Media Mayhem and ADversity
Risk Management for Advertising, Design, and Media Professionals

3 Copyright Issues that Can Spell Trouble for an Ad Agency

Copyright law can be confusing for advertising agencies and graphic designers. Most small-business owners don't have a background in law, and they have to learn on the fly when it comes to copyright laws that could lead to expensive infringements or lawsuits.

While we can't teach you everything you'll need to know about copyright law, let's look at three major issues that could lead to trouble:

  1. Failure to transfer copyright. Designers and ad agencies need to transfer copyright of their creative work to their clients. Until you do this, you'll still own the copyright. That can be a problem for your clients when they go to enforce their copyright claim, only to find out you never transferred it. Smash Magazine recommends ad agencies and designers transfer copyright when clients pay them. This is a nice way to make sure you get paid and take care of copyright issues in one fell swoop.
  2. Failure to get permission for copyrighted materials. Ad agencies and designers can't use any old image, video clip, or music in their creative work. As you know, you'll have to get permission from copyright holders (and keep a record of this permission on file).
  3. Miscommunications about who's getting copyright permission. Advertising and graphic design involves a lot of project management. With everyone sharing responsibilities, it's easy to forget who's handling what. Say your designer is supposed to email a photographer to get permission to use an image. With deadlines closing in, this task slips their mind. These things can happen. But having good policies and procedures in place can make sure no one forgets to get copyright permissions.

Copyright Infringement Can Cost Small Businesses in Big Ways

Why are these copyright issues so bad for small businesses? A copyright dispute can cost you in multiple ways:

  1. Lawsuit damages. Any copyright mistakes can lead to an expensive lawsuit. PR Daily tells the story of how the site used a picture from a Google image search — and it cost them. For a single image, the copyright holder sued them for $8,000 in damage. Even small slip-ups can lead to costly lawsuits. Lawsuit costs may be covered under your Errors and Omissions Insurance, but you should always check with your agent.
  2. Reputational damages. Lawsuits and copyright issues can have long-term effects on your business's reputation. When your business's good name is tarnished, you could lose clients (and revenue). For a small advertising agency or independent contractor, the loss of a big client could be potentially devastating.
  3. Fines. Purdue University warns that you can pay fines ranging from $200 to $150,000 for each work infringed. In addition, you could have to pay the other party's legal fees (if they sue you) and any profits you made as a result of the infringement.

Add up the total cost of infringement — legal costs, reputation damages, and fines — and you could be looking at a huge bill. In fact, the AIPLA 2013 report [PDF] found that for small cases of copyright infringement involving less than $1 million in damages, you can typically expect to pay $300,000.

Given the high cost of these lawsuits and how easy it is for one of your employees to make a copyright mistake, make sure you have a strategy to reduce the risk of copyright violations. See our article "There's No Such Thing as Intellectual Property Insurance — But that Doesn't Mean Advertising Agencies Shouldn't Protect IP" for additional risk management tips.

Customer Rating 4.9 out of 5
Read Customer Reviews

Grab-n-Go Information

Free Media Liability eBook
Managing Media Liability - How to Protect Your Business from Your Clients' Bad Judgment
Browse eBook
Sample certificates
See a sample Certificate of Liability Insurance, the proof of coverage you need for most contracts.
View Sample
Sample Quotes & Cost Estimates
See what insurance really costs: actual quotes by policy & specialty.
Get Estimates
Ask A Question
Submit your questions about small business insurance and get answers from our experts.
Read Answers