Takeaway for Freelancers and Creative Professionals
You can use copyright ownership rights to increase the chance you will be paid on time and in full. By drafting your service agreement so you own the copyrights and they do not transfer to your client until you are paid in full, you can create leverage over a client who wants to use your deliverable but tries to avoid paying you. While many clients who review your contract and notice that language will request you to amend the agreement so they own the copyrights outright, you can use their request as an opportunity to request more money up front to compensate you for your increased risk. If they do agree to the term and allow you to hold the copyright until paid, you have leverage if they do not pay, particularly if you file a copyright registration. If they use your work, if copyright remains with you, and if you timely file a copyright registration, you are more likely have a viable lawsuit that may be eligible for statutory damages – and that risk can be enough to force them to stop ignoring your emails about that unpaid invoice.
Copyrights cover most creative works, and they are created automatically when you fix a work in a tangible medium (paper, clay, a video recording, a file on a hard drive, etc.). The copyrights in a work are usually owned automatically by their authors, no registration required (though registration does create additional, useful rights). One situation in which copyrights are not owned automatically by their authors is when the author is an employee and the employee creates the copyrightable work while the employee performs their employment duties. A freelancer* is usually not a client’s employee and so, by default, a freelancer owns their copyrighted works instead of the freelancer’s client. Most service agreements, whether drafted by the freelancer or the client, include terms that give copyrights in the freelancer’s work to the client regardless of whether the client holds up their end of the contract. Under these standard terms, the copyright transfer to the client is unconditional.
Another but less common approach that is more favorable to the freelancer is to transfer copyrights to the client only after the client has completed payment in full. If the client does not pay the freelancer as required under the contract, the freelancer owns the copyrights. By itself, that does not make the freelancer whole because the deliverable is only valuable to the client – the freelancer can’t just sell it to someone else, because there’s no market for the work. But it does give the freelancer leverage. If the client does not pay, the freelancer can credibly threaten the client with a copyright infringement lawsuit if the client uses their work. If the freelancer timely filed a copyright registration, the client may even be on the hook for statutory damages. This will force delinquent clients to choose between using the freelancer’s work without paying and risking litigation, paying the freelancer to complete the transfer of copyrights, or simply not using the work. If they do go ignore the risk and use the work without satisfying their payment obligations, you are likely to be in a much stronger position for litigation than you would be absent the provision that allows you to maintain copyrights until you are paid.
Many clients will balk at this term if they bother to read your service agreement, particularly if it is reviewed by your client’s lawyer. And that is fine – but if they request that you give them copyright up front, you can use their request as an opportunity to negotiate more payment up front or at an early milestone payment. Indeed, the goal of including this provision at all is to make sure you get paid, so if you trade the provision for more money up front, that’s a win.
*Note: “Freelancer” is not a legal term, and what we’re really concerned with is whether someone is an employee or an independent contractor. Most freelancers are their client’s independent contractors, though there are circumstances where the relevant relationship to consider is one of employment – e.g., the “freelancer” is an employee of an agency that loans out their labor, in which case the agency owns the freelancer’s work for clients under default copyright rules.