Legals for Digital Advertising Agencies

For those starting or managing a creative studio / digital marketing / advertising business, it will help to have a good working knowledge of some of the legal issues likely to arise most frequently.  

Critically, you will need to have contracts in place with your clients – aka ‘Terms and Conditions.’ These terms should cover key areas such as confidentiality, the term of the agreement, scope of work, payment terms, obligations as the agent of the client (or their company), exclusivity and how Intellectual Property (IP) will be owned.

Scope – in or out?

Most disputes between agencies and their clients are around defining what is in or out of a project’s scope. The tighter you can define the scope, the less likely you are to have disputes with clients, and the easier it will be to enforce those terms.

Terms and Conditions

Confidentiality or Non-Disclosure Agreement

Disclosure of confidential or commercially sensitive information is inherent in the digital advertising agency business. Both the agency and client will often have to disclose information regarding their business affairs. A confidentiality agreement ensures that the parties are bound to protect confidential information disclosed. This can include the prohibition of using any confidential information to compete with the other parts, revealing commercially sensitive information such as business strategy or finances, or even “poaching” staff members.

Term of Agreement

The term of the agreement effectively sets out the length of the commercial relationship between the digital advertising agency and the client. Some parties chose to limit the term to a specific time-frame (eg. 6 months). Alternatively, the parties can agree to set the term based on the duration of a specific marketing campaign. 

Obligations of Agency

This is a very important element that the parties need to agree on. While it may seem simple, it is important that the parties are very clear about what the agent is expected to do. On the most basic level, what services will the agency be providing? Does the agency have full authority to post on the client’s social media? Or is approval required beforehand? Is verbal approval enough? Or is written consent required? The agency may also want to limit their liability by implementing a clause that relieves them of responsibility/liability if the client deviates from an agreed upon marketing strategy.

Exclusivity

Most agencies will seek exclusive rights to provide digital advertising services to the client. However, a non-exclusive relationship can be negotiated that allows the client to engage the services of other digital advertising services for the duration of the term. A non-exclusive relationship may be the most suitable option when the agency lacks the reach or influence to reach a certain demographic for example, but has had success in reaching another. In any case, exclusivity is an important consideration that the parties must agree on in order to avoid conflict down the road.

Intellectual Property

Over the course of the relationship, the digital advertising agency will inevitably produce content that can be classified as IP. IP can include anything non-tangible about a business from final designs, to design files (eg photoshop templates etc), photos, written copy and so on. Clients will usually want to own any IP the digital advertising agency creates. In this case, it will be necessary to organise an assignment of IP rights to the client. This involves an Intellectual Property Assignment Agreement that will need to be formally drafted. Alternatively, a license can be granted to the client. This allows the client to use the IP in exchange for a licensing fee that is paid. Conversely, if the client has any existing material (eg. a logo) that the digital advertising agency will need to use in the course of their services, the client may need to grant a non-exclusive license to the agency for use of such materials. Similarly, if the digital advertising agency is using any third party music, art, photographs etc., it is important that the appropriate licenses are obtained to allow use of the material.

Summary

Before engaging a client, it is vital to have a strong contract that defines the terms and conditions under which you will work together. Whether scope is defined in the terms or in a seperate statement of work (SOW), removing ambiguity should assist in avoiding disputes and make it easier to enforce if needed. Throughout the relationship, IP is an issue to be aware of.

Let us know if your agency needs some legal assistance!