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As a freelancer, you own copyright in your work
First, it is important to know that under U.S. copyright law, when you work as a freelancer (or “independent contractor”), you are the “author” and copyright owner of your work, even though your client is paying you to do it. As the copyright owner, you start out with all of the exclusive rights under copyright law: e.g., the rights to make and distribute copies of the work, publicly display the work, and make adaptations or “derivative works” based on your work. These rights cannot be transferred to anyone else just because they paid for your work. In order to give your copyright (or a “buy-out” of all rights) to your client, you have to sign an explicit written assignment of your copyright. Often, there is no explicit assignment in a freelance graphic design contract. Certainly, if you have done the work without a written agreement, you cannot have given copyright ownership to your client.
You can decide what kind of usage rights to give to your client
As the copyright owner, you can grant permission (or a “license”) to someone else (e.g., your client) which allows him to exploit your rights under copyright. As part of granting that permission, you, as the copyright owner, can put limits on the scope of your client’s use. You can decide, for example, in what media, for what purposes, and for what time frame the client can use the work. You can decide to give your client “exclusive” rights to your work, meaning no one else can use it. Or you can decide that the client will get to use the work on a nonexclusive basis (meaning you can re-use the work and license it to other clients), or on an exclusive basis for a limited time. You can decide if the client gets the rights to make modifications, such as change colors or distort or crop an image, or to use your work as a basis to make new works. You can also decide what to charge for the license.
When you are talking to a potential client about his project that is when you can find out what kind of usage rights will be appropriate. This is important, because the scope of usage rights will help you decide how much you should charge for the job. Your fees should reflect not only the amount of work involved, but also the scope of the usage rights you are granting to the client. Your fees should be guided by general industry standards, your level of expertise and experience, and your personal values. For example, many copyright owners give nonprofit clients lower fees.
GOOD TO KNOW
Your arrangement with the client determines usage rights, even if they aren’t spelled out
Ideally, your project proposal or independent contractor agreement will clearly define the purpose or intended uses for your work, and it will state the corresponding usage rights the client will receive upon final payment. The specific “deliverables” that the client receives should also be defined, and it should be clear whether all your working files, or, more commonly, just the final digital files for the final art, will be turned over to your client as part of the deliverables.
But as the questions above demonstrate, frequently these matters are not clear, or not even mentioned in your contract; or you may not have a written agreement. In any event, clients often do not understand the concept of a limited license. Often they presume that they are receiving a buy-out of “all rights” just because they are paying you. So how do you deal with these disputes?
Consider how a court would deal with the dispute
First, it is important to know how courts deal with these kinds of disputes. Not because you expect to go to court, but because the potential legal outcome gives you bargaining leverage. (Especially if your client is threatening to sue you, it gives you negotiating power to know how a court would likely rule so you can explain that to your client.)
Many people think that there is no enforceable agreement without a written contract. That is not correct. As a general rule of contract law, oral agreements are enforceable. There are some exceptions, however. As noted above, under copyright law, you cannot have an oral agreement to assign your copyrights. So a court will never award a buy-out of all rights to your client if there is no written assignment. In fact, your client cannot even get an exclusive license without a written agreement.
If you don’t have an explicit assignment or exclusive license in writing, then at most, the court will find that your client has a nonexclusive license to use your work. If the terms of the nonexclusive license are not clearly spelled out in a written agreement, the court will have to determine the scope of the “implied” license. The usage rights granted under that implied license will be what you and your client both understood the client needed when you first agreed to do the work. That will not necessarily be what the client is claiming now. So the court would look at circumstantial evidence about the project and the scope of usage rights required.
For example, the court would look at the design brief, your written proposal, if you have one, and any other documents (such as emails), to see if they indicate how your client was expected to use the work. The court will also look at what you charged for the work, compared to what other designers typically charge for unlimited usage rights for similar projects. If your fees are much lower than the normal fees for unlimited usage, which will be strong evidence that your client received only limited usage rights.
Once the court determines the appropriate scope of usage rights, it will decide if the client needs your working files to use the work for those purposes. If the client doesn’t need the files for those purposes, then the client will not be entitled to receive your working files.