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Advertising agencies and the law: Who owns the intellectual property developed by an advertising agency? (part 3)

10 June 2020

#Technology, Media & Telecommunications

Advertising agencies and the law: Who owns the intellectual property developed by an advertising agency? (part 3)

Given the amount of creative output involved in an agency or client relationship, the ownership and protection of intellectual property is a fundamental issue when contracting. The development of a campaign by an agency for a client during the period of the client or agency relationship usually involves the creation of a wide range of creative material – for example, scripts, storyboards, slogans, jingles, photographs and audio-visual materials.

In addition, the period before a client or agency relationship is formed often involves the handling of creative concepts which may or may not be subject to copyright, such as an agency pitch to a client.

Copyright in a work or other subject matter is owned by the author or creator of that work. In an agency or client relationship, there is often tension between the approaches that a client and agency may favour in respect of copyright ownership.

The client may take the approach that it owns what it pays for whereas the agency may take the approach that the intellectual property is a tool of trade and that the ownership by the agency of the intellectual property should be protected, or at least the background intellectual property or any developments on its background intellectual property.

In the third part of our series, we examine some of the issues that can arise when developing creative materials as part of an agency-client relationship, and answer the all-important question of who owns the intellectual property in these materials.

The pitch and concepts

Copyright protection does not extend to ideas, only the expression of ideas that have been reduced to a material form. This can present a problem for an advertising agency that pitches an idea to a client. Often, a pitch will be submitted and presented to a client along with written notes of the idea that is being pitched.

In this circumstance, the written notes and images (for example, the pitch deck) will be protected by copyright, but no copyright protection will be available for the idea upon which the pitch deck is based.

The pitching process of an agency will sometimes specify that any intellectual property rights, which are created and used by an agency in a pitch for work, will vest in the agency itself and not the would-be client. It is recommended that agencies make written notes of a pitch as detailed as possible to maximise copyright protection. It is also prudent to include a standard copyright notice and a "private and confidential" warning on each page of the pitch document. These measures are prudent because at this early stage there is usually not an agency or client contract in place which sets out the ownership of any creative concepts already developed.

Conversely, if the client wants to own the pitch material, it will need a written assignment of such material in writing from the agency, as copyright will otherwise not transfer.  

Similar to ideas presented in a pitch, creative concepts that are presented to a client and not used can be problematic. The agency may seek to retain ownership of this material, and will retain ownership if there is no written assignment. However, the client may see the development of this intellectual property as something that it has paid for and something it should therefore have ownership of. To avoid any possible conflict, the drafting of the client or agency contract should reflect what will occur if concepts are presented to the client but remain unused.

Copyright in the creative product of campaigns

The client or agency contract should also cover the ownership of intellectual property rights in the production of a campaign. Usually the client will require ownership to be granted to it or an acknowledgment that it vests in the client.

Despite this presumption, the drafting of an intellectual property clause in a client or agency contract should not be so wide as to encompass and include the "tools of trade" or creative processes of an agency. The drafting should only cover intellectual property rights that are within the rights specific to the campaign that is the subject of the contract. This prevents the agency being deprived of using its tools of trade that may otherwise have been covered.

Another complicating factor affecting the ownership of intellectual property is the amount of sub-contracting undertaken by agencies. This may include the sub­contracting of music composition and photography. The problem arises in so far as the client may desire all relevant intellectual property rights to be transferred to it and there are third party sub-contractors retaining intellectual property rights. In these circumstances the rights will not have been transferred to the agency.

To avoid problems, the client or agency contract will usually specify that the agency must use all reasonable endeavours to effect a transfer of rights from independent contractors in favour of the agency, ultimately resulting in ownership of the intellectual property by the client. When drafting the intellectual property clause in a client or agency contract, it is prudent to ensure that the advertising agency only warrants the ownership of intellectual property created for the purposes of the campaign to be vested in the client, and specify that some intellectual property may only be licensed rather than transferred.

Particular care needs to be taken with copyright in music as it is usually impossible to obtain anything other than a limited, non-exclusive licence of pre-existing music.

Using licence-backs or exceptions to an assignment of copyright to a client

Taking the standard situation, where an agency transfers all relevant intellectual property rights to the client, issues of use may still arise when the contract is concluded. The agency or any sub-contractors who worked on the campaign may wish to use the intellectual property developed for the campaign after the intellectual property rights have been transferred. An example of this is when the agency and/or persons who worked on the campaign wish to use the intellectual property for the purposes of self-promotion or entering a competition.

To enable the subsequent use of this material, the agency or client contract should expressly carve out circumstances in which usage of the intellectual property by the agency will be permitted. The clause will usually operate as a licence-back to the creator of the intellectual property by the advertiser, which in this case may be the agency or, perhaps, the photographer or producer. The terms of the licence-back may be individually negotiated or set out in the contract and should specifically consider the term of the licence, the bounds of the licence, and the rights which are covered by the licence.

Click here to revisit our previous instalment on which essential contractual terms should be included to govern the unique relationship between an agency and its client, and here for our final instalment examining the liability for content created by advertising agencies and why prudent advertisers should ultimately vet content created by others prior to it being published.  

Authors: Ian Robertson AO & Emily Booth

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

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