Smart homes? What about intellectual properties?

As their names suggest, property and intellectual property (IP) relate to two distinct areas: the tangible and the intangible. While some may believe that this separation means the two frameworks do not overlap, there are a range of intellectual property considerations that property developers, sellers and buyers should be taking into account. Some of these, including the legalities around copying building plans and using ‘artistic licence’ in real estate marketing have been the subject of a few recent case law decisions. Let’s take a closer look.

Copyright

In Australia, copyright is an unregistered IP right which arising automatically upon the creation of an original work. What constitutes an ‘original’ work for the purpose of Australia’s Copyright Act¹ (Act) has been considered extensively by our Courts, with the current test for originality being whether a creator has exerted some ‘independent intellectual effort’ that is ‘more than a mere copy’ of a work already in existence. The scope of copyright protection afforded to an original work depends on its nature, with Part III of the Act regulating literary, dramatic, musical and artistic works, and Part IV regulating subject matter outside the scope of these works, including films television broadcasts and published editions.

How does copyright intersect with property?

The owner of copyright is afforded with the exclusive rights to use, reproduce and communicate their work to the exclusion of all others, with the infringement of copyright arising when a ‘substantial part’ of a work is used, reproduced, or communicated by someone other than the legitimate owner.

Copyright relating to property is caught by Part III of the Act as an ‘artistic work’, which is defined in section 10 to include:

1. a painting, sculpture, drawing, engraving or photograph, whether the work is of artistic quality or not;
2. a building or a model of a building, whether the building or model is of artistic quality or not; or
3. a work of artistic craftsmanship whether or not mentioned in paragraph (a) or (b).

Here we see that not only can copyright subsist in the drawings of a building , but also the building itself. Although issues relating to copyright and property are not isolated to these two subsections, they have certainly caused a few headaches, both for home buyers and property developers – for example, in Coles v Dormer & Ors² (Coles) and Look Design and Development Pty Ltd v Edge Developments Pty Ltd³ (Look Design).

Coles 

In Coles, prospective home buyers attended a house auction. Unsuccessful, yet remaining tied to the design of the house, they set about building a replica in the same area as the original property. Concerned about the uniqueness and value of their purchased property, the successful home buyer (Coles) had the copyright in the property’s building plans assigned from the architect to themselves after the sale.

As such, as soon as they discovered the unsuccessful buyers’ replica build (and in light of their specific desire not to have their new home devalued), Coles sought an injunction from the Supreme Court of Queensland, arguing that the construction of the house was an infringement of the copyright in the building plans.

In handing down its decision, the Court considered four primary issues:

1. whether the building plans were ‘original’;
2. whether the assignment of copyright was valid;
3. if there had been infringement in the building plans and whether the construction of the house based off of these had constituted infringement; and
4. the appropriateness of remedies.

The Court found in favour of Coles in relation to issues 1-3, noting particularly that the exclusive rights conferred to the owner of an original copyrighted work include the right to reproduce a 2D work in 3D form (provided this is not ‘industrially applied’⁴), and that reproduction of the building plans was obvious due to identical errors being evident in the original and infringing versions of the plans.

In spite of this, the Court held that it would be ‘overly harsh’ and ‘disproportionate’ to force the Respondents to demolish their home, instead requiring them to make significant changes to the exterior of their property (totalling $40,000) such that it no longer was identical to Cole’s property. Additional damages were also awarded against the Respondents as Coles was able to demonstrate that he had communicated to the Respondents that he was the owner of copyright in his property’s plans, and had asked to see the Respondents plans (a request which they denied).

Look Design

In Look Design, the Second Respondents (Mr and Mrs Flaton) engaged the Applicant (a project home building company) to provide them with housing plans. The Applicant obliged, eventually producing what are referred to in the case as the ‘Revision B Plan’. Communications between the parties eventually ceased. The Flatons then engaged the First Respondents to produce another house plan, from which the First Respondents then built the house.

Naturally, the Respondents argued a number of factors against the Applicant’s copyright infringement Claim, including that copyright did not subsist in the ‘Revision B Plan’ house designs because it had been created without ‘creative or critical application of thought’ via computer software. However, this was rejected by the District Court of Queensland, which found that significant time, effort and skill had been exerted by the Applicant in developing the plans.

Moreover, the Court found that the Second Respondents had brought the Revised B Plans to the First Respondents with the ‘very purpose’ to reproduce them, thus finding that a ‘substantial part’ of the original work had been infringed by the First Respondents, both in relation to the new housing plans and subsequently developed property.

Takeaways

The ‘substantial part’ test for copyright infringement is not satisfied on the basis of the quantity of an original work taken, but rather on the basis of the quality. In Look Design, this was discussed specifically in relation to housing plans, with the Court stating that an infringing drawing must adopt ‘the essential features and substance of the copyright work’, which is assessed by looking at ‘the (original) work as a whole’. In each of these cases, the unique elements of the original works were easily identifiable in the infringing plans and properties. That such identification could be made substantiated each Applicant’s claim.

