Completion of Building Sold in Bankruptcy Did Not Infringe Architect’s Copyright “Architectural works” are subject to copyright protection. Does this
Completion of Building Sold in Bankruptcy Did Not Infringe Architect’s Copyright “Architectural works” are subject to copyright protection. Does this
mean that the architect of an unfinished building can stop the building
from being completed until the architect is paid? A recent district court decision addressed a similar issue. An architectural firm was retained to design a building.
The firm obtained copyright protection for its technical drawings and for the building itself, as “the tangible embodiment of its design work product.” When the building was approximately 90% complete, the owner halted construction and filed for bankruptcy.
The trustee moved to sell the building free and clear of liens under Section 363 to a bank, which promptly sold the building. The architectural firm objected to the sale on various grounds, including violation of its intellectual property rights.
The bankruptcy court approved the sale. The firm moved for reconsideration, arguing that since the owner’s license to use the firm’s copyrighted work (including the building) was conditioned on full and timely payment thereof—which had not occurred—“the building [was], indeed, an infringing copy of the architectural work.” The bankruptcy court denied the motion for reconsideration. After the firm appealed, the court denied a motion to stay the approval of the sale pending the appeal.
The bank then sold the building to a third-party, which completed the building. As a result, the district court and the court of appeals concluded that the appeal was moot under Section 363(m), which protects good-faith purchasers of assets under Section 363 from an appeal if the sale order is not stayed.
Afterwards, the firm sued the third-party buyer. It argued that the completion of the building infringed the firm’s architectural works copyright. The district court eventually dismissed the entire complaint because (i) the firm failed to allege any copying, (ii) the building owner's right to finish the Building was protected from a claim of copyright infringement by 17 U.S.C. § 120(b), (iii) the two counts were barred by the bankruptcy court’s order based on the doctrine of res judicata, and
- the firm could not demonstrate the substantial similarity necessary for copyright infringement, since the buyer’s completion of the building “with or without using [the firm's] copyrighted plans” was not copyright infringement.
On appeal, the Eighth Circuit affirmed. The dismissal of two of the three counts was affirmed exclusively on res judicata grounds. The court of appeals concluded that the matter of copyright infringement was actually litigated in the bankruptcy court and rejected the firm’s contention that, since the appeal of the bankruptcy court’s order was dismissed as statutorily moot under Section 363(m) it should not have preclusive effect.
The dismissal of the third count was affirmed due to the absence of (a) direct evidence of copying or (b) evidence of substantial similarity of both ideas and expression in the infringing material.