With more than a century of experience, Schwabe, Williamson & Wyatt has built a legacy as a leader in construction and real estate law. Known for its forward-thinking approach, the firm helps clients navigate the evolving landscape of construction challenges, from complex disputes to innovative development projects.

At the heart of Schwabe’s success is its ability to provide comprehensive legal solutions that balance risk management with opportunity. The firm’s attorneys handle everything from large-scale construction litigation to intricate zoning and land use matters, ensuring projects move forward with confidence. Whether advising on environmental compliance or managing contract negotiations, Schwabe is a trusted partner at every stage of construction and real estate development.

A notable example of the firm’s expertise is its representation of ICTSI Oregon Inc. in a landmark labor case. In 2019, a jury awarded ICTSI $93.6 million in damages due to illegal labor slowdowns that led to the shutdown of Terminal 6 at the Port of Portland. Schwabe’s attorneys played a key role in securing this outcome, demonstrating the firm’s strength in high-stakes litigation.

With a commitment to collaboration, innovation and industry leadership, Schwabe remains a key player in shaping the future of construction and real estate law.

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Law firm Schwabe, Williamson & Wyatt is remodeling its office space after renewing its Portland office lease at PacWest Center in July. The building, owned by Lincoln Property Company, is located at 1211 SW Fifth Ave.

Schwabe has leased its office space for four decades and was the building’s first tenant. The office space spans 2-1/2 floors. Lincoln Property Co. and CBRE also played crucial roles in Schwabe’s lease resigning, Schwabe stated in an email.

The firm is partnering with project manager JLL, architect Ankrom Moisan and general contractor Lease Crutcher Lewis.

According to Schwabe, the remodel is designed to create a stimulating work environment by incorporating natural light, panoramic city views and a reconfiguration of the space to include open office areas and hallways. A variety of finishes have been selected to maintain the space, while focusing on reuse opportunities for sustainability initiatives.

The updates aim to foster collaboration among Schwabe’s hybrid workforce by reorganizing the workspace to better unite intersecting services, according to a press release.

A $9,340,119 facility permit is currently under review for the alteration with Portland Permitting & Development. Work on floors 16-19 would involve demolition of walls and construction of new ones to create offices, open office areas and hallways. The 17th floor would gain a phone room, an entry area, an IT storage/​work room, a server room, a coffee area, a file storage room and a records room. The 18th floor would gain conference rooms, a restroom, storage rooms, an AV room, a closet, a mail/​print room, a catering kitchen and a break room. It would also involve remodeling the reception area, elevator lobby, restrooms and a shower room. The 19th floor would gain a shower room, a copy room, a switch room, phone rooms, a coffee area, a storage room, a wellness room, a meeting room, a lounge, a bar area and a workroom. It would also involve remodeling restrooms and elevator lobby and connecting stairs with handrails. The work would involve ceiling, flooring, finishes, plumbing and electrical.

Construction is scheduled to start in January, pending issuance of the building permit.

The remodel is expected to be complete in the summer of 2025.

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Retainage, also called retention, is common in the construction industry. Retainage is the percentage of payment that can be withheld from progress payments to contractors until construction has been satisfactorily completed. Retainage is intended to reduce the risk that contractors fail to timely and fully perform their contractual obligations (i.e., default).

The use of retainage can, and often does, have significant financial effects on contractors, particularly subcontractors performing work early in the construction process. These contractors may be unable to recover their complete contract price until many months later when the overall project reaches the designated contractual milestone (e.g., substantial completion). This waiting period is often criticized because, in essence, contractors are required to partially finance the underlying construction through interest-free retainage on labor, equipment, and material until construction has been satisfactorily completed.

Many jurisdictions, including Oregon, have attempted to strike a compromise between the interests of owners in protecting against contractor default and the interests of contractors in avoiding partially financing the underlying construction. Between 1969 and 1975, the Oregon Legislature passed laws that restricted the amount of retainage that could be withheld from progress payments and required payment of interest on retainage to contractors. ORS 279.575 (1969), renumbered ORS 279.435 (1989); ORS 701.420 (1975). These laws created two separate legal frameworks for retainage, one for public projects and one for private projects, that lasted for nearly 30 years. During this time, the Oregon Legislature amended the framework for retainage on public projects ten different times, while leaving the framework for retainage on private projects unaltered.

