Agencies are not only in the business of creating intellectual property (“IP”) assets for their clients, but they’ve got a number of their own IP assets they need to make sure they protect.

Whether it’s your agency’s pitch materials, concepts, strategies, pre-existing art or proprietary technologies, these critical assets are the true currency of every agency. And if you’re not careful, you’ll jeopardize the financial benefits associated with these assets.

Since there’s always a risk of loss when an agency shares IP assets and ideation with others, such as new prospective clients, existing clients or third-party vendors, having the right contracts and legal policies in place can help protect you, but just as importantly, these tools help create clarity as to each parties’ rights and responsibilities concerning the IP.

And when you launch your work out into the world for a client, the IP issues and questions don’t stop either. Every campaign or program involves some level of intellectual property that needs to be cleared, monitored or protected.

The following are the 5 most common agency IP concerns we deal with here at the Firm, and quick tips on how your agency can proactively address each in turn.

Protecting IP in new business discussions

When deciding to share certain ideation or concept development in proposals to prospective clients, there are two main approaches.

First, it should always be clear that any pitch materials your agency generates are: (1) the property of the agency and subject to the protection of U.S. copyright law, (2) the information disclosed in the materials is considered confidential, and (3) disclosure of the materials or any agency information they contain should not be disclosed to any third party without the agency’s prior approval.  Ideally, these restrictions are contained in a mutual non-disclosure agreement (“NDA”) entered into by the parties prior to the exchange of any information between them.

However, we are realists, and therefore we know that the NDA is not practical in every new business discussion for various reasons, such as the prospect refusing to sign it, or where the prospective client insists on its own one-sided NDA.  And frankly, we know that some agencies will flat-out skip this step because it makes them uncomfortable, or they think it makes them look “difficult” to a prospect. So as an alternative to a mutual NDA, agencies can include language within the pitch materials themselves including intellectual property ownership statements (spelling out U.S. copyright law protections), copyright notices and confidentiality notices.

A second approach is to negotiate a pitch fee and get paid up front for the work.  Here, the agency is compensated for its conceptual work, and it’s understood that certain IP rights will be transferred to the client.   Additional rights can be negotiated as well, such as rights of first refusal to perform the work, or requirements that attach if the client takes the pitch to another agency for implementation.

Transferring IP to clients at the right time (i.e., after the money)

Under U.S. copyright law, copyright protection attaches the moment a work is created and the author of the work is deemed its owner and the copyright holder.  In the agency-client relationship context, this means that all work created by the agency is owned by the agency as of the moment it is created.  It’s a common interpretation of the “work for hire” principle by the agency industry that in the agency-client relationship, work created to be used for the client’s benefit belongs to the client when it is created.

This is all well and good, assuming your agency has been paid for its work. But it’s not really how copyright law works.

According to copyright law, the rights to work the agency creates must be transferred to the client in writing. The work for hire doctrine applies in an employer-employee context, not to your relationship with your clients.

Because of this common misconception, the client services agreement is critical in defining the moment that IP rights in the assets created by the agency transfer to the client.

Commonly, client proposed services agreements will include language that the IP created by the agency for the client becomes the property of the client upon creation as “works made for hire,” with no mention of any relationship between the transfer of the IP and the client’s requirement of payment for such work.

Because one of the agency’s most powerful mechanism for enforcing its right to payment is the retention of its IP rights, it’s important that the language in your service agreements be clear on this point. Make sure your agency’s MSA defines the point of transfer correctly, and when you’re reviewing an MSA proposed by a client, be prepared to push back on language that doesn’t provide for the agency’s payment being a condition of the IP transfer to the client.

 Keeping the IP you don’t want to transfer (agency proprietary IP, preexisting works)

What if the assets your agency transfers to its client contain the agency’s pre-existing work or other proprietary IP such as underlying agency technology or pre-existing creative materials?

Here, your intent is to grant the client permission (a license) to use the asset under certain terms (e.g., in connection with the ad campaign only, or for a certain period of time), but not to transfer the IP to the client.

Accomplish this by using language in the client contract that makes it clear the agency is granting only a license to the client to use these pre-existing works (sometimes called background works or something similar).  And of course, make that license contingent on your receiving payment (see above).

Similarly, since your agency can only legally transfer what it actually owns, the agency should also be very clear in its contracts and dealings with clients that all third-party assets, whether its creative content or a software program, are subject to the third party’s licensing terms – for example, your agency doesn’t own the stock photography that ends up in an ad, or the CRM software that is used to store customer data for a direct response campaign.

This clarity in your agreement on this point helps the client understand that a completed project can contain IP that comes from multiple owners, and that there’s a difference between what it owns and what it has a limited license to use.

 Securing IP rights in the work contractors create for agency or client

Use of freelancers or independent contractors is a fact of life for agencies. So who owns the IP rights in the work they create for your agency, which then makes its way into a client deliverable?

It’s a rude surprise to some agencies that, without the proper agreement, it isn’t you. And that’s true even after your agency has paid the contractor for the work.

Under our copyright laws, work created by independent contractors your agency engages is not automatically considered the Agency’s IP. And if the agency doesn’t own the rights to that work, it can’t transfer those rights to its client. It’s all the cause of a very uncomfortable conversation that you don’t want to have to have with your agency’s clients.

Instead, in circumstances where you bring in freelance or contract talent, it’s critical that your written independent contractor agreements with those non-employee producers who create work product on behalf of the agency (you do have a written agreement with them, right?) include language making it clear that the agency owns all IP in the completed work – either as a “work for hire” or by assignment from the contractor.

Additionally, don’t forget that all agency contracts with independent contractors should also cover the contractor’s ability to display any of the work product in their portfolios, or any permissions your agency requires they receive from you before displaying the work.

Putting work out into the world without infringing others’ IP rights

There are multiple scenarios where the work your agency puts out into the world for its clients has IP implications:

• A new brand or rebrand (trademark implications)
• Use of stock photos, videos or graphics (copyright implications)
• CRM or marketing automation software used in direct response campaigns (again, copyright)

Your team should be fluent enough in the potential IP issues that a campaign raises to know when to ask questions, and when legal advice is needed. If they aren’t team training on these issues is a powerful risk minimizer for the agency.

And in some cases, clients will insist on your agency having systems in place in order to minimize their exposure to liability from third-party claims such as copyright or trademark infringement, or the invasion of the right of privacy.  These expectations may even be a provision of your MSA with the client.

Be proactive about managing Agency IP issues

 Managing the IP implications of your agency’s work and contracts doesn’t have to be overwhelming. Two great proactive steps to take right now to minimize your risks are:

• Reviewing your current contracts to make sure IP is adequately addressed; and
• Scheduling team education or training sessions on managing IP issues in contracts and in the work product of the agency

Our team can help your agency avoid IP risks and overwhelm – contact us for a consultation to discuss your IP questions.