[EP 042] What to Watch Out for in Creative Contracts


CLICK HERE to download the transcript for this episode.

Episode Highlights:

02:13 Common Issues with Creative Contracts
03:40 Intellectual Property in Creative Contracts
08:22 Moral Rights in Creative Contracts
14:13 Approval Process in Creative Contracts
16:17 Indemnity Clauses in Creative Contracts
17:34 Confidentiality Clauses in Creative Contracts
17:49 A Snapshot of Other Areas to Consider

Hi, it’s Joanna Oakey here on welcome back to Talking Law brought to you by our commercial legal practice Aspect Legal. Today we are continuing our series in talking about effective contracting relationships in episode 40 and 41, we talked about the Top Tips in creating effective contracts.

Those episodes were perhaps a mostly at organisations who deal with lots of contracts on a regular basis. But this episode is an episode that will be relevant to all organisations whether they deal with many contracts or whether contracts are something that only come in from time to time. And here we’re specifically looking at creative contracts both from the position of client and from the position of the creative agency themselves. So this is for you if you ever deal with creative agencies like website design, website builders, graphic design, marketing organisations or if indeed you are a creative agency yourself.

Today we are talking about what to watch out for in creative contracts so a particular type of contracting situation. We often come across clients who need to engage the services of a creative agency to create something for them.

In this episode we’re not picking on creative agencies. In fact some of our most treasured and valued clients are creative agencies themselves. But this is just a topic that can allow us to get really practical about how any organisation whether it’s small or big can apply some of the elements that we have been talking about in relation to effective contracts.


Common Issues with Creative Contracts

Creative contracts are one of those areas that most organisations can relate to in some way shape or form. And often when organisations are engaging in creative contracts or contracts with creative agencies so that might be organisations where they are having designs created for them, websites created for them, content created for them. Often in each of these events timing is an issue and unfortunately it is not uncommon for parties to rush in to work without properly thinking about the contracts that are relevant to this situation and it is often commonplace for work to commence on a project before terms are laid out.

Now sometimes if we dealing with really small elements of creative with creative agencies this may not be an issue. But sometimes if we’re dealing with larger items that relate to larger amounts that we’re paying or indeed something that is important for us to be able to use into the future then it’s really worthwhile for us to sit down and spend a little bit of time thinking about what it is that we’re looking at that we want to achieve from this contract and what are the elements that are important from a legal perspective.

Whilst it is always best to get things sorted from the start and the need for a clearly written agreement goes without saying, I thought that I’d make it easy for you so that you could get an idea of a few things to be aware of in creative contracts to arm you with the right information for when the need arises.



Intellectual Property in Creative Contracts

Let’s tackle one of the biggest areas first intellectual property. You might assume that because you’re paying for the work that is being created for you that you were getting the copyright in the work. But that assumption is often incorrect.

If there is no mention in the contract of who owns the copyright and other intellectual property in the work being produced for you then it is likely that the creative agency will be taken as owning the underlying rights whilst your business will simply just hold a license to the use of the works.

Don’t assume that because you’ve commissioned someone to create a one off advertisement that gives that that then gives you world-wide rights in the whole copyright you might actually just be getting a license to use the works for a very specific purpose and a very specific region and the agreement may even specify that the same license can be given to other people. So if you want to ensure that you can use it for whatever you want to use it for in the future without any risk further royalties might be charged or the risk that it might be used for someone else, then you need to have this discussion about copyright and intellectual properties ownership right at the beginning.

So 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’re getting.

Make sure you check the fine print and know exactly what you're getting.- Joanna Oakey #creativecontracts #talkinglaw Click To Tweet

The IP can be exclusive so no one but the licensee, in this case you, can use the work. Or it can be non-exclusive so that the same rights can be licensed to others, meaning that others can use the same work the license can be worldwide or it can be limited to a geographical area. It can be revokable which means that the copyright owner can revoke it. Or it can be irrevokable which means the copyright owner can’t revoke it. You need to work out whether or not you’re getting a license and if so what the terms of that license is or whether or not you’re getting a full ownership to the intellectual property rights.

And on the flipside, if you’re a creative agency this is also an important thing for you to think about. If you are basing some of the work that you’re providing for your customers and clients on base work that you also provide to others, then you need to be really careful in agreeing to any IP clauses where the customer owns all of the intellectual property rights. You need to make sure you have carved out the areas that you might require to use for other customers and sometimes we call these background intellectual property right. If you have background IP, you’ll want to ensure that you’ll have clauses that are sure that you retain the ownership to that background IP if you are indeed using it with other customers.

