From the June 1998 issue of Entrepreneur

Suppose you hire a photographer to shoot photos of your products. You order prints and pay the bill. But the first time you use the photos in a brochure, you get a letter from the photographer's attorney saying you have no right to use the images; you must stop or answer for it in court. What's going on?

"The photographer has the copyright," explains Portland, Oregon, attorney Leonard DuBoff, author of numerous books on copyright law for small business. "The mere fact that your business commissioned them doesn't give you the right to use them." Unless you have a contract with the photographer that gives you the right to publish the photos, doing so might cost extra--and the more often you want to use them, the more it'll cost you.

Or suppose you see a photo you like in a photographer's studio and decide to buy it. What you've bought is that particular print, DuBoff says, which you may display in your office or home. But buying it doesn't give you the right to put the image in your ads, use it as an illustration in your brochure or upload it to your Web site. If you do, the photographer can sue you for copyright infringement.

The same goes for artwork, graphic designs, music, written works and software. The federal Copyright Act of 1976 governs the duplication, distribution, display and performance of creative works. Under this law, the person who creates the work owns the copyright and has legal control over its use unless a signed contract states otherwise. That's good news if your business creates material for use by other businesses. You have the right to decide just what uses of the material you'll allow and to reserve the right to use the material later for your own purposes. But if your business buys or commissions creative works, it could be bad news if you haven't planned ahead.

The major exception is "work for hire," which is created by employees in the course of their employment with you. In cases of work-for-hire, the copyright belongs to the employer unless a contract specifies otherwise. Under limited circumstances, work produced by an independent contractor counts as work-for-hire but only if that's stated in the contract.

Since the writer, photographer or graphic designer you hire is not usually your employee, be sure you bargain upfront for the rights you're buying. Otherwise, you risk never getting to use what you paid for. Sign a written agreement specifying which rights are transferred, such as unlimited rights to publish. Even unlimited rights, however, don't give you the copyright, so the creator could later include the work in a published collection without your permission and keep any profits generated. If you want the copyright, which gives you total ownership, you must get it in the contract.

A Case In Point

Consider a case decided in 1995 by the U.S. Court of Appeals for the 2nd Circuit. A national magazine developed a relationship with a freelance artist in which the artist would submit paintings on a regular basis and, nearly every month, one of his paintings would appear in the magazine. This went on for 10 years. At first, the editors would describe how they wanted to illustrate a particular article, but over time, they allowed the artist to submit whatever he wanted to paint because his style so suited the publication. There was no contract signed in advance, but each check had a statement stamped on the back that said by signing, the artist was acknowledging payment in full and assigned all rights, title and interest in the item (which was then described) to the magazine. In later years, the checks specifically stated that by endorsing the check, the artist was agreeing that the painting was work-for-hire and that the publisher owned all rights, including the copyright.

After the artist's death in 1984, his widow obtained rights to his artwork, had posters and fine art reproductions made, and made $23 million from their sale. The publisher filed suit, hoping to be declared sole owner of the copyright of all the artist's paintings that had appeared in the magazine. When the publisher then started selling reproductions of the artwork that had appeared in the magazine, the widow countersued for copyright infringement.

The case wound through the courts for five years. The publisher argued that the statements on all the checks effectively transferred ownership of the copyrights. The court disagreed concerning all the checks that did not use the word "copyright." Perhaps, the court noted, the artist intended only a one-time transfer of rights. The case was decided in favor of the widow, allowing her to keep the copyright on 100 paintings, plus the millions of dollars to be made from the sale of reproductions. The publisher could have avoided the lawsuit if it had entered into a written agreement with the artist when commissioning the works and made sure the agreement stated that the copyright was transferred.

Pin It Down

What's the lesson? "When you're contracting to create a logo, software, etc., make sure you find out what you're paying for," DuBoff says. "In exchange for your money, what do you get? Can you replicate the design on your stationery?" He notes that each creative field has its own conventions. Photographers, for instance, usually retain their negatives. Graphic designers typically charge an override fee when they provide or arrange printing. Writers generally offer "first rights" to an article or text, reserving the right to sell reprint rights later. A contract, though, supersedes these conventions. Decide what rights you want, and find out what it will cost to get them. Some tips:

  • The artist may have a standard contract with terms acceptable to you. Otherwise, agree on the major points and have an attorney draft a contract.
  • Anticipate the uses you might have for the creative material. For instance, are you likely to want to use photos repeatedly without obtaining permission from the photographer each time? Negotiate for unlimited rights. Rights for one-time use, however, may be all you need, and they cost less. Usually a photographer who is doing a photo shoot specifically for your company will agree to grant you unlimited rights but may ask for more money.
  • Specify in the contract where disputes will be handled--especially if the person lives in another state or country.
  • If you get into a dispute, who will pay the lawyers' fees? Agreeing that the loser pays the attorneys' fees for both sides can discourage frivolous lawsuits.

Contact Sources

DuBoff & Ross, Hamton Oaks, 2nd Fl., 6665 S.W. Hamton St., Portland, OR 97223

Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.