Contractors and design professionals are rapidly incorporating artificial intelligence (AI) technology into their work. We construction lawyers are striving to keep up with the breakneck pace of technological adoption and evolution and develop ways to protect against emerging risks.  During this period of adoption and change, two risks are emerging, particularly with respect to design work: the effect of AI on copyright and the risks of data disclosure when using AI tools.

Design involves the fixing of work in tangible media — that is, it involves drawing, writing, printing, etc. in physical and electronically stored forms — so designers typically have a copyright in their work that gives them the right to control the use of that work. But design documents, including architectural drawings, technical specifications, engineering reports, and the like, are critical to construction projects, and owners and contractors need to be able to use them for project purposes. As such, contracts with designers typically address issues of copyright ownership and licenses to copy, distribute, and use designs. For example, the American Institute of Architects’ (AIA) widely used standard General Conditions of the Contract for Construction provides “the Architect and the Architect’s consultants shall be deemed the authors and owners of their (designs) and retain all common law, statutory, and other reserved rights … including copyrights,” while “Contractor, Subcontractors, Sub-subcontractors, and suppliers are authorized to use and reproduce the (designs) … solely and exclusively for execution of the Work.” This sort of provision may restrict these parties from using the designs on other projects or for other work, or simply distributing them without compensating the designer.

One key component of copyright is authorship — the act of a person creating the work. Under current law, software like AI cannot be a legal author, and fully AI-created work is not protected by copyright. But what about designs for which a human uses AI technology to assist with some of the work? This is an evolving issue in copyright law, but under some circumstances the human user’s input is sufficient to create copyright (as, for example, with photography) and in others there may be no copyright or only limited copyright protection. Questions regarding authorship may jeopardize the allocation of rights and risks in construction contracts with respect to the use and distribution of designs.

Use of contemporary AI tools also presents data security risks. AI use often involves a two-way exchange of information between the user and the tool itself (or, more specifically, the data processing, storage, and server systems utilized by the company or other entity providing the tool). At this stage in the overall integration of AI into workflows and tasks, users’ familiarity with this concept and the methods and processes they use to safeguard information when using artificial intelligence tools vary widely. This is as true in design fields as in any other, and it presents a risk of inadvertent, careless, or intentional disclosure of confidential or sensitive information to third parties when it is uploaded, pasted, or otherwise provided via the software.

The risk of data disclosure is not unique to construction, but the large volumes of data created and maintained for construction projects, which may include confidential or sensitive data like financial information or security system plans, can present substantial risk. A design professional, particularly when working on integrated processes like building information modeling (BIM), can inadvertently disclose data to software or data storage companies by using AI tools, and those companies might use or distribute that data. Both designers and the owners and contractors engaging with them should consider the potential for data disclosure, but allocation of this risk is often an afterthought in construction contracting.

The industry will (perhaps slowly) adapt to the use of AI by designers just as that usage will adapt to the available technologies and the professional and legal requirements that govern design practice. Notably, the AIA’s most recent revision of its major standard contract document sets was in 2017, several years before AI became widely available. Future revisions may address these issues and start to mold industry practice. For now, it is incumbent on forward-thinking designers, owners, contractors, and lawyers to consider whether issues like copyright authorship and inadvertent data disclosure present risk to their projects and, if so, how to proactively allocate those risks in their contracts, project specifications, and processes.

Evan Brown is a Stoel Rives LLP associate and a member of the construction and design group in the firm’s Seattle office. Contact him at 206-386-7512 or evan.brown@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post Authorship and data disclosure risks in construction and design | Opinion appeared first on Daily Journal of Commerce.

Seemingly everywhere you look, there are stories about how the increased adoption and use of artificial intelligence (AI) technologies is changing the way industries operate. The construction industry is no exception, and neither is the practice of construction law. Construction teams are beginning to adapt to the use of AI tools, and construction lawyers are adapting as well. It is increasingly vital that people in both fields have an awareness of AI and how it is being integrated into the work of planning, developing, managing, and building projects. Awareness of AI’s limitations is similarly vital.

