Become a Successful Designer - Protect and Manage Your Design Rights Internationally : Protect and Manage Your Design Rights Internationally 9783034610872, 9783034601016

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Become a Successful Designer

Imprint Translation from German into English: Rose Tizane Merrill, Berlin Art work, cover, and typography: Erik Spiekermann & Thomas Walsch, Edenspiekermann, Berlin Illustrations: Liv Andrea Mosdøl, Gvarv, Norway Layout: Sven Schrape, Berlin Proof reading: Karin Huck, Basel Project management: Robert Steiger (Birkhäuser) A CIP catalogue record for this book is available from the Library of Congress, Washington D.C., USA. Bibliographic information published by the German National Library The German National Library lists this publication in the ­Deutsche Nationalbibliografie; detailed bibliographic data are available on the Internet at http://dnb.d-nb.de. This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, re-use of illustrations, recitation, ­broadcasting, reproduction on microfilms or in other ways, and storage in ­ databases. For any kind of use, permission of the copyright owner must be obtained. This book is also available in a German language edition (ISBN 978-3-0346-7643-7) © 2013 Birkhäuser Verlag GmbH, Basel P.O. Box, 4009 Basel, Switzerland Part of De Gruyter Printed on acid-free paper produced from chlorine-free pulp. TCF ∞ Paper: Munken Print White, 100 g/m2 Typeface: Arnhem, Akkurat Printed in Germany ISBN 978-3-0346-0101-6

987654321    www.birkhauser.com

Joachim Kobuss Alexander Bretz Arian Hassani

BECOME A SUCCESSFUL DESIGNER PROTECT AND MANAGE YOUR DESIGN RIGHTS INTERNATIONALLY BIRKHÄUSER Basel 

For Alexander-Semjon and ß Joachim Kobuss For Nicole Zeddies, my puppy friend, in thankfulness and auld acquaintance. Alexander Bretz

Table of Contents

Preface



Joachim Kobuss

13

Introduction



Part I

Alexander Bretz

15

Exploiting rights

20

1 1.1 1.2 1.3

The legal framework for design in a globalized economy Creativity, law, and money Intellectual property rights relevant to designers International legal relations

2 2.1 2.2 2.3 2.4 2.5

Why successful designers don’t need intellectual property rights Shared space: A project Places without ­protection How to design ­without intellectual property rights Learning from those without rights Intellectual property rights vs. competitive environment

3 3.1 3.2 3.3 3.4 3.5 3.6

Principles for survival Margin of ­assessment What if your designs are copied? What if you’re accused of copying? So what does it cost? Arbitration and mediation Legal expenses, insurance, and financing of legal ­proceedings

37



Checklist for cease and desist letters

49

23

31

7

4 4.1 4.2 4.3 4.4 4.5

How the law applies to the ­different design fields The design disciplines: distinct, yet overlapping Communication design Industrial and ­product design Interior design Fashion and ­textile design

5 5.1 5.2 5.3 5.4

Negotiating contracts Your attitude, ­predisposition, and skills Negotiation ­techniques in ­practice Negotiating ­contracts: some real life examples Typical nego­tiation ­situations and how you should handle them 5.5 Your positive ­potential for ­aggression

57

6 6.1

77

6.2 6.3 6.4 6.5 6.6 6.7 6.8

The value of intellectual ­property rights When is the value of intellectual property rights assessed? Intellectual property rights on the balance sheet Using licensing ­contracts as a basis for value assessment Assessing the value of intellectual ­property rights in ­partnership ­agreements Trademark ­protection through a demerger Licensing ­agreements and insolvency Trademark licenses and abstract licenses Using intellectual property rights and licenses as collateral

Part II Creating rights

8

51

7 7.1 7.2 7.3 7.4 7.5

Design and product-affiliated rights – copyright and design rights What you need to know about designs and products Copyright Design patent Registered and unregistered design rights (EU only) Design and ­product-affiliated rights worldwide



Checklist for design and product-affiliated rights

86

89

113

8 8.1 8.2 8.3

Brand-affiliated rights – protecting trademarks and trade names Trade names: so what’s in a name? The trademark Brand-affiliated rights worldwide Checklist for brand-affiliated rights

115

129

9 Activity-related rights – provisions in competition law 133 9.1 Trade secrets: ­protecting yourself when pitching and presenting 9.2 Palming off: the trademark’s tough little sister 9.3 Cybersquatting: the rules of the game in conflicts over domain names 9.4 Misuse of patent and copyright as an issue of antitrust laws 9.5 Laws against unfair competition ­worldwide 10 10.1 10.2 10.3

Technical rights for designers – patents and utility models Patents Utility model Patents ­worldwide

Part III Wording contracts

145

154

11 11.1 11.2 11.3 11.4

The search for the ideal contract The contract as concept Law and ­Economics Sample ­contracts Customization of the legal ­consequences

157



Checklist for presentations

175

12 12.1 12.2 12.3 12.4 12.5 12.6

Defining your services in contracts The range of ­services Development of the design Granting of usage rights Client ­consultation Mediation ­activities Reimbursement of expenses

177

9

10

13 13.1 13.2 13.3 13.4 13.5 13.6 13.7

Calculating your fees The range of ­fee-based services The design fee The usage fee The con­­sultation fee Your commission for mediation services Reimbursement of expenses The special case pitch fee

187

14 14.1 14.2 14.3

Terms and conditions at your ­service What are “Terms and conditions”? Terms and conditions for contracts of sale The design ­contract

199

15 15.1 15.2 15.3 15.4

Liability and claims Avoiding liability – an example Contractual obligations Liability for design Typical liability risks for designers

207

16 International business ­transactions 16.1 The basics 16.2 Defining the international jurisdiction and appli­cable law in your contract 16.3 Is arbitration the solution?

215

17 Anatomy of a design contract 17.1 Purpose 17.2 License 17.3 Term 17.4 Compensation 17.5 Record inspection and audit 17.6 Warranties, acknowledgements and obligations 17.7 Samples 17.8 Copyright 17.9 Termination 17.10 Post-Termination rights 17.11 Infringements 17.12 Indemnity 17.13 Notices 17.14 Jurisdictions and disputes 17.15 Agreement ­binding on ­successors

219

17.16 Assignability 17.17 Waiver 17.18 Severability 17.19 Integration 18 18.1 18.2 18.3 18.4

The future of intellectual ­property rights An internationally harmonized legal system A uniform IP right for all forms of i­ntellectual property Protecting solely against ­commercial usage Employment of ­modern information technologies

235

Interviews



Introduction Interviewer Anja Engelke Alexandra Fischer-Roehler, Johanna Kühl Karsten Henze Fons Hickmann Arik Levy Eckart Maise Justus Oehler Sabine Zentek

243 245 249 251 253 255 257 259 261

Appendix



Acknowledgments Authors’ biographies International Survey Argentina Australia Brazil Canada China Denmark EU France EU Germany EU Great Britain EU India Israel Italy EU Japan Kenya

267 269 271 272 274 276 278 280 282 284 286 288 290 292 294 296 298 11





12



Korea Latvia EU Russia South Africa Spain EU Sweden EU Switzerland Turkey USA Glossary of Legal Terms Addresses Literature Index

300 302 304 306 308 310 312 314 316 319 325 329 333

Preface

My writing partner Alexander Bretz and I have spent many years ­consulting and coaching in the design industry. Together, we run an institute which aids companies and political institutions in ­finding, funding, and collaborating with designers – with the aim of safeguarding the design industry for the future. Nothing seemed more natural than to compile our experiences in dealing with the protection of design services into a book, in order to reach you – the designers – more effectively. The first step in this direction came with the German edition of Become A Successful Designer – Protect and Manage Your Design Rights Internationally. This was published in Germany, Austria, and Switzerland (as the second book in a series) in 2009. It quickly became clear to us that we also wanted to release an English-language edition. You hold the result of this decision in your hands. However, this is no mere translation from German to English, rather a complete reworking and rethinking, taking into account the prevailing circumstances for designers in the English-speaking world. To our great good fortune, we were able to win Paris-based American national, Arian Hassani, as coauthor. Having worked for many years at UNESCO, she is recognized as an expert on design issues at the international level. Canadian-born copywriter and translator Rose Tizane Merrill was a further asset, thanks to her wellhoned skills in communicating complex ideas in clear language. In all, it’s been a congenial collaboration which has brought several significant departures from the original German edition with it. To the legal and economic expertise essential to the German edition, were added further insights on the international political situation. In his introduction on the following pages, Alexander Bretz explains how designers can most effectively put this book to use. Upon finishing the German edition, we came to the conclusion that above and beyond the descriptions and recommendations on exploiting, creating, and wording contracts, we had to make clear our position on the future of design rights internationally. This can be found in Chapter 18 of this book. It’s a recommended course of

Joachim Kobuss

13

action for policy, administration, and all players in the design industry. We’re delighted to have had the opportunity to contribute to the current discussion on copyright law in this way. To this end, this book should be viewed as our offering to the discussion, wherein we express our position as it has been formed and informed by our experience. Suggestions and criticism are always welcome. Joachim Kobuss, Berlin, July 2012

14

Introduction Why it’s necessary to transform two red pedestrian stoplight men into two green ones, what this has to do with design and how it can be accomplished?

Alexander Bretz

At some road intersections in Germany you’ll find pedestrian lights that were actually designed for automobile traffic, with three lights arranged vertically. However, as pedestrians only really need two lights, one of the lights is doubled. I’ve always wondered why on these lights two red lights displaying a stiff, stern figure are used at the top, while there’s only one little green man running along at the bottom. It seems much more intuitive to me to have two green walk lights – and preferably at the top. I suspect that if such traffic lights existed in the USA, they’d do it that way around. There’s no need to dwell any further here on traffic lights and their relationship to German anxieties. However, metaphorically speaking, it’s precisely this shift from red lights to green ones that this book aims to achieve. Simply put: the big red light that so many designers see whenever the subject of law or lawyers comes up, should be switched to green. This book takes a different approach to other publications on the laws relevant to creatives and designers. With its help, you should begin to understand law as a crucial aspect of your profession as a designer – and maybe even begin to like it a teeny bit. Information has been brought together here from extremely diverse areas. Naturally, there’s information on design rights and licensing contracts, as well as advice on how to negotiate such agreements. But there are also discussions of why the current rules exist and if anyone really needs them. And all this, taking into account the situation worldwide: in Europe, the USA, and in a total of 23 countries around the world, significant to design: Argentina, Australia, Brazil, Canada, China, Denmark, France, Germany, Great Britain, India, Israel, Italy, Japan, Kenya, Korea, Latvia, Russia, Sweden, Switzerland, Spain, South Africa, Turkey, and the USA, of course. 15

It’s a book that challenges intelligent designers who understand that design illuminates the path to the future when it’s created by desig­­ners who see themselves as entrepreneurs – entrepreneurs who have perhaps the single most important quality to offer the world for the future: intelligent design. To contribute on this scale, you need to be legally fit – and for that reason you’ll also have to leave behind those lawyers – the majority – who are still all tangled up in their national legal systems. These guys are sure to find a lot to disapprove of in this book. But that doesn’t matter, because this book is for you. We recommend you work your way through it like a textbook, with highlighters and pencil in hand. We even offer you three ways to read this book to soften the experience: the nightmare, the challenge or the brownnoser trip. The nightmare trip works on the assumption that you really have absolutely no desire to delve into this subject, but have bought the book anyway, because it was some sort of penance inflicted upon you or because you felt obligated for whatever reason or because you’re one of those people who believes that if you put a book under your pillow its contents will be magically funnelled into your brain. In other words, you’re a hopeless case and you just want to read the bare essentials. It’s doubtful that this is something to be encouraged, but your fear of the issue obliges us to provide a way through the book for you that at least helps you learn the bare necessities. You should read chapters 1, 2, 5, 7, and 11. Make no mistake – it won’t be easy, because these are chapters presenting fairly sophisticated content in a concentrated way. But you should really be punished in some way if you’re only going to read so little of the content. The challenge trip will also be tough, but you’ll be rewarded with considerably more knowledge. It works like this: in addition to the nightmare trip, read chapters 8, 12, and 13 – in other words, the five chapters of the nightmare trip plus the three of the challenge trip, in sequence. Then stop and ask yourself whether you shouldn’t just read the rest of the book – afterall, you’re already about halfway through! And now for the readers we like the most: the ones who aren’t afraid of being called goody-two-shoes by the nightmare and challenge gang. This journey consists of simply reading the book in full. There are three possible ways: following the order of the chapters, following the nightmare-challenge-everything-else order or simply choosing your own adventure. And does not absolute freedom make for real adventure?

16

If some stuff in this book seems a bit odd to you or others tell you the book isn’t totally kosher, just remember that as a designer you’re different from a lot of people. And that’s why you and your talents will be needed in the future – like all those others who Wolf Lotter dubs the disturbeds. Wolf Lotter: The Disturbeds. Germany embarks on a search for the creative economy, the key to the information society ... in the process, it discovers a class that somehow doesn’t fit the plan. In: brandeins Nr. 5/2007, p. 53:

Creatives are creative because they respond very openly to­sensory stimuli of all kinds. In the average brain, a mechanism called latent inhibition ensures that external stimuli are more or less blocked. People with severe inhibitions are virtually imperturbable and reluctant to be distracted from their routines. The unknown, the new – it rolls over them like a drop of water across a fresh coat of glossy paint. The mind of a creative person is wired quite differently, their latent inhibition only very faintly developed, the mind open 360° degrees – ready for anything, round the clock. To simplify matters, we’ll call the first test group from now on the “inhibiteds” and the second, that of the easily excitable creative people, the “disturbeds”.

Naturally, you’ll ask yourself why there are no law texts or model contracts printed in such a great book. Tell me, have you ever actually read this stuff? Surely, you only read the odd model contract if there’s no way to avoid it. We’ll come back to that later, incidentally: how damaging it can be when you rely on texts that have been worded by others. That’s the reason there are no model contracts, and certainly no law texts in this book. If you really want these, you can find enough of them elsewhere on the market. Which brings us to a final piece of very important advice: please take note that this book reflects the opinions of its authors and may not be applicable to all situations. Many situations may appear ­similar on the surface, but actually differ from one other in key legal respects. What’s more, the laws and jurisdiction don’t just ­differ from country to country, but also change over time. So it may be that information in this book has already become out of date at the time of publication. Although we’ve done everything possible to avoid mistakes, the authors and publishers can assume no ­responsibility for any readers’ acts or omissions based on the information or advice in this book. Our readers should be very careful in ­applying

17

the information or advice in this book and, as a precautionary m ­ easure, seek the support and counsel of appropriate experts. To sum it up: please use your brain at all times and be careful!

18

I

Exploiting rights

21

1

The legal framework for design in a globalized economy

The systematic development, use, and enforcement of intellectual property rights are still very much in their early stages. This not only affects large corporations but it also severely impacts creatives themselves as our experiences in advising and coaching designers and design service providers have shown. This finding is especially disturbing given that all the livelihood of designers hinges on their capacity to effectively manage their intellectual property rights. This chapter is about how earning money as a designer works, and how it can be improved with relatively little effort. It is an in-depth investigation on a commodity no one can spare to lose: income. Alexander Bretz: Before I began studying law, I did an apprenticeship in publishing. In our training, we had a course called Subsi­diary Rights and Licenses, so naturally I began searching for the course that addressed primary rights, but I couldn’t find anything in the syllabus. I asked our friendly and competent instructor what primary rights were, given that we were concerning ourselves with Subsidiary Rights and Licenses. Despite his usual easygoing demeanor, he answered curtly and somewhat indignantly, Copyright law, of course! All of a sudden I had the impression that I was behind everyone else, and that I was lacking an essential piece of general know­ledge that embarrassingly came to light with my misplaced question. Of course, I didn’t have the guts to admit that I actually didn’t have a clue of what copyright law consisted. So I bought myself books on copyright law, which I couldn’t understand at the time because they were legal textbooks that assumed substantial background knowledge, and I trembled with fear up until the final exam, terrified that someone would ask me about the primary law. I’m happy to say that no one did. In the meantime, I thankfully know a bit more what it’s about now. This is why this book begins with a gentle approach to what kind of rights we’re actually talking about. Primary rights are not really as 23

simple as my professor made them sound, so don’t doubt your intelligence if you don’t understand right away. Intellectual property rights for designers can be like bitter medicine: the first encounter might make you cough a lot, but you might still depend on it for your health. You probably didn’t purchase this book out of a love for law, but you may find that law is much easier and more interesting than you think – not to mention easier to swallow than bitter medicine! 1.1 Creativity, law, and money

The cultural and ­creative industry

Constitutional right

Whether you’re self-employed or an employee, as a designer you’re part of the economic system. Even the most artistic or experimental approach comes down to the necessity of survival in the end. Individuals who earn their money through the exploitation of design-­ oriented activities, at the end of the day are dependent on the money they earn through the value of their work. But what do you actually get paid for? Your advice? Your strategy? Ideas, sketches or prototypes? Effort? The time you need for this? In theory, it’s simple. Lawmakers provide you with copyright laws that allow you to define for a certain time period who can use your intellectual efforts for how much money and in what way. You can completely forbid the (re)production of your designs, allow it in individual cases at a cost or regulate it in some other way. One can also interpret it as a plot of land with specific boundaries that lawyers and policymakers put at your disposition for a limited time frame. You can choose to sell this plot, rent it as it is, or make it more lucrative through construction. Policymakers, lawyers and economists have gone out of their way to establish intellectual property rights not because it’s in the interest of designers, but because it’s in the interest of society at large. After all, the growth and development of the global knowledge economy, including the cultural and creative industries, is based on the maximization of creative production in all forms. Creativity is an integral human attribute that is protected by the constitution of most free and democratic societies. Following this train of logic, intellectual property rights legislation merely carries out the tenets of the constitution. Constitution of the United States of America, Fifth Amendment:

…   nor shall be any person … deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation. 24

Lawrence Lessig, the American lecturer in constitutional law and Stanford University professor, takes a fundamental approach to this question. Lessig claims that copyright legislation is the prime enemy of creativity and recommends replacing it with a system that allows free usage after payment of a one-time fee (or ticket), ­which has given rise to the so-called Creative Commons movement. According to Lessig, the current copyright law system and other intellectual property laws have up to now only led to an enormous expansion of more derivative laws, which have been of no use to ­individual creators.

