Construction projects do not always go as planned. Sometimes a builder decides to leave, or is terminated from, a project. In a design-build construction project, however, when the original builder created the designs for the project, does the owner have the right to continue using those designs with their new builder?
A decision from the Court of Appeals of Kansas highlights the importance of knowing who owns the designs in a design-build construction project, as well as planning for what may occur if the original design-builder departs the project.
The Case: Monarch Build, LLC v. DLH Holdings, LLC, 65 Kan. App. 2d 519 (2025)
In Monarch Build, an owner, DLH Holdings, hired Monarch Build to be the design-builder for the construction of a new 27,000 sq. ft. commercial building that would house a blend of office spaces and retail shops. DLH Holdings and Monarch Build prepared a contract for the project using the American Institute of Architects’ “Standard Form of Agreement Between Owner and Design-Builder” (the A141). Although the parties negotiated this contract and agreed on the final version of the contract, they did not sign the final contract.
After the design phase of the project was completed, and as Monarch Build was preparing to begin the construction phase of the project, DLH Holdings decided to replace Monarch Build and hired a different contractor to complete the construction phase of the project. Unfortunately for DLH Holdings, changing builders mid-project was not that simple. The contract between the DLH Holdings and Monarch Build included a provision that stated, “[t]he Design-Builder, and the Architect, Consultants, Contractors, and any other person or entity providing services or work for any of them, shall be deemed the authors and owners of their respective Instruments of Service, including the Drawings and Specifications.”
Monarch Build sent DLH Holdings a letter demanding that DLH Holdings cease and desist construction of the project as DLH Holdings no longer had Monarch Build’s permission to use the project designs. DLH Holdings continued construction of the project. Monarch Build then filed a lawsuit including, among other things, a civil claim alleging that DLH Holdings had stolen Monarch Build’s intellectual property by continuing to use the project designs without permission.
The District Court ruled in Monarch Build’s favor, and the Court of Appeals upheld the District Court’s ruling on all issues except their award of attorneys’ fees. Because the parties had negotiated the contract and agreed to its terms, the courts found that the contract was binding and enforceable even without the parties’ signatures. The courts found that DLH Holdings had hired Monarch Build as design-builder for both the design and construction phases of the project. Critically, the contract made clear that even though DLH Holding had paid Monarch Build for the design phase of the project, Monarch Build still owned the actual designs. Therefore, Monarch Build had the right to grant or revoke DLH Holdings’ permission to use those designs. Absent Monarch Build’s permission, DLH Holdings could not hire a new builder to complete the project using these designs.
What this means for owners and contractors
This case highlights the importance of knowing who has ownership rights or license to use different items of work, especially as it relates to intellectual property in a design-build project:
- As a project owner, paying a designer to complete the plans for your project may not be enough if you do not have a contractually assured right or license to use those plans for your project.
- As a design-builder, maintaining ownership or control over the use of your designs may be important, especially if you are entering into a design-build project and are relying on revenues and profits from the later phases of the project.
- For all parties involved, it is important to plan for potential conflict and the possibility that either party may terminate an agreement before the project is complete. Each party will have different priorities and concerns in the event of a conflict. One party may be concerned about its ability to complete a project it has already significantly invested in. One party may be concerned about losing anticipated future revenue. These are all concerns that can be alleviated by thoughtful planning before the project begins and before the conflict arises.
Bernstein Shur’s Construction Law Group helps developers, contractors, and construction professionals manage risk and keep projects on track at every stage of the project lifecycle. The group provides sophisticated legal solutions spanning contract negotiation, project administration, dispute avoidance, and litigation, drawing on deep experience in the construction industry. Samuel X. Frank is a construction and real estate litigation attorney who represents clients in complex disputes, combining analytical rigor, clear communication, and creative problem-solving to develop effective, strategic resolutions. He can be reached at [email protected].