In 2003, the Oregon Legislature merged the two frameworks, adopting the unaltered framework for retainage on private projects. ORS 279C.555 (2003). This merged framework remained substantively unchanged until 2019 when the Oregon Legislature considered whether to require retainage to be deposited into interest-bearing escrow accounts. The Oregon Legislature heard competing testimony from subcontractor associations and municipal and special district associations. The subcontractor associations supported the change, noting that retainage (and interest on retainage) was not being timely paid on projects. In contrast, the municipal and special district associations opposed the change, noting that an escrow requirement would create administrative issues by, among other things, adding complexity and cost. The Oregon Legislature sided with the subcontractor associations and passed House Bill 2415, under which retainage on private and public construction projects with contract prices exceeding $500,000 must now be placed in an “interest-bearing escrow account.” ORS 701.420(2)(b) (2020).

Unfortunately, the administrative concerns expressed by the municipal and special district associations quickly proved prescient. Many financial institutions proved unwilling to open escrow accounts for retainage without charging substantial fees—fees that often exceeded the amount of retainage interest. Claim disputes concerning retainage quickly expanded from whether (and how much) retainage was owing to whether retainage was being held in a statutorily compliant “escrow account” and whether the owner, contractor, or subcontractor should be responsible for paying associated “escrow account” fees. Notably, House Bill 2415 does not define “escrow account” or address responsibility for payment of fees attributable to such accounts.

Recognizing that House Bill 2415 created administrative issues, the Oregon Legislature introduced House Bill 2870 during the recent regular legislative session. As introduced, House Bill 2870 proposed amending the merged retainage framework by eliminating the “escrow account” requirement and otherwise entitling contractors and subcontractors to submit a retainage bond, also called a release of retainage bond, in lieu of retainage on all construction projects. Subsequent engrossed amendments proposed omitting smaller private construction projects from the retainage bond framework.

The retainage bond framework recently considered by the Oregon Legislature is similar to the long-standing framework in Washington State. RCW 39.08.010, 60.28.011. Under both frameworks, contractors and subcontractors are entitled to submit a retainage bond in lieu of retainage under most circumstances. This entitlement enables contractors and subcontractors to avoid waiting to recover their complete contract price until the project reaches the designated contractual milestone. If a contractor or subcontractor submits a retainage bond, the owner or contractor can assert retainage-related claims (e.g., incomplete or defective work) directly against the retainage bond itself.

Unlike House Bill 2415, House Bill 2870 received broad support from contractor and subcontractor associations and the Oregon State Bar Construction Law Section. The Oregon Legislature heard testimony from contractor and subcontractor associations, among others, that the “escrow account” requirement did not work and should be eliminated. The Oregon Legislature also heard testimony that financial institutions charged substantial fees to open and manage escrow accounts. Notwithstanding broad support and favorable testimony, the Oregon Legislature was unable to pass House Bill 2870, as amended, before the end of the recent regular legislative session.

Without legislative action, private and public construction projects in Oregon will continue to face claim disputes and other administrative issues attributable to House Bill 2415’s “escrow account” requirement. Fortunately, these types of disputes and issues are entirely avoidable if the Oregon Legislature reintroduces and passes legislation eliminating the “escrow account” requirement and establishing a retainage bond framework similar to the framework in Washington State. Such legislation is not controversial and has broad support amongst owners, contractors, and subcontractors.

Matt Berry is an associate at Schwabe, Williamson & Wyatt PC. Contact him at 503-796-2085 or mberry@schwabe.com.

This column is intended to provide readers with general information and not legal advice. Consult professional counsel for help regarding specific situations.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. None of the authors nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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The Daily Journal of Commerce held a Builder Breakfast event on Thursday morning at the Sentinel Hotel in downtown Portland. The presentation focused on south Hillsboro and Reed’s Crossing – a 463-acre master-planned community that will include large-scale residential and commercial development as well as parks, schools and infrastructure.

Over the course of the next 15 to 20 years, Reed’s Crossing will hold an estimated 20,000 people living in about 4,000 residences ranging from detached single-family housing to townhouses and apartments. Commercial development will encompass about 36 acres of the area, with 100 thousand square feet of planned retail space and 100 thousand additional square feet of office and medical space.

