The Art Director And The Law

Written By

James Lorin Silverberg

ã 1984 All Rights Reserved

The questions which art directors most frequently ask their attorneys generally relate to three distinct aspects of their business. These include their business's organization, their contractual relationships and their copyrights or protection of their ideas. What I would like to do in this article is to review each of these areas and discuss, seriatim, some of the questions and concerns which arise.

The Art Director And Business Structure

Doing Business as a Sole Proprietor
The Art Director and the Partnership
The Art Director and the Corporation

Trademarks and Copyrights

The Art Directors' Rights In Commercial Photography
The Art Director and the Law of Trademarks
The Law of Trademark Has Dual Relevancy to Art Directors
The Art Director and Law of Copyright Some Questions and Answers

What is a copyright?
How do these rights protect the Art Director?
How does the art director obtain these rights?
Do Copyrights protect against the unauthorized use of all of the art director's work?
Are there any works which cannot be copyrighted?
Does the art director own the rights in works which are not created by the art director themselves but by the art director's employees or freelancers?
Does the work made for hire doctrine cover only works created by employees?
When a client hires an art director to prepare a work, does the client own the rights in the work?
How can clients obtain authorization to exercise the art director's rights?
What rights does the client obtain when the art director provides the client with mechanical art?
Why do art directors place copyright notices on art work?
Why do art directors register their rights?
Are art directors required to also deposit copies of their work with the Library of Congress under the Copyright Law?

The Art Director and Contracts for Creative Services

Compensation and Fees
Work Description
Additional Fees For Additional Work
Costs and Expenses
The Art Work and Its Use
Completion of Work
Deliver and Retention of Work
Warranties
Use of Work
Royalties
Indemnification, Generally
Payment Terms
Attorney's Fees
Conclusion

The Art Director And Business Structure

Since every art director is confronted with establishing or participating in a business operation, questions commonly arise which are about business structure. In this area there are generally three types of businesses that are of concern: sole proprietorships, partnerships, and corporations.

Doing Business as a Sole Proprietor (Back to Top)

The most common type of business is the sole proprietorship. This is generally a business which is owned and operated by a single person. Many art directors are involved in this type of enterprise. Operating their business in this way gives them control over the business operations, flexibility (and lack of accountability to others) in making decisions quickly, control over finances and profit distribution, and relative freedom from government regulation.

In order to establish a sole proprietorship, usually nothing more is required than a license from the state in which the art director is doing business. Once this is done the financial records of the sole proprietor should be organized to coincide with the business's operations, separate from the art director's personal records, to facilitate record keeping and tax accounting.

Art directors often wonder whether this is the best form of business under which to conduct their operations because of one major drawback: sole proprietors have "unlimited liability".

This means that the financial responsibilities which are incurred by the sole proprietor in the course of the business, whatever their denomination or description, are ultimately for the sole proprietor to satisfy. If there is not enough money in the business, the sole proprietor must go to personal accounts or may be forced, by court order, to sell real or tangible assets (house, car, etc.) to pay.

The reason for concern is that art directors are sometimes exposed to liabilities which are substantial. Potential copyright infringements, a missed deadline causing a client to lose a business opportunity, the negligence of an employee, are all hazards of the art director's job. A client's going out of business, their not having funds, their refusal to pay, are all part of a recurring nightmare that the art director will be left with bills for printing costs, freelancer's pay, and costs of typesetting, merchandise or supplies.

Sometimes insurance, or carefully drafted contracts, may help the art director to cover or limit these liabilities. But many art directors who feel that their financial liabilities could be extensive look away from the sole proprietorship to the corporate form of doing business for help.

The Art Director and the Partnership (Back to Top)

A partnership is an association of two or more persons to operate a business as co-owners for profit. Partnerships are also a form of business which art directors regularly employ.

Many Art Directors never realize that if their business falls within the definition of a partnership, it is one; that this is really all that the law requires. While many states require partnerships to obtain licenses to do business, the failure to do so does not dissolve the partnership, although it might subject it to fines for a regulatory violation.

The attractiveness of the partnership form of doing business lies partly in the fact that it is so easily formed, partly in the fact that equal partners often share in management and operations responsibilities, and partly in the fact that a combination of two or more art director's abilities and financial resources can facilitate each other's creative and business objectives.

However, in consider the disadvantages of this form or business there are some important points to address.

There is the fact that the partnership can be bound for the liabilities which each partner subjects it to, and for the acts which each partner takes in its behalf. So, for example, the partnership must pay for the stat camera which one of the partners ordered in behalf of the partnership. And, the partnership could be liable for the automobile collision of one of the partners who was en route to review art boards with a client.

There is also the fact that where the partnership cannot pay for the business's liabilities, both or either of the partners may be legally forced to account for them. In short, the rules of unlimited liability apply to partnerships as well.

This may make the partnership form of business especially onerous. So it is well to consider first if in doing business the art directory wants to be bound by the acts of partners and whether the art director understands that the liabilities which the business incurs (including those incurred through another partner) are ones for which the art director may be liable in not only a business but in a personal capacity.