While it’s always good to have a plan B if your dream property is sold to someone else, unless you obtain the explicit consent of the copyright owner, your alternative cannot simply be to buy a plot of land and ‘diy’ your own version. Similarly, property developers should take special care in determining where their client’s design inspirations derive from, noting they could also potentially be found to have infringed copyright.

Moral rights

Whereas the exclusive rights afforded to the owner of copyright are largely commercial in nature, moral rights (which arise under the Act), are personal and non-economic, meaning that they cannot be assigned or licensed to another person or entity. They remain with the original creator of an artistic work for their life plus 70 years.
Moral rights can be broadly defined into three categories:

1. the right of attribution (to be credited as the creator of your original work);
2. the right against false attribution (to not have someone else credited as the creator of your original work); and
3. the right of integrity (to not have your original work treated in a derogatory manner, negating your honour and reputation).

How do moral rights intersect with property?

Although all three categories of moral rights intersect with property, property developers and purchasers should take particular notice of the right of attribution and the right of integrity.

Section 195AA of the Act proscribes that the ‘identification of the author of a work must be clear and reasonably prominent’. Section 195AB explains that the attribution of authorship is ‘reasonably prominent’ if it ‘..is included on each reproduction of the work….in such a way that a person acquiring the reproduction…will have notice of the author’s identity’. As such, this moral right is infringed when such identification does not occur.⁵

As already stipulated, the right of integrity is the right not to have your work subjected to ‘derogatory treatment’. The Act contains a broad definition of ‘derogatory treatment’ as applied to artistic works, described under section 195AK as:

1. anything that results in the material distortion, destruction, mutilation or material alteration to the work that is prejudicial to the author’s honour or reputation;
2. the exhibition in public of the work that is prejudicial because of the manner or place in which the exhibition occurs; and
3. the doing of anything else in relation to the work that is prejudicial to the author’s honour or reputation.

Australia’s authoritative case law on moral rights is limited, with only one case concerning the right of integrity – a matter between American rapper Pitbull (real name Armando Christian Perez), and Australian DJ Jamie Fernandez, regarding the use of one of Pitbull’s songs.⁶ Obviously, the nature of this matter means that this decision isn’t entirely applicable in the world of property. What the Court in this case did highlight however, which is applicable to moral rights relating to property, is that the harm caused to an author’s honour or reputation need not be quantifiable, confirming the subjective basis on which this kind of moral right can be infringed.

Why should you be concerned? Let’s take a look at a couple of scenarios.

Scenario A

Your company commissions a family friend to paint a mural on one of the external walls of your office. Because of your relationship with this person, no official agreement is drawn up. Following its creation, the mural becomes a feature of much of the marketing and promotional materials created by your company with, for example, a number of employees posing in front of it for a photo to be included on the company website.

Issue

Your relationship with the family friend sours, especially so after they come across the website and notice that they have not been credited as the creator of the mural. They contact you about this, and upon further investigation, you notice that the uploaded image has been cropped, such that their easily identifiable signature (which was otherwise visible on the mural) has been removed from view. The family friend demands that the situation be rectified or they will pursue legal action, noting particularly that their work has been commercialised beyond what they originally thought it would be. You are reluctant to do so, having already spent considerable money on this image and noting that your marketing team have distributed the cropped version of the photo across your professional and public networks.

Result

The Act provides a number of defences for moral rights infringements, including under section 195AR and 195AS which provide that the right of attribution and right of integrity will not be infringed where it was ‘reasonable in all the circumstances’ to either not identify the author or subject the work to derogatory treatment. In addition, moral rights will not be infringed where the explicit, free and informed consent of the author of a work has been obtained.⁷

Here, your company did not obtain the explicit consent of your family friend to use their work without attributing them. The family friend argues, as per section 195AVA of the Act, that your company had the power to prevent this from occurring, and that no reasonable steps were taken to prevent or avoid the doing of the infringing act.

With respect to the defence of reasonableness, it would have been neither difficult nor expensive to attribute the family friend⁸. Now that the mural has become a prominent feature in the marketing of your company, any requirement to recall and amend all marketing materials to rectify the attribution issue could be costly and embarrassing.

Scenario B

A property developer engages an well-renowned, independent architect to draw up building plans for a client. The architect agrees in writing to assign their copyright in the plans to the developer, allowing the developer to validly build the client’s house. However, no explicit agreement is made in relation to moral rights.

Construction on the property begins. Halfway through the build, the developer’s client wishes to make some changes to the house. The developer agrees, considering that because they hold the copyright in the plans they have the power to alter them, and so proceeds, constructing the house accordingly.

Sometime later, the architect walks past the construction site and notices the property looks different to their original design. They state that the particular features that have been changed were key components of their design, with the constructed property now being inconsistent with, and detrimental to, their personal brand.