The term AI is a bit of catchall. In general, AI describes systems and software built to mimic human behavior and thinking by processing the types of inputs humans take in and producing human-like responses and outputs. The term as commonly used encompasses various related technologies: machine learning, neural networks, discriminative models, generative models, etc. The recent explosion in public awareness of AI has been spurred primarily by large language models (“LLMs”) like ChatGPT, which are “trained” on massive amounts of data and capable of generating responses to user prompts based on synthesis of that data. The rapid expansion of data storage and processing capacity has fueled these new technologies. The sudden publicity produced by ChatGPT has driven a feverish trend toward development (or marketing) of automation technologies and data processing as “AI.”

In the construction industry, humans have always been required to process and understand large amounts of text and data. They must read and understand dense and voluminous specifications, drawings, notes, schedules, and contracts, and apply them to the physical work of building. They make and keep large amounts of data such as site conditions, weather, manpower, schedule progress, and so on. Over the past two decades, there has been a push toward more data, not less, with building information modeling, computer assisted design, and other data-driven technologies. The varying degrees of human competence and diligence applied to these tasks and tools have led to many construction disputes and kept us construction lawyers plenty busy.

In recent years, contemporary generative AI technologies (i.e., those that function similarly to ChatGPT) have become very good at doing these sorts of tasks, quickly processing large amounts of text and answering questions about it. Unsurprisingly, companies have begun to create construction-specific applications. Generative AI programs like Civils.ai will process plans, site data, and contract documents, and allow users to ask questions about them. Programs like Buildots process schedule, productivity, and management information, and assist with work planning. Commonly used construction management platforms like Procore are incorporating AI-driven searches and automation.

So, with these sorts of powerful technologies, is AI going to eliminate mistakes, errors, and disputes on construction projects? Not likely. The first reason why lies in a well-known risk of generative AI: it “hallucinates.” AI hallucinations are responses that contain, or entirely consist of, false or incorrect information synthesized and fabricated from underlying data. They appear indistinguishable from factually correct responses. For example, in a notable case often discussed among lawyers, ChatGPT provided legal citations to entirely made-up authority in perfect citation format, which a lawyer then included in briefing to a court. The prospect of hallucinations means that a user should double-check an AI program’s responses before it trusts them.

The second reason lies in the way that the law of construction is intertwined with the documents, records, and data of construction. A contractor faced with a question regarding the drawings for a project might reasonably think, “Why should I submit a formal request for information to the architect and wait hours to days for a response when AI will give me the information in seconds?” The temptation to avoid a delay is a strong one, but a primary distinction is the legal risk shifting effect of processes like requests for information. A contractor who requests information from AI and relies on the answer may assume risk it would not otherwise have assumed had it requested the information from the architect. Coupled with the risk of AI hallucinations, this can create the potential for significant legal problems.

For these reasons, AI is not likely to truly upend construction methods and processes, at least in the near term. Neither is it likely to put construction lawyers out of business. Instead, lawyers need to be aware that designers, contractors, and consultants are incorporating AI tools into their workflows and that this trend is likely to accelerate as companies improve the technology. In litigation, traditional document discovery is poorly suited to reveal the inputs and responses of AI and other automated technologies, and lawyers should take this into account when assessing electronic discovery needs. A lawyer assessing a dispute will need to understand when, where, and how AI technologies were used on the project, what data and documents they were trained on or utilized as inputs, and whether generated responses can be accessed or exported. Lawyers also should consider and account for the use of AI and its attendant limitations and risks when negotiating and drafting contracts and evaluating project risk. It’s worth noting that lawyers are also starting to employ AI technologies of their own to streamline both discovery and contract drafting.

Used responsibly and knowledgably, AI technologies can efficiently harness the power of the copious data produced for and during construction projects. Contractors, designers, consultants, and owners, as well as their lawyers, should be aware of the technologies and how they can be used and misused. As more powerful and more accurate AI applications are developed, this will become even more essential. While we need not (yet) bow to our robot overlords, the use of AI in construction should no longer be ignored.

Evan Brown is a Stoel Rives LLP associate and a member of the construction and design group in the firm’s Seattle office. Contact him at 206-386-7512 or evan.brown@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post Bricks and bots: AI technologies’ growing impact on construction | Opinion appeared first on Daily Journal of Commerce.