If after considering these points, the partnership's advantages outweigh its disadvantages, it is generally prudent for the partners to execute a partnership agreement. Although not required, such agreements are useful in setting out the nature of the business which the partnership will be conducting, the terms under which the partners will participate, their rights to share in profits and revenues, their interests in partnership property, their respective responsibilities for contributing money to the partnership business, the rules governing the admission of new partners to the partnership, and the terms under which the partnership will be dissolved.

Because there are so many problems which might come up in partners dealings with each other, it is usually a good idea to establish in a partnership agreement a fair and appropriate way of resolving them before they occur.

The Art Director and the Corporation (Back to Top)

Corporations are business entities which are formed and are authorized to operate under the authority of state laws. They are considered to be separate entities from the people who form or own them.

The most universally recognized attribute of the corporation is that while the corporation itself is legally responsible for its business transactions and operations, its owners are not.

Thus, if there is any liability for which the corporation is responsible, notwithstanding its denomination or description, it must be satisfied or paid for solely through the revenues which the corporation has, if any, or through the sale of the property, if any which the corporation owns. Due to this fact, it is often said that one of the most important reasons for incorporating is to limit the liability of the corporation's owners, who do not personally have to pay for the corporation's debts.

The structure of most corporations consists of a board of directors which is responsible for the long range planning and overseeing the operations of the corporation, the officers including President, Vice President, Secretary, and Treasurer, who are responsible for the coporation's day to day operations, and the shareholders, who are holders of the stock of the corporation which reflects ownership in it.

However, many states have recognized that there are situations where the complexities of having different directors and numerous officers are unwarranted, for example where essentially one or two people are establishing and operating the corporation. So in some cases the law provides that it is possible to organize a corporation in which a board of directors and numerous officers are dispensed with. These Corporations, sometimes called "close corporations," are then often run by the shareholders themselves.

Many art directors choose the corporate form of business because the limited liability gives them protection for their personal assets, and because they find that the simplified forms of corporate organization easily facilitate the manner in which they conduct their business. Others find when they incorporate they obtain certain tax advantages, and save some money. However, whether incorporating will save the art director taxes will depend on several factors, and their individual case.

To establish a corporation it is necessary to file Articles of Incorporation with the state in which incorporation is being applied for. However, this alone, will not always satisfy all legal requirements.

In many states it is also necessary to establish "bylaws," the internal rules for how the corporation operates, specifying such things as the rights of shareholders, the responsibilities of officers and directors, requirements for issuing stock, procedures for voting, and miscellaneous other matters such as the maintenance of savings and checking accounts, check writing authority, and pension plans. In some states it is also required that the shareholders have an organizational meeting, to enact bylaws, and pass special resolutions.

A failure to comply with ALL requirements properly may result in an incorporation which is legally void, and which will be disregarded for legal purposes. When this is the case any party that sues the corporation may attempt to have the corporate veil of the business disregarded and hold the people doing business under the invalid corporation liable, personally. An invalidly formed corporation may do little to protect the art director.

Although they are many legal matters to which art directors may attend without the help of legal counsel, incorporating is probably not one. This is because attorneys are probably better equipped to maximize all of the benefits of an incorporation, and to prepare and amend forms, articles and bylaws, which best meet the art director's particular needs for their particular situation. They can also ensure that all of the requirements of incorporating are met. In many cases art directors who attempt to incorporate themselves do not understand which of the many approaches to incorporating will serve them best, or do not follow through meeting all of the requirements which must be satisfied.

Trademarks And Copyrights (Back to Top)

The Art Director and the Law of Trademarks (Back to Top)

A trademark can be defined as a symbol, word of phrase (or combination of these things), which is used to identify or distinguish a product or service. Trademarks which are used in connection with a product are generally referred to simply as trademarks, while trademarks which are used in connection with a service are sometimes called "Service Marks." Trademarks are also sometimes used to certify quality or approval, such as the mark of the better business bureau or the good housekeeping seal of approval, in which case they are called "certification marks."

"TM" is the symbol for a trademark and is used to designate that a mark is being used as a trademark. The symbol â simply means that the owner of the mark has filed and has been granted federal registration for the mark, on a federal register which is kept by the patent office of the Unites States Government.

Many people apply for federal registration because it gives them a record that they were the first users of the mark. It also gives other people who might wish to use the mark notice that it is already being used. In addition, there are advantages to federally registering a mark, if the owner ever has to take legal action against someone who is infringing the owners rights to use the mark exclusively. For example, the owner of a federally registered mark may be entitled to a reimbursement of attorneys fees, and may be able to recover the profits which the infringer made by trading off of, or doing business under the mark.

The manufacturers or businesses which use a mark often find that the mark becomes a symbol of the uniqueness, quality, or prestige of their goods and services, as opposed to those of someone else. They therefore want to protect against others who might wish to employ the mark and trade off of the good will associated with it.

