Repeat client is suddenly demanding intellectual property rights!

Question

A fairly sizable client whom I've done a few jobs for over the past several years has recently contacted me for a new job. We have never had a contract for any of the work I've done for them (I'm a freelance designer). In his most recent email, he said:

"By the way, I am requiring that all files in their native form belong to [my company] and are to be delivered to me upon completion of the project. The files must not be password protected and are to be in their 'collected-for-output' form before payment will be made. I consider what we pay for to be the intellectual property of [my company]."

Aside from the fact that this is a little insulting (considering I've held nothing hostage, have been perfectly civil, and complied with every request I've ever received from any client I've had, including providing original working files), I understand that this is not standard practice... Most designers, it seems, do not hand over copyrights or intellectual rights to a design. But I don't feel that it's worth losing a fairly good client over something that may make him feel I'm somehow taking advantage of him. (The designs I do for them are mostly advertisements, flyers, small brochures, etc.)

What would you do? What do you recommend?

Answer 1

I wouldn't necessarily be insulted. Your client is simply coming to the table with some terms. You can accept them, deny them, or counter.

I'd recommend countering with a formal contract. Typically designers do not deliver the work files for a number of reasons (the least of which is that the client usually has no use for them). But it's not unusual either. Sometimes designers will charge more for that. Sometimes not. It's up to you.

But I'd suggest you make your contract very clear and consider some thoughts:

• you will deliver your working files as-is meaning in the file formats and conditions you typically use. If the client needs the files in certain formats, or in certain cleaned-up conditions, then charges will be incurred to accommodate.

• only working files themselves will be transferred. Ancillary licensed content (typefaces, stock photography, etc) due to licensing can not be transferred. If the client would like you to manage the purchasing and transferring of additional licenses, you will need to charge as needed to accommodate.

And the one thing I'd probably not balk on is WHEN you'll hand them over:

• all work files will be handed over when project is paid in full. Not before.

In the end, it's your call. You need to weigh the long term relationship against how strict you want to be with your contract.

Answer 2

I thought I would wade into this.... yes, you are potentially giving your business away.

There are two separate issues in your question - one is client access to build files, and the other is to IP. The only reason a client would ask for build files is so they can do any future work themselves or nominate a cheaper third party to do this on their behalf - but that is their prerogative. If a client asks us for build files - we charge them a release fee as compensation for taking away part of how we earn a living (repeat print runs and changes/amends).

IP is a different issue but often intertwined. Asking for build files is not the same as asking for release of IP - BUT, many people can not see the difference. Giving a client build files doesn't mean they then own the IP. IP is giving away ANY use of the material in any way.

We had a situation with a company for whom we did some magazine ads (for the Australasian market). They asked us for the 'artwork files'... when we enquired why? It turned out they wanted to run the ads in Germany...! We had produced the ads originally according to an agreed scope of work - X number of magazine ads for X publications for the Australian and New Zealand Market. They are changing that scope - what they are really asking for is the IP. It isn't about artwork at all, but access to the concept and copywriting - our ideas.

And our answer was - sure, for 10,000 euro we'll release the IP so you can run our concept in a market outside the original scope.

They declined our proposal and we no longer work with them. Good riddance to them - what they were trying to do was unethical (remember a business relationship has too go two ways...).

An architect would laugh at this situation. If you pay an architect to design a home you may receive the plans in your hand - but you do not own the IP. You can not then choose to go off and build 300 of those homes. You can build one home on the site as nominated in the building contract and on the plans.

The key to this is having this spelt out in a conditions of engagement contract. Every new client we work with has to sign this or we won't work with them.

In your situation I would negotiate that you will release artwork files to the client that can be used within the intended scope of work and that release of artwork is not a handover of IP. If they reject this - they are being unreasonable and I would walk away.

Just a note on some comments posted about Logos - these are typically done under an 'open license'. Technically the designer still owns the IP, but agrees not to exercise any rights or seek further remuneration. Have a look at the case of the Nike tick - Nike paid the designer... and then came back years later with a share offer. Why? Because they knew they were exposed to recourse.

I actually disagree with the comments that this situation is not insulting. It is naive of a client to ask for IP and not expect to be charged. I've always found people are quick to give away some else's ideas, income and expertise for free... Sadly, it is a trend amongst marketers to pursue this thinking.

In any situation, even if you sign away the IP - you still have the right to be identified as the producer/creator of the work.

This is all totally different in a employer/employee situation - the rights are entirely different.

Hope that helps.