One of the most common protections for laborers, contractors, suppliers, and others providing construction services or materials for a project is the right to a lien against the project property for the value of the work provided. However, because these liens create involuntary encumbrances on the property, lien statutes provide certain protections for the owners as well.

One of the key protections is a time limit on how long a recorded lien can remain valid and enforceable without the lien claimant initiating a lawsuit to foreclose on it. In other words, liens usually will “expire” if the claimant takes no action within the specified period. But because recorded liens typically remain in the chain of title even after expiration, even an expired lien can create problems for an owner. But what can an owner do?

“Recordation” is the legal term for filing a document with the local county so that it appears in the public property records. Once recorded, the document is associated with the property and can be found in searches by title companies or members of the public. Many counties make their property records searchable via an online database that can be accessed easily. You do not have to prove the validity of a lien or initiate legal action to record it. As such, when a lien claimant records a lien against the project property, the encumbrance becomes publicly visible and creates at least the appearance of a “cloud” on the property owner’s title.

However, that recorded lien has a shelf life. The lien claimant is in a “use it or lose it” position once the lien is recorded and must commence a lawsuit to foreclose the lien within a certain period set by statute. In Oregon, this period is 120 days, though it can be extended up to two years. California gives a 90-day period, which can be extended up to one year from completion of the project. In Washington, it’s eight months from recordation, usually with no extensions. If a lien claimant fails to commence foreclosure within the specified period, the lien becomes effectively unenforceable. But it remains recorded for all to see.

Title companies searching property records in connection with a sale, a refinance agreement, or another activity can and do find expired liens and may or may not understand that they are expired. Title examiners usually are not lawyers and may not be aware of the applicable law, particularly in other states. Potential buyers or lenders may be scared off by the appearance of a construction lien against the project. Title examiners or other agents may require information from an owner’s lawyers, leading to unanticipated legal fees. To easily show future title companies and others that the property is no longer encumbered by the lien, an owner needs a release or other document showing that the lien has expired and no longer binds the property.

In some states, the lien statutes anticipate this and provide processes for an owner to obtain a release that may be recorded. In Oregon, the owner can send a written notice to the lien claimant that the lien has expired, and if the claimant does not object within 15 days, a release may be recorded with the county. In California, the owner can send a written demand to the lien claimant for a release, and if the claimant ignores the demand, can petition a court to release the property from the lien. These processes allow an owner to remove the apparent cloud on a title.

However, in other states, the lien statutes are less clear as to what exactly an owner must do to obtain a release. In Washington, for example, the lien statutes contemplate actions to seek “deliverance” of a lien release or cancellation of a lien. In most states, an owner has the option of commencing a lawsuit to “quiet title” and have the court declare that the lien no longer burdens the property. Similarly, many states allow an owner to seek a declaratory judgment if there is a dispute as to whether the lien has expired. In the recent case of 2400 Elliott, LLC v. VP Elite Construction, LLC, Washington’s Court of Appeals indicated in an unpublished opinion that this is an appropriate means of seeking clarity as to an expired lien. A lawsuit for “slander of title,” a tort cause of action for false statements that can impede the property value or owner’s ability to sell or use the property, may be an option in some states as well. But these can be costly legal actions for an owner, and the juice may not always be worth the squeeze. In some states, an owner can recover its attorneys’ fees from the claimant, but this too can be a drawn-out process. That said, often the threat of legal action alone is enough to compel a recalcitrant claimant to provide a release.

It is important that lien claimants and owners alike are aware of lien expiration and the potential for an expired lien to create problems in the chain of title. In most cases, it is in everyone’s interest to just cooperate informally, acknowledge the expiration, and provide a lien release. But, failing this, legal action may be available to obtain a release, and owners and claimants alike should be aware of the potential costs of such action (for both parties) and whether the operative statutes or other law allow the owner to seek an attorneys’ fees award.

Evan Brown is a Stoel Rives LLP associate and a member of the construction and design group in the firm’s Seattle office. Contact him at 206-386-7512 or evan.brown@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post From lien to clean: addressing an expired lien in the chain of title | Opinion appeared first on Daily Journal of Commerce.

