We often come across clients who need to engage the services of a creative agency to create something for them. Often timing is an issue, so unfortunately it’s not uncommon for parties to rush into work without proper legal protection, and for work to commence on a project before the terms are laid out.
It’s always best to get things sorted before you start, and the need for a clearly written agreement goes without saying. So here we’ve put together a few common issues that you should be aware of in creative contracts to arm you with the right information for when the need arises.
We may as well tackle one of the biggest issues first. You might assume that because you are paying for the work that is being created for you that you are getting the copyright in the work, but that assumption would be incorrect. If there is no mention in the contract of who owns the copyright and other intellectual property in the work produced for you, then it is likely that the creative agency will be taken as owning the underlying rights, whilst your business will hold a licence to the use of the works. Don’t assume that because you’ve commissioned someone to create a one off advertisement that it gives you world-wide rights in the whole copyright. You may be getting a license to use the works for a very specific purpose, and a specific region. And the agreement may even specify that the same license can even be given to other people!
The basic premise is that the creator of the work is the first owner of the copyright, but everything is negotiable and subject to agreement, so make sure you check the fine print and know exactly what you are getting. The IP can be exclusive (so that no one but the licensee, in this case you, can use the work) or it can be non-exclusive (so that the same right can be licensed to others, meaning that others can use the same work). The license can be worldwide or limited to a geographical area. It can be revocable, which means that the copyright owner can revoke it, or irrevocable.
And you would want to know what needs to happen for IP to transfer to you, for example, most agreements will make the transfer of the IP conditional on final payment.
The agreement also needs to spell out whether the agency has the right to display the work in their portfolio. And you need to check what exactly you can use the work on. So if there’s a restriction to a very specific use for the work, then you would want to get that modified to be a more general use, for example, to give you the ability after you’ve paid for the work, to ask for someone else to modify it.
Can the agency use the drafts they’ve used when creating your work to create other people’s work? If you are going to pay an agency for work in developing concepts and drafts, you should also ensure that it is clear who will own the copyright to these items.
Creators of work have moral rights in their work, which can’t be given away by a license, or sold. The moral rights are the right to be attributed as the creator of the work, take action if their work is falsely attributed as being the work of someone else, and take action if their work is treated in a way that prejudices their reputation. Unless the creator consents to these acts there might be infringement, so it’s not uncommon for an agreement to include a waiver of moral rights by the creator.
And finally, if IP is to pass over to you as the client, when will this happen, and will the IP include any background IP that the agency will continue to own? If the agency continues to hold rights in some of the background IP, you must take time to understand what implications this might have on how you will be able to use the materials into the future (and any restrictions on your use).
You need to ensure that you are very clear in the contract or scoping documents about what it is that you are expecting to receive, and how to measure the quality of the final product.
Other items to think about are how much control you want to be given over the approval process. Do you have a clear process in place for approving work, and when you are liable for payment? Do you have to pay for making changes to work?
These are all issues that if sorted out at the beginning can potentially save you a lot of headaches later on.
Does the agency give you an indemnity for breach of anyone’s intellectual property rights? An indemnity is used to protect against third party claims for loss or damage caused to a third party. If the agency has breached other people’s rights in creating work for you then they should be liable for that – not you, and so indemnify you for any loss that you suffer as a result of the work breaching someone else’s intellectual property rights. The agency should have their own rigorous internal processes for ensuring that the work they produce for you doesn’t infringe anyone’s IP rights. But check if they’ve inserted exclusions on this sort indemnity. It’s not unusual for these sorts of agreements to waive liability for certain matters that are left in your court to work out, such as trademark clearances.
Is there a tight confidentiality clause? You don’t want your information in the hands of your competitors, so getting the wording right in these clauses is crucial
Creative contracts should also include all of the major areas as any other supply contract. These things include for example:
- a clear outline of key responsibilities and deadlines
- remedies for a failure of the creative agency to deliver on any of its promises
- how variations will be managed
- who will be responsible for managing the contract on both your side, and the side of the supplier?
- can the agency sub-contract out the work, or do you want to ensure that you know exactly who is working on your projects?
- clearly set out the price, and what will trigger a payment obligation (ensure that you won’t be required to make payment, if you don’t receive what you had intended)
- what is the term of the contract? If it is an extended term, ensure you have appropriate rights of termination built into the contract in case problems arise.
You might also want to visit this article for a 5 minute contracting checklist.
So these are a few issues to be mindful of when reading that agreement before you rush into a new project. If you would like feedback on any a creative contract, or if you would like us to draft or check an agreement for you, just drop us a line at [email protected] or call us on 02 8006 0830 for a confidential discussion.
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