The law recognizes that trading off of someone else's mark is an unfair form of business competition. It is "unfair," because someone who did not develop the mark should not be able to monopolize on the good will that is associated with it. As it is sometimes put, one should not be able to reap where one has not sown. Thus the use of another's mark may be unlawful.

The law also recognizes that if a mark could be used by more than one person for goods or services, the mark would not adequately distinguish from which of the two users of the mark the goods and services marketed under it were derived. One reason the law permits only one person to utilize the mark is based on the policy that the public should not be confused in this way as to the product's or service's source.

The Law of Trademark Has Dual Relevancy to Art Directors (Back to Top)

Many Art Directors use a name to identify their own creative services and work, and do not want others to use or trade off of their name or mark and the symbol of quality or uniqueness associated with it. So they assert trademark protection in order to prevent competitors or others from unfairly capitalizing on the name that they have made and which is associated with their work.

Secondly, when art directors design or create marks for clients who wish to use the mark to identify the client's products or services they become concerned with trademark law.

There are many different types of marks which may be capable of protection: There are word marks, like "Lifebuoy and Chevrolet" and design marks, like the Mobil flying horse, the Mr. Peanut peanut design, the Prudential Rock of Gibraltar, the MacDonald's golden arches, and the Art Director's Club symbol. There are slogan marks like "Good to the last Drop," "The champagne of bottled beers," "I'd rather fight than switch" and there are marks comprised of initials and numbers like "CPB," "GTE," and "3-M." Sometimes trade dress and general design marks can function as trademarks, as is the case with the Coca-Cola bottle, and the Howard Johnson's building configuration.

In order to obtain protection for a mark there are various legal requirements, and the law is somewhat detailed on what they are. The first is that in order to qualify as a protectable mark, the trademark must actually be used in connection with a product or service. Further, the use of surnames or geographical names is generally prohibited, although there are exceptions. Another restriction is that marks which are merely descriptive of a product or service are sometimes not prosecutable. And marks which a generic (like "coffee" as the trademark for coffee, or "shirts" as the trademark for shirts) can almost never be used. On the other hand, fanciful marks, coined names, and type and illustrative designs may often qualify.

Unfortunately there is no one test which can be applied to determine what will and will not qualify as a legally protectable mark. So it is usually necessary for the client or the art director to retain an attorney to evaluate under the many applicable legal criteria whether the mark can be protected.

One reason that art directors become concerned with whether the mark is or is not protectable is that they do not want to design a mark which their client will find incapable of protection. Obviously, the client may consider an unprotectable design worthless.

Another reason is that the art director will not want to design a mark which is a copy of or similar to another mark, because the use of a substantially similar mark may subject the client, and perhaps the art director, to an action for trademark infringement. As stated above, the law permits the bonafide owner of a mark to exclude others from using marks which are the same, as well as confusingly similar.

To ensure that the client does not use an "infringing" mark either the client or the art director might have a trademark search conducted. Attorneys and trademark search houses can perform this service. These searches are undertaken to determine if the same or a confusingly similar mark is in use. However problems often come up when the client does not perform a search and does not authorize the art director to conduct one himself.

In these situations there are nominal steps which the art director can take. One is for the art director to build into the price of the design the costs for having the search conducted. However, this is not always possible. When it is not, another solution might be for the art director to ask the client to release the art director from any liability which might arise from the design of an unprotectable or infringing mark, where the client refuses to conduct a search. In this way the art director can at least be sure that the client himself will not come back to the art director and complain that the mark cannot be used.

However, this does not necessarily protect the art director from suits which someone else might bring against the art director for the client's trademark infringement. So the art director might also ask that the client "protect, indemnify, and defend" the art director from such legal action, when this could have been avoided by the client's having a proper trademark search conducted. If such a release is not already in the art director's written contract with the client, it may be provided for in a separate legal document. In addition to these forms of protection the art director might consider obtaining or expanding existing professional liability insurance to cover liability stemming from trademark infringement.

 

The Art Director and Law of Copyright Some Questions and Answers  (Back to Top)

What is a copyright? (Back to Top)

Although the term copyright suggests that a copyright is comprised of a single right, it is actually comprised of many. It includes the following:

 

How do these rights protect the Art Director? (Back to Top)

As a copyright owner the art director is the only person legally entitled to make reproductions, disseminate copies, display copies, and make other art works based on the art director's art. Therefore, if derivations or reproductions of the art director's work are required, the art director must be approached to prepare them. The fees for preparing these derivatives or additional reproductions may be an important source of revenue, and the law assures the art director of payment. Alternatively, the art director may charge for granting a client permission for the client to prepare the reproductions or derivation themselves. Unless this permission is granted, the clients exercise of these rights might constitute an unlawful copyright infringement.

How does the art director obtain these rights? (Back to Top)

The copyright law makes it very simple for an art director to obtain copyrights in works which are created by the art director. The law says that art directors are automatically vested with the copyrights in any work which they create in tangible form, such as sketches, illustrations, drafts, mechanical art. Nothing else is required merely to obtain copyright ownership in a work which is subject to copyright protection. In the course of creating a finished piece the art director may create a number of preliminary pieces in each of which the art director will have a copyright, (copyrights).