Open source

Lawrence Lessig in an interview with the Süddeutsche Zeitung, 22.12.2006:

There has been an explosion in recent years of so-called laptop music. Songs and individual fragments of songs are mixed via digital media and used to construct completely new songs. However, this is forbidden, according to the U.S. courts, when permission has not been obtained. And so now we have teenagers sitting in Harlem, making fantastic music which they don’t dare release because it’s unbelievably expensive to clear the rights. Many of them ignore the legal situation, others give up, and not even the music teachers in the schools teach them how to deal with it, because, well, you shouldn’t teach children illegal things. It’s just ridiculous.

Analogous open-source approaches already exist in the area of design, for example in furniture design. The Web site of the Open Design Club (address in Appendix) offers designs with detailed construction manuals even for commercial production under the con­ dition that the name of the designer is always mentioned on the product. Widely available sewing patterns from decades ago also serve as good examples of a widespread democratization of design.

Open Design

One of the most important questions you must address as a designer is what intellectual property rights are currently available and which ones are relevant to you. Here is a preliminary overview. A glossary of legal terms can also be found in the Appendix.

1.2 Intellectual property rights relevant to designers

>> Copyright – protective right of the individual’s intellectual ­creation, thus, important for your designs. >> Registered design right – protective rights over the (optical) ­presentation of products obtained by application to the ­administrative authority.

25

>> Unregistered design right – only possible in the EU, these are the protective rights over the (optical) presentation of products, granted automatically upon disclosure. >> Industrial design patent – protective rights over the (optical) presentation of products, obtained by application to the administrative authority. As explained below, here originality must be proven via rigorous scrutiny. >> Trademark – a distinctive sign or indicator used to establish that the products or services bearing the trademark originate from a unique source, as well as to distinguish these products or services from those of other entities. A trademark may, in most places, consist of a name, word, phrase, logo, symbol, design, image, or a combination of these elements. >> Patent – a protective right over technological inventions. This will only be relevant to you in rare cases. In continental Europe, these rights are more or less engineered in the same way (and relatively widely differentiated). USA

A possibility to simply register a design does not exist in the United States. The design patent, which is statutorily regulated there, doesn’t play a very big role in practice, because the Patent Office reviews it in a longer (and quite expensive) procedure which may also cause infringement proceedings by competitors. Due to the reviewing process so far more than 70 percent of design patent applications have been rejected in contested infringement proceedings.

Great Britain

The law in Great Britain is still very different: while it’s true that even before the EU’s uniform regulations there were registered designs (and nonregistered designs), like in the U.S. there is still the basic concept of common law (as opposed to the civil law in ­central European states). The difference between the two systems is a bit like the difference between building a house in the traditional way with walls bearing the load and the modern way to build a concrete skeleton first and then adding walls as a skin. But don’t worry too much: in both cases eventually you have a house.

Japan

26

Japan bases its civil law system on German law. Because Japan has booming design and technology industries, it has been forced to develop a highly sophisticated intellectual property rights system. Designs are protected from identical copying for three years; however, this has become progressively more difficult to prove. Appli­cations

for registered design rights are, as in the U.S., formally reviewed for form and content, causing various problems in practice. Despite all rumors to the contrary, China now has commercial law with intellectual property rights that are largely in line with international standards. Although admittedly for the time being only on paper. This highlights China’s classic problem with intellectual property rights enforcement rather than legislation. In order for an injured person to seek justice, they have to rely on the administrative bodies which tend to take action only in the bigger cities. However, plagiarists and intellectual property violators are frequently found outside of the the big cities, which easily slip through the cracks. The problem in China is therefore not the lack of rights, but their reinforcement.

China

But of course in the context of a globalized economy it doesn’t just come down to the various national laws of the different countries. It also depends on the legal relations and the handling of laws between countries. Without going into too much detail at this point, there are essentially two different models for international legal ­relations in the realm of intellectual property rights, namely bi- and multilateral contracts in which the involved countries agree on ­certain (minimum) standards. There are also contracts between countries where an independent organization is created to take on specific functions for all the member states.

1.3

The model of creating an independent organization by several countries is best exemplified by the EU, which is already on its way to becoming a full-fledged subject of international law even though it is not one unified nation. Since its founding, most of the legal matters pertaining to intellectual property rights for designers have not only been established but also harmonized. The most important agency for designers in the EU is located in Alicante, Spain, and it is called Office for Harmonization in the Internal Market (abbreviated OHIM, or in Spanish: OAMI). This agency is only responsible for EU-wide registration of design rights and trade names, not for EU-wide patents. In fact, there exists no EU-wide patent office – as of yet (despite long-lasting discussions).

European Union (EU)

There is a wide range of international organizations that deal with intellectual property rights, including the World Intellectual Property Organization (WIPO or, in French, OMPI), and the World Trade Organization (WTO), who in certain cases can have a considerable

Worldwide

International legal relations

­organizations

27

influence on the international validity of a trademark and ­associated legal matters. The principle of equal treatment

Progress in legal systems

Method: Helping you to help yourself

28

Contracts that have been ratified by two or more countries also play a large role. Later we’ll discuss this in detail. Here we’ll just ­handle the principle which is mentioned in almost all of these contracts, namely the principle of equal treatment with nationals. This means that the intellectual property rights of a citizen in one contracting nation will be protected in the same manner as citizens in the other contracting nation. This sounds good, but it really only works when the participating countries have an essentially similar standard of intellectual property rights. Otherwise – and even in the case of totally different systems – such an agreement is to the advantage of the country with the lower standard of intellectual property rights. Regions with relatively complex and differentiated legal systems are in general somewhat at a disadvantage to those with a more ­simply legal structure and lower protection standards. It is not so much a lower standard of protection but the fact that simpler rules add to the usability. However, over time these competitive disadvantages level out and in the end also lead to more complex structures. In this process (which has to be seen over decades) the different legal solutions are also played off against each other by people who intend to profit from this. We are still in this process towards a system worldwide, so for national legislatures it is still a big question whether to have their legal systems more finely tuned and the people running from it or vice versa. A recent example can be found in U.S. copyright law where, until 1976, in order to be copyrighted, you had to send in your work to be registered. However, with time the law leveled out internationally and since 1977, copyright in the U.S. is granted automatically, without product or application submissions. Even though submission and registration processes are still possible and even recommended, their removal as a requirement was a fundamental paradigm shift in American copyright law. This demonstrates the perpetual evolution of the rule of law and legislation as it adapts to competitive forces in the environment. International topics will be addressed again and again in the ­following chapters of this book. Don’t worry: it’s not about bombarding you with oodles of information about foreign countries that may not interest you in the least. Rather, this method of Helping You to

Help Yourself should enable you to get your bearings in most circumstances, even in relatively unfamiliar conditions. In any case, seek the advice of a lawyer specialized in international design law concerning issues that cross international jurisdiction! Now that you’ve gotten some preliminary insights into the legal apparatus at your disposal, the next chapter will introduce you to a radical new world where you’ll learn how to design your own rules for the optimum legal protection of your intellectual property. In the Appendix you’ll find an overview of the intellectual property rights system in several, particularly relevant countries. You’ll find more information on the regulations in force in each country and the addresses of their representative agencies and authorities on the Web site of the World Intellectual Property Organization (WIPO, see Appendix). >> IP rights allow you for a certain time period to determine who can use your intellectual efforts for how much money and in what way. >> The existence of such rights is very often explained by the u ­ sefulness of creativity for society. >> The Creative Commons movement stems from the notion that intellectual property rights diminish creativity, advocating for a system that allows free usage of intellectual property after a one-time payment. >> There are four groups of rights which are important for ­designers: >> design and product-affiliated: copyright, design patent >> brand-affiliated: trademark >> activity-related: laws against unfair competition >> technical: patent, utility model >> Copyright, which helps to protect the right of the individual’s intellectual creation, is one of the most important forms of intellectual property rights for designers – but not available for them in all countries. Not at least because of the uniformity of trademark laws in most countries worldwide the importance of trademark protection is growing rapidly. >> Designers in countries or regions with relatively simple legal structures are often at an advantage to those working in places with relatively complex and differentiated legal systems.

In summary

29

2

Why successful designers don’t need intellectual property rights

This chapter is about how you can best use the law to your own advantage. Those of you who find this approach unusual or even strange are probably under the mistaken impression that the law is static. This attitude can also be attributed to many lawyers who don’t have much more to ­offer than references to centuries of legislation and scholarship. We want to align ourselves with Thomas Jefferson. He recommended a revolution every two or three generations. Whether intellectual property rights are absolutely necessary for designers can best be explored by considering a situation where a designer has no intellectual property rights ­what­soever. In 2006, the town of Bohmte, in Lower Saxony, Germany, launched a project based on the so-called shared space philosophy. All traffic rules were abolished and all road users, from pedestrians to bicyclists, cars, busses, and trucks, had to share the road equally. The goal of this project, which had previously been launched in numerous towns in the Netherlands, was to explore the effects of fewer and more flexible regulations on the use of public space. ­Incidentally, the project is being supported with funding from the European Union. The fact that the abolition of rules apparently requires money has nothing to do with our subject, however. Something else is of interest here. In Bohmte, as well as in the other municipalities taking part in the project, a strong trend became apparent immediately. The number of accidents fell dras­ tically and traffic on the whole ran more smoothly. According to s­ urveys, there haven’t been any serious accidents in the 107 shared space towns in the Netherlands since. However, it should be noted that shared space projects have only been systematically e­ valuated since 2008. The Bohmte project sets the stage to introduce the concept of shared space in the realm of intellectual property rights. Take a moment to think about what would happen if there were simply

2.1 Shared space: A project

31

no intellectual property rights at your disposal. Would you stop designing? Would you, consumed by fear and frustration, change your career? As the last chapter’s findings indicate, probably not. But what would such a situation really be like? What new devel­ opments could come out of this unregulated, thus free and unen­ cumbered, point of departure? More about this from a revolutionary point of view can be found in Chapter 18. 2.2 Places without ­protection

32

Before it all becomes too abstract, it should be said that there are most definitely areas where designers have absolutely no intellectual property rights. For example, in the U.S. where available, fashion designs can theoretically be registered as so-called design patents. However, the application has to meet the same criteria as a regular patent, which we pointed out in the previous chapter will be rejected more than 70 percent of the time. Thus, copyright is simply not a consideration for fashion designs in the U.S., essentially meaning that American fashion designers work without intellectual property rights. You’ll find an overview of the intellectual property rights system in the U.S., as well as other relevant countries, in the Appendix. In Germany, one of the most regulated countries in the world, there is one area where designers are left out in the cold without any intellectual property rights, namely Web site design. At best, individual elements such as text, photos, logos, and programming are copyright protected or protectable, and this may even include the final visual results. However, the communication design in its entirety, including its templates, is virtually unprotected and unprotectable. You’ll find an overview of the intellectual property rights system in Germany, as well as other relevant countries, in the Appendix. More details on the difficulties of protecting works of communi­ cation design and Web sites can be found in Chapter 4. Nevertheless, fashion designers in the U.S. and communication designers in Germany manage to survive. There are, incidentally, even more examples of unprotected intellectual property where huge sums of money can be made, including television series formats, cell phone ring tones or book editions where the copyright term has expired. How is this possible if intellectual property rights are ­supposedly the most important prerequisite to creativity’s economic usefulness? If the reasons for having intellectual property rights were really so solid, none of this would be possible. So why does it work after all, and can you draw conclusions from this that can help your own dealings with intellectual property rights?

Yes, designing without intellectual property rights does work, for two reasons. First, the possibility to fall back on other protective rights exists in more or less all legal systems. It’s not without reason that brands are so important in the U.S. It’s true that the triumph of branding and the use of logos have their roots in marketing, but the fact that American fashion labels prominently display their logos is a direct result of this particular legal situation. In the U.S., the socalled Trade Secret also plays a very powerful role by prohibiting the unauthorized disclosure of business secrets. There are plenty of other international examples of legislative safety nets, which will be explored throughout this book. For now, it’s just important to note that, whenever possible, you should thoroughly investigate the existing options for protection in a new market. Don’t necessarily assume that the most obvious form of protection is the one best suited to your needs. Second, much can be controlled through contracts, which is exactly what’s done in the U.S. In this way confidentiality, obligations to perform, and restrictive covenants can be contractually defined. The contract might also simply be used to explain in detail what a client receives without the necessity to establish any particular legal basis. These two factors should provide you with some food for thought on how to optimally protect yourself in different legal systems worldwide while maintaining your calm. Furthermore, they can help you to establish another, relatively simple, tactic for international survival, learning from those without rights. Therefore we call this tactic: Learning From Those Without Rights. If all designers walked around pretending there were no intel­ lectual property rights, they would be forced to better secure their rights themselves. The aim is to transform subconscious demeanors that preclude accidents in the shared space projects into active defensive strategies that work in all systems.

2.3

Learning from those without rights means two things: First, learn what you can from the range of legal alternatives at your disposal. Problems with protection in a broad spectrum of design fields are pretty much the same everywhere, yet legal systems are different and people find different solutions. Legal systems are also in competition with one another, which means that they will begin to resemble each other more and more over time. Simply take your own precautions and help yourself to what’s legally available.

2.4

How to design ­without intellectual property rights

Learning from those without rights

33

We’re thrilled with the idea that the future simplification of legal systems will enable us to spend significantly less time in future editions of this book on questions of law in order to have more time for inspiring revolutionary and innovative topics for every generation (Jefferson again). Second, set yourself up to get a slice of the action. This means, above all, taking care of your own legal problems. The more that is spelled out directly, and the more you anticipate ahead of time, the better your contracts and the greater your future prospects. You can handle this very effectively yourself because you are best aware of your special requirements and situation. This allows you to easily draw up contracts yourself and be taken completely seriously by your contractual partners and lawyers. One positive side effect is much greater independence, which is what really sets you free. From the above you can derive the following two core principles for your practice, and you’ll find more pertinent information about them in the following chapters: >> Document everything – file as much as is necessary and as little as possible. You’ll find the essential information on this in the Part II of the book. >> Contracts – regulate as much as possible yourself. You’ll find out what this is all about in the Part III of the book. Before you turn away shuddering, asking yourself if you, a desig­ner, now have to transform into Super Lawyer, remember that perfect conditions don’t exist! In your daily interaction with regulations, it’s not a question of how you manage them or even ignore them. It’s about using them to find the best possible solution for yourself and others. Designing rules

34

You know from your own creative activities that the optimum solution is always relative. This approach can and should be applied to all legal solutions as well. This means that handling legal problems is nothing more than applying design rules. Law is relative. It depends on the circumstances and requirements. You have to take it into your own hands to find an ideal solution. But you’re a designer, you can do that.

So is it accurate to say that you don’t need intellectual property rights to be a successful designer? To answer this question we return to the example of fashion designers in the U.S. Clearly, the absence of intellectual property rights causes greater economic competition where sometimes not the better but the more financially advantaged competitor wins out. The reason intellectual property rights exist is not because creatives wouldn’t work without them, but it’s a way to honor the personality and the efforts of creatives. The reason is highly political in nature. Creative businesses are delicate seedlings in the beginning, and they are prone to collapse easily when there’s too much economic uncertainty. If a society wants to ensure the fair founding of creative enterprises, it has to provide intellectual property rights that guarantee maximum protection of designs and start-up companies with a minimum of prerequisites. Even if EU policymakers have yet to come up with the best solution, they are much closer to providing this type of protection than any other place in the world. We should always be suspicious of prophets promising huge freedoms, as has been the case in the public debate over the free use of cultural works on the Internet. This debate is nicely illustrated in Steve Jobs’ (CEO of Apple) essay Thoughts on Music, published on February 6 th, 2007, on his company’s American Web site. Jobs’ essay argued that Apple was always concerned with the freedom and self-fulfillment of the creatives of the world, but unfortunately it was forced to sell music through its iTunes Store with D ­ igital Rights Management (DRM) because the evil music industry demanded it of the company. Of course, Jobs didn’t neglect to mention that there are only four huge corporations in the music industry that control over 80 percent of the world’s music market. So whatever can Apple do? Apple can continue along the path it has been on so far (but then why write this essay?). Or it can make its DRM more widely available and license it, if you will, across the board to everyone for a few cents. But then someone would certainly reveal the security codes because that’s just how naughty users are. This would mean that Apple would be forced to further develop newer and ever better codes, which would cost unbelievable amounts of money, leading Apple to increase its prices again against its will, so to speak. Well there’s another solution. We could get rid of DRM altogether. Well yes, of course, we don’t want to destroy the music industry, but that would really be the best solution. So, away with it!