Now once again on both sides of the transaction you need to be clear about when intellectual property rights transfer. For example many agreements will make transfer of the IP conditional on final payment and of course if you are the creator agency then you’ll want to ensure that that’s the case for you, that you are paid before the IP transfers. From a customer perspective, if there might be some delay in payment for some reason, say for example it’s a long project you might want to ensure that progressive parts of the IP transfer over to you progressively or that you get all IP at the point that it’s created.

You need to be clear about when intellectual property rights transfer. - Joanna Oakey #creativecontracts #talkinglaw Click To Tweet

The agreement should also spell out whether or not the creative agency has the right to display the work in their portfolio. So if you’re the creative agency, you need to check exactly what you can use the work on. If you are the customer, you need to potentially think about whether or not you’re happy for your creative agency to use this work in their portfolio.

If there’s a restriction to a very specific use for the work then you’d want to get that modified to be a more general use, for example to give you the ability after you paid for the work to ask for someone else to modify it if you’re the customer. And on the flipside, if you’re the supplier if you are the creative agency you might want to ensure that you have a specific right, if the IP is completely passing over to your customer, a specific right to use this in your portfolio.

Another consideration is whether or not the creative agency can use the drafts that they have created when creating your work in other people’s work. So if you’re the customer and you’re paying for an agency for work in developing concepts and drafts, you might think that it’s important that you own the copyright to these items. And on the flipside, if you’re the creative agency it might be important for you to carve out any of this work in relation to drafts and concepts to ensure that you can use them with other customers where your client hasn’t taken up particular elements of your concepts or your drafts.



Moral Rights in Creative Contracts

Next we need to think about this tricky area of moral rights. The creators who are individuals so the individual creators of all copyrighted works have moral rights in their work which can’t be given away by a license or sold. The moral rights is the right to be attributed as the creator of the work or to take action if your work is falsely attributed as being the work of someone else and to take action if your work is treated in a way that prejudices your reputation.

The thing to bear in mind in this area is that unless the creator consents to these acts there might be infringement. So it is not uncommon for an agreement to include a waiver of moral rights by the creator.

Now this is really important in the chain of title. If you are having something created by a creative agency that later on you might then need to sell or pass on or transfer to someone else. If you don’t have the right clauses that show that there have been moral rights waivers, you might have an issue when you seek to sell this intellectual property later on or if you sell the business and this intellectual property is a valuable part of that business.

On the flip side, if you run a creative agency then it’s also extremely important for you to think about this area. Because if you’re signing contracts with your customers where you are indemnifying them against any actions that might be taken by the people who hold the moral rights you i.e. the staff within your office. You need to make sure that you have the right contracts with your staff to back up these rights and these waivers. So that means that your employment contracts and in your contracting relationships with your contractors and your employees, you need to not only have the right intellectual property assignment and transfer clauses from these people these individuals who are creating that work but also that you have a waiver of moral rights from them in these contracts.

And then finally in this area, if intellectual property is to pass over to the client, each party needs to think about when that will happen and whether the IP will include background IP as I spoke about before. If the creative agency continues to hold rights in some of the background IP, both parties need to take time to understand what implications this might have on how each of them can use the materials into the future and any restrictions this might have in relation to future use.


Let’s Take A Break

Let’s take a short break. When we come back, we’ll look at the approval process for creative contracts and indemnity and confidentiality clauses.

And that’s next! I’m Joanna Oakey and you’re listening to Talking Law by Aspect Legal.


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Welcome Back

Welcome back! Earlier we talked about the intellectual property rights in relation to your creative contracts and the important considerations to bear in mind in dealing with this area. Let’s keep the conversation going and run through all the other areas that you should be thinking about from both sides in creative contracts.


Approval Process in Creative Contracts

All right then. So that was an overview of intellectual property in relation to creative contracts. Let’s now move to the next area which is the approval process for both parties.

Whether you are the customer or the creative agency it is important to ensure that you are very clear in the contract and the scoping documents about what it is that the creative agency is providing and how to measure the quality of the final product. So from a creative agency’s point of view this is critical to ensure that you don’t end up in a situation where customers have had a different view to you as to what performance under the contract looks like, what the quality or how to measure the quality of the final product. Because sometimes in creative services the outcome is subjective. So what we really need to do is make sure we put in place ways to reduce the subjectivity and increase the objectivity so that each party can measure at the end whether or not the goods or services have been provided in accordance with the requirement under the contract and therefore whether or not the customer has a payment obligation.