Do Copyrights protect against the unauthorized use of all of the art director's work? (Back to Top)

The law states that copyright subsists in work as soon as it is fixed in tangible form. This means that the art director's copyrights spring into being as soon as the art director fixes an image on paper, film, or any other tangible material. The art director can therefore have copyrights in illustrations, sketches, photographs, art boards, and other tangible work which is created in the course of finishing a piece.

The law also provides that in order for the art director to acquire copyright protection in a work, the work must be original to the Art Director. This does not mean that the work must be novel or unique. It only means that the Art Director must have originated, not copied the work.

Are there any works which cannot be copyrighted? (Back to Top)

The law provides that certain works are not copyrightable. These include typeface designs. Theoretically the entire publishing industry could be stigmatized if people could control or restrict the use of typefaces used for publishing. Therefore, in enacting the copyright laws, Congress provided that copyrights could not be used to protect or restrict the use of a typeface design.

The law also provides that copyright protection cannot be acquired for works which are in the public domain. This means that anything for which copyright protection was not acquired, or works in which protection has expired, and certain works created by or for the United States government, are not copyrightable. Anyone can, use them.

Phrases and slogans are additional items which cannot be copyrighted. However, it may be, possible to copyright the embellishments, illustrative characteristics, or pictorial elements which are sometimes added to typefaces, slogans and phrases, or to works in the public domain. Only the uncopyrightable elements will then be unprotected.

Does the art director own the rights in works which are not created by the art director themselves but by the art director's employees or freelancers? (Back to Top)

The law provides that the art director owns the copyrights to the work which is created by the art director. But sometimes the art director is not creating the work, but is employing other people to create a work. In these circumstances the question of who owns the rights often comes up. Do they belong to the art director or the person whom the art director has hired?

The Copyright Law's "works made for hire" provision answers this question.

Works which are made by hire include works created for an employer by an employee within their scope of the employment. The law says that the employer is legally considered the author and creator of the works done by employees and is therefore considered the owner of the rights. Under the work made for hire provision art directors are considered the owners of the works which are created by their employees. However, before concluding that the art director owns the rights in the works of the people who are hired, the art director must be certain that the people who are hired are legally considered "employee." Not everyone who is hired is an employee.

Whether someone will be legally considered an employee depends on several factors, perhaps the least of which is whether they were merely "hired."

The most important factor is whether the art director controls or has the right to control the physical conduct of the labors of the person who was hired. If the art director has the control or right to control with respect to the hired persons physical activities, then it is possible that an employer-employee relationship exists.

However, other factors can also be considered. The accoutrements of an employer-employee relationship usually would include that the art director is providing the space in which the artist creates the work, provides the tools and supplies with which it is created, pays the artist on a regular wage as opposed to per job basis, withholds employment taxes. Other considerations may also apply.

The art director's ownership of rights may be suspect when the work is created under circumstances which do not bear the accoutrements of the employer-employee relationship. For example, the art director's claim of ownership of the rights in works prepared by freelancers is generally unfounded, either because the art director does not control the physical conduct of the freelancer's work (photographers for example), or because the freelancers are not paid on a wage basis, do not work with the art director's tools and materials at the art director's premises, or do not have taxes withheld. Whether the doctrine will apply will of course depend on each situation.

When in doubt, the art director should obtain copyright releases from those who are hired to create work-.

Does the work made for hire doctrine cover only works created by employees? (Back to Top)

The doctrine actually covers works created in other situations besides those for an employer by an, employee. For example, the doctrine is applied when the art director has requested that a work be prepared by someone "on commission." But the application of the doctrine in these circumstances is limited.

First, it applies only in certain situations, which are listed in the statute. These include where answer material is being prepared for a test, where the work is for audio visual purposes, where the work being prepared is an atlas, and several other situations.

Further, the application of the doctrine in these "commisioned" situations is limited by yet another requirement. It applies only where there is a written agreement which states that the work prepared on commision shall be considered "a work made for hire."

It is therefore unlikely that art directors will obtain ownership in the rights to works which have been commissioned, because the doctrine applies only with respect to a few categories of work, and then only when the commission arrangement includes a written statement that the work will be a work made for hire.

When a client hires an art director to prepare a work, does the client own the rights in the work? (Back to Top)

The law states very clearly that the author is the owner of the copyrights in a work. Therefore, the fact that someone hired the art director to prepare a work does not give him ownership of the rights in the work.

The exception would be when the client is an employer of the art director (hence the work would be a work made for hire), or where the client commissions the work (in which event the work would have to fall within the categories listed in the statute and would have to be prepared under a written "work made for hire" statement).

How can clients obtain authorization to exercise the art director's rights? (Back to Top)

In order for an art director to transfer ownership of a copyright to a client, the transfer must be made in writing. It might be contained in a contract, a letter of agreement, or a copyright assignment form.