2.5 Intellectual property rights vs. competitive environment

35

Well, it’s not hard to guess what all the news tickers were showing at the beginning of 2009. The four big music corporations had given their permission to abolish the use of DRM in sales of music files on the Apple iTunes Store. Suddenly so much freedom! But what does this freedom do for individual creatives? It proves the wisdom of the old saying – be careful what you wish for, you may just get it. Manage your ­intellectual property rights

In summary

36

Now you’ve read what’s relevant to handling your intellectual ­property rights. No regulation is ever absolutely right or wrong, but always relative. This is true of national laws as well as stipulations you draft yourself in contracts. This means you will encounter changing circumstances and unpredictable situations where oftentimes given regulations won’t be of much help. The best thing you can do is make your own decisions about how to effectively deal with each case. After all, who can do that better than you!? Lastly, don’t forget your creative strength and your intention to be original and innovative. Take your entrepreneurial position ahead of exploiters, dealers, and mass producers. >> Designing without intellectual property rights works because 1) the possibility to fall back on other protective rights exists in more or less all legal systems, and 2) much can be controlled through contracts. >> Learning from those without intellectual property rights is a great tactic for international survival. >> The more that is spelled out directly, and the more you anticipate ahead of time, the better your contracts and the greater your future prospects. >> No regulation is ever absolutely right or wrong – it’s always ­relative. The best thing you can do is make your own decisions about how to effectively deal with each case. To help you do this, as much as possible try to 1) document everything, and 2) ­regulate your contracts yourself.

3

Principles for survival

What should you do when your work is being copied? What should you do if someone accuses you of copying their work? The proper conduct in the event of a conflict with someone else’s rights is often just as important as being in a tactically good position. This chapter is designed to provide you with guidelines to help you deal with disputes over plagiarism and similar infringements.

Even design professionals with years of experience accept the ­assertion that one may, up to a certain percentage, copy other designs. The exact percentage tends to fall into a relatively wide range. Alexander Bretz: I routinely ask the basis for their ­calculation: What constitutes 100 percent? What parameters are you using? I’m almost always met with baffled silence. Assigning specific percentages as to how much is allowed to be copied is silly and there’s no clearer sign of incompetence in this field. Nevertheless, the question of what 100 percent would be can be rather illuminating, if reasoned to the end. Alexander Bretz: Many years ago, one of my clients wanted to ­convince me of the supposed percentage rule’s validity. He proposed to organize his designs, spice containers with a stainless steel sprinkle function, according to certain categories, he con­sidered to be representative of his creation, namely the cylindrical form, stainless steel material, height and diameter, sprinkle function, and more. If he could establish, or not establish, respectively, identicalness or resemblance for each of the above categories, he could then specify a percent value for each of them which would add up to the total value of 100 percent. I tried to make it clear to him that the determination of the ­cate­gories was already random and thus ineffectual. If, for example, the dimensions were not considered as one category, but rather height and diameter as two, or height, width and depth as three,

3.1 Margin of ­assessment

37

the relative proportions of the final product could vary greatly from the original. The same was true of almost all of the other points. For instance, one could easily differentiate between different shapes and opening placements for the sprinkle function. Naturally there were many more categories that had not occurred to him, manufacturing techniques to name just one. Such supposedly exact rules are always biased and therefore useless, unless they are used as ammunition for opposing argumentation. In the legal reality, it comes down to abstract terms and definitions such as newness, character, and uniqueness of the object, or danger of mistaken brand identity. Needless to say, there’s always an enormous margin for interpretation that cannot be expressed in exact percent terms. You’ll find more detailed information about intellectual property rights and how they’re defined and assessed in Chapters 7 to 10 in Part II of this book. You can never really be sure before you enter the courtroom whether what you’re dealing with is a matter of plagiarism, copying, improper brand usage, or some other related infringement. However, you can find out what is essential in these kinds of disputes. This chapter is not about providing you with an instruction manual for independently solving serious problems with your intellectual property rights. Rather, it’s a sort of first aid kit that gives you lots of basic knowledge and necessary guidance until the legal paramedic arrives. This information should in no way be considered as a replacement for proper, professional legal treatment! We’ll tackle the following important situations, questions, and eventualities: >> >> >> >> >>

3.2 What if your designs are copied? Your entitlements in cases of copyright infringement 38

What happens if your designs are copied? What happens if you’re accused of copying? What kind of costs can you anticipate? How should you use courts of arbitration and mediation? How should you deal with legal expenses, insurance, and financing of legal proceedings?

Let’s start with the instance that your designs, products, or trade name have been copied. Plagiarism is the term legally applied when someone passes off someone else’s intellectual property as their own. If your intellectual property rights have been violated by ­copying, the first legal objective is naturally to put a stop to this copying immediately. In judicial decisions, injunctive reliefs or injunctions

are stated as an obligation, and they are usually accompanied by the threat of a penalty if violated. In plain language, it says: Cut it out. If you do that one more time you’ll have to fork over a lot of cash or you’ll be locked up. The business of locking up can be a bit tricky since the judgement creditor (as you are called if you win an award against someone in a civil suit) has to pay the costs of imprisonment upfront, which are comparable to four-star hotel accommodations. As a result, the practical impact of detention threat is virtually nil. Frequently though, damages incurred prior to the injunction have to be settled as well. You’ll want to take care of all adverse aspects. In the design sector, this usually means the destruction of any potentially still-existing plagiarized pieces in the hands of the copier, as well as compensation for all damages suffered by you. The basic idea is to force the copier to clear up the damages inflicted on you. As a rule, damages consist of a concrete sum of money that is payable by the liable party. When it comes to damages, people seem to have all kinds of wild fantasies, running the gamut from huge lottery jackpots to ultimate revenge. This is as good an opportunity as any to clear up some misconceptions. 1. Strictly speaking, damages are only awarded when the injuring party is not only to blame for the damages but also caused them. In legal terms, to cause means: if you dismissed the source of the damage from your thoughts, the damage would consequently disappear – if the damage persists, then something doesn’t quite add up about the source. To cause something implies that the injuring party acted negligently or deliberately. This is usually not difficult to prove in cases of copying and plagiarism, however, it can be much more difficult when dealing with accidental similarities. 2. Damages are supposed to put the injured party in the position they would have been in had the infringement of rights not occurred. So it’s neither about a profit, as many clients tend to think, nor about taking the evil plagiarist to the cleaners. Damages always work on the assumption that actual damage occurred. The courts will make sure that this is quantifiable, or at least to some extent assessable. 3. Damages in the intellectual property rights domain (aside from reimbursement of clearly verifiable damages, including lawyer’s fees) can be calculated according to the injured party’s preference in one of three ways: >> The liable party must compensate the injured party’s profit losses. 39

>> The liable party must compensate any profit gained. >> The liable party must pay a lump-sum compensation based on standard licensing fees plus a penalty charge of between 30 and 100 percent. It’s important to note that with the first two points we’re talking about net profit, not gross income. Therefore it’s not enough to know merely what gross figures are under discussion, net earnings must be calculable. This is often difficult in practice, which makes point three the preferred option. In the U.S., the damages calculated may then be tripled in order to punish the liable party (so-called punitive or treble damages). Right of access to information

Assess your position

40

In order to be able to make a reasonably appropriate decision, you will potentially require more information on the sales figures or the revenues of your copier. These can be legally acquired by obtaining a discovery (a forced disclosure). A right of access to information always presupposes an entitlement to damages; therefore, if you can’t demonstrate that you’re entitled to damages, you definitely can’t claim this right. Before you rush off with guns blazing, you should first consider very carefully if the actions of the alleged injurer of your rights are actually illegal. Because, as you will discover after scrupulous reading of this book, this is often not as easy to prove as it may appear at first glance. The following steps have proven to be an effective way to assess this: 1. Try to briefly describe the potential violation of your rights in your own words, to another, preferably uninvolved, person. Pay attention to their face and reaction. Any frowning, requests for clarification, or a lack of understanding on their part should definitely set off alarm bells. In a legal battle, you’ll have to explain it to a completely uninvolved third party (for example a judge), and if one person can’t follow you, then … 2. Consider what evidence you have to prove that plagiarism has been committed. Original pieces are better than photos and photos are better than witnesses. Think about your own profession and imagine you had to show an uninvolved person what your work is about. You would surely prefer to pull out an original piece, or at least a visual representation. That’s how it works in legal disputes as well, the better your presentation, the better your chances of ­success.

3. Consider what you want. Use the legal entitlements mentioned earlier as a guide. You also might want to give some thought to how much to ask for in damages, and whether at the end of the day it’s really worth pursuing financially. Even in a best-case scenario, where you ride out all of the legal battles triumphantly, you usually still have to finance the legal proceedings yourself. 4. In any case, engage the services of a lawyer specialized in these kinds of conflicts! Take this advice seriously. First, because it’s not always recommended in many other places in this book, so when it is mentioned take it as a very genuine piece of advice. Second, there’s a great deal of lot of truth in the saying, Defend yourself and the devil will be your advocate. Even lawyers seek the representation of colleagues, because they recognize that their own perceptions can never be objective enough to secure success in a court of law. One last tip, if your lawyer advises you against taking legal action, believe them. Lawyers usually have no interest in foregoing legal action, unless they are sure that it translates into wasted time and effort. Getting a second lawyer’s opinion is only worthwhile when the first one attempts to give you the impression that everything will turn out in your favor, which simply won’t be the case. You’ll also find these steps in the form of a checklist on correct procedure in handling intellectual property rights infringements as appendix from this chapter. It’s still important for you to know roughly how things will proceed in the hands of your lawyer. First of all, they’ll write a letter in which they accuse the other party of a precise infringement and call on them to desist. This letter is appropriately called a cease and desist letter. This letter normally also includes a cease and desist declaration, which is usually a preformulated text the injurer can (and should) simply fill out. In this declaration the suspected infringer (as your poor opponent could now be called) promises not only never to do again whatever it is they’ve done to receive the letter, but also to pay a sum of money for any future noncompliance – this is called a contractual penalty. There are generally four things the your suspected infringer can do when they receive a warning notice, summarized as: white flag, tortoise, rooster, or ninja. In the white flag option, your opponent admits defeat and sends back the signed cease and desist declaration. Your lawyer will then send them a closing bill (if it was not already included with the warning notice), and with that the matter is usually closed for you at this point.

The legal procedure

41

In the tortoise version, the suspected infringer doesn’t do anything. The tortoise can be the correct reaction when the opponent is convinced of their innocence or sees the claim as being unfounded. It might appear harmless at first glance, however, they are allowing you to walk straight into a trap, since this maneuver forces you to take the next step and go to court. If you’re not successful in court, you’ll end up with bigger damages than if they had just clearly explained everything to you from the start. The rooster version is your opponent proudly crowing (ideally in writing!) across the barnyard: Now listen to me, you have no claim against me! It’s plucky, but tactically not very clever, because such ­letters of defense usually fall on (your) deaf ears. They can even be used against the writer as an assertion. Let’s say your opponent responds to an alleged copy by writing, That’s not a copy at all! If then the court, possibly with the assistance of an appraiser, reaches the conclusion that it is indeed a copy, you can at this point use your opponent’s earlier assertion to prove their intent, and thus get awarded your damages more easily. This leaves the ninja version, which the opponent uses when they feel extremely confident and decide to proceed aggressively. In this case, they simply turn the tables and file a suit against you for having wrongfully accused them of an unlawful act. This leaves you with no other option but to prove your claim in court. It still remains to be said how the story continues in the tortoise and rooster versions. As mentioned, in both of these cases your next step leads to court. Either your lawyer now files for a temporary restraining order (TRO) – although that only works when directly linked to an injunctive relief – and it prevents further damage only temporarily; or they file for an injunction or injunctive relief right away, which enables the court to make a conclusive ruling about the lawfulness or unlawfulness of certain behavior. If you weren’t convinced of the necessity of legal advice before, hopefully by now you’ve changed your mind. As you can see, the p ­ roceedings are not exactly laid-back, and there are lots of potential pitfalls, even for the most conscientious designer. The fine line between law and justice can more often than not be drawn based on how the legal procedure is managed. 3.3 What if you’re accused of copying?

42

Knowing what to do if someone else accuses you of copying their designs or compromising their brand identity is just as, if not more, important than knowing how to press charges. You already have a

general idea of how the process works, so here are just a few more tips on how to conduct yourself on the other side. In most instances, you’ll notice that someone is angry with you even before the formal cease and desist letter is issued. For example: you might be proudly displaying your work at a client’s stand during a trade show when another designer approaches you, red in the face, claiming that your work is just a lousy copy of their design. This kind of situation is highly unpleasant and bad for you for two reasons. First of all, it sheds a negative light on you in the eyes of your client. Even if the accusations are quickly laid to rest, a certain aftertaste will linger. Second, you might end up saying things in front of witnesses that could be damaging later on. As with all exceptional situations in life, you should try to stay calm. Don’t let yourself be drawn into a discussion, and don’t sign anything presented to you in such a situation. If there’s any substance to the matter you will subsequently receive the aforementioned cease and desist letter. You learn about the allegations against you for the first time in this letter. This is the time to seek get some clarity. Apply the same checklist used to consider whether to make a claim against someone else, but in reverse. Try to do this as quickly as possible, as time is of the essence in these conflicts. 1. Again, try to describe any possible infringement as briefly and factually as possible to an uninvolved third party. Observe their ­reaction and take it seriously. If they don’t understand at all what you’ve been accused of, that’s already a good sign. But be careful, it’s not as clear-cut as it was the other way around. 2. What evidence do you have to refute the accusation of plagiarism? Remember, original pieces are better than photos, and photos are better than witnesses. Work under the worst-case scenario assumption meaning that your opponent has all the evidence they need in order to successfully bring charges against you. 3. Carefully consider what you want given the worst-case scenario! What can you (and do want to) offer to get this conflict resolved? What direct and indirect risks are you taking by going to court? Read up again on the options for potential reactions to a cease and desist letter, and consider your white flag, tortoise, rooster, and ninja options. Also bear in mind the possible collateral damage of your conduct, including any actions that might lead potential or actual business partners to lose confidence in you.

A cease and desist letter arrives – what now?

43

4. In any case, seek the services of a lawyer specialized in these kinds of conflicts! Remember the advice to take counsel that is unpleasant for you seriously and in turn, to question that which is more than agreeable to your tastes. You’ll find a checklist in the appendix outlining the correct ­procedure for handling cease and desist letters. What next?

The next course of action depends on whether, after critical selfexamination, you have actually decided to admit to anticompetitive behavior or not. If you can basically agree with the accusation, then you should seriously consider signing and returning the cease and desist declaration in due time, as requested. In this case, you’ll also have to pay the legal fees of the opposition lawyer (within reason, that is). If the lawyer was somewhat overambitious and doesn’t allow any negotiation, then it is recommended to pay an appropriate portion of the invoice and allow for a legal dispute over the rest of the fees. Frequently representative bar associations can review lawyers’ fees to make sure that they are within reasonable limits. If, on the other hand, you’re fairly certain that you are not respon­ sible for any anticompetitive behavior, it’s better not to react at all than to explicitly repudiate it. This is the classic tortoise option. If the accusation ends up being validated in a court of law, a letter of repudiation can potentially be used as evidence against you.

3.4

Intellectual property rights disputes tend to be extremely expensive. This is mainly due to the fact that such conflicts raise questions about a company’s core identity, brand, and products. Additionally, the necessity to engage specialists, for example your lawyer and potentially other kinds of experts, is often not exactly a money saver.

So what does it cost?

Retainers

44

In many countries, lawyers are paid on an hourly basis. However, in some cases lawyers are promised 30 to 50 percent of any amount that is won through litigation provided there are no upfront charges. Both models have their pros and cons. Who can really check to make sure that the hours claimed were actually spent working? After all, there is some truth to the joke that when Saint Peter sees a young lawyer at the gates of Heaven he says: According to your timesheet you must be over 80 years old now. Needless to say, success-based fees really only motivate a lawyer when there’s a high chance of success, which is not necessarily a given in most design cases. So it comes back to finding a reason-

able arrangement with your lawyer. If the case is about relatively small amounts of money, it’s common practice to agree on a flat fee. Regardless, don’t harbor any illusions. Quality legal advice consulting from a specialized lawyer is always expensive, and that’s why outof-court settlements are frequently encouraged in intellectual property rights disputes. In legal terms, arbitration is a nongovernmental court of law, which is appointed by all of the concerned parties to issue a final ruling. Mediation, on the other hand, is nothing more than a negotiation process where the mediator has no decision-making power. As a side note, it might be best to agree to include an arbitration or mediation clause in contracts with clients from the get-go. So why exactly is arbitration preferred worldwide? What advantages does it offer?