The area will also include an elementary school with capacity for 600 students; construction is anticipated to begin in 2021. Other sites within Reed’s Crossing could become home to additional elementary and middle schools. Over 50 acres of planned open space will include a greenway, two neighborhood parks, and miles of pedestrian walkways and bike paths.

Three panelists – David Brentlinger of Newland Communities, Dan Dias of the city of Hillsboro and Frank Angelo of Angelo Planning Group – spoke about the development and opportunities available at Reed’s Crossing. The discussion’s moderator was Stephanie Holmberg, leader of the real estate and construction group at Schwabe, Williamson & Wyatt.

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Earlier this month, on a temporary stage set up on the Block 216 parking lot for a ground-breaking ceremony, an investment manager pitched to an audience of potential investors and VIPs an opportunity zone fund for the 35-story tower in downtown Portland.

Lenders and investment managers from San Francisco and Philadelphia discussed the $600 million project, the scale of which had attracted national capital. Mayor Ted Wheeler heaped praise upon the project. Meanwhile, a sleek, black Bentley sat parked where only days earlier an Iraqi food cart had been selling $8 shawarma.

An 844,117-square-foot tower with a Ritz-Carlton hotel and condos may not be the type of urban renewal foreseen by advocates of opportunity zone tax breaks, but it’s the type of project attracting investment.

It’s unclear how much of a role the Block 216 opportunity zone fund is playing in the project. Mosaic Real Estate Investors previously announced a $460 million, four-year construction loan. Terms of Ritz-Carlton’s deal have not been disclosed.

Tracey Nguyen, a partner at Baker Tilly Capital in Philadelphia, is managing the Block 216 opportunity zone fund. She referred requests for comment to Pat Walsh, a spokesman for developer Walt Bowen’s BPM Real Estate Group. Walsh declined to comment on the project’s financing.

Nationally, it’s difficult to assess how opportunity zone funds are functioning, who is using them, which zones are attracting registered funds or how much money they’re raising.

Opportunity zone funds are not subject to public disclosure, and there appears to be no comprehensive list or database of registered funds.

Opportunity zone funds stem from a federal tax law enacted in December 2017. The funds provide tax benefits for long-term asset holders. After 10 years, investors don’t have to pay any tax on capital gains realized for a property.

It was pitched as a boon for places passed over by the long economic expansion. Opportunity zones are “designed to spur economic development and job creation in distressed communities,” according to the Treasury Department.

Portland’s opportunity zones drew national interest because they cover much of the city’s most desirable real estate, including portions of downtown, the Pearl District and the inner Central Eastside. Yet, so far, opportunity zone activity appears to be modest.

“It hasn’t been a tsunami of opportunity zone funds, but I continue to see activity there,” said Dan Eller, a tax attorney with Schwabe, Williamson and Wyatt.

Eller said timing has been a deterrent for some clients who had considered opportunity zone funds.

“Some people had transactions that were ongoing that happened to be in opportunity zones, and looked into doing an opportunity zone fund, but just the timing of connecting investors with their project didn’t work, and so the fund didn’t take off,” he said.

Sturgeon Development Partners has raised $8 million for its opportunity zone fund; the firm’s goal is $330 million. The fund is backing construction of a 126-room hotel in downtown Salem. Demolition began at the site on July 15.

“Interest has been very steady,” co-founder Vanessa Sturgeon said.

More Sturgeon Development Partners fund projects lie in the future, she added.

“We expect to leave the fund open for the next four years or so, and continue to take investments on a rolling basis,” she said.

Sturgeon is eyeing Portland’s Central Eastside Industrial District for a second project: a seven-story office building to be constructed with cross-laminated timber. She declined to reveal the property’s precise location.

The Sturgeon Development Partners opportunity zone fund is one of a handful backing local projects. The Goodman family’s Downtown Development Group is working to form single-asset funds for both the Eleven West mixed-use tower at Southwest 11th Avenue and Washington Street, and the PAE Living Building at Southwest Second Avenue and Pine Street, co-President Greg Goodman said.

The Eleven West project will involve an opportunity zone fund in a 50-50 arrangement with a partner, said Goodman, who declined to identify the other investor. Construction of the project, which won Design Commission approval in December 2017, has not begun yet.