Answer 3

A few things you'll want to watch out for in your contract (you should always have one):

1. Retain specific rights to reproduce the art for portfolio purposes.
2. Font software and licenses will be purchased by them, or you can purchase on their behalf for an additional charge.
3. Image and illustration rights will be handled similar to the fonts issue (you aren't a media management agency).
4. You will not provide any original files until payment is received in full or according to an agreed upon payment schedule.
5. Never give up rights to your sketches and other process materials.

Answer 4

It's not insulting at all. Those are standard terms for this type of work, as your work would be useless to them otherwise.

It may not seem as serious with a brochure or one-time ad, but imagine if you retained the copyrights and trademark rights to the client's company logo. Then every time they used the logo, they'd need to get your prior permission or risk violating your trademark. Every time they transferred the digital artwork, they'd be risking copyright infringement. That's hardly a viable business arrangement.

The fact that this doesn't seem to be common sense (professional ethics really) to all designers is precisely the reason the client has to spell this out. I've personally encountered quite a few clients who've been burned in this way. They spend thousands of dollars on branding design, and all they get are flat PNGs, or worse—JPEGs. Some printers who offer design services also use this as a method of vendor lock-in.

There really is no good reason for a designer to not agree to not operate under these terms whether the client explicitly requests it or not. After all:

• You're already getting paid for the services rendered. What reasons do you have to retain the copyrights?
• The digital artwork (collected for output) is in this case the very deliverable that they're paying for. A flattened image, a password-protected file, or a partial design will either cause potential problems down the road or simply be useless to the client.
• Handing over the masters, or at least a copy of them, concludes the business transaction and relieves you of the responsibility of holding on to them for safekeeping in case alterations/corrections need to be made.
  • One of the worse scenarios I've dealt with was a designer who sent only a flattened image (saved in PSD form for no apparent reason) and then promptly lost or deleted the master files. Well, the flattened design, in addition to being less than ideal for printing, turned out to have an error in the copy. This resulted in a costly process where the designer basically had to re-create the design from scratch, delaying the project.
• Portfolio rights (essentially a special reproduction license given to the designer) are separate from copyright. It is customary for the designer to retain portfolio rights after handing over copyrights to the client.

There are however some secondary artifacts that are negotiable. For instance, in web development a distinction is made between the design and content on the site, which are clearly copyrighted by the client, and the code the site runs on, which the client is usually only licensed to use. It may be a conglomerate of open source projects (WordPress, jQuery, Compass, etc.), or it may be proprietary code that the developer is giving the client a singular license to use on that particular site. Done correctly, this lowers the cost for individual clients and additionally saves the developer time while delivering a superior product to all clients.

Likewise, many designers choose to retain the copyrights to unused designs from a project or brushes, photos, and other reusable stock resources that are used in the final product. But if you want to both charge for work and still retain ownership, you should spell that out explicitly in the contract to avoid any misunderstanding that could result in unpleasant surprises for the client.

Answer 5

It sounds like your long-term client has finally talked to a lawyer or read an article somewhere.

It's also time for you to start using written contracts. The contracts I use as a template are from the Graphic Artists' Guild, but they are available only to paid members.

However, they apparently now sell their Handbook of Pricing and Ethical Guidelines to non-members (you can find it on Amazon), which I strongly recommend to anyone working as a freelancer in the United States. It has lengthy explanations of copyright and intellectual property as related to the graphic design and illustration industry along with a lot of good business practices, and legal information.

When you are performing a "work for hire", the client ends up owning the IP. You as the artist/designer can (and should!) charge more money, as you'll never be able to reuse the work for other clients. (This is for other work besides logos, which are a separate case).

I can't tell you how your client will react to you presenting him a formal contract, but you need to get your relationship onto a professional footing and written contracts protect both you and him.

Answer 6

I now always use a contract and I now also ammend and return most clients contracts back to them before signing, adding the following: client owns all intellectual property and copyright only on completion of full payment. This protects you as 99% of client contracts sent to you will stipulate they take all intellectual property and copyright as soon as you sign. That means they immediately own your work regardless of any payment problems further down the line. That could be in many forms, from late payment after the date they want to use the work, non-payment from administration or simply unwilling to pay. My take on source files is that they should pay when handing over working files in animation and motion graphics or editing, as your skills are in these fields. Once they have them they also rule out the need of repeat business. But it must written in the contract. You decide what you think it is worth.

Answer 7

I'm coming from a print production standpoint. When third party designer holds back native files, it can hold back production quite a bit. Most print companies have in-house designers, so if we need to make a small change due to the output of my digital press being different from yours, we're not going to wait a full day for the designer to make a change, send it back to me, have me approve or not approve, send it back again etc. We're going to make the change in house because we know what needs to be done to get the outcome we want off our presses. In my oppinion once the designer is finished creating, his job is done. I agree that the designer should be paid before giving up the native files, but to hold them back afterwards is just unethical.