3.5

The proceedings are less costly. Usually a smaller sum is paid for arbitration than for public court proceedings. Lawyer fees for proceedings in a public court are, in particular, often very high. ­However, if arbitration is carried out by trial lawyers, the financial advantage is minimal. The proceedings are more straightforward. In arbitration, you can have legal representation, but it isn’t mandatory. Nonlawyers can create their own verbal formulations without having to worry about adhering to specific formalities. The proceedings are, as a rule, faster. Whereas in a public court of law the waiting period for a hearing can take months or even years, arbitration proceedings can take place purely in writing or with a hearing date in any location chosen by the involved parties. The proceedings are, for the most part, managed more competently. While in a public court it can never be guaranteed that the judge is knowledgeable about the intrinsic issues of the design industry, in arbitration, the parties have the option of assigning a specialized judge, providing some certainty of their greater famil­­­ iarity with the relevant facts. The proceedings will save face for both sides. Arbitration proceedings take place behind closed doors, and the court works, similarly to mediation, first and foremost towards an amicable settlement of the dispute. In contrast to mediation, however, a ruling is made when no amicable resolution can be found. The verdict in arbitration is legally binding, as it can be – upon submission of an application to a public court of law – deemed

Arbitration

Arbitration and mediation

45

enforceable. This makes an arbitration verdict as legally binding as a ruling from a public court of law. Mediation

Mediation, on the other hand, which can also be agreed to by both parties, is never resolved by a ruling. Rather, it attempts to bring about an amicable settlement between those involved. The uncertainty of its outcome gives some people the wrong impression and makes it seem less appealing than arbitration. However, practical experience has shown that even parties that are very much at odds with one another at the beginning of mediation often reach an amicable, thus workable, solution at the end. A further advantage is the fact that both parties contribute to the outcome, and thus, enforcement of the ruling (potentially required) becomes super­fluous. By the way, the settlement in mediation proceedings can also be drawn up as an enforceable document, in which the agreement is laid down in writing and signed by the lawyers representing both parties. You can receive free and nonbinding advice and information in English and German on the possibilities for mediation or arbitration proceedings in the design sector by writing to: [email protected].

3.6

Naturally, it’s advisable to have insurance coverage for the costs associated with intellectual property rights disputes. A policy that covers all of the above-mentioned risks and even out-of-court settlements would be ideal, but, as is often the case with ideals, such a ­policy just doesn’t exist in real life. At best, insurances plans cover conventional conflict situations with foreseeable and limited risks. It’s the only way to keep insurance premiums low enough to generate the impression of providing sufficient coverage for what most people regard as completely unforeseeable risks. The risks associated with intellectual property rights disputes are understandably not very appealing to insurance companies. This is first and foremost due to the fact that these companies are largely dependent on the insured party’s personal behavior, which, unlike road traffic, is not tightly controllable and highly regulated. In addition, there is great uncertainty when it comes to the legal procedures necessary, and there is insufficient data for calculating the statistical probability of failure. For these reasons, disputes over intellectual property rights are not part of any legal expenses insurance plan. Out-of-court counsel and proceedings are also excluded from coverage (except in divorce cases).

Legal expenses, insurance, and financing of legal proceedings

46

There’s no point in getting too riled up over this situation, since insurance quotes are based exclusively on hardheaded risk calculations. A legal insurance plan that covers intellectual property rights disputes would be so expensive that the policy simply couldn’t be sold. For you, as a designer, this means that acquiring legal expenses insurance, even as part of an occupational coverage for freelancers, is, generally speaking, not advisable. This is especially the case since a large part of the risks you will encounter wouldn’t be covered or even be insurable. The only exception is the legal expenses insurance the ver.di (Vereinigte Dienstleistungsgewerkschaft) trade union in Germany ­provides to its members. As even creative freelancers can become members, they are able to receive legal advice and basic protection for their legal problems. Financing via a standard bank loan or via a specialized financial backer can also come into consideration, especially when large amounts are in dispute. At the end of the day, even justice is business – at least for the backers. The client can supply a business plan clearly outlining the chances of winning the case. A successful and experienced lawyer is a good argument, as well as the quality of evidence. Then the bank either provides the requisite loan at a certain interest rate, or the financial backer agrees to take on all court and lawyer expenses, regardless of outcome, with a 30 to 50 percent share of the profit if the case is won. If financing is necessary, you should discuss with your lawyer which arrangement makes the most sense. They can also advise you on which banks and financial backers are worth considering. >> Whether you accuse someone else of plagiarism or whether it is you who is being accused, always take the time to consider your options carefully. What you do and say in haste can be used against you in a court of law. >> Familiarize yourself with the white flag, tortoise, rooster, and ninja approaches. It’s important that you apply these strategies thoughtfully and objectively. >> Don’t think that you can tackle complicated intellectual property rights disputes by yourself. Seeking the advice of a trained lawyer who specializes in this field is absolutely essential to your success. >> Understand the pros and cons of arbitration and mediation, and don’t hesitate to include arbitration and/or mediation clauses in contracts with clients from the get-go.

Financing of legal proceedings

In summary

47

Checklist for cease and desist l­etters

If you want to issue a cease and desist letter: Attempt to describe the alleged violation of your rights in your own words, briefly, to someone else (preferably someone uninvolved). Pay attention to their face and reactions – frowning, requests for clarification, or a lack of understanding on their part should definitely set off alarm bells. In a legal battle, you’ll have to explain things to a completely uninvolved third party (a judge, for example), and if your test person can’t follow you, then chances are others won’t be able to either. Consider what evidence you have to prove that plagiarism has been committed. Original pieces are better than photos and photos are better than witnesses. Think about your profession and imagine you had to explain the nature of your work to someone with no previous knowledge of it. You’d surely prefer to pull out an original piece or at least a visual representation. It works like this in legal disputes as well: the better your presentation, the better your chances of success. Consider what you want to achieve. Use the legal entitlements mentioned in Chapter 3 as a guide. You may also want to give some thought to how much to ask for in damages and whether, at the end of the day, the matter is financially really worth pursuing. Even in a best-case scenario where you ride out all of the legal battles triumphantly, you usually still have to finance the legal proceedings yourself. By all means, engage a lawyer specialized in these kinds of disputes. And take this advice seriously, firstly because this isn’t necessarily recommended in many other parts of this book, thus it’s a very genuine piece of advice, and secondly, because there’s a lot of truth in the saying, “defend yourself and the devil will be your advocate.” Even lawyers choose to be represented by col49

leagues because they recognize that their self-perception and consequent self-management lacks the necessary objectivity and professional distance. Besides, wouldn’t you rather do something more constructive with your time than quibbling? One last tip: if your lawyer advises you against taking legal action, take them at their word. Lawyers usually have no interest in avoiding legal action, unless they’re sure that it’s a waste of time and effort. Getting a second lawyer’s opinion is only worthwhile when the first one attempts to give you the impression that everything will turn out in your favor. This simply won’t be the case. If you receive a cease and desist letter: Keep calm, but react quickly! Again, try to describe any possible infringement as briefly and factually as possible to an uninvolved third party. Observe their reaction and take it seriously. If they don’t understand in the slightest what you’ve been accused of, that’s already a good sign, but be careful – it’s not as clear-cut as it was the other way around! What evidence do you have to refute the accusation of plagiarism? Remember, original pieces are better than photos, and photos are better than witnesses. Work on the assumption of a worst-case scenario for you – meaning that your opponent has all the evidence they need in order to successfully bring charges against you. Carefully consider what you want in the worst-case scenario. What can you (and do you want to) offer to get this conflict resolved? What direct and indirect risks are you taking by going to court? Review the options for reacting to a cease and desist letter in Chapter 3, and bear in mind as well the possible collateral damage of your conduct, including any actions that might lead your prospective or current business partners to lose confidence in you. By all means, seek the services of a lawyer specialized in these kinds of conflicts! Remember to take unpleasant counsel seriously and, in turn, to question any counsel that leaves you feeling warm and fuzzy. 50

4

How the law applies to the ­different design fields

Different fields of design require – different laws. This pretty much sums up the legal situation within the individual design subsectors. In this chapter, the legal particularities in the branches of communication, photo, industrial and product, interior, fashion and textile design are discussed separately. If the different forms of intellectual property rights don’t mean much to you yet, then you should read Part II before you start this chapter.

At first it may not seem to make sense to handle the different fields of design separately, especially since these disciplines have long been lumped together. However, the legal situation hasn’t really kept pace, so individualized treatment is unavoidable. Separate treatment is also necessary in light of the evolution of some of these fields and their affiliated trainings. The classic design disciplines break down into subcategories and there’s plenty of crossover within these fields, not to mention totally new fields that arise constantly due to technological devel­opments. There’s simply not room to explore all of the unique cases in this book, but we’ll provide an overview of the intellectual property rights asso­ ciated with the main design disciplines. To start here’s a brief description of each of these disciplines and their affiliated subcategories: Communication design may include corporate, graphic, motion graphic, and web design, as well as interface design, which also plays an increasingly important role in industrial and product design. Industrial and product design, usually three-dimensional, is broken down into numerous subcategories, which include: automotive design, transportation, mechanical engineering, furniture, and lighting design. Due to technological development, interface design belongs to the communication field. Interior design essentially belongs to industrial and product design; however, because of its history has roots in interior architecture. The resulting legal differences make it necessary to handle interior design separately.

4.1 The design disciplines: distinct, yet overlapping

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Fashion and textile design also comes under the umbrella of industrial and product design, but here as well, legal and industryspecific particularities make separate treatment necessary. Jewelry design, which has a long product life cycle, also tends to fall more into the category of product design. There are also some totally new design subcategories, such as digital film design or system and service design, that are not (yet) individually recognized, which makes them difficult to fit into the preexisting categories. As there are still no legal rules developed specifically for these categories, they won’t be dealt with in the following sections. 4.2 Communication

Here we’ll discuss the specific legal considerations in the field of communication design. First, an overview:

design

>> Copyright for designs: virtually nonexistent. >> Registered and nonregistered design rights: seldom possible outside the EU. >> Ability to trademark designs: high. Communication design is the biggest subsector of the design industry. As the number of employees and volume of turnover shows, this sector predominantly consists of small offices that receive their assignments from larger corporations. One would think that the legal situation would therefore be geared primarily towards the average freelance communication designer with their own larger or smaller office, but it it’s not. The legal situation, which has improved somewhat over the years, consists of laws and an administration of justice that doesn’t really protect communication design in most countries. You’ll find more details about the various intellectual property rights, copyright laws, design rights and trademark laws mentioned here in Part II of this book. Communication design, with its tendency to consciously break the boundaries of traditional media, makes defining its legal status especially difficult. The way things currently stand, it’s impossible to say if and how a specific design will be able to acquire legal protection. Therefore, undertaking legal battles over questions of protection in this realm often means a gamble with particularly bad odds. Often certain parts of a communication design are protected as a piece of art, whereas the whole design is without any protection. Photos are copyright-protected either as works of art or – to a large 52

extent, considered coequal – as photos. Any image editing is considered modification, which is also copyright-protected. A web page that displays this photo may be protected as a computer program, while the whole composition is not protected at all. Here we’ll discuss the specific legal considerations in the field of industrial and product design. First, an overview:

4.3 Industrial and ­product design

>> Copyright for designs: explicitly excluded in all countries except for Germany, where there are particularly high requirements for product design. >> Registered and nonregistered design rights: rarely possible ­outside of the EU. >> Ability to trademark designs: possible only if it’s not purely about the the exterior form of the product. Product design is characterized by designs with a relatively long product life cycle. There aren’t very many independent design studios and those that do exist are predominantly in the realm of furniture design. The industry, including all the automobile and consumer electronics companies, usually has its own design departments and mainly engages independent design studios for, what they consider, peripheral business areas (including interface design for electronic dashboard instruments or textile design for car upholstery). The automobile industry’s considerable political influence (which stands in direct contrast to its future relevance) has, in par­ ticular, led to product design to be maximally accommodating to the industry. In traditional car-manufacturing nations, the industry’s lobby groups have ensured that there are frequent provisions created to meet their needs. The needs of the automobile industry aren’t exactly the same as those of designers working in other fields within this subsector. For these designers, the question of intellectual property rights has to do with whether copyright can be awarded or not. This is especially relevant due to the exceptionally long period of protection in this sector. Protection through a registered design patent is, in many cases, sufficient; however, precisely in cases of designs that become classics, a design patent is unsatisfactory. Literary works, as economically noncomplex creative products, enjoy copyright in most countries long after the author’s death. In contrast, highly complex creative products, such as furniture ­classics, enter the public domain long before the death of the 53

designer. To make it even trickier, there are substantial differences in intellectual property rights systems from country to country. This, in combination with varying international surveillance customs, makes the importing of plagiarized products easy. In the absence of a legal structure which is consistently tailored to the needs of designers, the current intellectual property rights ­systems has no future and represents more of an obstacle than a support mechanism for creative innovations in the field of product design. 4.4 Interior design

Here we’ll discuss the specific legal considerations in the field of interior design. First, an overview: >> Copyright for designs: protected as an overall work of architecture. >> Registered and nonregistered design rights: not possible, even in the EU. >> Ability to trademark a design: low. Of all the design subsectors, interior design has the most obvious proximity to architecture, including its working processes. As a result, much like in architecture, the focal point of legal protection lies in copyright. There’s a very long period of protection of 70 years after the death of the interior designer. It’s also, luckily, very easy to determine the moment of creation or manifestation upon completion of the particular project or object (especially when there are publications about the project). More details on copyright law can be found in Chapter 7. In terms of intellectual property rights, interior design is by far in the best position. And it’s precisely this difference that makes the limited legal protection of the other design fields so evident.

4.5 Fashion and

Here we’ll discuss the specific legal considerations in the fields of fashion and textile design. First, an overview:

­textile  design

>> Copyright for designs: automatic for fashion designs in the EU, explicitly excluded in most other countries. >> Registered design rights: possible in the EU, but due to reasons of cost not realistic; nonregistered design rights are crucial in the EU. >> Ability to trademark a design: substantial, if the logo is included in the composition of the design.

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Fashion design, as a subcategory of product design, is only p ­ rotected, together with its designs, in the EU. In most of the world, fashion and clothing designs don’t have any protection at all. For more information on the situation in the USA, see Chapter 2. You’ll also find information about the legal situation in many other, relevant countries around the world in the Appendix. To compensate for this lack of protection, alternative solutions have been found. In Germany, for example, before the EU design rights were introduced, special protection in the area of competitive law was introduced by the courts in the form of copyright protection of new designs for one or two seasons. In the U.S., strong label integration on fashion designs attempts to create a layer of protection. Relying on copyright protection of sketches in India serves a similar function. In general, copyright protection of designs in the fashion domain is virtually nonexistent. Why are silly song lyrics or cheap novels protected long after their authors’ deaths, while fashion designers are not permitted this honor? Without wishing to encourage envy in the creative fields, this difference is neither morally justified nor economically advantageous. Maybe it has to do with a widespread ignorance of what fashion designers do. Do they draw, paint, or sew? What seems possible to imagine in furniture design is often a complete mystery in the fashion domain, even to the contractors, who, above and beyond the creation of sketches, expect gradation, production of samples or prototypes, and overseeing of production, yet are often only prepared to pay a lump sum for these efforts. It seems to completely slip out of the public’s consciousness that the act of designing, and the right to use designs represent the core of this work. The possibility of registering fashion designs in the EU is thus not practicable, as the relatively large number of designs would cause high costs for the registration – which would, in turn, bear no relation to the realistic usage of this protection. A nonregistered design has, however, a substantial significance throughout the entire EU since it automatically receives protection for three years from the time of disclosure. In in most cases this is sufficient for the short product life cycle of a few seasons. Textile design has a longer product life cycle outside the realm of fashion design, namely in the interior, upholstery, and decorative fields. This factor strongly increases the appeal of applying for design patents in this area. However, due to its two-dimensional design (at least in principle), proving novelty can be a problem here. 55

You’ll find more detailed information on design rights in ­Chapter 7. In summary

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>> Different fields of design require different laws. >> Given the amount of crossover and the rapidity of evolution of design disciplines, it’s important to have a basic understanding of design domain classifications and their specific peculiarities. >> The political influence of large industrial players can have a ­significant impact on the type and duration of protection offered in an industry. >> Fashion design, outside of the product design subcategory, is not protected in most countries of the world.

5

Negotiating contracts

Many designers have concerns about handling their professional negotiations. Often as they enter into talks with bosses or clients about contractual conditions, they feel uncertain about how to behave, broach delicate issues, and define their interests and positions. Should they wait until the counterparty brings their terms to the table first? Is it okay to take the first step? How does one argue and make demands without snubbing the ­other party? How will the other party react? How does one successfully get a point across? If these are the kinds of questions that also preoccupy you, then it’s time to get to the bottom of these uncertainties and turn the tables on your perception of negotiation.