The writing in which the transfer is made can state that all of the rights are being transferred, or it can provide that only some rights are being transferred, such as the right to reproduce a work but not the right to use the work as the basis for the creation of subsequent works. Many variations are possible.

Unless a written document is executed the transfer of rights will not be recognized as being legal or valid. With a valid transfer however, the art director relinquishes the rights to the client, and the client becomes the owner and obtains the capacity to sue others who infringe the rights by using the work without the client's permission.

Distinguished from situations in which ownership of the rights is transferred are situations in which the art director retains ownership of the rights while giving the client only limited permission to exercise them. This is somewhat like retaining ownership of one's car but loaning it to a friend for the friend's use. By retaining title to the rights, the art director may still prevent others from utilizing the work, and even prevent the client from utilizing the work once the client has exhausted the permission granted. For example the art director might retain the copyrights in mechanical art and give the client mere permission to use it for making fifty thousand reproductions. Since the art director retains ownership of the rights, the client will have to return to the art director to acquire further permission to use the work, once fifty thousand copies have been made. In these situations licensing fees might be charged.

Although the law requires that a transfer of copyright ownership be made in writing, there is no requirement that a mere permission (also called a license) be written. This permission may be granted verbally. Or where there is no written agreement or verbal understanding, there might be a license or permission which is "implied" based on the facts, circumstances, and trade customs which apply in a given situation. It would generally be presumed, for example that the client who retained an art director to supply mechanical art also is requesting and is being granted some permisssion to use mechanical art for reporduction in print.

The problem with permissions and licenses which are not written down is that they are usually very ambiguous and leave the art director and client open to argument, or disagreement, about the scope of the permission or license being granted. This often happens when the art director has priced the job in expectation of exercising the right to do further or additional work, while the client agreed to pay based on the invalid assumption that there would never be any restrictions on how the client could use the work. For this reason it is a good idea to arrive at a clear agreement about the permission being granted in advance, and then to sign a contract or statement which memorializes the extent fo the permission which is being granted. Standard, short forms are often used for this purpose.

What rights does the client obtain when the art director provides the client with mechanical art? (Back to Top)

The copyright law explicitly states that copyrights are separate and distinct from the art work in which they subsist. The ownership of the rights is not affected by a transfer of the art work underlying them. They can be retained while the artwork is itself sold, transferred or given away.

In light of this one might wonder what good the client derives from merely obtaining possession of mechanical art without also obtaining the rights to reproduce it. The answer is quite simply that the mechanical art can be of little value unless the permission to use it is also granted.

Obviously, in most situations, the art director will be called upon to provide the client with, if not ownership of the copyright(s), permission to use the work. And if the this is not expressly requested and granted in writing, there will usually be "some" permission or license to use the work which is being implied by the facts, and circumstances.

The most common exception will be where the art director will be organizing the printing of the work himself, and will then be supplying the client with finished reproductions. In these situations the client will not need rights or permissions since the art director and not the client is handling the reproduction.

Why do art directors place copyright notices on art work? (Back to Top)

The proper form of a copyright notice is the word copyright (or the abbreviation Copr. or ã , the copyright claimant's name (whether a company, or individual artist), and the date in which the work was first published. This notice is placed on copies of the work to give people notice that there is a copyright claim in the works.

Affixing a copyright notice to the work will help the enforcement of the art director's rights. The law provides when suing for an infringement of the rights in a work which carries notice, the art director may be entitled to recover attorney's fees. In addition when the art director is unable to prove an actual financial loss from the infringement, the art director may instead request the judge to use discretion in making an award within special statutory limitations. Furthermore, although not a prerequisite to obtaining a copyright, a failure to affix a notice to a work may preclude an infringement suit against someone who did not have notice of the copyright.

Why do art directors register their rights? (Back to Top)

The copyright law provides that the owner of a copyright in a work may register his claim to copyright on certain forms provided by the Library of Congress. Registration is required as a pre-requisite to a suit for infringement, and unless registration is made prior to the infringement, or within three months thereafter, the art director will not be entitled to statutory damages or attorney's fees. Therefore art directors not only provide copyright notice, but attempt to register their rights for the nominal fees involved, where possible.

Are art directors required to also deposit copies of their work with the Library of Congress under the Copyright Law? (Back to Top)

Whenever a work is published with a notice of copyright, and whenever registration of a copyright is sought, the law provides that the copyright owner should deposit copies of the work with the Library of Congress. However, there are some exceptions to this requirement, and the number of copies which must be deposited depends on the type of work which has been copyrighted. It is possible in many circumstances to publish a work with a copyright notice and deposit copies of it with the Library of Congress, and then apply for registration at a later time. But many times art directors will register their rights when making the deposit.

 

The Art Director and Contracts for Creative Services (Back to Top)

The law of contract is of concern to the art director in many situations. Perhaps the most common is where a client simply retains the art directory to design or create art work. This apparently uncomplicated transaction entails numerous assumptions on the part of both the art director and client as to what will or should transpire in the course of "the job." Therefore these simple transactions usually entail agreements (or lack of agreement) that are more complex than what might first appear.

