Copyright Transfer of Rights and Buyout Price
Author of this post: Jean Perwin | About Blog Authors »Design-related legal, copyright, trademark, or intellectual property rights confusion? NoD guest author and legal expert Jean S. Perwin is taking questions. If you have questions for Jean, email them to us using editor (at) notesondesign.net. Jean will reply to questions frequently here under the “Intellectual Property” category of NoD.
Thomas says:
I am a freelance graphic designer. Over the course of 5 years, I conceptualized and designed all the branding, corporate identity, website design and illustration work for COMPANY A – at a reduced hourly rate. It was a small startup company with a website product, and I had a somewhat personal relationship with the owner.
Now, there was money exchanged for design services, with this set hourly rate paid for the work. There was also – however – a COMPANY A promise of a lot of future work once the COMPANY A product was sold.
No agreement was ever signed, and ownership of the copyright was never discussed. There was an inherent promise to compensate us once the product was acquired, but that has not materialized.
COMPANY A was recently acquired by a major Magazine, which will bundle the COMPANY A product into their features on their website.So basically the product was sold, but i’ve been cut out of any profit or promise of continuing work. The Magazine’s creative director is now requesting original art files from us as well, so they can take over the maintenance and further marketing of the product.
My questions are as follows:
1. From what I have read and researched, COMPANY A never really held the copyright for all of this creative work. would that be the case in this scenario?
2. The COMPANY A product was sold in it’s entirety to this Magazine. would they have gotten assurances from COMPANY A that it did indeed have full rights to the copyright ownership?
3. I would like to approach COMPANY A and ask them for compensation for the rights to that ownership. I really just want to obtain a fair settlement that might be based on retroactively paying me my full rate for all the hours I had put into the past work. not sure how to do the calculation…
Thanks you very much for any help and guidance with this matter.
- Thomas
Hello Thomas,
If there is no agreement in writing to transfer the rights, you still own the copyright to everything you created. If Company A warranted to their purchaser that they owned the rights, they will be liable to them for whatever amounts they have to pay you to transfer the rights. The full buyout price should probably be at least the difference between your reduced rate and the full rate for the work. I would explain to the magazine that you are happy to turn over the files to them for a buyout price to be determined based on the representations that were made to you by Company A. And explain what those were. And do everything in writing. If you speak on the phone, send a confirming email.
- Jean
March 20th, 2009 at 1:31 pm
This is excellent advice. Companies often assume they automatically own copyright to contract work, when they often don’t. The creator of the work does.
May 3rd, 2009 at 3:58 am
This is great advice! I have always been unsure of if I, as a freelance designer, were obligated or not to give company source files.
Thanks.
May 5th, 2009 at 7:57 pm
I have been in the same situation. I am not a lawyer, but I would like to address some of the other comments so that there is no confusion. If a client pays you for the work then it is a work-for-hire and they technically own the artwork/copyright. Which means that you must relinquish any source files to them or someone that is requesting it on their behalf. However, as Jean mentioned above, since Thomas was never paid (in full) then he still owns the copyright and does not have to hand over the source files until proper/fair compensation is received.
May 6th, 2009 at 11:06 am
I’m afraid that Randall is going to create more confusion with his post. If a client pays you for work, it is NOT work for hire unless there’s an agreement IN WRITING that makes it work for hire. Simply paying for work does not make it work for hire. The only rights acquired are the right to use it for the purpose it was created. The creator retains the rights and does not have to turn over source files unless they agreed to or unless they get paid for them. Designers need to make it clear at the beginning to clients that they will not have access to digital files unless the pay for them. Many clients (and apparently some designers, too) believe what Randall says–that if they pay for it they own it. Legally, they don’t.
May 21st, 2009 at 3:48 pm
All true and good information.
Unfortunately, in all my years, I’ve rarely come across a client who didn’t require right up front that all the copyrights would be transferred to them. And the few who don’t, become outraged and cry deceptive practices when they find out. It’s in my contract, but if I mention it or the client reads it, they simply won’t agree to my retaining the copyright, since almost anywhere else they go, they would get the copyrights. And I hate to admit it, but for the most part, that’s true.
It’s a vexing problem, but it’s a compromise between getting any work and getting paid what you’re worth. Especially as a new designer. I imagine the big guns can get away with it (and I mean really big), but it’s a bit of a mess at this level.
May 21st, 2009 at 4:07 pm
I don’t have a problem with designers transferring copyright rights to clients as long as they get paid for them. One way to educate clients about your rights is to offer two prices for the work–one for limited rights and one for full buyout. If you begin the discussion about the use of the work and whether the client would need all the rights before an agreement is signed instead of it becoming an issue later, it helps. If you are going to transfer all the rights, the price for the work should be higher. Cyd may be right that as a practical matter it’s hard to do, but the more educated clients are, the more designers will get paid what they’re worth.
June 1st, 2009 at 2:01 pm
Tricky-However I was on the other side. The developer went out of business and I was left with no site. When I finally found them they told me that to get the site sent to another developer I was going to need to dish up $4,750.00. Four years worth of information and a brand were lost in a day.
They said they owned it and basically I was SOL.
June 7th, 2009 at 9:01 pm
Thanks for this information Jean. I just stumbled upon this page after searching on google about a similar copyright issue I had with a startup I did some development work for.
July 16th, 2009 at 8:51 am
When doing a large amount of freelance work for a company, I’ve always had to sign an agreement transferring copyright. Now I understand why they insist on this. Good article.