Most people have huge reservations about handling their own negotiations. Asking for a raise is a classic example of this. Of course, there are some natural talents out there who successfully negotiate and come out on top without difficulty. Such individuals are usually viewed with a mixture of admiration and envy: They’re just good at it, you might say to yourself. Unfortunately, this is frequently followed by the conclusion: And I’m not, it’s just not my thing. Try to avoid such generalizations because everyone is capable of improving their negotiation skills. Even you can familiarize yourself with some of the basic principles and use every available opportunity to prepare and practice them. If you’re afraid that this book is going to mutate into a How to become a successful negotiator in just a few easy steps self-help book, don’t worry. We’ve encountered a large variety of negotiations in our practice and have learned a great deal in the process. We’d like to share our experiences and those of others with you in this chapter. The priority here is to take the art of negotiation off its unreachable pedestal and examine it up close. It’s easier than you think. Let’s start by considering how you enter into a negotiation.

5.1 Your attitude, ­predisposition, and skills

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Two paths to ­negotiation

Self-motivation

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There are two main paths that lead to the negotiation table. In one, the offer has practically already been made, while in the other the offer is actively developed. The first path arises when an interested party invites you to enter into negotiations. In the second path, you’ve taken the initiative yourself, sought out a counterparty according to your requirements and made contact. Both paths depend on your own positioning both as a designer and a service provider. You’ll find more information on the subject of Positioning in the volume of this series, concerning Design Future, currently in ­progress. The first path, the invitation or offer to negotiate, only appears to be the easier of the two. If you enter this situation unprepared, you’ll find yourself primarily on the defensive. So it’s even more important for you to be well prepared. The second path, using active target groups or client selection and acquisition, has already put you emotionally and rationally on the offensive, due to the preexisting relationship with your counterparty. In this case, it’s especially important for you to be aware of this advantage and know how to use it. You can learn more on the subjects of client acquisition and developing business relationships in Chapter 19 of the volume of this series: Become a Successful Designer – Starting and Developing a Design Business, currently in progress. Both paths present different starting points and both demand appropriate conduct and attitude. The training and the awareness you’ll need can be best understood by taking a closer look at negotiation techniques and approaches. In this chapter, the negotiation process will be illustrated with examples from practical negotiation positions. But let’s start with two big powers of your designer’s personality, self-motivation and creative skills. Negotiation isn’t magic. It’s a learnable and improvable skill. ­Naturally, this observation doesn’t apply equally to all creatives and designers. What’s beneficial to you in designing can be a substantial handicap in professional negotiation. You are used to visualize things, you feel a bit uncertain in the realm of arguing and texting. In this situation it’s less about amicably achieving a shared goal, but more about asserting your own goals as effectively as possible. In addition, the uncomfortable feeling that you’re in a minefield rather than on fertile

plain in these situations can be very overwhelming. Your counterparty will try to give you the impression that they’re more familiar with the terrain, but that’s just not the case. Being different, thinking differently, and acting differently doesn’t in any way mean ending up with the short end of the stick. In fact, over time you’ll realize that your creative skills can prove to be critical in the successful handling of negotiations. This means you should also make sure not to waste your precious time and money on books and seminars that supposedly will transform you into a great salesperson or negotiator overnight. Seminars and workshops will only help you if you’re developing the argumentation and negotiation style that best suit you. That’s why it’s more important for you to develop ways to critically measure the results of your negotiations. You shouldn’t necessarily be assessing the results themselves, but more importantly you should analyze the impact of each of your individual steps during the negotiation. Here are several examples of real life negotiations and typical negotiation positions.

Creative skills

Imagine the following situation, which, incidentally, is based on true events. You want to negotiate a lease for your studio or office in a building that will be renovated and remodeled in the foresee­able future. In the meantime, the building is rented to creatives to boost its market value. Your landlord is not the owner of the building, rather he has rented a large part of the building himself from the owner. A draft version of your lease has been presented to you and two points in it disturb you. First, there’s a very short cancellation period of just one month, and second, the very low rent is guaranteed for a limited time only. Think about how you would ideally react to this draft contract. First, you would find out what the normal cancellation period is for nonresidential, or commercial, property. In Germany, where this example took place,without an individual agreement the law is to give six months’ notice. However, standard practice is to agree on a set rental period, usually between five and ten years. Second, you would find out whether a time-limited rental price was permissible. The answer (again in Germany) is yes. Thinking about your next step, you’d probably start by looking at options for changing the cancellation period. After all, the law is a good argument. If the legal provision (in absence of an agreement) is to give six months’ notice, then the cancellation period in the draft contract is clearly too short, which means you have a point in your favor.

5.2 Negotiation ­techniques in ­practice

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The Harvard Method

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This is a good place to introduce the most well-known negotiation system, which promises to provide guidelines for the correct negotiating procedure. The Harvard Method was developed in 1981 by Roger Ury and William L. Ury at Harvard University in the U.S. and is used, among other things, as part of the diplomatic service training in international negotiation. The basis of this negotiation technique consists of two principles. One, the strict separation of factual and personal levels, and two, the emphasis on mutually achievable goals, also known as win-win situations. In relation to the lease and the two points of contention, namely the short cancellation period and limited rent price, the Harvard Method would advise you to ask the landlord directly about their interest regarding these two points. That’s already a shift away from the instinctive, self-centered negotiation approach because you’ve shown that you’re willing to put yourself in your counterparty’s shoes. If you give it some thought, you might even be able to discover what’s behind the proposed short cancellation period without asking any questions. Your landlord doesn’t want to find himself in the situation that his own lease with the building’s owner ends on short notice and they then have problems because he can no longer rent you the rooms. What’s more, the landlord also keeps his options open this way, so he can get in other renters – who are willing to pay a higher rent. These are interests which even all the good will in the world can’t change into a mutual win-win situation. If you ask the landlord about these two points, he’ll probably state these reasons more or less openly. Using the Harvard Method, you’d now have to try to solve the problem of the main lease (the landlord’s lease with the ­building owner) and its termination appropriately. This could be relatively simple. You could replace the time limits with what’s called a r­ eso­lu­tive condition. For example: The sublease ends automatically with the main lease, and there is no need for a separate formal notice. This is exactly what was suggested in the actual case; however, the landlord wasn’t convinced, mainly for psychological reasons. To deal with the second point using the Harvard Method, you’d have to counter with facts and data. But would you really be able to come up with a good argument? Would you really be able to prove, for example, that the rents in the area are on average lower? And what would you do if the landlord had a better comparative rent database? What if you had the better fact-based arguments, but your counterparty simply didn’t respond to them because their interests were in direct opposition to yours?

It’s for exactly these kinds of reasons that you often reach an impasse with the Harvard Method principles. While it’s true that they’re very good points of departure, in practice they sometimes simply don’t guide you through to the end. Alexander Bretz: In my law firm, I handle negotiations almost daily. Not dramatic ones, but often ones that are fairly important for my clients. I can attest that with the Harvard Method one often reaches one’s goal entirely. It doesn’t tell you how to behave in a s­ ituation where you have no factual basis for persuasion, which is, unfortunately, fairly frequently the case in practice. The FBI in the U.S. has developed a method in which police negotiations with hostage takers and kidnappers minimize the risk to human lives. This method has, over time, been adopted by police forces in other countries. Applied to your, hopefully much more peaceful, negotiation situation, this method helps you to go on in a situation when interests of the negotiating parties cannot be changed into a win-win solution. That’s because this method is based on the situation that two parties have directly conflicting interests. Get the money and flee versus don’t compromise but arrest the kidnapper. The essentials: Evaluate your options ranging from worst- to best-case scenario. Determine whether it would be better to avoid conflict, engage in negotiations, or if your interests can even be met without negotiation. Never define the goal of your negotiations as a fixed point. Instead, define a target area between a maximum and minimum goal. If you can’t reach your minimum goal, you must terminate negotiations. Always make sure when determining your objectives that your n ­ egotiation goals are Specific and Measurable, and that for your counterparty they are Attainable, Realistic and Time-focused (this is known as the SMART formula). Gather as much information about your counterparty as possible. Verify all of the information from various angles in order to attempt to understand their position fully, including examining a statement for plausibility. Consider whether your counterparty’s stated interest makes logical sense. When possible, negotiate in a team of two people. One of you takes on the negotiations (the Negotiator), while the other (the Commander) monitors the Negotiator and the negotiation as a whole. The final decision on the overall result should be delegated to a third person (the Decision Maker), who doesn’t partake in the negotiations.

The FBI Method

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Choose between these five key strategic actions: pushing, evading, conceding, cooperating, and compromising. Decide what’s the best tactic for opening negotiations, making tough demands from the start, working towards your counterparty’s demand(s) or simply waiting and watching. Throughout the negotiation, always try to understand your negotiating partner’s point of view and feelings. Your capacity to feel empathy may be more or less developed, but this is something that can be trained. Listen carefully, ask, and ask again. Pay less attention to what your counterparty demands and more to why they are demanding it (i.e. the subtext). Drum the following seven rules into your head, until you’ve completely absorbed them: >> Always negotiate reciprocally, meaning you should only give something yourself when you’re also getting something in return (tit for tat). >> Avoid all commitments. >> Emphasize common ground rather than differences. >> Use nonaccusative and conditional formulations. >> Don’t use threats, rather articulate cautions. >> Propose as many alternatives as possible. >> Ask questions to obtain clarity rather than making statements that might provoke surprise or a negative response. Be economical with your own suggestions. Go so far as to thank your counterparty, even for unacceptable suggestions. Don’t immediately reject them and never make an immediate counter ­proposal. Try to break your counterparty’s propositions down into more ­agreeable alternative solutions. If nothing else is working, merely reject proposals by responding with questions. Allow yourself to experience your emotions, but don’t let them overwhelm you. There’s no point in arguing rationally if your counterparty is excited, angry, or emotionally affected in some other way. Keep calm and carry on, even when you’re confronted with rage, hate, aggression, or tears. If you notice that you’ve reached a point where you’re only behaving reactively, you should terminate nego­ tiations. You probably won’t be able to completely memorize and/or use all of these pointers at once. Therefore, try to practice as much as possible by going through the points again and again. To start, you can practice in less serious situations (i.e. at a flea market), and then 62

gradually expand into your professional negotiations. With a lot of practice and constant reassessment of your actions, you will improve and become increasingly confident. By applying the aforementioned principles to our lease nego­tiation example, you’ll immediately recognize that there’s a conflict of interest over the second point that can’t just be argued away because neither party is really in the right. However, in the case of the first point, it’s conceivable that the landlord is working on the basis of a legitimate fear that he’ll encounter problems himself if he allows too long of a cancellation period. Using the Harvard Method principles, the idea of the resolutive condition was proposed. The landlord’s response to the resolutive condition suggestion was essentially positive, but, as mentioned earlier, he couldn’t quite get to grips with it. He still wanted a cancellation period of three months max and he wanted to keep the time limit on the low rent. Using the Harvard Method, you would now try once more to get to the ­bottom of the issue and look for factual arguments. What’s the point of ­flogging a dead horse you ask? Alexander Bretz: In practice the following course of action helped. My clients (two young fashion designers), using the FBI Method principle negotiated reciprocally (tit for tat), and said: OK, we’ll accept the cancellation period if the time limit on the low rent is cancelled. The landlord accepted without further ado. Honestly, this outcome wasn’t really predictable. Using either of these negotiation methods doesn’t necessarily guarantee achieving a specific result in negotiations. It does, ­however, ensure that you don’t make any serious mistakes in the process and that, as a rule, you get an outcome that is favorable to both sides. What made this method work here? By combining both points, the landlord was under the impression that he succeeded, meaning that he got his way in the matter of the notice period. At the same time, the basic principle of reciprocity was employed. You get something, and I get something in return. The problem of the limited-time low rent, which at first glance appeared insurmountable, was played down. However, if this point had been, as per the recommendations of the Harvard Method, emphasized, this resolution never would have been achieved. An ill-considered argument over the question of the cancellation period would also have merely hardened both positions and a valuable bargaining chip would have been wasted.

Example

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5.3 Negotiating ­contracts: some real life examples Drafting licensing contracts

Valuing and defining the “main mutual obligations”

Gathering and using information

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You can take the same approach in negotiations over licensing contracts, even if the subject matter appears a lot more complex at first glance. This is demonstrated in the following examples, using the general negotiation principles as a basis. When deciding how to arrange negotiations, you should consider in advance if you should submit your own draft licensing contract or let your client make a proposal. Most clients have a standard contract that they merely adapt to each job. This usually isn’t such a bad thing because you can learn a lot about the other party’s views and interests from their proposals. Not to mention that you’ll save yourself the money and effort of creating your own draft. For example, an Italian furniture manufacturer presents you with an English draft licensing contract with very quirky language. Rather than providing a completely new, alternative draft, it’s better to work your own suggestions into the skeleton of the draft and politely ask about any points you don’t understand. Try not to refer to any grammar edits as this will save face for the other party. When determining your negotiation goals, observe a clear order of precedence. As a rule, the type and amount of the licensing fees should be at the top of your list. Keep in mind that for your ­client, the scope and the exact definition of your services will be the most important points. Lawyers refer to this as contractual mutual obli­ gations. Incidentally, this is also a good opportunity to use the ­reciprocity principle. Consider another example where contrary to preliminary discussions, when it was decided you would develop a 100-piece collection for the price of 40,000 dollars, your potential client presents you with a draft contract in which you’re now supposed to design 125 pieces for the same amount of money. There are also a few more points in the draft you don’t like. Clearly, the only correct reply is: 125 pieces? Sure, but then for 50,000 dollars. The other bothersome points in the contract are only interesting once an agreement has been made on both the price and number of pieces. Use all the sources available to you for information gathering, in­cluding the Internet, firsthand reports of experiences with the ­client, information from unions, etc. In doing so, remember to always maintain a critical attitude towards this information, until you’ve cross-checked it.

On the question of what kind of remuneration you should suggest, there are always two approaches. Either you take the average market rates for comparable cases or you use your own internal calculations as a benchmark. If both are roughly consistent with each other, you’ve identified a value which you can then easier explain to the counterparty. Even if you’re not working by yourself, you should get an outsider on your negotiation team. This could be a lawyer or a business consul­ tant experienced in handling negotiations. But be careful if you want to bring this person into the negotiations off the bat. Some ­clients get very annoyed if you show up from the get-go with a lawyer or consultant. Consider the fact that licensing contracts are designed for long-term cooperations and everything that is managed by an advisor during the negotiation phase could quite possibly undermine your authority later on in your cooperation (at least in the eyes of your negotiation partner). For example, you’re invited to visit a prospective client and you already know that a discussion about the contract is in the cards. You can relax and leave your consultant at home if you’ve already gone over the matter with all the probable scenarios and possibilities as well as your doubts. By the way, this kind of background ­specialist support is called prompting in negotiation lingo.

Introducing external

You should have no reservations about making high demands, as long as they’re realistic, not utopian. Any self-confidence you can show in this situation will pay off because a confident person will automatically be taken more seriously.

Making demands

Pay attention to whether your counterparty favors a lump sum payment or a licensing fee in licensing contracts, and ask them about it to try to find out the reason for their preference. In no other licensing contract matter will you learn so much about the attitudes of your counterparty as you will here. This can also be a very rewarding area for developing empathy towards your counterparty. You’ll find more detailed information on the different kinds of remuneration and their legal classification in Chapter 13 Calcu­ lating your fees.

Understanding

Of the seven golden rules from the FBI Method, three are important to licensing contracts, namely reciprocal bargaining, evasion

Suggesting

expertise

­attitudes

­alter­natives

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of commitment, and bringing as many constructive alternatives to the table as possible. In this, you’re in your element as a creative and can subtly demonstrate your most important quality, your creativity. By the way, in negotiation lingo this bringing in of alternatives is called enlargement of the cake. Creatively acting on proposals

Presenting yourself as professional, rational person

5.4 Typical nego­tiation ­situations and how you

You can also put your creativity to optimal use when handling proposals. Be proactive when dealing with your counterparty’s proposals. The ability to develop an idea with another person is one of the most powerful tools of the creative spirit. Alexander Bretz: I’ve been in situations with parties who were arguing heatedly, and then a half an hour later started working enthusiastically on mutual solutions, almost as if they were doing an art project together in school. This is your chance as a creative! Always be prepared for emotions in licensing contract nego­tiations. Don’t let yourself be led down that path. Work on coming across as rationally and professionally as possible. Be aware that some negotiatiors will attempt to unfairly attack you. This may not even be conscious on their part, but only because they imagine themselves cornered somehow. In a contract negotiation, your counterparty attempts to question your competence, perhaps with questions about your education. So what exactly did you learn at that private fashion academy? You don’t necessarily have to have a snappy response, such as: I learned a helluva lot more than I would’ve at a state school, like how to impress even a skeptic with my achievements. It’s sufficient to counter their question with a question of your own in order to show the questioner the impertinence of their question. Try something like: What speci­ fically interests you about my education? I’d be happy to tell you more about that. Incidentally, in a real negotiation, a young fashion designer made an old fogey in the textile business blush with shame. Below are descriptions of several typical negotiation situations along with some possibilities on how you can conduct yourself when they arise.

should handle them The surplus tactic

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Fairly frequently, prospective clients will attempt to get you to make concessions by telling you that the market is saturated with designers.