Unfortunately, the easily entered into oral contract or verbal agreement usually fails in addressing the many concerns and assumptions which are truly underlying the transaction. It leaves them uncovered. It nether confirms nor denies as valid or invalid the art director's and client's possibly opposing viewpoints. If there are points of disagreement they are left alone. They must be resolved, if at all, during the course of the job. It is precisely this ambiguity and incompleteness which too often signals the death knell of an art director-client relationship which commenced in good faith.

Conversely, written contracts may add the clarity and specificity to the work relationship which is warranted, and safeguard against confusion, misunderstanding, disagreement, or irreconcilable differences, at the outset of a business relationship.

The written instruments which the art director may use to define the terms and conditions under which services will be performed, and work created, take varies forms. One, the "standard form contract," is generally designed to establish the art director's standard operating policies for completing a job. Standard forms will generally facilitate the addition of terms and specifications for particular job, depending upon how much variation the art director experiences in the type of work which the art director handles. Generally, there will be blank space to fill in stating prices, work descriptions, delivery dates, and special terms, followed by the standard provisions that will govern the job.

A more versatile type of written contract is the "letter of agreement." It is usually drafted in a letter format to contain all of the terms and conditions which should be included in a contract, customized to meet the needs and demands of a certain client or job. The art director transmits the signed letter to the client and asks the client for a counter signature to acknowledge that the terms and conditions in the letter are those which are acceptable to the client and that they will govern in the course of the job.

In either case the contract serves not only as a reference of the agreement but as notice of how the client's matters will be handled, what the client might expect, what the art director will be providing, what the client's rights are, and the full nature of the client's responsibilities. Therefore, it is not only useful in enforcing the respective parties' obligations, but in establishing the workings of their relationship so that things might move smoothly, without surprise, sentiment of unfair treatment, or misplaced assumptions.

When drafting a contract, or negotiating an already drafted contract, the art director confronts the challenge of balancing the art director's own rights and responsibilities with the opposing rights and responsibilities of the client. The terms and conditions regarding the art director should reflect the duties and responsibilities of the art director, and nothing more. Those which apply to the client should be fair and reasonable.

Contracts which are unduly burdensome or unfair to a client will generally meet objection, and will be of little use to the art director. They will rarely get signed. On the other hand, clients have certain obligations, (timely review of work, provision of specifications, making payment, etc.), for which they should be held accountable. These might be provided for in the contract, along with the art director's own obligations and responsibilities.

Compensation and Fees (Back to Top)

In all contracts provision should of course be made for price. If the job is to be done at a fixed price, the price should be stated. If costs and expenses are to be billed, they should be made clear. When services or additional services will be billed on a running basis, that is a certain amount for additional time, the rate of compensation (per day, per hour) should be provided for.

Work Description (Back to Top)

It is very important that the contract state that the stated fees are for the work which is described in the contract. And it is up to the art director to draft this description with enough generality as to permit the art director some creative leeway, while making it specific enough to exclude any claims by the client that the art director was to provide various items which were never contemplated.

The fact that the art director might be unable to draft this description is often attributable to a failure to fully understand the client's demands or expectations. However, when the client is requesting work which will be narrowed down, or defined with greater specificity at a later point in the job, the contract should be as specific as possible.

Once the price is clearly stated and the work is described, the heart of the agreement has been made. The client has stated that the client will pay a certain sum, in consideration for the work. Other terms wills simply expand upon the parties' rights and obligations.

Additional Fees For Additional Work (Back to Top)

Starting from the premise that the payment is fair for the work that has been described, it logically follows that additional payment is fair if additional work is required. The additional payment provision which is included in a contract might therefor state that compensation at the art director's designated rate is required if the client requests work beyond that which is described in the contract, or if additional work is required due to the client's errors or omissions or alterations in the original specifications are provide it becomes apparent that more work is involve (for example where the original price quote is an estimate). For want of such provision, a profitable job often becomes unprofitable, entailing uncompensated additional work.

It is often difficult to draft or negotiate an additional payment provision because the client may well fear that a large amount of additional work might be too costly, or beyond their budget. Trusting the art director to keep them within acceptable parameters, although theoretically plausible, may be imprudent if not unthinkable for a business standpoint. So it is often necessary to soften the additional payment provisions so that the client will find them both acceptable and fair.

One way of limiting the client's fears is to provide that unless the client's prior permission is obtained, the original price quoted will not be increased by more than a given percentage, perhaps from five to twenty percent depending on whether the job is large or small. If the art director believes that the job can be brought in within the stated percentage variation, then such a provision will fairly compensate the art director while protecting the client.

In addition, it is generally fair to provide that the client will not be charged for additional work which is necessitated by an error or omission of the art director. However, it should be clear that the art director's errors or omissions do not include errors and omissions which are the fault of other parties, whether the client, a typesetter, shipper, printer, or other party over whom the art director has no control.

