Off the Cuff: Who Owns the Art? — Part II

Here are the answers to four of the most important questions regarding your rights to intellectual properties such as artwork, screens, digitizing, CAD-cut images and laser images.
June 9, 2008

By Mark L. Venit, MBA

Among the major questions I didn't address in Who Owns It? — Part 1 are several I'm often asked about. In the following, Q&A, I describe each of those key questions and provide answers that should help you determine how to avoid legal entanglements and deal with these situations if they arise.

Q: Who owns art, digitizing and screens if the charges aren't itemized on the sales order and/or invoice and are instead incorporated into an all-inclusive price?

A: As a general rule, the company retains ownership in this arrangement. Because the customer cannot demonstrate that he paid directly for these items, there is no direct evidence for a claim to ownership. At best, there is a possible argument for exclusive usage, but even here the issue remains undefined, and as such, the customer won't win any lawsuits about controlling usage, much less owning the preparation work.

This is, however, not a sole basis for going to an all-inclusive pricing mode. That matter is a function of what's effective — pro or con — vis-à-vis the competition's pricing mechanisms, the comfort level of your existing account base with how things have "always" been done, and how prospective accounts want to see your numbers arranged (usually for comparison purposes).

Q: How are most intellectual property issues in our industry handled between buyer and seller when there's a dispute?

A: Unless someone creates the next Mona Lisa or Garfield the Cat, the cost of litigation would likely overwhelm any financial benefit to either side. What typically happens is nothing — beyond arguing, threats, bluster, and ill-feelings — and a disgruntled customer who feels he has been done an injustice and will take his business elsewhere.

Rarely will ANY legal actions EVER be filed. Even moving into the deposition stage of litigation will cost tens of thousands of dollars. And only once in a blue moon will creative issues ever go to a court of law.

Whatever cases actually go to court involve major copyright and trademark matters and licensing issues — or, more precisely, matters of alleged infringements ("bootlegging" in the vernacular). Today, an intellectual property dispute involving apparel graphics products that reaches being heard in a U.S. District Court, the first level of the federal court system, will cost each side at least $200,000 and probably much more. The only exceptions I know of to this rule are cases where a plaintiff is represented by counsel on a contingency basis.

Q: What are most effective means for resolving differences of opinion?

A:
1.    Reason. If you've got the law on your side via a written document furnished with the order (or invoice) as could easily be printed on the Terms & Conditions on the back of the order form or with an order acknowledgement, simply explain this to your customer, who presumably signed the sales order. If you provided no statement of any type, or if your customer didn't sign his approval (or you waived this procedure), reason might have to be provided by a judge in small claims court or between lawyers.

2.    Release fee. This is a dollar amount charged to the customer who wants a copy of the art or digitizing or other creative file used in executing his orders. It's what you consider fair market value. If the customer agrees to pay it, the discrepancy ends here. You might insist that the work be restricted to use only for application on the same type of product. In other words, you did a design for a T-shirt, the original product ordered, but which your customer now wants to use as his logo on vehicle signs, business cards, letterheads, advertising, etc. In this instance, you're entitled to an "all uses/all applications" release fee, which will have a market value much higher than a work rendered solely for use on shirts.

3.    Capitulation vs. Litigation. If you and your customer cannot come to terms, your choice comes down to capitulating or litigating — provided you can prove your customer went ahead with copying your work and using it for subsequent purposes. You can sue in your state or province's version of small claims court. Filing fees are generally $5 to $25 (with optional additional charges for special service or delivery charges); you can represent yourself, and a judge will decide who's right and who's entitled to what. Some small courts allow for damage awards, while others preclude it. You could sue in a higher level jurisdiction, but I can assure you "only the lawyers will win" in 99% of these cases.

So, do you litigate as a matter of principle? Or "chalk it up" to the learning curve? There's plenty of wisdom on either side, but it'll generally come down to a matter of money regarding what's at stake vs. what can be gained. For most folks in our business, if the request is from a good customer who's unlikely to take the rest of his business elsewhere, most industry firms will give the customer what he asks for and end it there. What YOU can or should do, of course, is your call. But armed with sound, written policy, one that enables you to enforce as you see fit or waive when the situation warrants, you provide your company with a strong upper hand when you need it as well as the flexibility to be practical or lenient when it suits you. Rarely will litigation ever ensue and rarely will the cost and effort ever be worth the trouble.

Q: Does your company really need to obtain a U.S. copyright for all of your creative works?

A: As a practical matter, no — not if you've issued a policy about the use of your work and made your customer aware of it. Unless your work is for something that will have long-term use or huge distribution, obtaining a registered copyright is unnecessary, albeit inexpensive (nonrefundable fee of $35-$45) and easily accomplished on your own at copyright.gov/docs/fees or by calling the U.S. Copyright Office at 202-707-9100.

And, essentially, you already have copyright protection for free in the United States, because anything created domestically after April 1, 1989, automatically has a legal copyright. It does help to add a copyright notice on your work ("Copyright YEAR/NAME" or ©YEAR/NAME) should there be a question of ownership or to let others know not to use or reproduce your work without your permission. However, a creative work’s originator is already legally protected even without a copyright notice. Do you really need a lawyer's opinion on this? Only in rare cases, and expect to pay $250-$400/hour for that opinion.

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He also is the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. He will be teaching a new all-day workshop, "Getting to the Next Level: Surviving and Thriving in Good Times and Bad," at ISS New England, Schaumburg and Fort Worth. You can reach him at markvenit@cs.com.


For Further Reading:

Logo Legalities for Local Uses of National Brands
Off the Cuff: Caught in the Copyright Middle
Off the Cuff: Who Owns It? — Part 1
Tread Carefully with Trademarks

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