The first thing to do in this situation is to pull yourself together. Your counterparty is playing on your fears in the most trite way. Ask yourself: Then why are they speaking to me, of all people? Right! There must be something I have to offer that they like and want to have, even if they generally find designers, and the costs incurred by their services, superfluous. These thoughts can be practically transposed, in whatever way you choose, onto one of the sample responses below. More options will surely occur to you, or perhaps you’ll even develop your own favorite responses. The first possibility is to give a cheeky reply in which you ask ­precisely the question that just went through your head: Then why exactly are we sitting here together now? Admittedly, that approach isn’t to everyone’s taste. You can also communicate it a bit more diplomatically by formulating the decisive factor: There must be something appealing about me, as a rhetorical question: Weren’t you interested in my XYZ designs? Asking questions is frequently viewed as an expression of intellectual posturing, so you should be careful that your tone doesn’t come across too ­arrogantly. Alternatively, answer with the help of a comparison – the chef metaphor for example: There are always a lot of applicants for canteen kitchens, but for three-star kitchens there are usually only a few worth considering. No matter how you go about it, the most important thing is to underscore the economic significance of your activities, which you can also communicate like this: In this day and age, design is the decisive factor in a company’s and a product’s success. I can help you achieve this success. Another classic from client negotiations is the surprise act. Your counterparty surprises you by coming up with a whole new range of demands in the course of the negotiation, or they call into question what was, up to this point, a shared basis for negotiations. Once again, they are playing with your emotions. In such situations you might have the sensation of being in the middle of an earthquake because the earth under your feet starts to quiver. But you should always remember that, statistically speaking, a relatively small proportion of a population actually gets killed in an earthquake. That’s good news for you. However, your counterattack in such a negotiation situation can be somewhat difficult to formulate. Try to use an unexpected step on your side to turn the situation to your advantage. Please don’t have any doubts that you’re not quickwitted enough. In ancient times, when Hannibal pushed through

The surprise tactic

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Italy with his army, pillaging and plundering, he defeated all the capricious attacks by the Roman generals. The first general to spark fear in the Carthaginians was the one who simply followed them and consistently abstained from battle. You know how it ended. Carthage lay in rubble and Rome was the mightiest power of the Mediterranean area. Dithering and hesitating is often not such a bad tactic. You always have as much time as you give yourself. So proceed calmly but try to come up with something juicy for your negotiation partner. This could be the right moment for reciprocity. Think about the example when the client suddenly wanted to have more designs. In that case, the Yes, but … of reciprocity was exactly the right answer. The client couldn’t refuse without losing face. Alexander Bretz: In a somewhat more complex case in my practice, clients of mine had closed a deal with a client for a very technically involved production of a chair made out of polycarbonate. In the beginning, other materials were also under discussion, but the client himself decided on this material, which was also expressly laid down in the description of the subject matter of the contract. At the same time, my clients had designed a wooden chair with a similar aesthetic for another client, but there was still no written contract. The polycarbonate-chair client got upset about the supposed similarity. You’re probably thinking this has nothing to do with a surprise for the designers. It seems more like a surprise for the client! Wrong, the polycarbonate-client complained with a lot of theatrical thundering about something they walked into knowingly, and even explicitly agreed upon. Apart from the fact that the wooden chair, due to its different proportions, different material, and significantly higher price, was neither, in terms of design rights nor in economic terms, similar, the protest actually implied something totally different. It’s true that I only have a contract for a chair made of polycarbonate, but now I don’t want you to make any chairs in other materials which might even only bear a slight resemblance to my chair. This is a surprising turn of events for the designers. The next step of the negotiation then happened almost orga­n­ ically. The designers made an offer to either design a wooden chair for their client at a relatively higher price, or to arrange appropriate exclusivity (meaning also a proportionally higher licensing fee). Such constructive responses simply took the wind out of the client’s sails. The patronizing ­tactic

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Unfortunately, it also happens time and again that clients demand economic opinion leadership and in doing so attempt to corner you with arguments. This tactic includes all financial proposals that are

not rationally explicable between fair contracting partners. Here are several of the most cherished examples of these kinds of proposals: >> The client refuses to allow examination of their license s­ tatements. >> The client insists on a short contract period. >> The client insists on not making a commitment regarding the timing of the market launch. >> The client offers you net profit sharing rather than a percentage of the gross sales figure. >> The client wants to pay reduced licensing fees upon increased sales (or after a certain sales figure has been reached or after a certain time period). >> The client offers options regarding the extension of the contract. The most dangerous aspect of all these proposals is first and foremost that you will perhaps not recognize the intent behind them. It could be that you don’t feel comfortable at all in business matters and finances. As a tolerant human being, you also don’t have any problem acknowledging and respecting the technical qualifications of others in other spheres. But beware! Don’t accept anything that you don’t understand! And during negotiation have proposals explained to you. Ask your counterparty why they want this or that. Sooner or later they’ll be at a loss to explain their reasoning, much like adults who quickly reach their limits with small children in the questioning phase. It’s time to let the little child in you out. If the counterparty is actually changing their opinion in such a situation, it’s very important to resist the urge to point out your partner’s change of heart. Protecting your counterparty’s dignity by not pointing at their weakness is called sheltering. Here are a few brief explanations of the proposals mentioned: A share of the net profit rather than a percentage of the gross sales figure is bad for you because your client can influence the extent of the profits via their expenses and thus can influence the basis for calculating your licensing fees. Refusing the possibility for an examination of license statements is a similar case. In both cases, you should point this out to the client in as many words as necessary, and as a bonus you will demonstrate your business acumen. An insistence on a short contract term contradicts sensible business thinking if the client has high preproduction costs for the development or market launch. In these cases it sometimes just boils down to surveying the market for yourself, considering whether you 69

can market the design elsewhere in the event of an early contract termination and only then agreeing to it. If the client insists on not committing to timing for the market launch, this usually indicates that they want to keep your design off the market. In this case, demand an extremely (i.e. shamelessly) high advance and then sit back and enjoy the effect this has on your negotiating partner. The client wants to pay reduced license fees upon increased revenues (or after achieving a certain sales figure or after a certain time period). This only makes sense if justified by extraneous marketing activities in order to extend the product’s life cycle. But exactly how does your contract partner want to predict that at the completion of the contract? Usually a reduction in licensing fees is not a financial necessity because the client will already be able to enjoy lower fixed costs per unit upon an increased sales volume. This is known as economy of scale. The correct counterproposal in this instance, if the client can’t provide a reasonable answer to your questions, is to suggest an increase (!) of the licensing fees upon the achievement of the appropriate sales figures. Options for a one-sided contract extension on the part of your client are always bad for you. Either your designs will sell well, in which case you can insist on better conditions in a contract extension later. Or your designs will sell poorly, then your contract partner won’t take up this option and it doesn’t help you at all. You’ll find more detailed information on the question of fairness in  contracts and on the correlation between services and fees in Chapters 11, 12, and 13 of this book. The circumstances tactic

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This kind of tactic is really a tough nut to crack – which is why you should absolutely be prepared for it. It goes like this: your client confronts you with a certain set of mutually disadvantgeous conditions. They then combine this with the request that you work together ­constructively towards a solution. Conditions of a predominantly legal nature are preferred here, things that don’t really interest you and which you often only know about by hearsay. For instance, ­imagine negotiating in Germany, about Künstlersozialabgabe, or in India, about the burning of the widows. To be honest, even many aren’t even entirely sure-footed when they encounter unpleasant surprises in this area. The best technique here is again the questioning tactic until either you understand or your client understands that it’s gibberish.

In practice, one tactic, from a psychological point of view, takes advantage of a human predisposition described as the empathy trap. Empathy, the ability to understand and share the feelings of others, is a remarkable ability. Empirical studies have also shown that creative people possess above-average levels of empathy. That’s great! However it sometimes presents a large disadvantage in negotiations if the counterparty consciously manipulates it. You fall into that trap when you accept a condition in the (surprise! surprise!) unfounded hope of future improvement. The most well-known example, familiar to all of us, is this classic behavior while on hold waiting for a call center to pick up. It’s taking ages to get through, but the longer it takes, the more willing you are to wait even longer because you’ve already waited so long. Not hanging up works out to be the best solution most of the time, as your waiting period otherwise becomes futile. If it’s difficult for you to hang up in such a situation, you’re also in serious danger of being trapped in your negotiations by your empathy. This is sometimes accomplished merely through the smuggling in of inconspicuous phrases, such as our project or shared project. In the most potent case, the dream promise is even clearly expressed, as in a case of a fashion designer who gets an exceptional offer to start their own collection (in reality as a label for a manufacturer), forgetting that in the process of bending to the will of their manufacturer, they will lose their creative autonomy. These kinds of projects don’t necessarily have to be bad but it is advisable to err on the side of caution. Don’t let your own enthusiasm in such situations tempt you to not further pursue your sober economic benefits in the negotiation. The project only becomes our shared project after the conclusion of the contract. And you can also communicate this without being abrasive. Another good tactic is often to take the negotiating partner at their word. When, for instance, despite lengthy negotiations, they still haven’t presented a draft contract, yet want to engage you in extensive preliminary work (presentations, meetings, etc.) on the basis of our shared project, simply present them with your own draft contract for our shared project. You can also easily put your shared project to a test like that. If it leads to an immediate 360-degree turnaround on the part of your counterparty, than they didn’t mean it seriously anyway, and at least you’ll be saving yourself time and energy.

The empathy tactic

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Relief tactic

The relief tactic works in a similar way; however, in this case, it’s a different psychological predisposition that’s exploited. A large-scale study in the U.S. examined the way people react immediately after receiving extremely relieving news. In the study, people who had just received the (for them) positive result on a medical test were faced with two beggars. One was seated directly in front of the door of the doctor’s office, the other several hundred meters further away at the entrance to the parking lot where everyone had to park. The beggar’s cap positioned directly in front of the door was clearly the one more copiously filled. These kinds of tricks are also not unusual in negotiation. The fairly well-known good guy/bad guy routine is an example. It consists of a face-off with two negotiating partners – one of whom is particularly aggressive and the other particularly understanding. After the aggressive one has disappeared for a substantial period of time, the understanding one scores extensive concessions from the opposing party. Another technique in this realm is the sudden dropping of an outrageously harsh demand along with the submission of another milder, but still excessive one. Alexander Bretz: I’ve experienced this kind of effect when ­assisting in negotiations with possible investors, sometimes completely unintentionally on the investor’s part. After two or three long-winded, unsuccessful negotiations, my clients were sometimes ready to make concessions with a new investor, whereas they would never have granted a similar concession with the first one. Even when not used tactically, such effects highlight a weakness in every negotiation process. Consciously applied, these are powerful instruments. In any case, try not to be intimidated by them – and ask yourself if you want to work long-term with a partner who uses tricks like the empathy and relief tactics.

5.5

Maybe you’re asking yourself what this subject is doing in this chapter, or for that matter, in this book, and what does it have to do with you? Are creatives, with their naturally high capacity for empathy, capable of aggression at all, and is it even relevant? Yes! Because healthy and skillfully applied aggression is a large component of our self-esteem, our feelings of dignity, and our healthy pride according to the renowned psychoanalyst, Fritz Riemann. You’ll find more details in the classic book Anxiety: Using Depth ­Psychology to Find a Balance in Your Life by Fritz Riemann. Someone who cannot embrace their positive aggression will have difficulties finding their place in a competitive society. Some-

Your positive ­potential for ­aggression

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one who wants to be able to endure the pressure connected with competition, needs assertiveness. Positive aggression is thus a precondition to success. However, the capacity to show consideration and team spirit do not contradict this. People who allow themselves to be guided by the standards of positive aggression act according to the following principles: >> >> >> >> >>

They fight for their interests. They don’t aim to destroy others. They respect others. They don’t humiliate underdogs. They respect honesty, fairness, compassion, integrity, and ­reliability. >> They fight against insolence and humiliation. >> They have civil courage. >> They always think about those who have helped them.

Someone who doesn’t repress their aggression and targets it constructively is successful. Consciously handled, aggressions are strengths that give energy and bolster courage to cross into new ­territory and to be innovative. Positively aggressive people are observant and, despite an ­optimistic view of humanity, are wary of untrustworthy and disloyal behavior. They recognize when trusting is worthwhile. The goal of positive aggression is cultural, social, and economic success. This positive form of assertion always fights for something, seldom against something, looking for win-win situations. Positively aggressive people believe in the concept of the individual’s responsibility. To them, success means failing and then getting up and trying again. They are forward-looking and ready to pursue their ideas and dreams. Sporadic failure along the way doesn’t bother them much because the most important thing is to have tried. Jens Weidner, a professor of education and criminology, has developed a form of antiaggression training, which he also uses in reverse to train assertiveness. He has identified the following key success factors for his so-called chili pepper strategy:

The chili pepper strategy

>> Speed – to confuse counterparties and allow them to have no impact. >> Patience – to be able to wait out insoluble problems.

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>> Openly addressing problems – calling a spade a spade, ­irrespective of a false understanding of harmony. Weidner proposes eight basic rules in order to increase assertiveness: >> >> >> >> >> >> >>

Assert yourself strongly to do good. Refrain from engaging in hopeless tests of strength. Take a position. Avoid losers, naggers, and naysayers. Cultivate your ability to shoulder things. Perfect your defensive rhetoric. Respond to any misconceptions and rumors circulating about you. Set them straight where necessary. >> Regularly observe and analyze your adversaries. He also points out that it’s essential to compete with the right individuals and not to engage in power games with those a constructive solution can be found through normal discussion. Fear and courage for active negotiation

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The chili pepper strategy demonstrates how you can use positive aggression to achieve your goals in a focused way. The precondition of this is that you acquire a mature form of aggression processing. As Fritz Riemann says, this mature form is gradually acquired through experiences gained by using one’s own aggression, which, in turn, necessitates overcoming the fears associated with this. The fear of negotiation is similar to the fear of client acquisition. The root of this fear, its characteristics, and how it can be dispelled is described in the first book of this series. You’ll find more details in: Become a Successful Designer – Starting and Developing a Design Business, Chapter 19.7 Courageous Acquisition. When you’ve overcome any potential fears and are able to take courage, use and practice your positive aggression. When you know the typical negotiation positions and have learnt how to handle them, then you’ve come a lot closer to securing your interests as a designer. And you’ll experience a lot of this helping you in more informal situations, like small talk with your clients or potential ­clients. Always be aware that negotiation doesn’t only happen at the ngeotiation table. In fact, it happens in casual conversation and interaction that you let down your guard and say things that can be used against you later. So begin to see life as a negotiation!

The next chapter explains what economic value you’ll achieve for your designs through these proactive negotiation efforts and how to assess this. >> Negotiation is easier than you think. The important thing is to know how to unravel the mystery behind it. >> You need to think through your reactions and prioritize your needs in the best- and worst-case scenarios, and you have to thoroughly comprehend the interest(s) of your counterparty. >> Don’t’ forget to apply the powerful skills you already have as a designer, namely your ability to develop an idea with another person and your uncanny instinct to constantly evaluate and measure the impact of your work (or negotiating skills in this case). >> Preparation, preparation, preparation. Do your homework. Have the facts, and don’t take anything at face value.

In summary

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6

The value of intellectual ­property  rights

Valuation of intellectual property rights is a discomforting but central subject of concern for every designer. Value plays an important role in the dissolution of companies, the stepping down and new entry of partners, brand licensing and getting credit. It’s also worth mentioning here that due to the huge variety of possible methods for assessing value, there has almost never been a subject that is more difficult to pin down.

As you learned in the previous chapters (and will learn much more about in the chapters to come), intellectual property rights are intended, amongst other things, to enable people to make money with their creativity. Whenever the question of earnings arises, the question of what these rights are actually worth naturally follows. At first glance, this may appear to be an academic question, but it can actually be very important in many practical situations in a designer’s life. For example, you’ve built up a company over many years with an associate and developed a large number of designs together. For some reason you now must or want to go your separate ways. Immediately, the question arises whether one of you wants to or should continue using the previously shared company name, and how much this name is worth. Is carrying on the company name alone worth it? How much compensation should the partner stepping down receive? And again, when a new partner enters, the question arises what the value of the assets is at that time. What have the owners developed in value up to the present day, how much should a new copartner (either an active one or an investor) pay? As you can see, the question of assessing rights takes on e­ normous significance when:

6.1 When is the value of intellectual property rights assessed?

>> Partners (want to) step down and it’s a matter of how much ­compensation they should be paid.

