By D. John Hendrickson

While many of our posts deal with legal issues involving advertising content, content is only part of the story when it comes to advertising law.  The other part is comprised of the agreements that underlie virtually all advertising campaigns. Among these is the agency services agreement, a document that is typically negotiated and signed while the advertiser and its agency are very much in the honeymoon stage, only to be revisited and dissected months or years down the road when the parties, or at least one of them, have decided to end their relationship.

How can parties to these agreements prepare in advance for that inevitable breakup and experience a relatively smooth termination (and maybe avoid being mentioned on AgencySpy)? While there is no guaranteed method for accomplishing this, one good approach is to make sure that the agreement addresses, in as much detail as is reasonably possible, the issues that are most likely to have an impact on the termination process – thereby avoiding surprises and disputes down the road.

In this post, we explore one of these issues – “ownership of creative materials” –  in :60 seconds or less. Future posts will touch on other termination issues of equal importance.

Most advertising services agreements provide that ownership of campaign materials created by the ad agency will be owned by its advertiser client. This seems straightforward and fair, right?  The agency has been paid a fee for development and production of the materials and, once approved and delivered, they become the property of the advertiser to use at it deems fit.

But, whether you are the advertiser or the agency, there are related issues that are often not fully addressed in the services agreement.  Here’s a simple checklist of items relating to ownership that you may want to consider the next time you negotiate your services agreement:

1. Will the advertiser own everything created by the agency? What about preliminary ideas and executions that are rejected by the advertiser?

  • What is fair in light of the compensation being paid?
  • What is fair in light of any exclusivity obligations imposed on the agency?

2. Regarding approved materials that proceed to final production, what does the advertiser own?

  • Final versions as delivered to the advertiser?
  • Raw footage and photography? Layered files?
  • What is fair in light of the compensation being paid?

3. Will any agency-owned technology be incorporated into the materials? If so, what rights of use will be licensed to the advertiser:

  • During the term?
  • Following expiration of the term?

4. Regarding any taglines or logos included in the advertisements:

  • Who is responsible for securing preliminary trademark searches, and who pays for the legal fees and costs?
  • If full trademark searches are needed (e.g., Thomson searches), who is responsible for securing these searches, and who pays for the legal fees and costs?
  • If trademark applications are to be filed with the U.S. Patent and Trademark Office, who is responsible for filing the applications, and who pays for the legal fees and costs?
  • In the event of an infringement claim, which party indemnifies the other for any damages that might be recovered?

5. If third party licensed material is incorporated into the advertising materials (e.g., stock photos, music, or artwork), is it reasonable for the advertiser to have approval rights over:

  • Some of these materials?
  • All of these materials?

6. Where the agency’s fees are based on a percentage of the media spend, how should the parties address compensation for advertising materials that are produced at the end of the term when no further media buys will be handled by the agency?

7. Upon delivery of approved advertising materials, who is responsible for maintaining in effect any underlying third party agreements required for use of the materials (e.g., talent, music, and other licensed materials):

  • During the term of the services agreement?
  • Following expiration of the term?

There are additional issues not mentioned above that are impacted by designation of ownership, including responsibility for claims substantiation, creative approvals, representations and warranties, indemnification, and insurance. The above items just happen to be some of the issues we commonly see arise during the process of terminating the services agreement and winding-up the working relationship between the parties.  Addressing these upfront can help you avoid unnecessary uncertainty and expenses in the future, not to mention a featured spot in the tabloids.

Legal disclaimer:  This article is not intended to constitute legal advice or to create an attorney-client relationship.  We trust you knew this anyway.