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Table of Contents

Since most people don't like reading through legal documents, I've spent the last 3 months researching contracts, copyrights, and common legal issues that freelancers and their clients run into. I assembled everything into this guide.

I hope you can use this information to negotiate a good contract for your next project, whether you're a client or an artist. And, if you make it to the end of this page, there's a cute surprise waiting for you. 🐢

Copyrights, Contracts, and Value

All contracts have terms and conditions, and a contract usually makes promises in exchange for benefits. The type of contract we're trying to understand and improve upon in this article deals with the purchase and exchange of digital illustrations. However, this type of contract can be easily expanded to deal with other types of intellectual property (for example, songs or product designs).

One of the most important sections of this type of contract is the section that deals with how copyrights are distributed.

What is a copyright?

"A copyright is an exclusive right of the creator of an artistic property to print, copy, modify, sell, license, distribute, transform to another medium, translate, record, perform, or otherwise use that property and to give it to another by will."

– Legal Dictionary

Why are copyrights important?

When you own part or all of the copyrights to a work of art, you can derive value from that work of art.

How many rights you have and the rules that govern when you can exercise these rights determine how much value you can derive from this work of art.

_Copyrights_ = _Value_.
It all comes down to value.

So, if you have limited rights for a limited time, you can probably squeeze quite a bit of value from an artwork.

However, if you have unlimited rights for an unlimited time, you can expect to derive much more value from the artwork over its entire lifetime.

Who benefits from a work of art?

Let's say you start a business and hire an artist to make a logo for your website and business cards. If you purchase all the rights to the logo, you lock down all the future value that can be derived from it. So, if your business is successful and becomes profitable, the positive brand that's associated with your logo, as well as the windfall you get from having a good brand, will belong solely to you. You can put your logo on t-shirts, decals, posters, and merchandise. All the profits you make from selling merchandise with your logo on it (or the indirect value you gain from promoting your brand by giving these t-shirts away for free) all funnel back to you because you own the copyrights to the logo (as well as the business and the brand).

On the other hand, let's say you hire a well-known artist to paint one of your favorite memories from childhood. This talented and well-known artist agrees and makes you an offer that's surprisingly affordable. However, they stipulate in their contract that they get to keep the copyrights to the artwork. You agree because, otherwise, you wouldn't be able to afford this particular artist. You both benefit from this arrangement: you get an original piece of art from a well-respected artist, while the artist gets to make money from reselling and licensing (i.e. permitting the use of) this artwork to other clients and other businesses.

These two examples are very different ways of distributing the rights to an artwork, but they're appropriate to their respective circumstances. When an artist and client work together, in many cases they're able to find some common ground that's agreeable to both of them and provides a lot of value to each party. This common ground translates into terms that end up in their final contract, which they both sign before starting a project.

The pros and cons of a "work for hire" contract

There are many things to consider when coming up with a contract that's fair for all parties involved. Sometimes an artist wants to gain experience working on a big project with a well-established client, so they agree to a contract that gives away most, if not all, of their rights. Sometimes a client is trying to start a new business or cares a lot about their company's intellectual property, so they pay an artist an extra fee in order to lock down the copyrights to a work of art that's important to them. The type of contract an artist and client might use depends a lot on what they're each looking for and what kind of project they're working on β€” so it's good to get clear about what both parties expect as soon as possible.

A type of contract that will hand over all the rights to an artwork to the client is called a "work for hire" contract. It's useful when the client is a big publisher whose business relies on its intellectual property being thoroughly protected. An animation studio like Disney, a video game studio like Valve, or a card game publisher like Wizards of the Coast are good examples of companies who hire freelance artists, but set up contracts that let freelancers retain very few rights to their own work.

For an artist, the main downside of a "work for hire" contract is that the client can expect to derive all of the future value from the artwork, while the artist can expect to derive almost no future value from it (besides some exposure). This means that if an artist exclusively works on projects under a "work for hire" contract, they have to keep finding new clients and new projects in order to make more money. Artists can't use any of their previous work, in original or modified form, in future projects β€” and they can't license any of the work they've already done, now or in the future, to other clients.