Eleven West vested before inclusionary housing rules required developers to provide below-market-rate multifamily units. The project wouldn’t be financially possible today, Goodman said.

“There hasn’t been a new high-rise in downtown Portland in 28 months with inclusionary housing,” he said. “While the opportunity zoning is good, it doesn’t offset the inclusionary zoning on the high-rise. The inclusionary zoning has shut that market down.”

Some investors have shied away from investing in multi-asset opportunity zone funds, fearing a lack of control or oversight compared to single-asset funds. A potential stumbling block is that investors must also be prepared to pay income tax on deferred gain in 2026.

In May, a bipartisan group in Congress introduced companion bills to require data collecting and reporting that was stripped from the original opportunity zone legislation. The bills were referred to the Senate Finance and House Ways and Means committees and have not advanced.

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Schwabe, Williamson & Wyatt has elevated a 36-year-old lawyer to head its construction service team. But Stephanie Holmberg’s youth belies a deep understanding of law and construction, according to her boss.

“She brings to us an industry perspective that is very much in line with our firm’s strategic positioning to be focused in six industries, one of which is real estate and construction,” said Mark Long, managing partner of Schwabe. “That is obviously a huge benefit in terms of her leadership and the credibility she commands with the people she leads in that group.”

Holmberg has been with the firm since 2015 after leaving Wilson Construction Company, where she served as general counsel.

“What she brings, and she would never admit this herself, are some innate leadership skills, and she’s really caused that group to congeal as a team,” Long said. “She’s smart. She commands respect.”

The construction industry is still feeling the effects of the Great Recession, Long said, and the legal field is being forced to adapt. Some law firms are responding by focusing on what they do best, or by expanding their number of lawyers or geographic footprint.

Schwabe has reorganized into industry groups to better serve clients, whose legal issues often cover several areas of law.

Construction clients often need help with contract drafting and negotiation, litigated complaints over construction defects or payment claims, employment matters, tax advice particular to the construction industry, or environmental issues. They come to their lawyers early in the development process, for entitlements, and stay involved with their counsel to the end of the life cycle of a project, where, unfortunately for them, many result in construction defect litigation.

Holmberg oversees around 19 lawyers in her subgroup. She formerly co-led the division with attorney Jeremy Vermilyea, who left the firm earlier this year to focus on his own practice.

“The nice thing about the construction service team is we have attorneys who can service all those needs; it’s kind of a one-stop shop,” she said. “Collaboration is really how we can best serve our construction clients.”

Holmberg is a native of Lake Oswego. She’s a graduate of Vanderbilt University and University of Oregon School of Law. She’s married to Stephen Holmberg, an employee of Nike, and serves on the boards of directors for the National Association of Women in Construction and the Pittock Mansion Society.

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A prominent Pacific Northwest construction attorney who was a shareholder at a major Portland law firm has left it to operate his own practice.

Jeremy Vermilyea, holder of the Twitter handle “@NWConstLaw” spent his last day at Schwabe, Williamson & Wyatt on April 28. Attorney Stephanie Holmberg succeeded him overseeing the 19 lawyers in Schwabe’s Construction Service Team.

Vermilyea will continue to represent construction industry stakeholders – primarily commercial general contractors, including a number of longtime clients who will follow him to this new venture, Vermilyea Law PC. (He actually established the business 10 years ago.)

Running a small shop is far more cost-effective these days, he said, mainly due to advances in technology. The new firm will be nearly paperless. Also, he plans to add to his caseload more mediation and arbitration work, which is more complicated at a large firm because of potential conflicts of interest.

Vermilyea Law is currently based in Lake Oswego and consists of Vermilyea and an assistant, though he hopes to hire four or five lawyers by the end of the year.

“It’s actually a return to a smaller approach to the practice of law – one that better suits my personality and my approach to client service,” he said.

Vermilyea has been active with the local construction industry since moving here in 2000. He regularly leads seminars and courses on current case law for the local chapter of Associated General Contractors of America. In 2013, he was awarded the chapter’s President’s Award for his contributions to the local building community.

Vermilyea, 47, is an Alaska native. He fell into construction law in large part because it was the specialty of the first firm he worked at after law school, in Anchorage. He found it to be a good fit.

