No matter how many times I’ve been told that “it’s always been done this way,” I still have difficulty getting my head around the seemingly eternal practice of agencies whipping up near-complete ads, concepts and campaigns entirely on spec (or for a de minimis amount of fees) to win the business of a potential client, and agree to hand over all rights to such materials whether the agency receives the work or not. Case in point: an article that appears in Advertising Age this week. In what other industry does this practice exist?  As attorneys, we may provide some general direction or insight to a prospective client for purposes of demonstrating our competence within a particular area of the law, but I don’t know very many attorneys that would agree to draft a complaint on spec. The same goes for accountants, architects, consultants, developers, and on and on…

Well, the times may be changing – slowly, but changing nonetheless. Having the distinct privilege of representing both advertisers and agencies alike, we are often able to see trends on both sides of the table. Let me offer a few observations:

(i) As more young professionals take on leadership roles within both agencies and the marketing departments of advertisers, there seems to be a greater sense of fairness and equity within the fabric of the client-agency relationship.

(ii) As the nature of advertising continues to skew digital, the traditional cross-media campaign is likewise evolving. A digital (whether Web, ITV or mobile) advertising and media strategy is as much about monitoring and optimization on the fly as it is well-thought-out-planning.

(iii) Agencies are waking up to the reality that there is a benefit to developing their own portfolio of assets – ranging from creatives, to digital tools that have the ability of transcending a particular client or campaign but which can be used in various forms on multiple occasions.

This last point is deserving of greater extrapolation. As consolidation continues to exist within the agency universe, there is a growing spirit of discontent over the way these deals have traditionally been structured and the multiples employed to arrive at a purchase price. Essentially, agencies have always been viewed as service entities, and there’s only so much one will pay for services and good will. If, however, an agency becomes the composite of services, good will and proprietary technology, tools and/or creatives, then the traditional valuation methodologies may quickly cease being the only value indicators, and agencies may have greater and inherently more “valuable” value propositions to offer a potential acquirer. As a first step in this direction, agencies should seriously consider reaching out to their attorneys to explore intellectual property protection and monetization strategies and programs, which may include better monitoring of work product, reworking of both internal and external agreements, intellectual property registration initiatives and global coverage considerations.

One area in which I’m seeing this dynamic play out is in agency service agreements. It’s almost commonplace now to find a Pre-Existing Property clause in the intellectual property section of these agreements. Whether I’m on the agency or advertiser side of the deal, agencies are increasingly seeking to ensure that, to the extent they utilize tools, applications and content which pre-date their engagements, they retain ownership rights over those elements. A typical clause might read as follows:

Each of Client and Agency agrees and acknowledges that all software applications, databases, computer programs (including source code and object code for any such programming), and executable code (collectively “Code”) as well as other creative content, methodologies and materials in existence prior to this Agreement (or created outside the scope of this Agreement) and all Code or portions thereof provided to Client by Agency hereunder, excluding any materials provided by Client (“Agency Property”), shall remain the sole and exclusive property of Agency. Agency hereby grants a fully paid-up, perpetual, non-exclusive, non-transferable license to Client to use the Agency Property to the extent integrated into the Advertising Materials and without modification, and solely for the benefit of Client. For clarity, it is understood that (i) Agency shall own all modifications, improvements or enhancements to the Agency Property and (ii) any and all Code utilized by Agency, or made available by Agency for use by Client, that is not integrated within the Advertising Materials, may not be used by Client after the term of this Agreement (or applicable Scope of Work) except pursuant to a separately negotiated license agreement.

…and if you’re the advertiser that is being asked to agree to one of these provisions? Make sure the following points are in place:  (i) you receive a royalty-free license to use such pre-existing tools, (ii) the licensing language is broad enough that you can use the pre-existing tools as may be necessary to craft and run your campaigns (both in the United States and elsewhere, if applicable), (iii) the agency is willing to give you a representation that such tools do not violate the rights of third parties, and if a problem should arise the agency will indemnify you, and (iv) to the extent these tools and/or creatives are inextricably integrated within yours, the license should be perpetual and will not expire if and when the agreement or the engagement terminates. Lastly, be sure that you, as the advertiser, own anything and everything that is custom created or developed by the agency for you, and that the agreement contains the requisite language which allows that to happen.

Hopefully, this provides readers with some valuable food for thought. We certainly welcome a healthy debate and discussion over the issues presented, and we’d like to know what our readership is experiencing. Finally, we’re always available to answer any questions or assist in structuring any of the ideas presented.