"Work for hire" contracts only become more of a burden for more talented and experienced artists, who are forced to watch from the sidelines while the value of their hard work is maximized by savvy clients who know how to turn a simple character or illustration into a core part of their brand or business. Entire media empires have been formed on the backs of hardworking artists, working for little pay, under "work for hire" contracts. Many artists only realize they've severely undervalued their work several years β€” or even decades β€” after they've finished working on it and sold away all of their rights to it.

For clients, the main downside of a "work for hire" contract is that they will probably end up paying a much higher fee for an artist's services under this type of contract β€” especially if the artist is an experienced professional working at a design agency or is someone who cares a lot about creating a well-known brand for themselves. Also, clients may find that some artists are a little less invested in producing artwork that they'll immediately lose their rights to after it's paid for. It's hard for any client to replicate the feeling that an artist gets when working on a character or story that truly belongs to them, even if they compensate the artist well.

There are many reasons an experienced artist will charge more per hour for a project that's under a "work for hire" contract, but it mostly comes down to the fact that professional artists know how valuable their work is. They're no longer trying to build out a portfolio of work or feeling guilty about charging money for doing work that they enjoy so thoroughly β€” they're singularly focused on creating their own business that's sustainable, and they know that being denied the rights to their work removes a massive amount of future value from their portfolio. If a freelance artist wants to prosper in the creative market, one of the first things they discover is how much it costs, in terms of money and time, to run a real business.

What other types of contracts should I consider?

There are many types of contracts. You can design a contract to be flexible or to have lots of idiosyncratic terms. For the most part, it can have rules that are completely governed by your preferences β€” and you have a lot of leeway as to what terms and conditions you can dream up.

For example, you could add a buyout clause to an otherwise standard contract. This clause would open up new areas of possibility for a client, basically allowing them to purchase as many additional rights to an artwork as they want before an agreed-upon expiration date. This means a client could start small and then adapt as new circumstances come into play, purchasing more and more rights from the artist as needed.

You can read more about creative ways of thinking about contract terms (and how they can help you commission an illustration) in this really helpful e-book, "How to Commission an Illustration."

Some popular contracts that a lot of professional creatives use are:

  • One Time Rights Contract
  • All Rights for Limited Purpose Contract
  • All Rights for Limited Time Contract

One Time Rights. Use this contract if the client is a small business with a limited market. If the client only wants to sell its product in a certain region or to a particular type of customer, this contract works perfectly. The client gains the rights to distribute the artwork as part of a single product in a specific market β€” for example, North America β€” while the artist retains the right to license it to people outside of this market β€” for example, to a client with a European market.

All Rights for Limited Purpose. Use this contract if the client is working on a product or service that they are eager to present to the world. The client will gain the right to use the artwork for their particular project β€” for example, as part of an animation on their website β€” while the artist will retain the right to license the artwork to other people for other, unrelated purposes.

All Rights for Limited Time. This type of contract is perfect for clients that just need the rights to an artwork for a single event or for a limited period of time. For example, a client might want to use an illustration on all of their wedding stationery or on a poster at a convention booth. This contract allows the client to use a work of art however they want, while an event is happening, but returns all of the rights back to the artist after the agreed-upon time limit expires.

Each of these contracts can be adapted to suit your specific needs, but here's when each one would probably be most appropriate:

All Rights for Limited Purpose One Time Rights All Rights for Limited Time
If using artwork for a single product
If using artwork for a single event
If using artwork internationally

Flexible contracts can help both artists and clients

These are some examples of the contracts professional creatives use with their clients so everyone involved can derive the maximum value from a piece of artwork. If a client only needs a piece of art for a limited time or a limited purpose, why shouldn't the artist give them a great deal, and, in exchange, the client will let the artist reuse the artwork for unrelated purposes? Both parties get a lot out of this type of deal, with very little downside.

Flexible contracts that consider the needs of artists, like the ones mentioned above, would all likely lead to much better deals for the clients than would a "work for hire" contract. When artists are given the right to derive future value from their work, and even reuse their work for their own entrepreneurial projects, they have every reason to give their clients a better experience and a lower price.

