The changing role of intellectual property in client agency relationships

There are often discussions in the industry regarding the charging of fees for intellectual property. Most of the contracts we see have the agency assign their IP on the payment of the project or retainer fee.

The issue is that if the retainer or project fee is based on the agency resource cost by the overhead and a profit margin, where is the value of the IP represented?

Advertising_Copyright.jpg

The concern for most advertisers is that if they start placing a value on IP, where will it end? They have paid for the “work” so why should they be potentially held to ransom to pay for the IP?

The fact is that this approach is not always fair and often not sustainable for long term productive relationships.

Here are two examples where IP could be valued and make the agency / client relationship more equitable.

Case 1 – Local work used overseas

A local independent agency creates a campaign for their global client. A local production company shoots the campaign here.

The campaign is a huge success and the advertiser hands the concept, which they own under the contract, to their head office to run the campaign overseas. The head office gives the campaign to their overseas rostered agency who flies to Australia to shoot new versions.

The same local production company charges three to four times as much so they make more money. The overseas agency gets paid for producing the overseas campaign. The client gets a successful campaign for the rest of the world, for no extra concept fee. The only one to not get paid is the local agency.

Case 2 – Created here, produced there

A client goes to pitch and awards a highly creative agency the account for coming up with a great strategy and idea. Six months after the development of the campaign the client begins moving the bulk of the production work from the agency to a “cheaper” design house / production facility.

While not terminating the successful agency, within 12 months they are no longer doing any more work for the client.

With agencies often taking six to 12 months after appointment to recoup the cost of the pitch, the successful agency is out of pocket.

Is there a better option?

Both of these cases are possible because currently most agency agreements pay for the production of the idea and not the value of the idea itself.

On payment of the concept, the agency assigns their copyright to the client.

While this is considered legally “neater” for the advertiser, it is hard to justify the fairness.

Instead of assigning the copyright, the agency provides the client with an exclusive licence within the confines of an agreed geography and for the term of the agency / advertiser agreement. If at the end of the agreement, the advertiser wishes to continue to use the IP created by the agency during the term of the agreement, they pay the agency a pre-agreed amount for the assignment of the copyright.

This recognises the value of the IP created by the agency, but does not use the rights of the IP to hold the client to ransom, with an agreed set of conditions up front.

We have successfully implemented this with a handful of clients, interestingly usually those who have long terms relationships with their agency partners (more than ten years).

What are your thoughts on this? Is there a way to make IP work in a more fair and reasonable way to recognise its value in client agency relationships?

Related Posts Plugin for WordPress, Blogger...

About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com
This entry was posted in agency remuneration / compensation, agency solutions, industry news & trends and tagged , , , , , , , , . Bookmark the permalink.

One Response to The changing role of intellectual property in client agency relationships

  1. Anne Miles says:

    I like many things about this approach – mostly that if an idea is great and it is working for the client that the agency has some buy-in on that and rewarded for a long term relationship. It works much like a talent rollover or music rollover fee for additional usage. Both fees cover a portion of the exertion fees for the time and effort to perform the task with a royalty for use beyond the agreed term. The extension of the use can be negotiated up front.

    This keeps the initial outlay of costs down to market value as well which means the work gets done. Yet there is some way to recognise the IP.

    Administratively this can be a little more work to manage but clients and agencies can manage it well with a simple reminder in their calendar when it is near expiry. Caution is that if the rollover is not taken up within the contracted period the fees can become out of 'contract' and therefore there can be pressure to maintain the agreed price. So, caution for the administration of it.

    Where it can become grey also is where only part of the work is essentially 'rolled over' – what if the branding and website is maintained but now the rest of the work for example? So, provision for a part of the campaign could be warranted in the original agreement.

    Likewise when the agency's suppliers, the film companies for example, started to impose the same fee for re-use there has been a big uproar about this in the past too and it never made it through. If the agency is making money on the re-use then down the line how far does this go for those people currently not recouping IP costs? I haven't supported film companies charging a fee on re-use of their work in the past because I have seen them as a service provider working under instruction rather than providing an idea or something that can't be done by other means. Many times these days film companies deliver to a specific look and feel and produce the work to an exact brief and approval through every step. (At the same time I acknowledge that a photographer is getting royalties when the equivalent film company is not – purely because of union strength). However there are instances where the agency's involvement in the idea coming to life is very minimal and in some cases the film company can come up with the actual concept for which the agency takes credit and in this model they will be paid for the re-use but not the film company.

    Taking this a step further the film company employs a DOP, who would then be missing out on their IP being recouped. the DOP is not really any different than a blend of a director and DOP in one, so why should the photographer be paid a rollover and not the others? Dilemma.

    Going down the line even more – can the production designer then say that the project couldn't be created exactly that way if it wasn't for their unique input?

    Again for sound production – the voice over artist, sound effects library, and musician get a rollover but why not the sound producer? What if the editor was the one that put the famous 'Not happy Jan' line in that commercial all those years ago and it would have otherwise not seen the light of day?

    So the real question here is where is the line drawn?

    I agree that agencies need a way to have their IP acknowledged and a rollover model seems the most feasible I've heard. Within that though I feel there needs to be clarity and transparency to the other key providers for those that have actually contributed to the success of that idea. The question is then what defines an idea and who has contributed to the success of it in order to be rewarded fairly and how is that determined? I realise fairness isn't easy to administer and having a value judgment on each project just isn't viable. Most times an agency wont acknowledge the input of their suppliers.

    My feeling is that the film company should be equally treated as a photographer (whether they both do or they both don't get paid rollover, is up for question). At least this suggested model allows for the provision for a supplier to be paid on a project by project basis. At the moment it is no additional cost to the client for a film director to come up with the idea (not typically anyway). Does the client have a say in that though ongoing?

    What this also may do is encourage some independent film companies to approach clients directly allowing them to be acknowledged for actually creating the ideas, where currently the agency is taking credit for it. (This is not all the time, but it happens).

Comments are closed.