an implied licence if the fees are not paid. The solution is to ensure that there is a written agreement about the use of the plans by the developers.

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