March 2008 - Channel Crossing: Legal

Understanding Work-Made-For-Hire Agreements

By Gary P. Kohn

Yogi Berra, that lovable Hall of Fame baseball player with the homespun one-liners, once said: “You’ve got to be very careful if you don’t know where you’re going, because you might not get there.” In his inimitable style, Yogi was trying to say that you need to have a plan in order to get to where you want to go. Every marketer knows that planning every detail of a marketing campaign is critical to the success of that campaign. However, some marketers’ plans fail to take into account protection of the very core of their campaigns-ownership of their creative materials. Marketers should take steps to own all creative elements vital to their products and brands. Before launching a marketing campaign, marketers should insist that any third-party rendering creative services sign an agreement commonly known as a Work-Made-For-Hire Agreement.

The most common situations in which a marketer would want to enter into a Work-Made-For-Hire Agreement include the following: when engaging a producer to produce an infomercial or short-form commercial, an editor to edit a direct response production, a writer to create a script for a direct response production, a web developer or designer to create a website, a copywriter to create manuals or other sales literature, and a graphic artist to create artwork, logos or animation. A well-crafted Work-Made-For-Hire Agreement typically consists of the following contract provisions, among others: (1) specifics of the work being created or developed; (2) specifics of the creative services to be rendered; (3) the deliverables schedule; (4) the economic deal between service provider and marketer; (5) the schedule of compensation payments; (6) work-made-for-hire provisions; and (7) numerous legal protections, such as approval rights, representations and warranties, covenants and indemnification.

There is a general rule that a person who creates a work is the author and owner of that work. By virtue of creating that work, the author can claim a copyright for that work. This ownership right permits the author to exercise and to control all rights relating to that work. However, there is an exception to this general rule based upon a category of works under the United States Copyright Act called “works made for hire.” The principle of a work made for hire is that the author and owner of the work is the person who commissions and pays for it, not the person who actually creates the work. The concept of a work made for hire is derived from the Copyright Act and case law. Section 101 of the Copyright Act provides for two distinct ways in which a work will be categorized as a work made for hire: a work prepared by an employee within the scope of his or her employment; or a work commissioned, falling within a special group of categories and the subject of a written agreement.

A marketer wants to acquire and to control the broadest bundle of rights possible when developing and launching a marketing campaign. Therefore, the marketer desires to have exclusive, irrevocable, worldwide rights to develop, manufacture, advertise, promote, market, sell, distribute and exploit a product in any and all media and markets now known or hereafter devised. The marketer obtains some or all of these rights either by an exclusive license from a third party, such as a product inventor, or owns the rights outright by developing the product internally.

However, if a marketer hires persons to develop creative elements integral to the marketing campaign but fails to secure legal rights to exploit those elements, the creator of these elements may be entitled to force the marketer to cease using those elements and/or to pay the creator additional compensation including a percentage of sales.

The stories are legendary of products that have become hits only to witness persons coming out of the woodwork to claim ownership rights to certain creative works. For example, a marketer who intends to spend millions building a brand around a trademark or a logo should ensure that the graphic artist commissioned to create the trademark or logo is not deemed the author and owner of that intellectual property.

Thus, the critical need by the marketer for the foresight to enter into Work-Made-For-Hire Agreements regarding key creative elements before spending significant dollars launching the marketing campaign.

In structuring a Work-Made-For-Hire Agreement with a service provider, the marketer should list the specific services to be rendered to the marketer, including a precise schedule for deliverables. The marketer should provide that the service provider shall submit a reasonable number of revisions of the work until the work is deemed satisfactory to the marketer, and that the marketer shall be entitled to terminate the engagement of the service provider with or without cause. In consideration of the services being rendered, the marketer will provide in the Work-Made-For-Hire Agreement for the amount of compensation to be paid to the service provider.

Because the work being created is typically done in stages, likewise the compensation is typically paid in installments according to the achievement of certain performance benchmarks, such as submissions of drafts of the work. To avoid claims by the service provider for additional compensation after the fact such as a percentage of sales, the Work-Made-For-Hire Agreement should be clear that the compensation set forth in the Agreement represents payment in full for all services rendered.

The Work-Made-For-Hire Agreement should expressly state that the marketer is the sole and exclusive owner throughout the universe in perpetuity of the work and the results and proceeds of the service provider’s engagement and services, which are deemed to be a “work made for hire” for the marketer under the Copyright Act. Typically the Agreement would confirm that the marketer has a laundry list of rights to market and exploit the work, and that the service provider shall cooperate and willingly sign any assignments requested by the marketer to evidence ownership rights.

Oftentimes, a power of attorney is provided if the service provider fails or refuses to sign such assignments. Most importantly, the Agreement should state in the event it is ever determined that, in accordance with the Copyright Act or otherwise, the work or the service provider’s engagement and services are not deemed a “work made for hire” for the marketer, then the service provider assigns all rights therein to the marketer and agrees never to make a claim of ownership thereto.

Important legal protections in a Work-Made-For-Hire Agreement would include the following, among others: approval rights of the marketer over the work being created; representations and warranties of the service provider confirming that the work is wholly original and does not infringe on any rights of any third party; covenants of the service provider agreeing not to make reproductions of the work and not to disclose any confidential information of the marketer; an indemnity for the benefit of the marketer if the service provider breaches the Agreement; and an attorneys’ fees clause providing that the prevailing party in any court action or arbitration proceeding, as applicable, shall receive such party’s attorneys’ fees and costs.

As a marketer investing substantial time and resources to build and to exploit a brand, it is crucial to have a solid gameplan to lock up the ownership of all creative elements integral to the marketing campaign. In addition to filing necessary applications and registrations for intellectual property protection, taking the time to enter into a Work-Made-For-Hire Agreement is an investment that will pay substantial dividends when the campaign is launched without a hitch or an ownership challenge.

Gary P. Kohn practices entertainment and corporate law and specializes in licensing, marketing and direct response contracts. He is licensed in both California and New York. Kohn can be reached (310) 670-7311, or via e-mail at [email protected].


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