Plans, drawings, and related design documents are needed at all stages of a construction project, from early concepts and permitting to site preparation and construction itself. Many professionals in construction and property development are well versed in contract law, safety regulations, insurance law, and the like. Yet the law that governs ownership and use of architectural works — principally, copyright law — often is not well known even among seasoned veterans of development and construction disputes.

Architectural drawings are protected under federal copyright law. Although architects may not have ownership of the ideas inherent in the drawings, they have the right to prevent others from copying, publishing, or, in some cases, using their drawings. In certain cases, architectural drawings also may be protected by the Visual Artists Rights Act (VARA) — legislation enacted by Congress in 1990 specifically to protect visual artwork. Because VARA applies to limited-edition “drawings,” but specifically does not apply to “technical drawings,” issues often arise regarding whether an architectural drawing is sufficiently technical in nature to fall outside VARA’s protections. If VARA does apply, however, the architects have additional rights, including “moral rights” to prevent modification, adaptation, and some uses with reputational significance. Architects may have tangible property rights in drawings and related works as well. In one recent California case, an owner who gave his original architect’s plans and drawings to a successor architect without permission was found liable for theft and forced to pay treble damages!

The penalties for infringing a copyright go beyond breach of contract and the architect need not prove actual damages. Under the Copyright Act, an infringer can be liable for steep statutory damages — between $750 and $30,000 for each infringement. For willful infringement, statutory damages can be as high as $150,000. An infringer also may be on the hook for paying the architect’s attorneys’ fees. The costs can be quite high.

As such, owners or contractors working with an architect need to be mindful of these rights and secure ownership of them or permission to use them in architecture agreements and construction contracts. Permission can be granted in the form of an express license — a written agreement that the other party can exercise some or all the rights that the architect has under the law. But the terms of such a license can vary widely, from perpetual, irrevocable authorization to copy, alter, and publish to others to revocable grants of limited permission to use only for a specific purpose. As with any intellectual property right, an architect can also transfer ownership of the drawings entirely.

Copying plans for use, transmitting them to others, and, in some cases, even building what is depicted in the drawings can constitute infringement if there is no license in place. Agreements with an architect therefore should include some form of license sufficient for the needs of parties during the project.

The most common form of agreement used by architects is the American Institute of Architects’ (AIA) B101 document, which, as you might imagine, includes a license favorable to the architect. It “grants to the Owner a nonexclusive license to use” the drawings, specifications, and other “Instruments of Service solely and exclusively for purposes of constructing, using, maintaining, altering and adding to the Project, provided that the Owner substantially performs its obligations under this Agreement.” Under the license, the owner may similarly authorize the contractor and subcontractors to use the work for project purposes. But the provision that the owner must “substantially perform” to keep the license raises complicated questions concerning whether the designer may revoke the license and threaten progress of the project.

An owner often will prefer an irrevocable license, which will allow the project to continue despite a dispute with the architect or alleged breach of contract. Some owners require transfer of ownership in the drawings or designation of the work as a “work for hire” whereby the architect creates the drawings on the owner’s behalf and the owner owns the copyright. On projects involving a single-purpose entity like an owner LLC or corporation, the owner also will want to consider whether the rights are assignable to others, including successor entities that may be planned. However, a design professional may have concerns with an owner using its drawings on future projects without employing the design professional’s services and, if so, may seek indemnities from the owner against claims arising from such future use.

Failure to include an express license for the architectural works in a contract can open an owner to significant risk if the relationship with the architect sours. It can be difficult to establish an implied license, and even more difficult to determine the terms of that license. Because of the threat of substantial infringement damages, lack of clarity over the scope, applicability, or transferability of a license can lead to delays and disputes with contractors and subcontractors.

Although perhaps not top of mind when beginning a construction project, these issues are important for owners and contractors. Careful planning, review, and negotiation of licenses can pay dividends on a project if things go awry.

Evan Brown is a Stoel Rives LLP associate and a member of the construction and design group in the firm’s Seattle office. Contact him at 206-386-7512 or evan.brown@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post License to build: the importance of license terms in design agreements | Opinion appeared first on Daily Journal of Commerce.

