What happens to the copyright in building plans after termination of the residential building contract?
A question that we get asked a lot is if an owner can use the building plans after termination of the residential building contract.
In most building contracts, the copyright remains with the builder or building company after termination. A building contract will usually have a clause which says something like:
Where the builder creates the plans, the owner agrees that the builder retains copyright in those plans. The builder may grant a licence to the owner to use those plans.
We see less reputable builders saying things like "we retain copyright" or "you are not allowed to use our plans", or words to that effect. But this may not be true.
So, what does copyright mean, and does a license to use those plans exist after termination of the residential building contract?
Stonegate Legal were involved in a matter like this - DSGN Kartell Pty Ltd v Pathmaperuma; DSGN Kartell Pty Ltd v Hennig Bros Construction Pty Ltd; DSGN Kartell Pty Ltd v Craig Russell Stranger  QCAT 211 where we acted for owners in a failed claim by DSGN Kartell Pty Ltd to claim copyright infringement in QCAT's building and construction jurisdiction.
In this article our building and construction lawyers explain copyright, and the case law around licensing and the use of building plans.
What is Copyright?
This article is not really about copyright per se, but a brief definition may be required to put the rest of the article into context.
Very simply put, copyright is a collection of legal rights that a person has over artistic or creative works such as computer programs, books, films, music, sound recordings, text, and of course building & architectural plans.
The main right which subsists in copyright is the "right" to controls who can "copy" or reproduce their artistic works, who can use the copyrighted material.
Copyright protection in Australia is automatic and exists as soon as the works are created (written down, recorded, etc). There is no need to register copyright as you would say a trademark.
Copyright law in Australia is prescribed by the Copyright Act 1968.
What is a Copyright License?
A copyright license is one way that a copyright owner grants permission for the artistic works to be used and commercialised.
A good example of this would be Netflix. Netflix is a streaming service and does not own the copyright to a lot of the movies/tv shows on their service. They license the protected material from the copyright owners.
There are different types of licences can allow a person to use material that is protected by copyright, which includes the following:
- A copyright licence granted by the t's & c's on a website.
- A copyright license for open-source content.
- A direct copyright licence.
- A license for commercial use of copyright.
- A statutory copyright licence.
In most residential building and construction contracts there will be a clause in relation to the ownership of copyright and the licensing rights.
A license in copyright is essentially the permission or consent to use artistic works (drawings and building plans) in which copyright exists.
In Computermate Products (Aust) Pty Ltd v Ozi-Soft Pty Ltd (1988) 20 FCR 46, Sheppard, Spender and Gummow JJ said:
the expression "without the licence of the owner of the copyright" in s. 37 was simply a reference to the absence of the owner's "consent" or "permission" or "licence" as interchangeable terms.
In Hardingham v RP Data Pty Limited  FCA 2075, Thawley J considered the authorities in relation to copyright licenses and said:
A licence of copyright might be granted expressly. It might be granted wholly in writing, wholly orally, or partly in writing and partly orally . A licence might also be implied into a contract which is otherwise in writing or oral. The implication might arise in a number of ways. It might arise by implication from what was expressly agreed or from the nature of the contract as expressed in the words of the contract or from usage or from considerations of business efficacy.
However, these will apply when the contract is alive and on-foot. But what does the law say about the copyright after the termination of the residential building contract?
Copyright in Building Plans after Termination
In relation to the copyright in building plans and architectural plans, there are few things to consider:
- What does the contract say about copyright in building plans?
- What does the legislation say about copyright in building plans?
- What do the cases say about copyright in building plans?
This article will discuss each of those issues in turn.
What does the contract say about copyright in building plans?
In most building contracts there will be a clause which talks about licensing of the plans.
This can include something along the lines of:
The owner and the builder agree that the price for a copyright licence is 5% of the contract price. The contract price includes the copyright licence fee.
If the owner uses the plans without the builder's consent, the owner must pay to the builder the licence fee above.
Therefore, the license fee is included in your residential building contract and represents a certain percentage of the building price in the contract.
It is important to check the contract before terminating if you want to use the plans with another builder. You may have to pay for the right to use those plans.
But what does the legislation say about copyright in building plans?
What does the legislation say about copyright in building plans?
The terms "artistic work" and "drawing" are defined in section 10 of the Copyright Act.
An artistic work is defined as:
"Artistic work" means (a) a painting, sculpture, drawing, engraving or photograph, whether the work is of artistic quality or not
Drawing is defined as:
"Drawing" includes a diagram, map, chart or plan.
Section 32 of the Copyright Act says that copyright exists in unpublished artistic works:
(1) Subject to this Act, copyright subsists in an original literary, dramatic, musical or artistic work that is unpublished and of which the author:
(a) was a qualified person at the time when the work was made; or
(b) if the making of the work extended over a period-was a qualified person for a substantial part of that period.
So, the Copyright Act does include building plans as artistic works, and whether published or unpublished, copyright exists in those plans.
So, what do the cases say about copyright in building plans?
What do the cases say about copyright in building plans?
A good starting point is the New South Wales Supreme Court case of Beck v Montana Constructions Pty Ltd [1964-5] NSWR 229, where the Jacobs J said:
[T]he engagement for reward of a person to produce material of a nature which is capable of being the subject of copyright implies a permission, or consent, or licence in the person giving the engagement to use the material in the manner and for the purpose in which and for which it was contemplated between the parties that it would be used at the time of the engagement.
In conclusion, Jacobs J said:
There then remains the question whether there should be any implied right to transfer it and here I think that it must inevitably be implied that the owner, having commissioned the sketch plan and having obtained the right to use it for the purpose of erecting on that site a building in substantial accordance with it, should have the right to transfer it to a new owner of the land . I so conclude and in the circumstances of this case and without considering the question of what would happen if there were no agreement for transfer to the new owner, I conclude that there was, on such evidence as there is before me, a collateral agreement to transfer the plans.
