To Sell or to Rent: The Difference Between Copyright License and Transfer
by Jean S. Perwin
When you create artwork of any kind, the copyright law automatically makes you the owner of a copyright of that work. Whether you create it first and sell it later or whether you create it for a client, unless you are an employee, you start out as the owner of the copyright. As the owner of the copyright you have control of five things that can be done with the work.
• You control reproductions of the work.
• You control derivative works made from the work.
• You control display and exhibition of the work.
• You control public performance of the work.
• You control distribution of the work.
As with other kinds of property assets, when you want your work to produce income, you have a choice of how to exploit it. If the price is right, you can sell it. Or if you think the value of the property warrants it, you can rent it. Copyright rights to artwork work the same way. The copyright law says you can transfer or sell your copyright of the artwork if you follow the requirements of the statute. Or you can license or rent one or more of your five copyright rights to one or more people for one or more purposes. If you sell, you give up control forever. If you rent, you can keep renting as long as there is a market for that particular work.
Put It in Writing
According to Section 204 of the Copyright Act, there are two way to sell or transfer your copyright rights to a piece of artwork. The first is to transfer by operation of law as work for hire—either as an employee or in writing with a client. The second is to transfer the copyright in writing. Under the statute, transfer of copyright ownership means “an assignment, mortgage, exclusive license or any other conveyance, alienation or hypothecation or any of the exclusive rights comprised in a copyright…” (§201(d)(1)). The transfer is not valid, the law says, unless “an instrument of conveyance or a note or memorandum of the transfer is in writing signed by the owner or the rights conveyed” (§204(a).
The writing requirement is strictly enforced by the courts. When a California appeals court characterized a movie studio’s defense in a case involving lack of writing—as in moviemakers do lunch, not contracts—it noted that the statute makes no exception of the writing requirement for movie studios, and neither would the court.
The effect of a transfer of a copyright is the same as selling it outright. You don’t own it anymore, and you no longer have any say in how it is used.
Licensing your copyright rights to a client or to anyone else to use your work for a particular purpose for a particular length of time means that you are still the owner of the copyright for any uses not licensed. And you become the owner again when the term or purpose of the license has ended. For example, if you are hired to create an illustration for a magazine cover you generally license the illustration to be reproduced on the cover of one issue of the magazine. If the response to the cover is good and the magazine decides to create a promotional poster from it, they have to go back to you for another license and further payment. If instead you transfer all the rights to the same illustration or do it as work for hire, when the idea to make the poster comes along, the magazine does not have to get your permission or pay you for the poster rights.
Nonexclusive licenses do not have to be in writing. But anyone who has ever been involved in a copyright dispute will tell you that any graphic designer who does not spell out in writing what is being licensed and what uses are covered by how much money is playing with fire. The myth of “If I paid for it, I own it” is alive and well out there. It’s very important to make it clear what rights a client is getting and what the payments cover. The economic value of your work is based in the copyright rights you have when you create it. If you are not careful about how you license those rights, you will lose money.
Licenses come in many forms. A transfer comes in only one. You can license the right to make copies of your work. You can license the right to display it. You can license the right to make derivative works from it. Each of these licenses has a value which may be much higher than the value of selling it outright and transferring all of those rights to the buyer. The market will determine those values, but one thing about the market is that it is fickle and unpredictable. What has no particular value today may have great value tomorrow. If you license rather that transfer, you will be able to take advantage of any value your work may have down the road or any uses for it that nobody thought of when you created it.
When to License
When should you license and when should you transfer? As a rule, I always advise designers to hold on to their copyright and to license, if at all possible. If you can keep the copyright to your work, you should. In most freelance situations, this is not a problem. The law presumes that you are the owner of your work. You are hired to do design work for a particular purpose and you license the work for that purpose.
Problems arise because of client misconceptions about ownership which should be addressed at the beginning of a business relationship. Discuss price before you begin work and put the terms in writing. Have one price for a license and a higher price for transfers of the copyright or full buyout. For example, if you are hired to create a brochure for a client, have one price for the creation and specific uses of the brochure and a second higher price if the client wants the disk or wants to be able to use or change the brochure for other purposes. Clients will then have a better understanding of what rights are being licensed. If you wait until everything is done and the client is asking for the disk, you may have a problem.
When to Transfer
There are, though, situations where complete transfer of rights is appropriate. Corporate identity work is one. If you are hired to create a logo for a company where the company contemplates widespread uses of the logo on all its products and merchandise, get paid appropriately and transfer all the rights to the company so that they can use the design in any way they want. If you are hired to do only stationery and business cards, make it clear that payment does not include widespread uses of a logo on stepvans, uniforms, and a 20-foot sculpture on the corporate campus—unless your fee reflects that. Advertising is another. Depending on the circumstances, if you are creating work for an advertising agency, they may need control over the work when dealing with the client. It probably doesn’t have further uses to you anyway.
However, some creatives may not want to transfer all rights. Unless the fee really reflects it, those who service ad agencies can sell an exclusive license for a specific period of time—say, two years, after which they have the right to continue using the work.
In the copyright area, there are no hard-and-fast rules for when to transfer and when to license. When in doubt, err on the side of retaining your copyright rights. It’s up to designers to educate clients in areas of the country where clients may not be as sophisticated as they are in New York or Los Angeles. The decision to transfer or license is a business decision. Common sense and business necessities should prevail.
Jean S. Perwin has been practicing in the area of intellectual property law, entertainment, and general corporate law since 1987 in Miami, with specialization in copyright, trademark, and other intellectual property, for a wide range of clients, including graphic design firms, advertising agencies, and individual visual artists and photographers. Perwin is a past chair of the Entertainment, Arts and Sports Law Section of The Florida Bar, co-author of The Artist’s Friendly Legal Guide, author of Electronic Copyright, and a columnist for How magazine and The Artist’s Magazine.
Art Licensing entails any creative image that is contractually licensed to appear on any manufactured product or entertainment vehicle. Art licensing agreements are complex documents which define the advance and royalty the artist (or licensor) receives. Licensing can open new markets and put archived work to use. There are several resources on licensing, from books and periodicals to tradeshows and organizations.