The Russian invasion of Ukraine and economic sanctions imposed by countries around the world in response have disrupted supplies of fuel, steel, and other materials necessary for construction. This has resulted in price escalation that threatens construction project budgets. Owners and contractors across the country are running to their contracts (and their lawyers) to determine who bears the risk of these cost increases. While contracts vary quite a bit with respect to the assignment of risk for material price escalation, there are a few common provisions to keep an eye out for.

Some contracts include express material price escalation clauses or allowances for materials that allocate shared risk between the contractor and the owner. Some contracts also have broadly applicable change provisions that grant the contractor the ability to seek a contract price adjustment. But in the absence of these sorts of provisions, the key contractual term often is a “force majeure” clause, which addresses the assignment of risk of unforeseeable events outside of the parties’ control.

An example of typical force majeure language is:

“The Contractor shall not be in default because of any failure to perform this contract under its terms if the failure arises from causes beyond the Contractor’s reasonable control, including, but not limited to, acts of God or of the public enemy; labor strikes or disturbances; riots or civil disorder; acts of war; epidemic or pandemic disease; the acts of governmental authorities; or unusually severe weather.”

Unfortunately, this sort of language can raise more questions than it answers. Where a military conflict directly affects contract performance, the conflict generally will qualify as a force majeure event. But it is rare that a contract specifies what qualifies as a “war.” Is a foreign war far from the project site an “act of war” affecting performance? What about material price increases caused by the economic ripple effects of a war?

Courts have addressed similar issues before, though infrequently. The baseline rule stated in various cases is that the contractor generally bears the risk of price increases due to labor or material shortages resulting from a war, but that those shortages may excuse delayed performance. Definitional issues have been litigated in the context of insurance policies. For example, “war” need not necessarily refer only to a formal, declared war.

In the 1993 case TRT/FTC Communications, Inc. v. Insurance Company of State of Pennsylvania, a federal appeals court even determined that a robbery occurring during the 1989 Operation Just Cause conflict in Panama was caused by war to the extent it was “enabled by the military hostilities.” But cases like these provide only rough guidance: every contract is different and should be evaluated according to its particular terms.

Some construction contracts – notably including the American Institute of Architects’ form contracts – do not include force majeure clauses addressing cost increases. In such cases, the risk of price escalation usually falls on the contractor unless it can show that the increase fundamentally changed the project in ways not contemplated by the parties or rendered performance truly impossible. These positions usually are difficult to support and tend to produce costly and time-consuming dispute resolution proceedings.

If a contract includes a force majeure clause that seems to cover the indirect price impacts of a foreign war, it is imperative that the contractor strictly comply with any and all notice and claim procedures specified in the contract. A contractor can waive its rights to seek a price or time adjustment by failing to follow the procedures. The procedures often require notice of the event within a stated number of days. But this presents another difficult issue: is the relevant “event” the outbreak of war or the downstream increase in prices? This ambiguity again can lead to disputes, so a contractor should provide notice as early as it possibly can.

For those entering contracts, how should the parties address this sort of conflict-driven price escalation? Contractors should consider the potential for far-flung military conflicts to impact material prices and availability and account for that risk when preparing bids or estimates. Owners may have an incentive to agree to materials allowances or price escalation clauses, assuming some of the risk, rather than pay contingency pricing. For negotiated contracts, it is advisable to negotiate specific, well-defined force majeure provisions and specify price thresholds or percentage increases over defined time periods for key materials beyond which price increases are a compensable change. This can provide some degree of certainty to the parties and reduce the potential for disputes based on competing interpretations.

Whether we like it or not, in the wake of the Ukraine war and escalating international tensions, it is more difficult to say that war and resulting price increases truly are unforeseeable events. While force majeure clauses are often boilerplate and easily overlooked, it is important for owners and contractors to pay close attention to the allocation of risk in their contracts for these sorts of increases.

Evan A. Brown is a partner and construction and design practice group member in the Seattle office of Stoel Rives LLP. Contact him at 206-386-7512 or evan.brown@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

The post OP-ED: War-fueled cost increases may warrant look at force majeure appeared first on Daily Journal of Commerce.