A recent High Court case Summit Building Services v Baxter serves as an important reminder to all professionals in the design and architectural fields of some crucial do’s and don’ts when it comes to copyright law.
The Summit Case
The Baxters wanted to build a house. They approached Summit, and Summit prepared a set of six building plans. Once the building plans had been provided to the Baxters, they ultimately decided not to proceed with Summit and instead engaged Grigor Construction Ltd. It later transpired that the plans used by Grigor to build the Baxters’ new home were all but identical to those prepared by Summit.
Summit brought a case against the Baxters in the District Court on various legal grounds, all of which failed. Summit appealed to the High Court, solely on the ground of breach of copyright. Summit sought compensatory damages of not less than $73,043, and exemplary damages of not less than $20,000.
The High Court ruled that Summit owned the copyright in the building plans – the commissioning rule did not apply because Summit’s contract expressly reserved copyright ownership rights. The Baxters breached that copyright by providing Summit’s plans to Grigor.
The level of damages sought by Summit was rejected by the Court because the Baxters had already decided not to proceed with Summit, and because they did not use the building plans for ‘profit’. Instead, the Court assessed damages by determining a notional licence fee or royalty, being the sum that the copyright holder (Summit) would reasonably have charged for permission to use the plans. Based on Summit’s schedule of charges for preparing full drawings for consent, the Court determined that those damages amounted to $5,500. Summit’s claim for exemplary damages (the purpose of which is punitive, rather than compensatory) was rejected.
The Baxters were therefore liable to pay Summit damages of $5,500, as well as Summit’s legal costs (which would likely have been tens of thousands of dollars).
Fortunately for Grigor, it was not named as a second defendant in the proceedings for its part in using the copyrighted works.
Important Lessons for Professionals
There are two key takeaways for creative professionals from the Summit case.
First of all, the case highlights the importance of ensuring that contracts with clients modify or exclude the ‘commissioning rule’. Under the commissioning rule, when a work is ‘commissioned’, the commissioning party (most likely the client intending to pay for the work) is the first owner of any copyright in that work, rather than the original creator. The commissioning rule is the default position at law, unless it is ‘contracted out’ of.
In the Summit case, if Summit’s contract had not expressly reserved ownership of copyright, Summit would not have had any legitimate copyright infringement claim against the Baxters, because the Baxters would be the legitimate owners of the copyright in the building designs.
If you would like to know more about the commissioning rule, you can read our explainer here.
Second, professionals should be mindful in situations where clients provide pre-prepared design concepts or plans at the outset of a project. In those instances, enquiries should be made as to where the designs originated from. Of course, it may be inevitable that similar concepts are produced where those concepts are driven by site-specific restrictions and functionality requirements. However, care should always be taken to ensure that a design or plan is distinct and not a copy of an existing/prior design or plan. Clients may also need to be educated on the risks of copyright infringement. Although Grigor was fortunate to avoid liability in the Summit case, such a scenario is certainly possible.
Due to the material and reputational risk to professionals in instances of copyright infringement (whether as a ‘Summit’ or a ‘Grigor’), it is crucial to be aware of the risks and implications of breaching copyright, as well mechanisms to retain and protect ownership rights in original works.
This article is provided to assist clients to identify legal issues on which they should seek legal advice, and by its nature cannot be comprehensive and cannot be relied on as advice. Please consult the professional staff of Clendons for advice specific to your situation.
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