A Tip for Freelancers

If you're a professional artist who's just starting out and you're interested in turning your freelance career into something sustainable and even lucrative, you should consider using a contract that doesn't forfeit your rights. It's hard enough being in business on your own β€” you don't want to force yourself back to the drawing board with every new client. Building up a reservoir of projects from which you can draw can help you in hard times, make you more resourceful in busy times, and set your business up for growing and expanding into new markets.

You can download these contracts from PACT, a website that provides a toolkit for professional artists who are serious about building sustainable freelance businesses.

Crafting a fair and flexible contract

The needs of most artists are very different from the needs of most clients, but in many cases both parties can find common ground. In the end, their focus should be on helping each other build successful businesses and benefiting from each other's insights. It's always exciting when everyone involved can benefit and find a foundation to build upon.

I'd like Artisfy to be a bridge between the typically separate worlds that artists and clients occupy, helping both to maximize the value of their efforts. I believe a good contract will be able to bring many profitable opportunities to artists over the long run, while also allowing clients to protect their intellectual property.

Ideally, this contract would work well in the majority of cases and for the majority of projects. If it's not a good fit for everyone, that's okay β€” it just has to create more value for artists and clients and be more flexible than the default "work for hire" contract. If a fair and flexible contract can become widespread and accepted by the market, artists and clients won't have to renegotiate idiosyncratic terms every time they start a new project together.

The contract terms I decided on were heavily inspired by reading through the e-book I mentioned before, "How to Commission an Illustrator." In this book, Randy Gallegos talks about how one strategy for getting a lower rate from artists is offering them appealing contract terms. In the following section, he explains that, even when a client gives an artist favorable terms, they can always include a backup plan.

This backup plan comes in the form of a buyout clause.

A buyout clause allows clients to purchase some rights upfront and then purchase more down the road, when they need them the most. It's like leasing a car and then, later on, deciding you want to buy it. This allows artists to offer great prices upfront, while allowing their clients to lock down more rights in the future.

A Summary of Artisfy's Copyright Terms

After much consideration, the basic idea I came up with for the Artisfy contract was this:

The client gets exclusive rights to the artwork for the first 3 years. Within those first 3 years, the client can exercise the buyout clause by paying the artist 30% of the original project cost. After these first 3 years, the buyout clause expires, as well as the exclusivity of the client's rights, returning some rights back to the artist.

The aim of this contract is to provide fair terms for the artist, while also providing a bulletproof backup plan for clients.

Clients usually want to obtain the rights to a work of art not because they know their project is going to be super successful, but because they hope it will. This contract allows them to maintain that hope for 3 long years, while giving them the ability to lock down all of the artwork's rights and future value if they need to.

An Outline of the Artisfy Contract

The following is a summary of the copyright terms of Artisfy's new freelancer contract, which will be used as the default contract for all new projects:

Artist Rights β€” Inalienable

  • The artist is guaranteed the following rights to all of their artwork:
    • The artist can continue to work on their artwork and modify it after receiving additional requests to do so from the initial client.
    • The artist can display, publish, and distribute full-resolution samples of their artwork for promotional and marketing needs. For example, an artist can use their artwork in portfolios, newsletters, and social media posts.
    • The artist can include the artwork as part of an artbook that they market and sell in order to show off their skill, style, biography, and/or body of work.
    • The artist can sell their artwork to interested parties as a canvas, poster, art print, or framed artwork.
    • The artist will, at all times, retain all rights related to their unique style and manner of creation, and future works in their unique style shall not be deemed derivative works.
    • The artist will have access to only these inalienable rights during the first 3 years after a project is completed.
    • The artist will always have these inalienable rights unless this contract is formally amended.

Artist Rights β€” Time dependent

  • After 3 years, if a client hasn't exercised the buyout clause, the artist is granted the following rights to the artwork:
    • The ability to use, copy, modify, license, or sell the artwork in any form.

Client Rights β€” Inalienable

  • The client is guaranteed the following rights to artwork produced at their request:
    • The ability to use, copy, modify, license, or sell the artwork in any form.