Result

The architect has not explicitly agreed to the infringement of their moral rights, nor has the developer complied with the notification requirements under section 195AT of the Act in relation to moral rights and the relocation, demolition or destruction of buildings, including:

1. before the change, relocation, demolition or destruction is carried out, given the author or a person representing the author a written notice stating the owner’s intention to carry out the change, relocation, demolition or destruction; and
2. stating within the written notice that the author has, within 3 weeks from the date of the notice, access to the work for either or both of the following purposes:
   1. making a record of the work; and/or
   2. consulting in good faith… about the change, relocation, demolition or destruction of the work.

The Court in Perez v Fernandez noted particularly that artists ‘go to great lengths to control whom they associate with and these associations form a central part of their reputation’. The architect therefore may have grounds to bring an action for moral rights infringement, arguing that the changes to the design of the house are a ‘material distortion’ of their original work, offending their ‘honour or reputation’ as a well-renowned architect. The property developer is potentially liable to pay the architect damages, or even cease construction work until the matter can be resolved, wasting (similarly to Scenario A) time, money and resources.

Takeaways

Fortunately, and as set out above, the Act does provide a number exceptions to moral rights infringements where, even in the absence of explicit agreement, moral rights will not be infringed (for example, if the abovementioned changes to the building plans needed to be made due to safety). Nonetheless, if not carefully considered, the existence of very broad, subjective moral rights provisions do have the ability to significantly impact the development, use and enjoyment of a property.

Misleading and deceptive conduct

The Australian Consumer Law, found within Schedule 2 of the Competition and Consumer Act¹⁰, aims to balance the need to protect consumers against the rights of traders, via the prohibition of ‘misleading and deceptive conduct’. Section 18 of the Australian Consumer Law provides the general rule relating to misleading and deceptive conduct, stating that ‘a person must not, in trade or commerce, engage in conduct which is misleading or deceptive, or is likely to mislead or deceive’. This is supplemented, amongst other things, by section 29 which prohibits a person (in trade or commerce) from making ‘false or misleading representation(s) that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use’.

How does misleading and deceptive conduct/passing off intersect with property?

Property developers, real-estate agents and the like have an obligation to ensure their dealings with consumers are fair and free of any undue influence. Unlike moral rights, what constitutes ‘misleading and deceptive conduct’ for the purpose of the Consumer Law has been clarified numerous times in Australian case law – with, for example, the Court in REA Group Limited v Fairfax Media Limited¹¹ clarifying the difference between the widely-used marketing practice of ‘puffery’¹² and property advertising that is simply misleading or deceptive¹³.

More recently, Australia’s Federal Court handed down its decision in Ripani v Century Legend Pty Ltd¹⁴ in relation to misleading and deceptive conduct and the marketing of off-plan property. In contrast to REA Group, which pertained to text-based advertising, Ripani explored the concept of misleading and deceptive imagery, with the Court finding that the term ‘artistic impression’ could not be used below an image of an apartment included in a brochure (which the developer knew would not ‘bear a reasonable resemblance’ to the real apartment being developed) to avoid making a misleading representation about it – nor could a disclaimer at the back of the brochure.

Ripani cements a couple of important points (which you can read about in greater detail in HWLE Partner Melissa Hanbidge and Senior Associate Rachel Lake’s article here). First, at least in relation to the marketing of off-plan property, a picture really does speak a thousand words! A statement cannot be used to counter the effect created by an image, nor can consumers be expected to meticulously comb through fine print to clarify whether information (or pictures) are misleading or deceptive. Second, the liberty of those to utilise ‘artistic licence’ in the advertising and sale of property is limited. As already stipulated, the primary objective of the Australian Consumer Law is to protect consumers. Irrespective of the intention of an advertiser/marketer, content will be found to be misleading and/or deceptive if the effect on consumers is as such.

Takeaways

IP can intersect with property in ways that are not always obvious. In relation to copyright and moral rights, it is important to look to the original creator of a work and determine what rights they retain before proceeding to design or construct a property. If you want to own the copyright in your property, have you had this assigned from whoever created its design? Similarly, if you want a particular person to build your house, are you bringing them plans you’ve already had drawn up by someone else? And even after you’ve got confirmed the copyright position, have you thought about the consequences of future property alterations? Finally, if you’re in the business of property advertising, are you dressing spam up as steak? This may not be as great an idea as you think!

Have an IP question relating to your property matter? HWLE can help. Contact our Intellectual Property team today – we would be more than happy to assist.

This article was written by Luke Dale, Partner and Annabel Bramley, Law Graduate.

¹1968 (Cth).
²[2015] QSC 224.
³[2022] QDC 116.
⁴Reproduced more than 50 times.
⁵Copyright Act 1968 (Cth) s195AO.
⁶Perez v Fernandez [2012] FMCA 2.
⁷Copyright Act 1968 (Cth) s195AWA.
⁸One of the reasons the Applicant in Corby v Allen & Unwin Pty Limited [2013] FCA 370 was successful in their moral rights Claim.
⁹Perez v Fernandez [2012] FMCA 2 AT 87.
¹⁰2010 (Cth).
¹¹[2017] FCA 91.
¹²a wildly exaggerated claim that has numerous interpretations.
¹³ie where a claim has a definitive meaning and cannot be substantiated by evidence.
¹⁴[2022] FCA 242.