“I’m fortunate,” he said. “I think a lot of lawyers out there struggle to figure out what sort of work they want to do and who they want to be as lawyers. I never really had that problem. I always knew that I wanted to work with contractors.”

Vermilyea is a 1987 graduate of Wasilla High School, also the alma mater of one of Alaska’s most famous daughters.

“Sarah (Palin) was a senior when I was a freshman. She was older, and I didn’t know her that well. She was the point guard on our basketball team that year. I have friends who know her, know her family,” he said. “There are stories, but I don’t have any.”

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At this time last year, Oregon building industry professionals were preparing to keep an eye on legal issues that included a move to eliminate from job applications a question asking applicants if they had ever been convicted of a felony as well as a plan to create a statewide mandatory sick leave policy. With those two laws now in place, construction company officials have at least begun to wrap their heads around them. So, what are the legal issues in construction and general business that people in the industry should keep an eye out for in 2016? Two Portland-area attorneys weigh in on some of the trends and issues they anticipate seeing emerge during the coming year.

Construction defects

While construction defect claims have become a regular occurrence these days both for firms in the building industry and attorneys that deal with construction law, the fast-and-furious rise of multifamily projects in Oregon – and across the country – coupled with a shortage of skilled construction labor may be laying the groundwork for a future spike in defect claims, warns Jeremy Vermilyea, a shareholder with Schwabe, Williamson & Wyatt.

Vermilyea says he hasn’t yet seen or heard of any definite problems, but current conditions remind him of the early 2000s, when construction defect claims spiked sharply. An emergence of new building materials combined with a slew of condo projects constructed by crews that had little to no training in procedures for handling those new products led to a long list of problems – and lawsuits – when moisture and mold problems resulted from improper installation.

Fast-forward to 2016, and companies are trying to keep up with a mad rush of multifamily projects; they often are forced to tap into a less experienced workforce. The dearth of skilled workers is the result of both baby boomers retiring and the fact that many construction workers who were laid off during the recession have failed to return to the industry.

“Now it’s a different source, but it’s basically the same result,” Vermilyea said. “Some (companies) are hiring anybody. As a result, the product could be more subject to potential problems … five, 10 years down the road. That’s a lot of speculation … but still.”

Material matters

Vermilyea says he also anticipates that the cost of building federally funded projects could begin to rise this year due to a new interpretation of the Buy American Act handed down late last year by the U.S. District Court in the District of Columbia.

In the past, going as far back as 1983, the Federal Highway Administration has interpreted the act as only requiring that steel and iron products used on the projects it funds be manufactured or produced in the United States.

Last year, however, the district court overturned that interpretation.

“On all federally funded projects going forward, the full act will apply,” Vermilyea said. “All products must be manufactured in the U.S.”

He sees that decision having possibly significant ramifications.

“It has the impact of probably increasing the cost of (federally funded) projects,” Vermilyea said.

Then there’s the chance that contractors not aware of the new ruling could be caught off guard and use materials that fall outside the parameters of the court’s decision.

“It’s a possible ‘gotcha,’ ” Vermilyea said.

Exempt or not

Rich Meneghello, a partner in the Portland office of Fisher & Phillips, advises that employers be on the lookout for new regulations related to overtime pay that the U.S. Department of Labor is expected to finalize sometime this year.

“We anticipate it coming as soon as (spring) or as late as late summer,” he said.

In simple terms, the regulations are expected to shrink of the number of employees that employers will be able to exempt from overtime pay, according to Meneghello. The regulations also are expected to increase the salary threshold that employers will have to meet in order to qualify an employee as exempt. Current speculation is that the threshold will rise from $23,600 per year to around $50,000, but the definite amount isn’t set yet.

“We don’t know what the final version will look like, but it will impact how employers can classify workers exempt from overtime,” Meneghello said. “We’re expecting employers will need to review everybody on exempt status to meet new rules.”

A fight for $15

The push to raise Oregon’s minimum wage from $9.25 per hour to $15 per hour was a topic of discussion – though no agreement was reached – during last year’s legislative session.

Meneghello doesn’t expect the conversation to go away in 2016. Minimum-wage workers eventually will be successful in their bid to earn that earmarked amount.