You also need to think about how much control the customer will be given over the approval process both from a customer and a creative agency perspective. So from a customer perspective you might want to ensure that there is a clear process in place for approving the work and that it’s clear whether you are or not you’ll have to make payment for making changes to the work if you don’t like the work.

And from a creative agency point of view, it’s important that you are very clear on what authorisation and acceptance looks like so that when you get that authorisation and acceptance then it’s very clear from that point onwards and your customers don’t have anything that they can rely on to then not pay if they change their mind into the future. These are all issues that have sorted out at the beginning can potentially save you a lot of headaches later on.



Indemnity Clauses in Creative Contracts

And the next area that we are going to look at here. The third area are indemnities. Here we are looking at whether or not the creative agency provides an indemnity for breaching anyone’s intellectual property rights.

An indemnity is used to protect against third party claims for loss or damaged caused to a third party. So for example, if you’re a customer and you have had someone create a design or a website for you and then someone else sues you on the basis of that work that’s been created for you by the creative agency, do you have the right to then go and seek recourse from the creative agency. And on the flip side if you’re creative agency and you have employees or contractors working for you and you later on find that work they have source has been copied, what rights do you have against them?

A lot of these rights will be held in the indemnity clauses and it’s really important that anyone in your position both as customer and as creative agency you have your own rigorous internal processes for ensuring that your work doesn’t infringe anyone’s IP rights and that you are each protected if something happens that reflects some sort of breach of someone else’s intellectual property rights.


Confidentiality Clauses in Creative Contracts

And fourthly we get onto confidentiality. So you should be thinking about whether or not there are tight confidentiality clauses. You don’t want your information in the hands of your competitors. So getting wording right in these clauses is crucial.


A Snapshot of Other Areas to Consider

And finally let’s run through a snapshot of all other areas that you should be thinking about from both sides in creative contracts. This includes for example.


  1. A clear out line of the key responsibilities and deadlines.


  1. Remedies for a failure of the creative agency to deliver on any of its promises. And if you’re the creative agency, you need to make sure that those remedies are appropriate. Are you happy to sign up to those remedies?


  1. Think about how variations will be managed.


  1. Think about who will be responsible for managing the contract on both sides, on the sides of the client and on the sides of the supplier.


  1. Can the creative agency subcontract out the work? From a customer perspective, sometimes you want to ensure that you know exactly who is working on your projects. So in these instances you might want to ensure that you have a clause that restricts the agency from subcontracting out the work.


  1. Is the price clearly set out? And this is important for both parties. Are there triggers for payment obligations under the contract? From a customer perspective, this is important to ensure that you won’t be required to make a payment if you don’t receive what you had intended. And from a supplier perspective, the creative agency perspective, it’s important that you’re clear about these payment obligations so that you know at which point your clients are obligated to pay for each milestone as it occurs.


  1. What is the term of the contract? If it’s an extended term, you want to ensure that you have appropriate rights of termination built into the contract in case problems arise.


Here's a snapshot of all areas that you should be thinking about from both sides in creative contracts. #talkinglaw Click To Tweet


So that’s it for today’s more practical review of dealing with a particular type of contract. And in this episode, we’re dealing specifically with creative contracts both from my customer and from a creative agency perspective.

If you found today’s podcast interesting you might want to pop over to our website at talkinglaw.com.au. There you can get a free transcript of this podcast episode which really covered some tricky concepts. So if you’re dealing in any way with creative agency contracts, whether you’re a creative agency yourself or whether or not you are a customer dealing with a creative agency, it might be worth your while to go and download the transcript so you can work through each of the areas that I’ve spoken about today in more detail.

There you’ll also be able to get a download for a five minute contracting checklist which is a general list that we have a cheat sheet that can assist in your general contract drafting well I hope you enjoyed what you heard today. If you need any help at all with any of the areas we covered today, pop over to our website at talkinglaw.com.au or our website at aspectlegal.com.au and there you can find details of how to contact our lawyers that Aspect Legal.

You can actually set yourself up a free 15 minute appointment, if you want to speak with any of our lawyers about any of the topics that we have covered today – if you are a creative agency and need to make sure you have the right templates and approach in place, or on the flip side if you deal with creative agencies and you need to make sure you have the right terms in place for contracts in which you’re dealing with them.

Well that’s it for today. Thanks again for listening in. I look forward to seeing you next time.