Dealing with IP rights in creative services agreements

2 October 2019
Posted by Tony Grujovski

If you are a creative agency, graphic designer, or other creative services provider, it’s important to understand how to protect and deal with the intellectual property (IP) rights found in the work you create for your clients.  Ideally, you will already have a services agreement in place which your clients would sign when they engage your business to complete a new creative project.  This agreement should include terms about how IP rights will be managed, and set the scope of IP rights owned by your business that will be assigned or licensed to your client.

What intellectual property rights are relevant to creative services?

For creative services, copyright is the main type of IP right that will apply to the “output materials” that you create for your client. Copyright protects certain “works” automatically once they are expressed in material form (for example, when the works are written down, drawn or digitally created on a computer file).

The following types of works which are commonly created through providing creative services are protected under Australian copyright law:

– literary works (passages of text, website and computer source code);
– artistic works (graphics, visual designs, photographs);
– musical works (song composition and melody);
– sound recordings (recordings of music or other sound); and
– cinematograph films (video recordings).

The owner of the copyright (which is typically the author) has the exclusive right to use or licence the use of the copyright to a third party, and can also assign ownership of the copyright to a third party (who then acquires all of the benefits of the copyright as the new owner).

What should you look out for when dealing with IP rights in a creative services agreement?

Often, services agreements will include an IP clause like this:

“[service provider] will assign to [client] all intellectual property rights subsisting in any materials created by [service provider] in the course of providing the services”.

This is a common example of IP rights being dealt with in a very simplistic manner and may create legal risk for your business through purporting to grant rights in IP to your clients where you do not have the necessary legal rights to do so. The IP clause included in your services agreement should consider and cater for the complex nature of IP rights which are developed and used when providing creative services.

There are typically four different categories of IP rights that should be catered for in an effective IP clause included in a creative services agreement:

– Developed IP: IP which has been created by your business as a result of providing the scope of agreed deliverables to your client (i.e. the output materials);
– Third Party IP: IP which belongs to third parties (that may be included in the output materials);
– Service Provider IP: IP which has been created by your business independently of providing the scope of agreed services to your client (that may be included in the output materials); and
– Client IP: IP supplied by your client (for use in the output materials).

Developed IP

You can assign ownership of IP in the output materials to your client, which will essentially hand over all usage and commercialisation rights for that IP to your client without restriction. Alternatively, you may wish to control or limit the use of the IP by your clients by only providing a licence to use the IP (with the scope of the licence set out in the terms of the services agreement). The licence may be limited to a certain period of time, certain platforms or media, and/or certain territories.

Third Party IP

In most instances, the output materials will not consist entirely of IP that has been newly developed by your business in the course of providing the services.

For example, the output materials may incorporate a font design or photograph acquired from an independent third party source. The use of third party material incorporated in the output materials by your client may be subject to obtaining a licence from the copyright owner of the third party material. If your client lacks these rights, the use of the output materials may end up infringing the IP rights of third parties.

The IP clause should:

– acknowledge that you are unable to assign individual IP rights in any third party materials that form part of the output materials to your client; and
– outline the parties’ respective obligations for obtaining the necessary rights to use such third party materials.

Service Provider IP

Your business may have created copyright works prior to being engaged by your client to provide the agreed scope of services. If these copyright works are incorporated in the output material, you may not want to assign ownership of that copyright to your client (so that the copyright can be used for future clients).

In this instance, the IP clause should exclude your own independent IP being assigned to your client under its terms, and instead, use of the IP should be licensed to your client on a non-exclusive basis (so that you can use that IP for other clients).

Client IP

Your client may provide you with IP to use as part of creating the output materials (for example, your client’s logo branding), this IP may be owned by your client or a third party. Typically, your client will provide the necessary rights for you to use that IP as part of providing the agreed scope of services under the IP clause, so your own use of that IP does not infringe any rights of a third party. Then, it will usually be your client’s responsibility to obtain all necessary licenses or permissions (where needed) to use that IP as part of using the output materials incorporating that IP.

How can we help?

It can be tempting to dispense with IP rights in a one-dimensional way in services agreement, but this is usually done to the detriment of the creative agency or service provider. From the other perspective, your clients need to ensure they are receiving the necessary IP rights to use the output materials so that use does not infringe a third party’s IP rights.

At Studio Legal, we are experts in drafting and reviewing creative services agreements to ensure that complex intellectual property rights are effectively managed and administered. If you require assistance with drafting or negotiating a creative services agreement, please give us a call on 03 9521 2128, or email us at hello@studiolegal.com.au.

DISCLAIMER

The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.