Buyout Clause β€” For the Client

  • After an artwork is completed, the client has 3 years to buy exclusive rights to it by paying a fee equal to 30% of the total cost of the artwork. As soon as the artist receives this payment, they must relinquish the following rights:
    • The artist loses all the rights in the section above, labeled "Artist rights β€” Time dependent."
  • When a client exercises this buyout clause, the artist does not relinquish the rights specified in the section above, labeled "Artist rights β€” Inalienable."

I think this contract provides a good starting point for discussing what a fair and flexible contract can accomplish for both artists and clients. It attempts to reserve a good amount of rights for the artist, while also ensuring that any client can protect their intellectual property whenever necessary.

I collaborated on this contract with Seth Polansky. Seth helps artists secure their intellectual property rights. He created this excellent Lynda course: Contracting for Creatives. He also designed the free contract templates on PACT. If you need legal services for your startup or freelance business, I'd strongly recommend you check him out at The Law Office of Seth C. Polansky, LLC.

What I hope this contract will accomplish

1. Artists will be more excited about their projects

I believe creative people work harder when they're able to steer the future direction of a project they've crafted. I believe they will care more deeply about projects they have some ownership over and they will be more invested in how these projects are presented because they have a vested interest in them. I believe artists will work diligently on projects that have a higher chance of benefiting their financial future, especially when there are so many upsides to crafting a really well-designed project on Artisfy. Not only will artists produce work they can be proud of β€” if a project is really well-designed, the likely outcome for an artist is a 30% pay bump. And, if this doesn't happen, the other outcomes are just as good: the artist will get back the full rights to the (really well-designed) project and be able to keep using it.

2. Clients will be able to take more risks and pay less for professional services

When creative people start gaining more rights over their original work and they start to see more of their projects fall back into their own hands, I believe they will come to see their work in a new way. Creating value for their clients will be, at the same time, creating value for themselves. Every piece of artwork an artist creates will also be supporting the backbone of their business and brand. Gradually, artists will become more open to taking on riskier projects if they truly believe in the project's direction and goals because they will be able to influence those directions and goals themselves in the future. The value created while working on a project will no longer be relegated to payments from their clients, as happens when working under a "work for hire" contract, but will be something that's spread over the lifetime of a work of art.

3. Artists will be able to derive more value from their work

I look forward to a day when fair and flexible contracts are well-established in the industry as a best practice. This will mean that, as creative people do their everyday work, they will also be building up a long-term, permanent stockpile of future value and potential opportunities. Just by going into work in the morning and setting to the task of expanding their clients' horizons, they'll be ensured that, in all likelihood, a lot of their hard work will fall back into their own hands down the road. And, they'll be able to use this work however they want: to build out their portfolios; sell prints; market themselves; license this work to other clients; incorporate it into their own personal, entrepreneurial projects; or remix it into new, experimental projects. The possibilities are endless β€” and I think this will make an artist's job much more interesting, exciting, and lucrative than it is today.

4. Clients will get a great deal, no matter what

If a client's business or project is successful β€” if the web comic gains a big following, the clothing line gets picked up by a major retailer, the board game tops the charts, the novel makes the best seller list, or the action figure sells out β€” the client will have the exclusive option, in the first 3 years of the project's life, to lock down all of their intellectual property. This will be plenty of time to see if the project is something they want to pursue long-term. Moreover, the client will get all the benefits that come from a fair and flexible contract: professional artists that are more willing to work with them, creatives who are more engaged and personally invested in their work, less expensive fees, and artists who want nothing more than for their clients' projects to succeed.

Is this a good contract for Artisfy?

Under a good contract, a client will be able to find professional, highly-skilled creatives who are willing to work with them and who will work harder than they otherwise would β€” all for a little less money than they would otherwise charge. The terms of a good contract will reward this behavior and discourage less well-meaning clients and artists from using it altogether.

I want to get your feedback on whether you think the contract outlined above will accomplish this mission in a way that's fair and lucrative for both artists and clients. Do you feel β€” as a client or as an artist β€” that this contract has your best interest at heart?

Please leave a comment below or email me directly. I'd love for your voice to be part of this conversation!

➭  Read the full contract: The Artisfy Contract.

Awesome, you made it to the end!

Here's a cute video (as promised):

The animated icons used in this post are from the amazing icon sets.