“It a matter of when, not if,” Meneghello said.

What’s less certain, though, is how quickly that increase will begin to occur.

Earlier this year, Gov. Kate Brown rolled out a plan that she considered a compromise to demands for an immediate increase of the state’s minimum wage to $15 per hour. Her stepped approach not only gradually increases the rate over time but also differentiates the rate of implementation between rural and urban areas.

But Brown’s proposal may not be enough to appease advocates for action immediately.

“Even if it does pass, a lot of people are already decrying it, saying it doesn’t move quickly enough,” Meneghello said. “They’re saying they’re going to put it on the November ballot.”

The post Four legal issues for employers in 2016 appeared first on Daily Journal of Commerce.

At the same time that Portland architecture and engineering firm Mackenzie gained its new name, Hilary Mackenzie’s small residential architecture firm, Mackenzie Architecture Inc., began receiving fewer calls from prospective clients.

A rebranding effort in late 2013 wherein the larger firm, which was founded by Hilary Mackenzie’s father, Tom Mackenzie (he has since retired), changed its name from Group Mackenzie to Mackenzie immediately caused confusion for people seeking the services of Portland-based Mackenzie Architecture, Hilary Mackenzie said.

“It just sucked the life out of my business,” she said.

Before Mackenzie dropped the word “Group,” the names of the two firms were distinct enough that it was less common for people to mistake one for the other, Hilary Mackenzie said. Now, the first hit in a web search for “Mackenzie Architecture” is not her business. Instead, searchers find Mackenzie’s website.

“Basically, my phone quit ringing for three months,” she said. “I decided I had to do something.”

Hilary Mackenzie last summer filed a lawsuit in federal court against Mackenzie for trademark infringement and unfair competition, but has since dropped it after running out of money to pay her lawyer. Following an unsuccessful bid to convince Mackenzie outside of court to revert to calling itself Group Mackenzie, she’s planning to distinguish her business by changing the Mackenzie Architecture name.

In November, Hilary Mackenzie legally changed her full name to Hilary Sundeleaf Mackenzie in honor of her maternal grandfather, late Portland architect Richard Sundeleaf. Taking on her mother’s maiden name corresponds to plans to rename this spring the one-woman firm she founded in 1984. She will likely call it Sundeleaf Mackenzie Architecture Inc.

“I’ll probably keep Mackenzie in (the new name) because I’ve been doing this for 30 years and that’s how people know me,” she said.

Matthew Wilmot, the Schwabe, Williamson & Wyatt lawyer representing Mackenzie, declined to discuss the case, but issued a written statement on behalf of Mackenzie managing principal Rich Mitchell stating that the firm is pleased that Hilary Mackenzie dismissed her lawsuit.

“Our firm has used the Mackenzie mark since 1968, and believes it’s well within its right to use the Mackenzie mark in the present day,” Mitchell said.

Hilary Mackenzie said she has no regrets about pursuing legal action against Mackenzie over the impact of the larger firm’s name change on her business, but knew it was time to move on. She noted that legal fees for trademark infringement lawsuits average around $150,000.

“For one person, it’s prohibitive,” Hilary Mackenzie said. “I decided I needed to go forward. I tried. I wanted to try.”

Her lawsuit asked that Mackenzie return to using its former name and sought monetary damages from the larger firm. But she admitted that the chances of the case reaching court were slim.

“Trademark lawsuits – they’re fabulously expensive to pursue,” Hilary Mackenzie said. “What you win if you win is the right of the name. It’s where the big boys play. It’s all about gaining those rights and you rarely get monetary damages.”

Mostly, she said she’s disappointed with how the larger firm handled her concerns by barely responding to initial phone calls and letters before the lawsuit was filed and then indicating it would defend its name in a costly legal battle.

“I frankly thought they were better than that,” Hilary Mackenzie said. “That had always been the problem that they could always outspend me, but I was hoping they were willing to talk about it.  I didn’t think it was unreasonable.”

She said she’s also baffled why Mackenzie officials appear to have no concern about the confusion the firm name change has caused. After the larger firm rebranded, the volume of calls and mail her firm received intended for Mackenzie staffers surged. She said she still receives several calls a week and mail intended for Mackenzie. Her lawsuit claimed that when Mackenzie staffers received calls seeking the services of Mackenzie Architecture, they transferred those inquires to the larger firm’s architecture department.

