By John O. Cunningham
A condominium developer that infringed an architect's copyright by using his plans without permission was entitled to a jury instruction that damages should be apportioned between the value of the infringed plans and the value the developer added to the project, the 1st U.S. Circuit Court of Appeals has ruled.
The defendant developer argued that it had proved apportionment was appropriate and that faulty jury instructions led a jury to award almost all of the profits from its project to the plaintiff architect.
The 1st Circuit agreed, vacating the jury's damage award and remanding the case for a determination of appropriate damages using the correct standards.
Judge Sandra L. Lynch, writing for the court, said that the developer "did not need to prove that its noninfringing contributions to the development were 'wholly separate' from [the architect's] plans, as the first [jury] instruction repeatedly said."
She added that "[i]t is also wrong to state, as did the second instruction, that apportionment is unavailable where the final product was 'enhanced or ... undergirded by the copyright infringement.'"
But the judge also affirmed the jury's verdict on liability when she ruled that the architect had not dedicated the plans to the public or made them part of "public law" by allowing them to be placed in a restrictive covenant running with the land.
The 48-page decision is John G. Danielson, Inc. v. Winchester-Conant Properties, Inc., et al., Lawyers Weekly No. 01-068-03.
New Ground
Paul L. Feldman of Boston, counsel for the defendant developer, said he believes that this is the first case nationwide on how to apportion damages in a construction case involving architectural copyright.
He added that the parameters of apportionment defenses have been well established in music and film contexts but suggested that apportionment is just recently getting more attention in architectural cases due to 1990 changes in copyright law.
Feldman said the 1st Circuit rejected the plaintiff's argument that architectural plans are so fundamental to a project that infringement of those plans requires disgorgement of all profits.
He also noted that the court specifically addressed several factors that may be considered in apportionment, such as the defendant's added amenities, quality of construction and marketing of the units.
"We did not pursue evidence on the value of the specific location, but that could also be a factor as many developments never earn a profit in the wrong site," said Feldman.
He also noted that his client had purchased the site in question from foreclosure and that the previous developer had legally acquired the architectural plans before going bankrupt. "It was not necessarily intuitive for the builder to think there was a copyright problem here," he said.
Anthony E. Battelle of Brookline, Mass., lead counsel for the plaintiff architect, said that the decision would be of interest to real estate, construction and intellectual property lawyers.
"This opinion should help architects and developers to understand the boundaries of a very complicated area of copyright law," he said.
Battelle added that the decision gave an excellent analysis of factors to be considered in determining whether there has been a publication or public dedication of architectural designs.
Charles R. Heuer of Boston, an architect and lawyer who also represented the plaintiff, said that "architectural copyright has been a fairly active area in recent years."
He suggested that many real estate lawyers might be surprised to know that "you can't just stamp out multiple copies of buildings or plans" under the Architectural Works Copyright Act of 1990 any more than you can copy song recordings.
Heuer added that it was very hard to develop jury instructions in an area with so little legal precedent.
Condos And Covenants
In the mid-1980s, Louis Farese was working on a condominium development project for Winchester, Mass.
Farese hired the plaintiff, John G. Danielson, Inc., as the architect to develop plans for the site, and the plaintiff produced seven drawings depicting a 70-unit condominium development.
The site was not zoned for residential development though, and a restrictive covenant attached to the land required amendments to accommodate the project.
On June 11, 1987, the Winchester Planning Board voted to amend the site's zoning and entered into a new restrictive covenant that required development in accord with the drawings of the plaintiff.
But in 1988 after construction began, Farese began having financial troubles that landed him in bankruptcy, so the plaintiff never fully collected on payments for the drawings.
In 1994, Winchester-Conant Properties, Inc., the defendant, acquired the site in foreclosure, and attempted to remove the restrictive covenants to do a different kind of development.
After failing to get town approval to change the development, the defendant provided its architects and engineers with the drawings that were done by the plaintiff.
The plaintiff became aware of the use of the drawings only after an employee of the plaintiff drove past the site as it was being constructed in 1997.
Three of the drawings that were site plans and one artist's rendering of the buildings became the subject of copyright infringement claims in a lawsuit filed in U.S. District Court in Boston.
Chief Judge William G. Young dismissed the defendant's claims regarding publication of the plans and their entry into the public domain, and he instructed a jury that no apportionment could be made if revenues from the project were "intertwined" with the infringed drawings.
Apportioning Profits
Lynch wrote that profits from the project should have been apportioned, but were not due to incorrect jury instructions.
She noted that copyright law places a unique burden on defendants to show how much of their revenues are profit and what elements of profit are attributable to factors other than the copyrighted work.
The judge also noted that the parties had stipulated to most of the calculations of revenues and expenses attributable to the project, so it was easy to determine that the jury had awarded all profits to the plaintiff.
Lynch suggested the finding was problematic.
"The caselaw is clear on this point: there must be a rational apportionment of profits," she said.
"The defendant may show that the existence and amount of its profits are not the natural and probable consequences of the infringement alone, but are also the result of other factors which ... add intrinsic value," she explained.
The judge also noted that the evidence revealed the use of other architectural drawings by the defendant, as well as value added in the form of logistical coordination, supervising of contractors, installation of amenities and marketing of the units.
She added that the defendant rejected some aspects of the original site plans that it believed detracted from the development's appeal.
Given those facts, the judge said that "WCP [the developer] has ... made enough of a showing to require some apportionment as a matter of law."
Lynch also noted that the trial judge's first instruction to the jury engendered confusion and questions regarding apportionment.
She said the judge's response to the jury incorrectly asserted that the defendant had to prove noninfringing contributions were "wholly separate" from the architect's plans.
Public Domain
But the judge rejected the defendant's arguments that the plans were in the public domain as a result of publication or incorporation into law.
Lynch noted that copyright law at the time of infringement required sufficient notice of ownership rights with any "publication" in the form of sale, transfer or rental of the plans.
She also noted that the plans were displayed publicly at town meetings, filed with the town as exhibits, and depicted in a videotape in the town library.
The judge said that not all of these displays were covered by the "limited publication" exception for copyright display.
But she added that the exception was not necessary to apply because mere display of the drawings in town meetings was not such a "performance or display" as to constitute a publication under copyright law.
Lynch suggested that the videotape at the library was a different issue, but said the image was so unfocused and blurry that it could not qualify as a publication.
The judge also rejected an argument that the drawings, by virtue of their inclusion in a restrictive covenant approved by the town, had become "laws" in the public domain.
She said that "the restrictive covenant ... is nothing more than an agreement between the Town of Winchester and Farese ... concerning the site."
Lynch concluded that "Farese could just as easily have entered into an agreement with the site's neighbors to limit development ... [and that] would not convert such a private contract ... into a 'law' and thrust it into the public domain."
Questions or comments may be directed to the writer at jcunningham@lawyersweekly.com.
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March 17, 2003
