Recently, the floor plan court case affecting appraisers surfaced regarding copyright restrictions that can apply.

What, specifically, is this case about? How could appraisers be impacted by the outcome? How will technology companies that help create floor plans be impacted? Valuation Review sought legal expertise from an attorney who handles appraisal legal matters.

“The case about floor plans called Designworks Homes, Inc. v. Columbia House of Brokers Realty, Inc., is actually two cases that have been combined for appellate purposes,” Peter Christensen, founder of Valuation Legal told us. “It is a copyright case because federal copyright law protects the design of houses, buildings and other designed structures as ‘architectural works.’  Unless transferred to another person or to an entity, the owner of the architectural copyright would be the original designer, often an architect.  In this case, the designer/builder of two homes is suing real estate agents and brokers who created floor plans of the two homes and then published those floor plans in property listings and sales information sheets. 

“It’s important to realize that these floor plans were created by the agents themselves (or a contractor hired by the agent) based on their own measurements,” Christensen added. “They did not copy existing plans. But this can still be a copyright issue because an architectural copyright covers the whole ‘work.’ In other words, the copyright covers the complete design/artistic elements of the whole house.  It’s like the house itself is the art or the book. The reasoning of a party bringing a copyright claim would be that the creation and publication of a floor plan of the house equates to illegal copying.”

Christensen said that the two original cases originated in Missouri.  It was filed in federal court – where federal copyright cases are normally filed.  Initially, the attorney said, the defendant agents and brokers won dismissal of the case because of an exception from the copyright law relating to architectural works that permits “pictures, paintings, photographs, or other pictorial representations of” to be made and published of copyrighted structures. 

He added that the district court concluded this exception allowed the agents and brokers to make and publish floor plans.  The plaintiffs then appealed. In the summer of 2021, the court of appeal – the 8th Circuit Court of Appeal -reversed that ruling.  The defendants then appealed to the U.S. Supreme Court, but in June of this year, the Supreme Court declined to review the case.  Thus, the problematic ruling of the appellate court remains in place, he said.

Christensen gave an example of plans for a Missouri house being built back in 2010. We asked why did the agent create his/her own floor plan, and are they legally entitled to do that?

“One of the houses in the case was built in 1996. When the current owners of the house hired an agent/broker to sell the house in 2010, the agent created a floor plan to include in real estate listings and sales materials to help potential buyers visualize the house,” Christensen said. “Not until 2018, did the designer/builder file its lawsuit – 22 years after the house was built.”

Did that creation violate any copyright laws in relationship to the developer’s design?

“That’s the key question in the case,” Christensen noted. “The appellate court only decided that the exception for ‘pictorial representations’ did not protect the agents and brokers.  Now, the case is back at the trial court level and liability will need to be determined because other potential defenses might apply.

The attorney also explained how ownership of copyright aspects are obtained, and what the exceptions are to the copyright law as it relates to this case.

“The most relevant exception that the agents and brokers believed protected them is in Section 120 of the Copyright Act,” Christensen said.  “It says: ‘The copyright in an architectural work that has been constructed does not include the right to prevent the making, distributing, or public display of pictures, paintings, photographs, or other pictorial representations of the work.’”

“The problem is that the 8th Circuit Court of Appeal determined that the wording of this exception does not apply to floor plans,” he added.

As to how the case might impact appraisers, both residential and commercial, Christensen said the case itself “specifically relates to agents and brokers, but because appraisers often create and include floor plans or detailed sketches of the structures they appraise, appraisers are potentially at risk for similar copyright claims.” 

“I don’t want to overstate that risk, but the fear is that, if left unchecked, parties who own copyrights to structures will more often sue agents and brokers in the future – with a small potential that appraisers could also be targets,” he said. “In the real world, however, the risk to individual appraisers does appear small because, among other things, the floor plans in their reports are not published widely in the way that a real estate listing is published via the internet.  More exposure equals more risk.”

Christensen also outlined some specifics of what an amicus brief is, and how it applies to this case. He said when the defendants in the case appealed to the U.S. Supreme Court, a number of real estate and valuation industry organizations and companies believed the case presented an important issue.  These companies therefore joined together to file what is called an “amicus” brief – a “friend of the court” brief to support the defendants’ request that the Supreme Court review and reverse the case. 

The organizations included the Appraisal Institute, ASA and MBREA, AMCs (CoreLogic, Clear Capital), Zillow, REVAA, NAR and others, he pointed out.

Christensen also mentioned a specific defense related to this case as “fair sse.”

“It’s important to understand that the court ruling only applies to the exception in the Copyright Act stated in Section 120 – potentially viable other defenses do apply and one key one is called ‘fair use,’” he said. “The problems with the fair use defense are that it is not clear cut like the statutory exception and depends on weighing four factors.  Among those factors are considerations like whether the use of the copyrighted work was for commercial purposes – so that’s not ideal of using a floor plan in an appraisal. 

“Other factors would tend to support an appraiser’s use of the defense – but the basic problem again is that it’s not a perfect defense or inexpensive to litigate,” Christensen added.