Off the Cuff: Who Owns It? — Part I

Artwork, screens, digitizing, CAD-cut images and laser images are all subject to ownership questions. Knowing your rights to such intellectual properties will help you avoid misunderstandings and improve customer relationships.
May 22, 2008

A customer has asked you to create graphics, do digitizing or perform some other preproduction functions for what you'll be screen printing, embroidering, laser engraving or CAD-cutting. Should the rights of ownership — read: rights of use — of intellectual work you've created for a customer's order become an issue sometime down the road, here's what you need to know about who really owns it. And since many screen printers are reading this, who owns screens imaged for a customer's order?

The question of ownership of intellectual property generally doesn't come up until a customer asks you to provide a copy (in electronic or hard copy form) of the work you created in your shop. When a customer asks for a copy, we know where it's headed: to another vendor, with whom your customer has placed an order.

Are you obliged to furnish or forward this intellectual property? Whose property is it?
a)    Mine     
b)    The customer's
c)    Depends on my mood
d)    Depends on how big/important the customer is
e)    Depends on how naive the customer is
f)    Depends on whoever has a better attorney
g)    All the above
h)    None of the Above

The Correct Answer: None of the Above
 a) Whose it is, is a matter of what has been agreed to between you and the customer before the work was created
 b) Whose it is, is a matter of what the law says, subject to . . .
 c) How the sales order and/or the invoice is written.

So that we can explore the differences and nuances of a) and b), let's first separate out screens and screen making from this discussion, because, unlike the other matters at hand, screens aren't "creative" in the sense that the other processes are. Screen making is essentially a technical process, which, depending on the substrates and images involved, follows a fairly well-defined set of procedures and rules regarding mesh count, squeegee particulars and ink type, among other minutiae.

Who owns the screens is a simple matter — IF you use the correct terminology in taking and invoicing an order. Unless you actually sell the screens to your customer (an extremely rare practice), what you're really charging for is screen preparation. The issue of ownership can be settled easily by changing your line item to read "screen preparation charge(s)" instead of — as 99% of all screen printers write — "screen charges." Inserting the word "preparation" before "charges" means you're charging for a service, not the hardware. How you handle re-orders using the same images is your business, based on your own production policies and marketing strategies.

1. What has been agreed to between you and the customer: You need to develop a policy and advise your customer as to just what your policy is before the sales order has been concluded. The ball is now in the customer's court if he wants to make an issue of it. If the customer doesn't, ownership goes to whom you say has it. The preferred language I provide for my clients — and my readers — is a statement included on the sales order (courtesy of the Apparel Graphics Institute) which reads:
 
OWNERSHIP OF ARTWORK, DIGITIZING (and, if appropriate, add: CAD-Cut Images, Laser Images, Etc.). Unless otherwise arranged prior to production, all artwork and digitizing (and - - - ) created by [YOUR COMPANY NAME] for your order remains the property of [YOUR COMPANY NAME] and will be maintained at our facility for our exclusive usage in executing your orders. Because our policy is to render art/digitizing/etc. services for production orders solely on a cost-recovery basis, any transfer to the client of rights to creative works and materials prepared or contracted by our personnel is subject to reasonable release fees, commensurate with the creative services rendered and at a value as determined solely by us.

The issue of "cost-recovery" in our industry is a matter of record. FACT: Few art departments in our business make a profit. FACT: The mark-up on digitizing, especially when performed in–house, is usually a matter of small potatoes and nowhere near the market value of the creativity that went into it, or in most cases, the time spent transacting the work doing sew-outs or editing.

2. What the law says: U.S. copyright law says whoever creates it, owns it — unless rights were transferred as part of a sale or agreement or unless the artwork or digitizing was clearly performed on a "work for hire" basis.

3. How the paperwork is written: If you write on your invoice "Art Charge" or "Digitizing Charge," your customer owns the art and the digitizing. If you, however, write "Art Preparation Charge" or "Digitizing Preparation Charge," you own it, especially so because you've clarified the matter with appropriately written policy. Said policy simply states who owns what and under what circumstances it can be used.
 
But what if you don't separate out art or digitizing or screens as specific charges and instead incorporate them into your pricing? How are most intellectual property issues in our industry handled between buyer and seller when there's a dispute? Which are most effective means to resolving differences of opinion?

Does my company really need to obtain a U.S. copyright for all of our creative works? How should you charge for artwork — by the hour? By the job? By the complexity? Or, Free!, as a marketing weapon? The answers to these questions and more will be explored in Part II.

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He also is the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. He will be teaching a new all-day workshop, "Getting to the Next Level: Surviving and Thriving in Good Times and Bad," at ISS New England, Schaumburg and Fort Worth. You can reach him at markvenit@cs.com.

Off the Cuff: Confidentiality Agreements
Confidentiality agreements protect more than your assets. Just as importantly, they protect your customers.
Some of you might recall a column I published last November that addressed how to keep contract customers out of your production area in order to protect your work. This week's column looks at the other side of the same coin -- employee confidentiality agreements. These are legal agreements that are intended to keep your employees from talking about who's placing orders, for what quantities and dollars, what's being produced and who the end-user might.
September 15, 2008

Off the Cuff: How to Charge for Rush Service
Charging for rush service is justifiable, but be sure to outline  policies upfront and inform your customers.
The issues of whether and what to charge for rush service are common in the decorated apparel industry and there are valid arguments on all sides. Most companies feel they’re entitled to some degree of additional compensation for going our of their way to accommodate a rush order, for bumping other customers a notch or two back in the production line and for having to deal with the potential hazards of doing something faster than necessary. Oh, and the more sanguine reason: you can, if you choose, stick it to ’em when they’re on the ropes.
August 29, 2008

How to Profit from the Tax Write-Off for Conventions and Trade Shows
Thanks to Uncle Sam, you can deduct certain trade show and conference expenses from your income tax filing. Learn what’s deductible — and what’s not.
Imagine an enjoyable — and educational — vacation with Uncle Sam picking up part of the tab. That's right, every decorated apparel business, the owner and employees of that business (even someone who is a shareholder/employee), can legitimately claim an income tax deduction for the expenses paid or incurred in attending trade shows, conventions and meetings.
August 18, 2008

Tax Breaks for Education — What Every Decorated Apparel Business Owner Needs to Know
Embroiderers, screen printers and promotional products distributors can profit from breaks in the tax code to educate their employees and themselves.
Finding, hiring, training and retaining “smart” workers have long been key factors in the success of small businesses, including decorated apparel companies. Lawmakers have also recognized the importance of a smarter workforce and created a number of educational and training-related tax breaks and incentives. Those tax benefits allow every commercial embroidery, screen printing and promotional products business, large or small, to offer training and education as a “fringe benefit.”
August 04, 2008

Economic Stimulus Package Offers Tax Break for Equipment Buying
Decorators interested in expanding their business or replacing old equipment can rejoice in the new round of government incentives designed to help small business owners.
Earlier this year, Congress passed, and the President signed, the Economic Stimulus Package of 2008, a $168 billion economic “rescue” package that included rebates for taxpayers and tax breaks for businesses. In addition to those tax rebates, the heart of the package, there also were tax breaks for businesses such as decorated apparel operations — breaks retroactive to the beginning of 2008!
July 21, 2008