Mrs Smith | Understanding copyright
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Understanding copyright

Linda Joy explains how to figure out if a client is entitled to your working files, and if not, how to explain it to your client.

Legalities is a service mark of Linda Joy Kattwinkel. © 2009 Linda Joy Kattwinkel. All Rights Reserved. The information in this article is provided to help you become familiar with legal issues that may affect graphic artists. Legal advice must be tailored to the specific circumstances of each case, and nothing provided here should be used as a substitute for advice of legal counsel. Linda Joy Kattwinkel is an attorney, painter and former graphic artist/illustrator. She practices intellectual property law, arts law and mediation for artists with the firm Owen, Wickersham and Erickson in San Francisco. She can be reached at ljk@owe.com.

Designer A:
Q. I was hired to prepare a one-time brochure for a client. The job was delivered to the printer (print-ready PDF file), the brochures were printed, and I was paid the fee I had quoted. Now my client wants me to give him my InDesign and Photoshop files for the brochure. I think he wants them so he can re-use my work for other projects. I don’t have a written contract. Do I have to give the client my files?

Designer B:
Q. I was hired as a freelancer to produce a monthly magazine. My monthly role was to take all of the camera-ready ads, article text and images provided by the client, and lay out a 40-page magazine. My client and I are now “going our separate ways.” The client is claiming that they paid me to produce the template for the magazine, and they want ALL my working files for the past 2 years (InDesign, Photoshop, etc.), to give to the next designer for future production. My understanding is, as a freelance designer, I maintain the rights to the working files and the client has rights only to the mechanical file (i.e., the PDF for the printer). I do not feel the client has the right to all files used in my process of designing and laying out the elements on the pages (i.e., unique treatments to photographs, unique typographical treatments, etc.). Also, if I am right, and the client still insists on obtaining all of the files, can I demand that they pay for a transfer of rights?

A. I am hearing these kinds of questions a lot lately. Many clients think that because they pay you to do design work for them, they are entitled to all of your work product (including your digital files). This is a common, but mistaken belief. Clients do not automatically own everything you create for their project. It depends upon what scope of usage rights you and your client agreed upon when the client hired you. Or, if your agreement was not clear, it depends on what the law would consider reasonable. That can be a complicated analysis.

As a freelancer, you own copyright in your work
First, it is important to know that under U.S. copyright law, when you work as a freelancer (or “independent contractor”), you are the “author” and copyright owner of your work, even though your client is paying you to do it. As the copyright owner, you start out with all of the exclusive rights under copyright law: e.g., the rights to make and distribute copies of the work, publicly display the work, and make adaptations or “derivative works” based on your work. These rights cannot be transferred to anyone else just because they paid for your work. In order to give your copyright (or a “buy-out” of all rights) to your client, you have to sign an explicit written assignment of your copyright. Often, there is no explicit assignment in a freelance graphic design contract. Certainly, if you have done the work without a written agreement, you cannot have given copyright ownership to your client.

You can decide what kind of usage rights to give to your client
As the copyright owner, you can grant permission (or a “license”) to someone else (e.g., your client) which allows him to exploit your rights under copyright. As part of granting that permission, you, as the copyright owner, can put limits on the scope of your client’s use. You can decide, for example, in what media, for what purposes, and for what time frame the client can use the work. You can decide to give your client “exclusive”rights to your work, meaning no one else can use it. Or you can decide that the client will get to use the work on a nonexclusive basis (meaning you can re-use the work and license it to other clients), or on an exclusive basis for a limited time. You can decide if the client gets the rights to make modifications, such as change colors or distort or crop an image, or to use your work as a basis to make new works. You can also decide what to charge for the license.

When you are talking to a potential client about his project, that is when you can find out what kind of usage rights will be appropriate. This is important, because the scope of usage rights will help you decide how much you should charge for the job. Your fees should reflect not only the amount of work involved, but also the scope of the usage rights you are granting to the client. Your fees should be guided by general industry standards, your level of expertise and experience, and your personal values. For example, many copyright owners give nonprofit clients lower fees.

Your arrangement with the client determines usage rights, even if they aren’t spelled out
Ideally, your project proposal or independent contractor agreement will clearly define the purpose or intended uses for your work, and it will state the corresponding usage rights the client will receive upon final payment. The specific “deliverables” that the client receives should also be defined, and it should be clear whether all your working files, or, more commonly, just the final digital files for the final art, will be turned over to your client as part of the deliverables.

But as the questions above demonstrate, frequently these matters are not clear, or not even mentioned in your contract; or you may not have a written agreement. In any event, clients often do not understand the concept of a limited license. Often they presume that they are receiving a buy-out of “all rights” just because they are paying you. So how do you deal with these disputes?

Consider how a court would deal with the dispute
First, it is important to know how courts deal with these kinds of disputes. Not because you expect to go to court, but because the potential legal outcome gives you bargaining leverage. (Especially if your client is threatening to sue you, it gives you negotiating power to know how a court would likely rule so you can explain that to your client.)

Many people think that there is no enforceable agreement without a written contract. That is not correct. As a general rule of contract law, oral agreements are enforceable. There are some exceptions, however. As noted above, under copyright law, you cannot have an oral agreement to assign your copyrights. So a court will never award a buy-out of all rights to your client if there is no written assignment. In fact, your client cannot even get an exclusive license without a written agreement.

If you don’t have an explicit assignment or exclusive license in writing, then at most, the court will find that your client has a nonexclusive license to use your work. If the terms of the nonexclusive license are not clearly spelled out in a written agreement, the court will have to determine the scope of the “implied” license. The usage rights granted under that implied license will be what you and your client both understood the client needed when you first agreed to do the work. That will not necessarily be what the client is claiming now. So the court would look at circumstantial evidence about the project and the scope of usage rights required.

