THE DEVIL IS IN THE DETAIL

acidlic1cpIf you are unlucky enough to be in an intellectual property dispute, whether it concerns the ownership of graphics, the terms of a licence/royalty agreement or  someone has broken the terms of a confidentiality agreement, the devil is in the detail. It’s the small print which counts in your commercial relationships and allows you to address these hiccups more easily. It makes absolute sense to spare a few moments to see how healthy all your agreements are and where your intellectual property is at risk. After all, everyone is in business to  grow and develop business relationships, which will provide a return on investment for the time invested. Successful entrepreneurs need to be reassured that the precious commodity that is intellectual property or “know-how” is protected as much as it can be.

Bergen TablecpACID recently carried out a  comprehensive ACID Intellectual Property Strategy Review,  with the Bentley Designs UK management and design team.  When we looked at the relationship between their PR/Marketing external advisors and the photographer who was taking pictures of their ranges it was apparent that clarity was needed. Who owned the rights? Many believe that if you pay a photographer to take photographs of, say, a new range of furniture, the commissioner (or the person who pays for the photographs) will own the rights. In law the answer is usually NO!  

Bentley Designs Bergen Table

The photographer will be the first owner of the intellectual property rights, in this case copyright, in the photograph(s) of your designs. However, it is possible to obtain the copyright by having the photographer “assign” the copyright to you and it is important to realise that copyright may only be assigned by a signed agreement in writing, and having an Intellectual Property Assignment Agreement drafted is the best way of achieving this.

Paying for the services of a professional photographer makes no strict difference to the legal position as stated above. However, payment may well provide an “implied term” of any agreement that you have with the photographer, that you intended to own the copyright rather than the photographer. Such an implied term will most likely result in your being permitted to decide where your photographs are published and for what purpose.

The photographer will also have moral rights associated with the photograph(s)he/she has taken. This means that you will have to take into consideration not using the photographs in a manner that could be interpreted as derogatory by the photographer. You will also have to credit the photographer as having taken the photograph(s) wherever published. In order for you to have full rights over how the photograph(s) are published, and to avoid having to name the photographer each time, you will need the photographer to “waive” these moral rights. A waiver of moral rights may be incorporated into an Intellectual Property Assignment Agreement.

Emma Holmes, Bentley UK Sales & Marketing Manager said, “As soon as ACID pointed this out we were able to purchase a generic, reusable IP Assignment Agreement and, together with some further advice from ACID Accredited Law Firm McDaniel & Co,  this is now part of our standard re-usable menu of agreements. People come and go at agencies and the most important thing for us is to know that we own the IP rights to any photographs that we have paid to have taken. It is also reassuring to know that if, as happened to us, we discovered someone had used our images on their website in order to sell a similar product line, we could take immediate and appropriate action, knowing that we had a piece of paper to say that we own the rights in the images which had been ”lifted”.

How many businesses thrive as a result of a positive relationship between designer and manufacturer and how few have a robust licence/royalty agreement to benefit both parties should things go wrong? In the creation of an industry standard agreement, ACID spent a considerable time consulting with both designers and manufacturers to create an agreement which demonstrates a fair balance between both parties and which is easy to understand, avoids legal jargon and most importantly is legally enforceable.  Having such an agreement protects the interests of both parties, without compromising either party and maximises commercial opportunities. Below are some key considerations for designers when thinking about a licence/royalty relationship: 

1  They’re my designs!… Assigning the rights in your designs effectively hands all the control over in those designs and the manner in which they can be exploited by the recipient, unless you agree specific terms under which you keep the right to maintain control over certain matters.

2      What licence?  If you do wish to retain more control over your designs, then you should license them rather than assign them. This means that you retain ownership of the rights and grant others the right to use the designs subject to certain restrictions which you can impose.

  • An exclusive licence means that you cannot use the designs for the duration of the licence – that becomes the exclusive right of the person granted the licence.
  •  A sole licence means that both you and the person granted the licence can use the designs.
  •  A person who is granted a non-exclusive licence merely has the right to use the designs but cannot take action to prevent anyone else also using the designs. Someone granted an exclusive licence can take action to stop anyone else using the designs.

3      Make a list All the designs which are to be covered by the licence should be listed in a schedule attached to the agreement. This avoids any doubt as to which designs are covered. If the licence covers future designs then further schedules should be added when those designs are created. 

4      Copying – who pays the bills? The licence should state whose responsibility it will be to take action against someone found copying the designs. Sometimes the cost of this can be shared, as can the proceeds recovered from the copier, but the licence should state how they will be shared.

