Michigan West Coast Chamber of Commerce

Well Drafted License Provisions in Architectural Design Agreements are Good Business

Posted by: 
Mark A. Rysberg, Hilger Hammond PC
Sunday, March 23, 2014

Architectural design agreements should be carefully drafted to identify the extent to which someone may duplicate or otherwise use the resulting work product.  In the legal context, that concept is referred to as a license.  Many times, however, the benefit of drafting license provisions to advance business strategies is overlooked.  Architectural design agreements should include license provisions that advance sound business strategies for the following reasons:

  • First, there is a direct correlation between license provisions and possible exposure to liability.  Risks of possible duplication or use of design materials by third-parties can increase the probability of liability.  Therefore, the scope of a license provision should be a significant factor in quantifying possible risk and, in turn, calculating a design fee that takes such risk into consideration.
  • Second, carefully drafted license provisions can help ensure that the costs and fees incurred in preparing the design documents are paid for.  For example, the granting of a license to use design materials may be conditioned on the full payment of the design services.  A license provision may also be drafted such that the license expires if contract administration fees are not paid.  Making a license conditional is especially important if a dispute ensues out of the design documents or agreement.  
  • Third, the scope of a license provision is conversely proportional to the protections afforded by copyright law.  Generally, the copyright laws protect against the unauthorized use of copyright protected materials.  That means that claims based on copyright infringement cannot exist if the design materials were used within the scope of the license provision.  Therefore, if a contractual license is very broad, or open to broad interpretation, the ability to rely on copyright protection is conversely limited. 

The scope of license provisions in design agreements should be considered before undertaking each design project.  Such provisions relate to risk allocation, the ability to ensure payment, and, if necessary, the legal recourse available if problems arise.  In those respects, careful review and drafting of license provisions in design agreement is a sound business practice.