This case seems to say that building plans can be used if they have been paid for.
So, the builder may still retain the copyright in the building or architectural plans, but there is an implied license in law to use those plans if they have been paid for.
A "licence" in the statutory context of ss.36, 37 and 38 means no more than "permission" or "consent", which for the purpose of those sections need not result from a formal grant, but may be an express or implied term of a contract or be implied by conduct
In the English Queens Bench decision of Blair v Osborne & Tomkins  2 QB 78, Lord Denning MR (with whom Widgery and Megaw JJ agreed) said:
. when the owner of a building plot employs an architect to prepare plans for a house on that site, the architect impliedly promises that, in return for his fee, he will give a licence to the owner to use the plans for the building on that site. The copyright remains in the architect, so that he can stop anyone else copying his plans or making a house from them; but he cannot stop the owner who employed him, from doing work on that very site in accordance with the plans. If the owner employs a builder or another architect, the implied licence extends so as to enable them to make copies of the plans and to use them for that very building on that site: but for no other purpose.
This case seems to say that building plans can be used by another builder or architect if they have been paid for, and they are used for exactly the same purpose.
The implied license seems to extend to any successor in title.
Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd  HCA 55 is a High Court case which involved the use of an architects plans by a successor in title, and the architect claimed copyright infringement. The High Court said:
By reference to the reasons of Jacobs J in Beck v Montana Constructions Pty Ltd and the reasoning of the English Court of Appeal in Blair v Osborne & Tomkins, the parties agreed that where an architect is engaged to prepare plans and drawings which are the subject of copyright, and is paid a professional fee to do so, if the fee would normally be taken to cover the use of the plans and drawings for the purpose of constructing a building in substantial accordance with them, the commissioner of the plans and drawings (or a successor in title) will have an implied licence to use the plans and drawings for that purpose.
The cases above are authority for the fact that even after the termination of a residential building contract, there is an implied license for the owner and the owner's new builder to use the plans in accordance with what the plans are supposed to be used for.
But what is the scope of that implied license?
Scope of the Implied License to use Building Plans
The scope of the implied license is limited to substantially the same design, for the same purpose, at on the same land.
This essentially means that an owner will be able to build the house that they wanted, where they wanted, and can use the building plans to do so.
When that principle is applied in the present case it seems to me to be inevitable that one should conclude that the payment for sketch plans includes a permission or consent to use those sketch plans for the purpose for which they were brought into existence, namely, for the purpose of building a building in substantial accordance with them and for the purpose of preparing any necessary drawings as part of the task of building the building.
In summary of the above:
- There can be an express clause in the contract which allows for a license to use the copyright for a fee. Pay that fee and an owner has a license to use the building plans.
- In the absence of an express clause in the residential building contract, there can be an implied license to use the copyright so long as a fee has been paid for those building plans.
What about if there is an express term in the residential building contract excluding any license upon termination of the contract?
Express Exclusion Clauses in the Contract
An implied term of a residential building contract must not contradict an express term in the building contract.
In the High Court of Australia case of Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, Mason J outlined at  the conditions necessary for implying a term into a contract (including a residential building contract):
The conditions necessary to ground the implication of a term were summarized by the majority in B.P. Refinery (Westernport) Pty. Ltd. v. Hastings Shire Council  HCA 40; (1977) 52 ALJR 20, at p 26 : "(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."
In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd  HCA 14, Gibbs C.J., Mason, Wilson, Brennan and Dawson JJ. said at :
A term will not be implied into a contract on the basis of custom where it is contrary to the express terms of the agreement.
This issue was addressed in relation to copyright in a building contract in the very recent case of Building Corporation WA Pty Ltd -v- Marshall [No 2]  WASC 140 where Tottle J was asked to decide if an implied license existed in the face of an express term. Tottle J concluded at :
The matters to which I have referred are sufficient to resolve the first issue in the plaintiff's favour but I would add that, in my view, the inclusion in the Contour and Conceptual Design Agreement of the words 'Copyright of Designs will remain the property of Giorgi Exclusive Homes design fee to be credited against Building Contract', is sufficient to negate the licence. A reasonable person reading these words would not draw a distinction between an assignment of copyright and a licence of copyright. Rather a reasonable person would understand them to mean that the Contour and Conceptual Design Agreement did not confer a right to use the Design Concept Plan to build a house unless and until they executed a building contract. This point is reinforced when the position in respect of the design is compared with the position in relation to the site survey which is to remain the property of the client in the event that they do not proceed to a building contract.
The Court found that there was no implied license as it would contradict the express terms of the contract.
However, it is worth pointing out that every case is different and a different case may turn on a different factual matrix and be decided in another way.
Copyright in Building Plans after Termination
So, in relation to the above article:
Express License - If you have an express term in your contract in relation to copyright in building plans which allows for a license for a fee, then as long as you pay this fee you can use the building plans, even if the builder gets grumpy and says that you cannot.
Implied License - If you do not have an express term in your contract in relation to copyright in building plans, then you will have an implied license to use the building plans, so long as you have paid the builder a fee for the building plans.
Scope of License - The scope of an implied license is limited to the house you were wanting to build, on the land you wanted to build on, substantially in accordance with the residential building contract.
Express Prohibition - If there is an express term in your contract in relation to copyright in building plans which states that you cannot have a license or any right to use the building plans after termination, then it is unlikely that you will have a legal right, and you might be subject to copyright infringement proceedings.
Tip - let the builder keep the deposit, or a share of the deposit after termination, and this may be the price of the license to use the building plans. However, every matter is different and so it is important to check with a legal practitioner if this applies in your particular case.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.