It is essential for creative agencies to have clear and authoritative provisions about ownership of intellectual property in their client agreements. Having clear terms in client agreements reduces the potential for disagreement down the track or for the client or agency to be put in a harmful position. Unmet expectations, unclear responsibilities, a loss of time and money, and resulting potential lawsuits are not worth the risk!
When preparing (or considering) a client agreement it is important to also clearly define the scope of work and to ensure that the terms regarding intellectual property are clear, appropriate and fair in the context of the scope of work and the contract price, at the commencement of the relationship.
Protecting the client’s intellectual property
Generally speaking, the underlying rights to any intellectual property provided by the client to the creative agency should be retained by the client. The agency will usually be granted a licence to use the client’s intellectual property in order to undertake the services they have agreed to provide whilst the agreement in in force.
The client agreement should include a clause that states that nothing in the arrangement between the creative agency and the client will constitute a transfer or assignment of the intellectual property rights of the client’s including its intellectual property in any material the client provides.
Protecting the intellectual property created by the creative agency for the client
Clients will generally want ownership of any intellectual property created by the agency for them. Usually an agreement will assign all right, title and interest in the created intellectual property material in any campaign or project for the client, sometimes with a limited licence back to the creative agency to use the created intellectual property for marketing or promotional purposes.
Sometimes creative agencies want to retain ownership of the intellectual property in the work they create for the client and licence it to the client. If you are entering into a licensing arrangement with a client, consider the following:
Where and how can that creative work be used, and for what length of time?
Is it an exclusive license to the client, or can that work be licensed to other clients? Do you want to continue to have the right to the creative work yourself (usually yes!)
May the client modify that creative work or create new works based on that work?
Does the client have to credit the creative agency for the work when using it?
Will royalties for use or sale of the creative work apply? Who will receive them?
Does the creative agency want to retain the right to use the work as part of a portfolio or exhibition, or on social media for promotion purposes?
Protecting the client when the creative agency uses intellectual property belonging to a third party
If the creative agency uses third party intellectual property in their provision of services to a client, there should be a clause warranting that the creative agency has the right to use that third party intellectual property, together with an indemnity in favour of the client, protecting the client in the event of any third-party claims. A similar undertaking should be in favour of the creative agency where it is the client providing third party intellectual property for the purposes of the agreement or project.
What will happen to the work done by the agency if the client engages another agency for the same work?
If you are a creative agency, you will want to make sure that any intellectual property rights that are to be granted to the client once you have delivered your work are reflected in the price you charge, and ideally, that you receive payment before the final delivery of the work. So; at the pitch-stages of marketing and pre-contract negotiations, ensure you as the creative agency retain the IP (and if necessary, require that any pre-contract negotiations are protected by confidentiality obligations), so that the client cannot run off to another agency with your ideas —without infringing your IP rights anyway!
Ensure that your agreement with the client states that the IP in the creative work will not pass to the client until payment has been made for the work. That way, even if the client engages another agency for the same work following completion of your work, they should still be legally required to pay you the full fee. There is also no risk that the client can obtain rights in the IP if they cancel the agreement before the work is complete or full contract price paid.
Who will own the work provided to the client if a refund of the deposit is requested?
If the client requests a refund of the deposit it insinuates that either the client is not happy with the work done by the creative agency to date, or that they have found another agency to do the work. Your terms should state under what circumstances the client is entitled to a refund and how the IP is to be treated in such circumstances (again we would suggest that the IP does not transfer or vest in the client unless and until the full contract price is paid).
Jessica Kerr is the director of Sinclair + May. Jessica set up Sinclair + May with a view to do law differently and make legal services accessible for small businesses. Sinclair + May operate on a fixed fee basis and offer retainer services for their clients. Sinclair + May is a female-led, boutique commercial law firm and work extensively with the creative industry. You can follow Jessica on instagram @thelawyerslunchbox for useful legal tips and see more about Sinclair + May at www.sinclairmay.com.au.