“It’s unprofessional and it goes against the standards of architects because you’re never supposed to take work from other architects,” Hilary Mackenzie said.

In an August 2014 letter to Hilary Mackenzie’s lawyer, Kevin Hayes of Klarquist Sparkman, Wilmot said Mackenzie exclusively provides commercial architectural services while Mackenzie Architecture strictly provides residential services, so it’s unlikely for clients to mix up the two, he said.

“My client does not receive inquiries from any such ‘confused’ prospective clients as there is no confusion in the marketplace,” Wilmot wrote.

He added that Mackenzie would only consider a dispute resolution that did not involve changing the firm’s name. In bold type face he wrote, “Mackenzie has no intention of changing its name and any demands that it do so will be objected outright.”

Publicity surrounding the Mackenzie Architecture trademark infringement lawsuit against Mackenzie has informed potential clients that the two Portland firms are independent businesses, Hilary Mackenzie said.

“Filing the lawsuit helped a lot,” she said. “It did distinguish. People were looking for which Mackenzie they wanted as opposed to thinking they were the same.”

When Hilary Mackenzie filed the lawsuit, she wasn’t willing to change the Mackenzie Architecture name. But she’s now pleased that her firm’s new name will recognize her grandfather who she interned for at the beginning of her career. Sundeleaf, who died in 1987, was a well-regarded Portland-area architect who helped Hilary Mackenzie’s father get established as an engineer in Portland by referring clients to him, she said.

“I think I’m going to like my new firm name,” Hilary Mackenzie said. “I have a nice architectural pedigree.”

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One of the most important and often least understood terms of an architect’s contract governs ownership of the design: Is the owner the architect or the architect’s client? On the surface, it may seem obvious that the client – the person who pays for and will ultimately use the drawings to construct a building – would be the owner. But traditionally, it is the architect who retains the ownership rights in the design documents, and there are some good reasons for this rule.

As with any intellectual property right, generally the ownership is with the “author” of the work. Unless otherwise specified in the design contract, the architect will retain the ownership of the work – the building drawings and specifications. In 1990, Congress specifically recognized this ownership right by passing the Architectural Works Copyright Protection Act, which expressly extended copyright protection to architectural works.

But if the architect retains ownership of the drawings, how is the client able to use the drawings for construction? Usually, the architect grants the client a “limited license” to use the drawings in construction, but only for the specific structure for which the architect prepared the drawings. The granting of this license is covered in the standard language found in often-used American Institute of Architects (AIA) contract forms under “Instruments of Service.”

The granting of a “limited license” to use the design instead of an outright transfer of ownership has a number of purposes. At its most basic level, it is a matter of public safety. The design of a building (at least the kind requiring the services of a licensed architect) is usually unique, and the architect is legally bound to not only maintain control over the drawings through construction but also provide observation of the construction while it is under way. The drawings should neither be modified without the architect’s approval nor used at a different location or for a different project.

Another reason for this rule is economic and a matter of proprietary design concepts. Individual architects develop many components and details that are the tools of the trade that can be used to differentiate their “product” from the product of other architects. If the ownership of those design components and details was transferred to the client and not retained, the architect could lose the right to incorporate those concepts in future projects.

Of course, in some situations, the balance of interests may tip in favor of transferring the ownership of the drawings to the client. One example would be a design-build project where the client of the architect is the general contractor and the architect may be working “in-house” as an employee. In such a situation, the general contractor retains the rights in the drawings.

Another example is the cookie-cutter design of many national retailers or suburban housing developers. In those cases, it is often the corporate owner or subdivision developer that retains the ownership of the design documents.

Finally, there is always that truly unique building design, specifically commissioned and paid for, where the interests of the client in protecting the structure from unauthorized imitation outweigh the interests of the architect.

Under any of these circumstances where the client is to acquire ownership of the documents, it should be spelled out clearly in the contract.

Bill Ohle is a shareholder with the law firm of Schwabe, Williamson & Wyatt. He ‎practices in the firm’s energy, construction and design groups. Contact him at 503-796-2414 or at ‎wohle@schwabe.com.‎

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