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>> New partners, particularly investors, want to enter a company and it’s a matter of how much money they should pay to be included. This question of value also plays a large role in the licensing of brands, franchising, merchandizing, and sponsoring. Wouldn’t it be great if you could use your intellectual property rights as a form of collateral, much in the same way as property, buildings, or investments to obtain credit from the bank? 6.2 Intellectual property rights on the balance sheet

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Everything starts with the question if – and with what value – intellectual property rights may be entered into a company’s accounting, and thus the company’s balance sheet. To illustrate this, let’s make a little detour into the composition and function of a company balance sheet. A balance sheet consists of two pages, namely the assets page (also called the active page) and the debts and capital (or passive page). On the passive page, you’ll find the sources of the funds that the company has access to. What the company has made of these source, you’ll find on the other, the active, page (which shows the utilization of funds). No company, even the largest one, can accomplish more than the funds they have access to, meaning that the sum of the active page is equal to the sum of the passive one. You see – the principles of balance sheets are actually quite easy. A balance sheet is made to find out about a company’s capital by assessing its valuables (hence assets) and then subtracting its debts, thus finding its capital. A balance sheet is nothing more and nothing less than the expression for the very simple truth that nobody (and also no company) can spend more that they have at their disposal, be it own capital or debts. In the past, companies tried to avoid or minimize their debts. This made them more solid but limited the funds with which they were able to do and produce things. Profits were possible but never too big. The businesses and the economy as a whole were growing very much slower. More and more companies discovered the concept of leverage. Leverage means adding debts to your company’s sources in order to be able to do and produce more, to get a higher profit. Leverage works as long as the sales (and thus profits) of a company rise. It doesn’t work when there is no big profit or even loss. So you can check a company’s solidity by finding the ratio between debts and capital on the passive page of a blance sheet. But we have also to concern ourselves with the active page of the balance sheet. This is where the assets can be found. Assets are items of real estate (i.e. land), which are more difficult to liquidate,

as well as already liquid assets, including bank account balances and cash. Right at the top of the list on the active page are the intangible assets. Now remember that the more assets you have the more capital remains after subtracting the debts. If and with what value these intangible assets will be factored into the overall assets plays a large role in determining the total capital of the company. If the intangible assets are deemed to be high, there will be a larger sum on the assets page. If they’re appraised at a lower value, then the total sum of the assets will be lower. In the U.S., what are known as identifiable intangible assets can, for the most part, be entered as assets on the balance sheet. PricewaterhouseCoopers, Böttger: US-GAAP and IAS/IFRS (2003, Paragraph 5.3):

In the case of self-created identifiable intangible assets ([as in] SFAS 142), the requirement to capitalize depends upon whether they were created on behalf of others with the intention of later transferal to them. If, however, they are intended for use in one’s own business, SFAS 142.5 refers to the differing administration in practice and accepts this option to capitalize (or not). The following may be considered “Identifiable Intangible Assets”: >> Usage and license agreements, >> Trademarks or trade names, >> Client and supplier address files, >> Noncompete agreements (CNCs), >> Secret formulas or production techniques, >> Patents, >> Concessions, >> Copyrights.

Briefly summarized, this means that companies with a high level of innovation have the possibility to enter their own creative results as assets. Naturally there are long debates about the appropriate methods to assess this. However, the situation in the U.S. is in direct contrast to the ­situation in Germany, where intellectual property rights may only be recorded on the balance sheet when they were purchased. A company that buys a design right from a designer can enter this design right on the balance sheet as an asset at its purchase price. However, the designer, who made the design to which the design rights apply, may not enter anything on their balance sheet. We could tell you why his legal difference exists, but to be honest, it’s a long story and we’re pretty sure you don’t really want to know. 79

The situation in the EU as a whole is markedly different from that of the U.S. In most of the member states, accounting conforms to the International Accounting Standards (IAS) or the International Financial Reporting Standards (IFRS). According to the IAS, the costs for research and development must, under certain conditions, be capitalized (IAS 38). Here, a distinction is primarily made between the research and the development phase. Self-created identifiable intangible assets that can be attributed to the research phase may not be capitalized, thus they are recorded as expenses. Self-created identifiable intangible assets attributable to the development phase must be capitalized, provided they fulfill certain criteria. On the other hand, expenses pertaining to marketing and publicity or for self-generated trademarks, publishing rights, client lists, and the like, have been determined not assessable. As there are additional, divergent national regulations that are also effective in some EU member states, the situation becomes completely unclear. There’s a lot more room for discussion and conflict over the question if, and to what extent, self-generated design rights can be recorded on a balance sheet as assets (and thus also a question about whether a bank will rate it as an asset). In principle, this means that as nice as it may look to have additional design rights in the EU, it doesn’t necessarily help with raising capital, and it can lead to unpleasant debates with the local tax office. 6.3 Using licensing ­contracts as a basis for value assessment

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As you saw in the description of the U.S. standards for assessing ­identifiable intangible assets, the value assessment first and foremost depends on whether the intellectual property rights were c­ reated on behalf of others with the intention of later transfer to them. For you as designer, this means that the assessment of the rights that you created for the client depends on the amount of remuneration you received for those rights. In effect, the basis for assessment of your designs is the possibility for licensing them and the amount of the licensing fee, namely the entirety of the license contract. You find more detailed information on the content of license contracts in Part III of this book. Chapter 13, in particular, has details on the amount and determination of the license fee. So, if you don’t pay attention to the content of your license agree­ ments, you’ll not only be underpaid, but you’ll also be playing an active role in your overall undervaluation as a commercial enterprise. This can dramatically decrease your chances for getting credit and attracting investors.

Admittedly, that was all covered a little quickly. But this isn’t the place to have a debate about the details of billing and accounting. It should just be made very clear that your license contracts are not only the basis for your income, but also for a possible financial assessment of your business. That’s why this book deals with this subject and that’s also why it’s your ticket to increasing the value of your business. Whenever you form a company with others, intellectual property rights and their valuation also play an important role. Details on the legal forms at your disposal can be found in ­Chapter 11 in the first book of this series: Become a Successful Designer – Starting and Developing a Design Business. If you as a designer found some sort of company, it’s very important first of all to set out rules in the partnership agreement on how the existing intellectual property rights in the company should be handled in the event of the aforementioned breaking up of a partnership or stepping down of a partner. Certain procedures which size up, even without a balance sheet, the company’s assets according to accounting principles, have become widely accepted for assessing the value of a company. This is done in the form of a so-called inventory, a list of all the existing assets. This part of the value assessment is called assessing the book value. In order to take into account the intangible assets – primarily the brand, but also the copyright and design rights – an assessment of the capitalized value (of an anticipated yield) is carried out. This is based on a realistic annual revenue projection which is then multiplied by a certain quantity. You’re probably asking what a realistic annual revenue projection means. This is annual revenue that is not susceptible to fluctuations, which naturally always occur. In practice, realistic annual revenue is usually determined by taking the average of previous years’ revenue streams, not taking into account the best and worst year. Next question: What does multiplying this realistic annual revenue mean? OK, so now we’ve finally entered the land of estimation and speculation. Alexander Bretz: My experience is that when selling a design ­studio or fashion label, it’s possible to attain values of around two to two and a half times the annual revenue. You’ll find out what role intellectual property rights play in the field of design in Part II of this book.

6.4 Assessing the value of intellectual ­property rights in partnership ­agreements

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6.5 Trademark ­protection through a demerger

6.6 Licensing ­agreements and insolvency

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Incidentally, the trademark plays a prominent role in the termination of any association. The right conception of brand management is especially of importance in the case of corporations, which area considered legal entities separate from the people that form them. Corporations are founded, above all, to limit the liability of the partners to their paid-in shares, meaning that only what’s in the company is liable, not what is kept outside of it. Therefore, when founding a corporation, care should be taken that the brand name is not brought into the corporation, otherwise, in case of an insolvency, the brand is gone. If, however, the brand name isn’t brought into the company, but held in another, separate company (which belongs to the same shareholders as the operative company) and then licensed to the operative company, it’s kept out in the event of insolvency. A so-called demerger splits one business into two separate corporations – one for the brand management and the other for the operative business. The advantage of a demerger is that if the brand name doesn’t belong to the assets, it is not affected by an insolvency of the active corporation and thus the same brand can be licensed to another new, active corporation. This allows its monetary value to remain intact for the shareholders of the brand corporation. While we’re on the subject of insolvency, the insolvency of your contractual partner is also worth considering. Imagine you have a longterm license agreement, from which you receive quarterly royalties. As long as it’s all running smoothly, there are no problems. However, when your licensee becomes insolvent and the liquidator liquidates all of the assets as per their mandate, the liquidator will attempt to turn the license to account as well. They do so by sublicensing or even selling it. Sadly this problem is predominantly viewed from the perspective of a licensee whose licensor becomes insolvent, but this is not your problem. Your problem is that, in the case of an insolvency of your licensee, the liquidator is legally obligated and authorized to take all measures necessary for the survival of the insolvent business. This includes their legal franchise to either continue or terminate a continuing obligation (including your licensing agreement), as they see fit. Both decisions can be problematic for you. If you’ve licensed a design that has already been launched on the market, it won’t be easy to find another licensee. If the liquidator chooses to terminate your license agreement, this is pretty problematic for you since your takings from the licensing contract no longer exist and alterna-

tive licensing will be difficult for you to arrange. Incidentally, this is often true even in the case of well-known designs, which usually don’t sell anywhere near as well as one would think, rendering their relicensing difficult. The reverse case of the liquidator choosing to continue the agreement can also pose problems for you because in this case, the liquidator could possibly attempt to generate revenue for the insolvent company by implementing a sublicense. By sublicensing to another company, your interests as the licensor will be severely impeded. The problem is that for both cases it’s only possible to take ­precautions through contractual stipulations in limited terms. For example, by the clause, that in the case of insolvency of the licensee the licensing agreement ends or you (as the licensor) have an extraordinary right of termination. But in most cases such a clause will be invalid. The reason for this is that a liquidator’s essential ­freedom of decision making is excluded from such clauses from the get-go. In most countries, you cannot make any binding agreements which may impede the decision-making rights of the liquidator. For this reason, in the case of insolvency, you can only have ­limited influence on the fate of your licensing agreement through contractual arrangements. But you should do so in two regards: You should explicitly provide for automatic reversion of all granted rights if the liquidator chooses discontinuation or termination of the contract. In this way you’re free to administer your rights at least in the case that a liquidator chooses one of these options. For the eventuality of the liquidator deciding on continuation and usage of the license, you should reserve a right to approve any sublicensing, also in the case through a liquidator. Only in this way are you protected from unpleasant surprises, for example sublicenses to competitors of your other licensees or even of yourself. Both variations are taken into account with appropriate for­mu­ lations in the basic contractual conditions for fashion and textile design and for industrial design, which can be found in Chapter 17. The question raised here is how in the case of abstract licenses (i.e. licenses for already existing designs), the value or even the licensing fees can be determined. Such abstract licenses primarily play a significant economic role as trademark licenses, for example in franchise contracts. It can also be the case that products already developed and launched on the market are licensed in this way. Here again, it’s best to use the exploitation possibilities resulting from licensing as a basis. Profit sharing is almost always agreed

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upon. Non-success-based components, at most, result in expenditure-based compensation, for example, sharing of costs for advertising or handling. You’ll find more detailed information on a success-based ­arrangement of licensing fees in Chapter 13. This structure also underlies all similar contracts that are essentially licensing agreements, namely franchising or merchandizing contracts. 6.8 Using intellectual property rights and licenses as collateral

In summary

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Recognition of design-based intellectual property rights as c­ ollateral that enables designers to borrow from banks, is still very much in its rudimentary stages. Although the precepts of capital allocation in Basel II make it possible in principle, most banks are traditionally still very conservative in this area. Admittedly, there are just a few banks starting to show interest in this area in light of the increasing economic significance of the creative industries. >> Valuing intellectual property rights becomes especially important when partners formally leave or enter into business activities. Agreeing from the outset on a set of provisions that clearly outline the way in which intellectual property rights should be handled is key in ensuring proper handover of business activities for all concerned parties. >> Licensing contracts not only provide designers with revenue streams, but they are also used to value designers’ businesses – even more reason to make sure that licensing contracts are negotiated effectively. >> Borrowing from banks against design-based intellectual property rights as collateral is still a new concept, but it has great potential to grow as a business practice, especially given the growth of the creative industries.

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Creating rights

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7

Design and product-affiliated rights – copyright and design rights

At first glance, design and product-affiliated rights, including copyright, design patents and, in the EU, unregistered or registered design rights, are most relevant for designers. However, the importance of these rights, in particular registering for design rights, is frequently overestimated. Such miscalculations are, unfortunately, almost always expensive. Neglecting to register a design that should be registered may incur substantial legal costs, but a superfluous registration will also result in unnecessary expenses.

The first thing you should know is which intellectual property rights are relevant to your designs. From a legal point of view, there are a whole range of rights that are available. You should begin by first familiarizing yourself with the two kinds of rights that are most closely connected with designs since they deal directly with shape and color, namely copyright and design rights. Don’t worry. You’re not expected to wade through the details of these rights without any psychological preparation. This first section will introduce you to the basics. Then, when you’re ready, you can dive into the latter sections and familiarize yourself with the finer points. Let’s start with the fundamental question. At what point is a design actually legally protected? Designers often think there’s some kind of protection of ideas or theft of ideas. However, the bad news is that there’s no legal system in the world that protects ideas in and of themselves, which practically means that they can’t be stolen. Protecting ideas would not only cause endless difficulties in proving who had which idea, but it would also impede all furtherreaching cultural and technological development where ideas build on each other. An intellectual property right only exists in relation to something concrete. In copyright, this is called a personal intellectual creation, whereas in design rights it’s a two- or three-dimensional outward appearance of a product.

7.1 What you need to know about designs and products

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So, it’s not enough to imagine that one could fold a bicycle. Only he concrete implementation of this idea, fixed in the form of text, image, or as a model, can command protection. In the case of outlines or synopses, this means that only the text and other elements (such as pictures) of the concept are protected, but not the ideas described therein. So, if you present something to others that is ultimately (just) an idea, it can be implemented by them through their own means in a different way than that proposed by you. That’s why pitches and presentations must always be handled with extreme caution. This problem will be explored in more detail in Chapter 9, which deals with activity-related IP rights. Symbols

In light of what you’ve just learned, it might seem tempting to try to prevent plagiarisms and copying of your designs by using of all kinds of daunting symbols. Unfortunately this really isn’t any more effective than a rain dance. Those of you who absolutely want to use a symbol should certainly do so, but at least use one that is design-­specific: >> The copyright symbol (© followed by the name of the owner and the year of the first disclosure) makes it clear that someone owns the copyright to a work. In Europe, this right is automatically granted with the creation of a work, and does not necessitate the use of this symbol. In other countries, for example China (and until 1976, the U.S.), registration of the work is necessary. For this reason, parallel copyright protection in China for works from abroad is quite formally tied in with use of the copyright symbol. Due to these international differences, it’s advisable to always use a copyright symbol on the Internet, which by its very nature extends far beyond national borders. >> The copyleft symbol (a vertically reversed copyright symbol) has its roots in the open source movement and shows that the owner of a work waives their copyright, but usually under the condition that users waive the copyright protection for their adaptations in return. Therefore, a copyleft symbol doesn’t indicate that there’s no copyright, rather that the author permits free usage of it under certain conditions. >> The creative commons symbol (two c’s in a circle, often followed by a sequence of letters and numbers, like CC 3.0 BY-NC-SA) is kind of standardized open license which offers several standardized types of relatively free use under certain conditions.

