Author: Eddie Powell
Appointing advertising agents or other consultants is a routine job, and no one expects to negotiate over detailed terms of business to do so.
But an appointment based on basic, or even no, terms can, in the long run, be worse. Asking questions and simply recording expectations, while both parties are positive at the start of a relationship, is rarely counterproductive. One party later doing something that the other regards as a breach of the terms of the relationship is, however, often fatal.
Nowhere is this more common than with the issue of intellectual property (IP), which covers the copyright or other legal rights in the agents’ or consultants’ output delivered to the client.
A recent case decided by the Intellectual Property Enterprise Court (IPEC) is a good example of this (1).
Orvec (Client) was a wholesaler of textile products (e.g. pillowcases) to airlines, and it included in its range products it purchased from a Hong Kong company, Intex. Client retained an ad agency, Linfoots (Agency), to create its website and printed material and Agency arranged for photos of products, including Intex products, to be taken for this purpose.
The Agency terms of business that Client had signed up to said only:
“The use of the design is limited to the items in the estimate.
Copyright remains the property of [Agency] unless otherwise assigned.”
After a few years, Intex ended its relationship with Client and started to promote its products in the UK directly. For this purpose it retained, as Client had, Agency as its ad agency, and Agency provided Intex with materials that reused some of the photos of Intex products it had previously supplied to Client.
Client objected to the photos it had commissioned (and presumably paid for) being used to promote (what had become) competing products. It sued Agency for breach of contract.
Client claimed that although the rights in the photos were clearly not assigned to it, there was an “implied” term in the contract with Agency to the effect that Client had been granted an exclusive licence by Agency, the exclusivity meaning that Agency could not let anyone else use the photos.
The court decided that this was incorrect. It said that the most that could be implied into the contract between Agency and Client is that Client had a right to use the photos, and that such licence was probably perpetual (i.e. open-ended). But the contract said nothing about Agency not being able to use the photos for other purposes, and making the licence exclusive was too complicated to be implied as a term.
Client therefore lost the case, and Agency was free to supply the photos to Intex.
Granted, the circumstances of the case were unique – the court may have had a different view if Agency supplied the photos to anyone but Intex – but it does show that leaving this sort of area vague is a bad idea.
Across a range of areas where IP rights have been created as a result of commissioned work, particularly in areas such as architects’ drawings, UK courts will not usually give the customer who pays for the work more than the barest of licences that they need to use the work, and often nothing else. The case above considered exclusivity, but the same applies to things like the ability of the customer to allow other people to use the work or to assign the rights, or even the geographical territory in which the content can be used. Anyone engaging designers, consultants or agencies needs to check that they are getting what they think they are paying for.
(1) Orvec International Ltd v Linfoots Ltd  EWHC 1970 (IPEC); 18 June 2014
Eddie Powell, Partner, Fladgate LLP (firstname.lastname@example.org)