Furthermore, once the client approves work (or is given the opportunity to approve work but does not), the art director should not have to correct errors or omissions at his own expense, since these could have been avoided if only the client exercised due diligence reviewing it. The contract might provide that the client will have the opportunity to review press proofs, blue lines and mechanicals, or other work, and that any errors and omissions which have to be corrected after the client has approved or had the opportunity to review the work will not be made at the art director's but at the client's expense.

Costs and Expenses (Back to Top)

Similar concerns arise in connection with the costs and expenses which the art director incurs for the purposes of completing the client's job. Providing first for the fact that the art director will be reimbursed costs and expenses (which may or may not be itemized in the contract), it may be necessary to impose limits on the amount for which the client will be liable. In some situations it will be sufficient to say that only "reasonable" or "necessary" or "ordinary" costs and expenses will be billed. In other places it may be necessary to either itemize, or limit the amount in dollars. If the art director is billing the client for costs and expenses on a cost plus percentage basis, this should also be stated.

Whatever provisions are employed, the art director will still be concerned with obtaining payment for additional expenses resulting from the client's request for additional work, or due to the client's errors, omissions, or alterations, or arising after approval of the work or after the client had the opportunity for approval. Since the client essentially controls what expenses will be incurred in these situations, the contract should provide that the art director will be reimbursed for the costs and expenses which are attributable to the client in any of the foregoing events.

Rather than worry about obtaining reimbursement for costs, some art directors simply provide in their contracts that they will incur costs and expenses only as the client's "agent," in the client's behalf, and will have the client billed directly. In doing this the art director should ensure that the vendor or supplier understands that the art director is acting as an agent only, and that the vendor or supplier will bill and hold the client liable for, and not bill and hold the art director liable for, the costs or expenses incurred.

To ensure that the art director will not be liable for them, the art director might also provide that if the vendor or supplier attempts to hold the art director liable for the costs and expenses incurred in the client's behalf, the client will indemnify, protect and defend the art director from payment responsibilities.

Attorneys are probably best left to draft provisions which establish an agency relationship. Provisions improperly drafted, or drafted too broadly, may impose duties on the art directory which accompany an agency relationship which are unnecessary and unwanted.

The Art Work and Its Use (Back to Top)

Contract provisions for the handling and use of the creative work relate to primarily four areas. These include provisions for the completion and review of work, provisions for its delivery, ownership, and return, provisions for rights to use the work (and royalties, and provisions for warranties.)

Completion of Work (Back to Top)

A provision which establishes that the art director will have certain creative leeway serves to give the art director the discretion and ability to act in the client's interest. Obviously the art director, not the client, is the expert. So it follows from this that the art director should have certain creative discretion to treat the client's needs. Further, such provisions should allow for the completion of work through a creative solution which falls within the contract description.

It should be made clear that once the work within the contract description is delivered, the art director has satisfied the contractual obligations. The art director should not be required to come up with alternative solutions, except under the provisions for additional work and payment discussed above.

It usually accompanies these provisions that the client will have an opportunity to review work at various stages (depending on the nature of the job) and approve it or not. The approval steps serve a salient purpose, to ensure that if the client requests alterations, additions, corrections, or modifications, that they can be made before advancing to the next stage of the creative process.

Once the client approves the work it should therefore be considered "accepted," and if changes are needed thereafter, they should be made at the client's expense. Further, if the client has had the opportunity to review work but does not, it would be fair to provide that the client bear the costs and fees for correcting any mistakes which could have been detected had the client taken the opportunity to review the work. In short, the client should not be permitted to wait until the last minute if not the completion of the job before requesting that the correction be made.

Deliver and Retention of Work (Back to Top)

Since it us usually necessary to place the work in the client's hand in order to permit the client an opportunity to review it, it is also necessary to provide for how it is to arrive there, how long the client is entitled to have the work, when the work must be returned, and ultimately who owns it.

It is usually sufficient to state simply that the client will have the work for a reasonable time, will diligently review it, and return it. If the client waives the opportunity to review it, the contract should provide that the art director will not be responsible for correcting, at the art director's expense, mistakes that the client could have discovered if the review was made.

The contract should also provide that if the client delays in reviewing the work, the art directory will be given additional time after the review is conducted to finish it. Further, extensions for preparing additional or modified work may prevent the art director from defaulting on a delivery date. Liability for loss or destruction of the work should be borne by the party who has possession of it.

A provision which states when the work will be returned or delivered will facilitate handling, and will thwart unauthorized use of the work when that is of concern.

Warranties (Back to Top)

In order to avoid disputes over the quality of the work, the art director's contract might also include provisions for what are acceptable technical variations. Color variations, overruns, and underuns which are acceptable to a printer and art director may not be acceptable to a client. Technical variations should therefore be covered in a manner which meets with the understanding of both parties.

Standards of acceptable design, unlike the standards for technical variations, are especially difficult to provide for. This is because the standards which are set may adopt different, sometimes subjective, criteria. There are times when the art director may not be informed as to what these criteria are, from the client's standpoint. There are times when during the course of the job, the client's criteria will change.