For example, the court would look at the design brief, your written proposal, if you have one, and any other documents (such as emails), to see if they indicate how your client was expected to use the work. The court will also look at what you charged for the work, compared to what other designers typically charge for unlimited usage rights for similar projects. If your fees are much lower than the normal fees for unlimited usage, that will be strong evidence that your client received only limited usage rights.

Once the court determines the appropriate scope of usage rights, it will decide if the client needs your working files to use the work for those purposes. If the client doesn’t need the files for those purposes, then the client will not be entitled to receive your working files.

Here’s how the legal process would play out for Designer A:
There is no written contract, so Designer A’s client cannot own all rights. At most, the client has a nonexclusive license to use the work for the scope of the project as both Designer A and the client intended when they first agreed she would do the work. Designer A asserts that she was hired to design a one-time brochure, and let’s assume she charged a fee consistent with one-time use. The court would look at these facts. The court might also consider that the client paid for the work when the final print-ready file for the brochure was delivered (inferring that all deliverables had been provided at that point). The client does not need Designer A’s working files in connection with the brochure, because it is finished. Accordingly, the client is not entitled to the files.

Designer A can explain all this to her client. He isn’t entitled to her working files because she didn’t grant him, and he hasn’t paid for, the rights to re-use her work (in other words, he hasn’t paid for the rights to create derivative works). If Designer A is willing to let her client create derivative works from her brochure design, she can offer to sell him those additional usage rights for an additional fee, and then she will give him the working files.

For Designer B, the issues are more complicated:
The purpose for Designer B’s work is less clear. Was he hired to create a template for future issues of the magazine, or only to do the layouts on a monthly basis? Designer B and his client did not talk about what would happen if Designer B stopped working for the client. Nevertheless, the court would have to decide if the designer and the client should have reasonably expected that the magazine would be entitled to continue with the same look and feel created by Designer B, even if this particular designer stopped doing the monthly layouts.

The court might consider the following in making its decision: Did Designer B’s work dramatically change the look and feel of the magazine? Did the magazine consistently reflect that new look over the two years that Designer B was doing the layouts? If so, that indicates that Designer B was creating a new art direction for the magazine. Was Designer B’s consistent use of the same unique treatments that he created for the photographs, type, etc. an important part of the new look? If so, that would indicate that his client needs the working files to continue using Designer B’s art direction.

But there are other considerations. How much was Designer B paid for his work? Has Designer B done similar projects for other clients? If so, how much was he paid, and for what usage rights? How much are comparable designers paid just to create a new art direction for a magazine, and then deliver the style guide and template for others to follow? How much are designers typically paid just to do the production work of laying out the magazine, following pre-established style guides? If Designer B was paid fees comparable to those normally paid just for production work, that would indicate that Designer B wasn’t paid to give his client the rights to create derivative works (i.e., new issues of the magazine) based on Designer B’s work.

How unique are Designer B’s techniques for the photo and type treatments? Did he spend a lot of effort and skill to develop them? Does Designer B keep these techniques secret? If so, the court might decide that they are Designer B’s trade secrets, which he should not be forced to disclose to his client (or the client’s new designers) without significant compensation.

If the court concludes that Designer B’s client did not pay for rights to use Designer B’s work for new issues of the magazine, then the client would not be entitled to Designer B’s working files. In that case, Designer B can demand an additional payment before he grants his client the additional usage rights and access to his working files.

Let’s assume that given all of these considerations, it is difficult to predict how a court would rule on Designer B’s dispute with his client. The more factual issues in dispute, the more chance there is that a court will get them wrong. That means Designer B has relatively weak bargaining power. He could offer a compromise, for example, he could give the client working files for the magazine layout grid, but not the files that reveal how he accomplishes his unique treatment of photos and type. Presumably, those techniques represent a valuable personal skill set, which Designer B is understandably reluctant to share with competing designers.

What if your services are terminated in the middle of a project?
If your client terminates your services in the middle of a project, the general rule is the client gets only what he has paid for at the date of termination. If you have a clear proposal that defines deadlines for interim payments and corresponding deliverables, then the client may believe you must give him the files for those interim deliverables. But that may not be correct.

Again, without a signed assignment or exclusive license, the general rule is your client will get only a nonexclusive license to use your work product. (Even if you have an assignment in your written contract, the assignment should be contingent on final and full payment for the work. So if the client terminates before the work is completed, the assignment will not be effective.) When the project is not finished, your client may assert that he can take your preliminary working files and finish the design on his own (or hire someone else to do it). But to a court, this may look like the client is trying to get the full benefit of the contract, or even more, without paying the full price.

For example, a mid-stage deliverable may include three options for a design direction. Later the client would choose one direction, and then the final deliverables would comprise final art for that selected direction (along with, presumably, the corresponding rights to use only that final direction). If a court were to allow your client to terminate the contract after paying only half of your fee, but then have usage rights to all three of the interim directions, your client would end up with more usage rights (for three directions) than if he had paid for you to complete the project (for the one final direction). If the court is well-informed about design industry practices, the court would likely conclude that your client has no rights to use your preliminary art, and thus no rights to your working files. But that is a big “if.” Courts are not typically familiar with the design industry. Thus, it may take a lot of attorney time (and fees) to educate the court on these issues, and even then the outcome of litigation is uncertain.

An archive of previous Legalities articles is available at Linda Joy’s website.



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