The recent decision of Ankenman Associates Architects Inc. v. 0981478, 2017 BCSC 333 raises some interesting issues surrounding the intersection of copyright law, construction law, and the foreclosure process.
In Ankenman, an architecture firm prepared copyrighted architectural plans for a project for the original developer. The original developer went bankrupt and failed to pay the firm’s fees. The firm filed a claim of builders lien against project lands for its unpaid fees.
A new developer bought the original developer’s property, including the project lands, in the course of foreclosure proceedings. The firm’s lien claim was removed from the project lands in the foreclosure process, without payment to the firm. The new developer hired a new architect who used the existing plans to finish the development.
The firm commenced a proceeding against the new developer seeking an order for damages for unauthorized use of the plans. The new developer argued that (a) it had an implied licence to use the plans, and (b) the firm was precluded from pursuing the matter because it did not raise the issue of ownership of the plans in the foreclosure proceedings.
On the first issue, the court noted that an architect who produces a set of plans, generally, retains copyright and ownership in them. The client acquires the right to use the drawings in consideration for payment, but does not (absent contrary agreement) obtain ownership. The court held that the right to use the plans was conditional upon full payment and, when the firm filed the lien claim against the lands, that signified that the plans could not be used until payment was made. The court held that, if the original developer had no right to use the plans, then no right to use the plans could be purchased by the new developer in the foreclosure proceedings.
On the second issue, the new developer essentially argued that the matter was res judicata meaning, in layman’s terms, that the issue of ownership of the plans could have been, should have been, or was actually determined in the foreclosure proceedings. The court did not accept this argument. The court held that, while the firm’s right to claim a builders lien against the lands was extinguished in the course foreclosure proceedings, the issue of ownership of the plans was not before the court. Thus, the removal of the lien claim did not preclude the firm from pursuing other remedies.
Ultimately, the court awarded the firm damages for copyright infringement in an amount equal to that which the new developer would have been required to pay to obtain the firm’s consent to use the plans.
For potential buyers of foreclosed property, this case highlights the importance of knowing precisely what it is that you are buying. In Ankenman, the outcome might have been different had the court order made in the foreclosure proceedings specified that ownership or copyright in the plans did not transfer to the buyer. Had the issue of ownership of the plans been squarely raised in the foreclosure proceedings, the new developer’s argument that the matter was res judicata (already determined) might have gained traction with the court.
For architects, engineers, and other consultants engaged in relation to a construction project, this case shows another way by which they may receive payment for their work as an alternative to their remedies under the Builders Lien Act, S.B.C. 1997, c. 45.
Mark Danielson is an Associate with Pushor Mitchell LLP. His litigation practice covers a number of areas including business disputes, construction law, builders liens, debtor/creditor claims, and property disputes. You may contact Mark at 250-869-1284 or [email protected].