5      Hidden extras The licence should set out exactly how royalties will be calculated. There will be a big difference between a royalty calculated as a percentage of the retail selling price of the article as opposed to its wholesale price. Check for further deductions for things such as discounts on bulk orders.

6    Which country? It is possible to license different companies to sell the same design in different countries or other geographical areas. The licence should clearly state which country or countries it covers, and should prevent active sales of the designs outside of that territory.  It is also important that the licence states which country’s law will apply to the licence.

7      How much? It is possible to agree either a one-off lump sum, or payment of regular royalties on sales, or a combination of the two, often in the form of an upfront payment followed by royalties. If you do agree an upfront payment and royalties, check to see whether the lump sum payment is deducted from future royalties. Also consider using a minimum guarantee for royalties, so that you are paid a guaranteed minimum amount each year even if the royalties actually earned are less than that amount.

8      How long? This can often be an important but difficult issue, as the shelf life of the design is often not known at the outset.  It may be difficult to get a company to agree to continue paying royalties after the period of copyright or design right protection has expired.

9      The last word… If you want to ensure that the products are being made to your correct design, or to your standards, then include a right to inspect samples before they are put into production. Similarly, you can include clauses which state the manner in which the products will be promoted. You may want to ask for your name to be included on all publicity materials.

10    Remember!… You should always read the whole of the licence and ask if you are unsure of the effect of any of the terms.

Damian EvanscpACID member and prolific designer, Damian Evans, who works effectively and successfully with some of Europe’s leading brands through licence royalty agreements says, “Without the inhibitors of writing and providing fee proposals, design briefs/meetings with a manufacturer become freer melting pots for idea growth. A manufacturer can also spread annual design costs over a greater range of product development allowing a competitive edge and, by using a broad spectrum of designers with different skills and styles, this adds to a manufacturer’s diversity. As the designer retains ownership of intellectual property rights in many cases, they are far more likely to present more ideas and greater choice than if they were only being paid a fee. Licensing rather than owning a design means that the period of license can be agreed and determined by both parties. Designers, too, are past masters at recognising the prevailing or emerging zeitgeist of a particular time. The creative lateral thinking designer is a sponge of new ideas and trends. Access to this pool of knowledge is licensing’s strongest asset to a manufacturer.  

It also allows a manufacturer to become a leader rather than a follower. Use of designers by store design buyers automatically provides a transformational competitive edge. Look at the metamorphosis of, say, John Lewis? By using the low risk license approach a company can keep on its toes with regard to continual product innovation, learning from mistakes and developing commercial successes. A designer, too, can be the eyes for more environmentally, cost effective use of materials”. Damian Evans was a key-driver in the creation of the ACID industry standard licence/royalty agreement which has since underpinned many successful commercial relationships

Susan Edgerton Ball, also a user of  ACID’s industry standard License Royalty Agreement to underpin all her licensing relationships, lists her top tips when negotiating a license royalty deal:

Make sure that the company you deal with commits to sales for a period of at least 3 years and that there is a clause included to enable you to accurately audit their Accounts.

  1. Ensure that your Royalty Payments in the Agreement are in monetary terms rather than percentage terms.
  2. Ensure you have an intellectual property lawyer specialist to include additional clauses in the standard license royalty that are pertinent to your particular needs.

The success of many within the interiors industry relies on trade secrets and know-how – it takes years to build up and can take moments to destroy when such valuable knowledge is stolen or used without permission. A company’s “know-how” is the fuel which provides a competitive edge in the market place, helping to differentiate your particular products or expertise from those of others.

So what constitutes a “trade secret” and “know-how”? Well, for example, a trade secret could be a formula such as used by coca cola or a chemical formula for a glue or cement. It could be an idea for a new product range or a method of manufacture. You cannot register trade secrets in the same way as other intellectual property rights and it does not have to be “novel” in the same way that design right or patents are. A trade secret does not have to be produced in a tangible form of reality either. For example, take a company’s valuable database of clients and suppliers, a classic example of confidential information gathered over years which gives that company the competitive edge. How many employers have failed to protect this vital information and taken the trouble to ensure that any employees sign a confidentiality agreement and/or have a specific clause in their standard terms of employment?

So, in short, if you land up in a dispute with someone who steals your trade secret you will need to be able to prove that you made every effort to keep it secret and confidential. A good start would be to have a policy in place which identifies all the trade secrets you have, lists the confidential knowledge or “know-how” that your company possesses and ensures that access is restricted tothis knowledge. Also keep an up to date  list of those who have been entrusted with this information. The bottom line – always ensure that trade secrets and confidential information is shared only when all parties have signed a “non-disclosure” agreement or confidentiality agreement. The devil is in the detail of SIGNED agreements upon which you can later rely if things go wrong.     

 

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