In view of this the art director might consider disclaiming any warranty that the work will be fit for the client's intended use and warranty only that it will meet the contract description. Compliance with the contract then involves meeting the stated, rather than unstated, or changing, objectives. If the client has changes, then the contract may be altered.

When technical or production work is not being overseen or coordinated by the art director, the art director might also disclaim any warranty that the work provided by the art director for fabrication or production purposes will be fit for such use. Unless the art director is coordinating or overseeing such work, there is no way to ensure that the work provided for such purpose will be properly used.

Use of Work (Back to Top)

It is especially important for the contract to state who owns the rights in the art director's ideas, an in the work which the art director has created. If the client requests permission to use the work or ideas the contract can accommodate the request. Otherwise, the contract should provide that the art director's ideas and work will be the art director's "property" and that they cannot be used without the art director's consent. The art director's ownership of the "property" serves to protect the art director from the unfair and uncompensated use of the ideas and work.

Counterpart to the provisions which restrict the client's use of the work are those that provide for when use of the work can be made. These might specify that the client must request any permission desired, in writing. An additional page to the contract might be added for such purposes. This gives the client an opportunity to disclose all uses which the client wants.

Handling things in this manner prevents the client from eliciting the art director's ideas and then employing someone else to execute them, taking the art director's sketches to someone else to prepare finished art, or taking the art director's finished art and reproducing it, unless the client has first obtained permission. It enables the art director and client to determine, for what purposes and in what situations the art directory must be compensated. And it enables both to provide for fair compensation to the art director for any liberties which the client requests.

Royalties (Back to Top)

Contracts which involve royalties on additional uses of work entail concerns with how the royalties will be calculated, what procedures will be followed to ensure that they will be accurately accounted for, when they will be paid, and the manner in which the art director can conduct an audit of the royalty accounting to ensure that the art director obtains payments for all of the royalties which are due. Depending on the circumstances, these provisions may be very complicated, including such things as attorney's fees and auditing expenses where the art director detects that there have been errors in payment and shortages in the amounts which are due and owing.

Indemnification, Generally (Back to Top)

Contracts which best protect the art director will also include provisions for the various liabilities which the art director confronts in the course of performing services or preparing work for a client. These might include liability for a copyright infringement where the client has provided work to the art director without asking the art director to obtain releases from the freelancers who prepared it. When public personalities or models have their appearances rendered in a work, there is the risk of violating their rights of publicity, or of libel. Where private individual are included in a work the risk may be of violating their right of privacy. When designing trademarks there is the possibility of trademark infringement. There are the risks of misdelivery, loss in transit, errors or contract breaches in printing, fabrication and typesetting. To none of these liabilities would the art director be exposed unless the art director was performing services for or preparing work in behalf of the client.

A well drafted contract should provide that the client will not hold the art director accountable for liabilities which arise through no fault of the art director, and that the client will indemnify the art director against any claims or demands which are made against the art director which stem from the actions which the art director is taking in the client's behalf, or which stem from the actions of the client. Limiting liability to a certain amount, may also be a means of protecting the art director from large liabilities that arise while working on a client's job. However, the drafting of these provisions requires strict attention to legal detail, and warrants an attorney's attention.

Payment Terms (Back to Top)

With these matters taken care of, the contract will of course have to set the terms for when payment will be made. Providing and enforcing a provision for the client to make a deposit for costs, or advance for commencing work, offers protection against delinquency on non payment altogether. Billing the client, although less desirable is probably more common.

Billing provisions should be careful, however, to protect the art director when the client delays completion of the job. They should not require that the art director wait to complete all work, if a delay ensues which is not the art director's fault.

In addition, billing provisions which have no "bite" in them often result in waits for compensation, cash flow interruptions, and poor cash flow management.

These problems are sometimes alleviated under contract provisions which provide for late charges at the highest legal rate of inters. However, charging more than the legally permissible rate constitutes usury, so excessive late charges must be avoided.

Further providing that any license or permissions to use the work are valid only upon full payment, offers substantial payment incentives (especially when the clients are under deadlines).

Attorney's Fees (Back to Top)

Contract enforcement can be expensive. So the art director may also want to provide that if the art director must sue the client to enforce the contract, or to collect fees due under the contract, the art director will be reimbursed attorney's fees and costs. Although not always fair, such a reimbursement would presumably be just in actions in which the art director prevails. In addition, a provision which states that the parties will appear in court convenient to the art director, as opposed to one in some distant state, may also be in the art director's interests. However, these provisions must be drafted in compliance with certain requirements.

Conclusion (Back to Top)

Whenever forming a contract for creative services, the art director's task will be to select, synthesize and condense these considerations into a forma that is simple, easy to understand, unobjectionable, and fair. This at first might seem difficult. But it really is not. Once it is understood what the contract provisions attempt to accomplish, adjusting them in special situations, or with "difficult" clients, is easy enough. The starting point is for the art director to begin working with a well drafted contract which the art director thinks is understandable, and fair, and which in fact offers the art director the protections which the art director needs. The art director will then be able to modify the standard written operating procedures to fit the various situations with which the art director comes into contact.