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>> The phonorecord symbol (® followed by the year of first disclosure and the name of the owner) can be found on CDs and DVDs. It designates the right as producer of a sound recording to the claimant. The symbol gained recognition through the Rome Convention and the Geneva Phonograms Convention. It grants producers of sound recordings protection from illegal copying, importation, or distribution. >> Not many people know that there’s also a protection symbol s­ pecifically for the realm of design, a large D in a circle followed by the year of the international deposit, the name of the depositor, and the identification number of the international deposit according to the London Act of the Hague Agreement. This symbol may only be used with a corresponding deposit. Since there are only a few signatory states outside the EU, this is not really known internationally. More details on the design symbol can be found in section 7.4. >> There are also brand-affiliated design and product symbols, such as ® or ™. These are explained in more detail in Chapter 8. In the U.S., as in most other countries, copyright protection is obtained automatically upon creation of the work, without registration. In the EU, this is true of both copyright and unregistered ­Community design rights. Nevertheless, copyright and design r­ egistration in the U.S. and respectively, is possible. In light of the free movement of goods within the EU, it’s advisable to register design rights as a matter of routine. It is important to note that a design can only be effectively registered within a year from the first time it’s publicly disclosed. The greater the danger of copying, the more an official registration is recommended and vice versa. If you can realistically rule out copying, then registration isn’t really advisable. This would be the case if, for example, a design’s aesthetic effect were dependent upon a complicated, labor-intensive or expensive-to-produce technical solution. Plagiarists have a long-standing preference for easily produced products. Alexander Bretz: One of my clients designed a very complex lamp for an Italian manufacturer, which, in addition to a multistage production, also required highly complicated components that enabled

Application and ­registration

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it to be switched on and off through a magnetic contact as well as an automatic dimming function. During discussions with the manufacturer over the necessity for registration, the company representative was completely nonchalant: If your client wants to pay for it out of their her own pocket, she’s welcome to do so. But we’ve never had any problems with our lampade being copied. They’re much too complicated for that. Proof (Self-documentation)

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In the event of a dispute over intellectual property rights, it’s important to be able to prove, in as much detail as possible, that you were the first to own a design. If you can’t prove direct imitation, the earlier right takes precedence, this is known as a priority right. Usage of the aforementioned copyright symbol doesn’t make much difference here, as it can be manipulated. Other forms of documentation are usually either too expensive (a deposit with a notary or lawyer), prone to manipulation (a photo of a design with a recent newspaper would really only help if a ransom was being demanded) or downright dangerous. Although announcements in Internet forums (especially created to provide proof of the first disclosure) officially mark the beginning of the one-year grace period in which you can register your design, if, for some reason, you miss the deadline (which happens more often than you might think!), your designs then become universally available. So even though Internet forums may seem like a reliable, economical alternative, they’re also a very dangerous feeding ground for plagiarists. For all of these reasons, self-documentation of designs using the mail has become common practice. How to self-document a design: Place renderings or images in a well-sealed envelope (in other words, one that can only be opened by destroying it) and send it to yourself by registered mail. Keep the proof of delivery and the unopened envelope, ideally with a note about the contents, somewhere safe. Self-documentation will prove a design’s worth if there’s ever a court case over the question of who designed what when. By opening the envelope in front of the court (court minutes will reflect this), it can be proven beyond all doubt that you were in possession of the design at the time of mailing. Of course, this form of self-documentation doesn’t help settle the question of the time of the actual first disclosure. Unfortunately there’s no solution for this, but there are some preventative measures that can be taken. Images in trade fair catalogues or magazines are useful. However, video or photo documentation, even with vis-

ible recording data displays, isn’t conclusive since it can be manipulated. The same objection applies to anything stored on computers or other storage devices. By carrying out self-documentation, you’ve done everything realistically possible to optimally protect your design. Above and beyond that, there’s the possibility of utilizing a completely different kind of intellectual property right. In the case of products, it’s actually possible to protect their optical design as a trademark. Technical intellectual property rights may also come under consideration, particularly for technologically oriented designs. You’ll find more specific details on these forms of rights in C ­ hapters 8 and 10. Below is a brief overview of the key factors associated with copyright, together with an assessment of the level of the difficulty or advantage (low, medium, high) for each one.

7.2 Copyright

>> Entry controls: Very high level of difficulty. >> Bureaucracy factor: This is an automatic right, which massively cuts down on paperwork. However, registration at your regional copyright office, if possible, is also advisable. >> Cost factor: Very low, this intellectual property right is free! >> Profit factor: The financial advantage is high. Aside from trademarks, no other intellectual property right lasts as long. >> Inheritance factor: High, the longest possible period of protection is 70 years after the death of the author, thus, hypothetically, your great-grandchildren could still be enjoying the benefits of the rights. >> Globalization factor: The level of international protection is high. Thanks to international agreements, if a work is copyright-protected, it’s pretty much protected worldwide. After reviewing these factors, you’re probably under the impression that copyright is a gift from the gods and you have to drop ­everything this instant and do everything in your power to reap the benefits of this fabulous right. The good news is that you can calm down and take a seat because the bad news is that your chances of getting copyright protection for one of your designs are relatively slim. There are very stringent requirements for a design to gain protection as a copyright. In many countries a product’s appearance is even explicitly excluded from copyright. 93

Laws pertaining to copyright and design rights

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The commercial protection of the outward appearance of a product as a pattern or patent is historically much older than copyright. The first forms of design protection go back to 16th century in France, where the silk factories in Lyon (in those days a pretty high-tech industry of substantial economic significance) were protected against the theft of patterns. Copyright, in contrast, is a child of the Enlightenment. In 1785, Immanuel Kant wrote the essay On the Unlawfulness of Reprinting, in which he distinguished between the rights to a physical book and the rights to its intellectual content. This led countries under continental European law to conclude that copyright was a question of an author’s personal natural right. In contrast, countries under common law believed that a creator is granted copyright by society in order to provide an economic incentive for generating intellectual works. Let’s give a nod here to the Protestant work ethic. This centuries-long duality still exists in most countries to this day. Here are some guidelines to help you assess if and under which conditions each of these rights may be applied. Richard Stim, Patent, Copyright & Trademark, p. 218:

Both copyright and design patent law may be used to protect a product’s design, as long as the design does not affect how the product functions. A design patent is more time-consuming and expensive to obtain than a copyright, but it offers a broader scope of protection. That’s because under design patent law you can stop anyone who uses the same design, but under copyright law you can stop only those who copy your design; you cannot stop someone who independently created the same design. On the other hand, copyright protection lasts for the life of the author, whereas design patent protection lasts for only 14 years from the date the patent issues (in the U.S.). As mentioned, these two approaches to protecting original designs are not exclusive. For instance, a truly innovative but functionless design for a computer might qualify for both copyright protection (as a pictorial, graphic, or sculptural work) and for a design patent (as a purely ornamental design of an article of manufacture). When is a design ­protected as a ­copyright?

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According to copyright law, a creative work (also frequently called a work of authorship) must first fulfill three criteria in order to be protected:

>> it must be original, that is to say created for the first time; >> it must be tangible and fixed in a medium; and >> it must exhibit a certain degree of creativity. For quite some time, the U.S. was one of the most powerful c­ ountries using a registration system for copyright. Until 1976, all works had to be deposited at the United States Copyright Office in Washington in order to enjoy copyright protection in the U.S. The 1976 Copyright Act fundamentally changed this by granting an author automatic protection for their work. However, registration at the Copyright Office is still possible, and even advisable, because it provides a precise date of entry. The only other option for registered protection of a design in the U.S. is the design patent, filed at the Patent and Trademarks Office (PTO). This patent has numerous disadvantages, which have been described in Chapter 1, in the ­overview of IP rights, as well as elsewhere in this book. With regard to design-related works, the U.S. Copyright Act explicitly states that copyright protection does not extend to those aspects of a work that are associated with its use or mechanics. Copyright Act of 1976, as amended and, set forth out in Title 17 United States Code (17 USC):

§ 101. Definitions (…) “Pictorial, graphic, and sculptural works” include two-dimensional and three-dimensional works of fine, graphic, and applied art, photographs, prints and art reproductions, maps, globes, charts, diagrams, models, and technical drawings, including architectural plans. Such works shall include works of artistic craftsmanship insofar as their form but not their mechanical or utilitarian aspects are concerned; the design of a useful article (…) shall be considered a pictorial, graphic, or sculptural work only if, and only to the extent that, such design incor­ porates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.

In other words, only those elements that can be physically and conceptually distinguished from the functionality of the product come under consideration for copyright protection. This principle is also known as the useful article doctrine. In practice, this rules out copyright protection for most communications, product, and fashion designs.

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The difficulties in making a distinction between form and f­ unction become quite clear, not only by looking at the extensive adjudication of the U.S. courts on this question, but also by considering related cases in other countries. For example, there were court cases several years ago for various Bauhaus designs, where it was attempted to determine whether they should be protected under design patent or copyright. As most of you probably know already, Bauhaus designs achieve their uniqueness precisely through the reduction of form to functionality, as per the famous Bauhaus motto: form follows function. An unfortunate universal conclusion can be drawn from this state of affairs. Legal professionals will be more inclined to accept the copyright, the more ornamental and adorned a design is. Thus, jewelry will be confused with art, while reduction and minimalism will be considered poor design and confinement to utilitarianism. Interestingly enough, there’s something very effective that you can do by yourself to convince courts that your designs deserve copyright protection as intrinsic forms. Take every opportunity to place your designs in the most prestigious museums and trade magazines possible. As even big museums have problems with acquisition budgets, they’re often grateful if they receive a design as a present. A letter from a museum director expressing this gratitude is of considerable value in a legal dispute. Naturally, it should be ensured that the museum’s own curatorial freedom is respected and that the whole undertaking doesn’t get blown out of proportion into some kind of bribery that can lead to prosecution. Luckily, once the threshold to copyright protection has been crossed, there are few additional problems with which to be reckoned. You don’t have to fill out any forms or register anything. C ­ opyright automatically falls to the author, though there is still the possibility of registering at your regional copyright office, which, as already mentioned, has the advantage of providing you with a ­concise definition of your work and date of entry. Priority (chronological precedence) and preliminary stages

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So far, so good. However, the problems with copyright tend to lurk in hidden crevices. For example, if someone else releases the same design, it will boil down to determining: who the first was to go public with the design. Legal professionals call this priority. Not only does the early bird get the worm, but it’s also often presumed that the latecomer copied the early bird. As nice as the automatic acqui­ sition of an intellectual property right may be, it’s very often difficult to prove exactly when the first disclosure took place. The simplest

means of establishing this is through self-documentation, which, along with other possibilities, has already been discussed in the first section of this chapter. The value that sketches, draft drawings, and even completely uninspiring accounting records, can have as proof as to whether or not a product has been copied, is highlighted in the following true story from India. The owner of a small goldsmith company in Chikpet, a town near Bangalore, in the southern Indian state of Karnataka, established a company specialized in unusually designed jewelry. This is even more reason why he was shocked when he stumbled upon jewelry manufactured by a large industrial concern, in the display window of a jewelry store in Bangalore that was obviously produced on the basis of his designs. When the jeweler approached the concern, their lawyer informed him that the designs were developed by employees of the company and, therefore, were not copies of his designs. Although the goldsmith could produce a whole array of design illustrations and sketches for the disputed products, he hadn’t registered them as designs, in accordance to Indian design law. So, in legal terms, all it boiled down to was an infringement of the jeweler’s copyright on the sketches and design illustrations, and only if it was possible to prove imitation. The jeweler’s son then launched an investigation into the accounting records and in the process came across some decisive evidence. There were actually receipts for the purchase of the pieces by the larger concern as New Year’s presents. Suddenly, the concern was more than willing to make an out-of-court settlement, which consisted of a very large compensation payment, the cessation of production as well as ­outsourcing of the production of the items of jewelry in question to the smaller business. Cases like this demonstrate once again why registration of your design at your regional copyright office without a doubt presents a fantastic opportunity to document this point in time. There’s yet another fact that the Indian jeweler’s story brings to light. Although design itself may not be copyright-protected, as is the case in India, the sketches and drafts generated during the design process can be useful in resolving a dispute. For this reason, it’s important to store these preliminary steps safely and, insofar as it’s possible, to date them. Although it didn’t work in this case, a priority disclosure could potentially be dismissed on the basis of proof of previous knowledge of a sketch.

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Use and usefulness

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What value does a copyright really have, once you’ve obtained it for a work? Where does the financial advantage lie? In copyright, as with the other intellectual property rights, we’re basically talking about a limited monopoly. This monopoly is legally enforced via issue orders (restraining orders and injunctions) and money damages. What’s more, there’s usually also a possibility to press criminal charges. This is, however, rarely appealing, because in criminal cases the fine is paid to the court, rather than to you. In other words, no one should slaughter a cow that can still be milked. These rights, which are judicial and enforceable by law, enable the author to forbid the usage or copying of their work by others, if and when necessary. Copyright is based on the perception of an artist as an artist. Someone who’s active as an artist is, it’s true, also a manufacturer, because they are making something. But the end product is more than a mere object that can be used like a faucet. An artistic creation can even be economically useful, earning money via its reproduction, distribution, and licensing. Most people still have trouble viewing intellectual property as the actual property of the artist, but in legal terms this is exactly what it is and it’s even h ­ andled like real estate. In today’s industrialized legal and economic systems, a person’s ownership of something is more or less a salable feature. However, ownership doesn’t just mean an object has value as a collectible. Money can also be generated with objects, particularly very valuable things like property or cars, by renting them. In other words, they’re leased to another person and the owner receives rent for the period of time covered by the lease. This is precisely the model underpinning copyright (as well as other IP rights). The creative’s creations are dealt with legally like a plot of land or a building, meaning that the creative can rent and earn money with virtual plots in virtual landscapes. Copyright is understood as the right of the artist as manufacturer, an analogy that makes it easy to understand. The two main components form the basis of all intellectual property rights. The first one is the recognition of the author as a manufacturer who deserves recognition from the public that consumes their work. The, second is the incentive to make something that can be com­ mercialized and on which money can be earned. Copyright is effective as soon as a work, defined by law as a personal intellectual creation, becomes accessible to the public for the first time. Legal professionals don’t feel any more comfortable than you do when they use a lot of abstract terms, but it’s important for

you as a designer to know that, in legal terms, your designs are considered pictorial, graphic, and sculptural works. 17 USC § 102:

Works of authorship include the following categories: (…) (5) ­ ictorial, graphic, and sculptural works. p

Copyright consists of two packages of rights. One encompasses what is known as moral rights, and the other exploitation rights. It’s a moral right, for example, to be recognized as the creator of a work in catalogues or other promotional materials. You’ll find the phrase The right of … to be identified as the Author of the work has been asserted by her in accordance with the Copyright, Designs, and Patents Act 1988. in every printed copy of a book. However, reproduction and distribution rights fall under exploitation rights and they have more to do with profit. So, in short, moral rights have a more humanistic emphasis and exploitation rights are economic in nature. While this distinction is not of great importance in practice, it’s intended to protect the author who, in any event, retains their moral right even if they sell or rent their copyright. The most financially advantageous route for the owner of the copyright is to rent it out or to grant usage rights of it. This is legally referred to as a license or licensing.

Moral versus

Much like a majority of countries with irregular borders, copyright does not have a clearly laid out sphere of protection. Here too, there are frayed edges, enclaves, limitations and on, and exceptions. However, limitations are sometimes merely subject to conditions, of which a common one is the payment of a flat fee. The most significant limitation to copyright is its duration, known as the term of a copyright. This begins with the disclosure of the respective work and stays in effect for 70 years after the death of the author. Compared to other IP rights, that’s an unbelievably long term of protection. However, the discussions over an even longer period of protection (of up to 90 years after the creator’s death) have recently resurfaced. All this really comes down to is a question of how many generations of heirs and licensees will be able to reap the benefits of the copyright. It is important to note that the prolongation of copyright terms has international repercussions, especially if it’s not done in a coordinated manner. For example, if international protection periods only lasted of only 50 years and the German legal system were the only one to choose to prolong it to

Limitations on

­exploitation rights

­copyrights

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90 years, Germany would be placing itself at a severe competitive d ­ isadvantage. But why should there be a time limit at all? There’s no such limit on owning a piece of land, for example. This question really hits the nerve of many countries’ economic foundations. No matter how you look at prolonging protection terms, the question of whether it should be limited at all is quite valid given that the ownership of material objects is for the most part unlimited in time. This question is frequently answered with the reasoning that the monopoly granted the creator of a design is only a concession to incentivize more creation, but, at some point in the future, society and the economy have an overriding interest in its free use. If every idea enjoyed unlimited protection, there would be no more development. Anyone who sought to further an existing idea would have to pay the author and their heirs. Following this logic, the descendants of the unknown inventor of the wheel could still be cashing in today for every bicycle or car tire that is produced. Over time this would increase the costs of new and further development to such a degree that change and progress just wouldn’t be worth it anymore. However, this argument just isn’t very compelling. Even awarding short-term ownership of tangible property or money can be seen as sensible, because the incentive for to economic activity can be newly awakened with each passing generation. High inheritance taxes, such as in the U.S., may be responsible for this effect. Trademarks, which are regular renewable IP rights with no time limits, are frequently diverted from their intended use and employed as a kind of catch-all right. This will be discussed in greater detail in the next chapter. There are quite a number of content limitations on copyright, but only a few are relevant in the design realm. >> A copyright-protected work may be used, even without the author’s permission, for specific purposes in the information, education, and social sectors on the grounds of general public interest. This is known as the fair use doctrine, and it is permitted for reviews, annotations, reports, teaching materials, and research (17 USC § 107). >> On the grounds of freedom of information and freedom of ­science, copyright-protected works may be reproduced and ­distributed through libraries and archives (17 USC § 108). >> If there is legitimate interest in personal use, the legal grantee of a work is also permitted a copy that which they may sell and, under certain conditions, rent (17 USC § 109). 100

>> According to 17 USC § 120 an architectural work that is located in or ordinarily visible from a public place, may be depicted in photos, or the like. The owners of the building may make ­decisions regarding the alteration or demolition of the building without the author’s consent. Voluntarily granting use of intrinsically copyright-protected works through use of the copyleft symbol described in section 7.1 of this chapter is a self-created limitation by the author themselves. Once this usage is granted, it can’t be rescinded. Copyright considerations on an international level will be explored in more detail in section 7.5 of this chapter. Now we’ll explore the workings of the design patent, which is available in the U.S. and most other countries using the common law system. Below are the basics, including an assessment (low, medium, high) of the difficulty or advantage associated with each of these factors:

7.3 Design patent

>> Entry controls: Difficult, as the contents of a design patent a ­ pplication are reviewed in the same manner as an application for a technical patent (see Chapter 10). >> Bureaucracy factor: Very high, as a standard patenting ­procedure will be undertaken. >> Cost factor: The costs for the registration of the design patent are comparatively high. >> Profit factor: The economic advantage is medium, however many exploiters are not familiar enough with this right to ­maximize their profit. >> Inheritance factor: The longest possible protection term is 14 years after issuance. This means that generally you’ll be around to witness the end of the protection term. >> Globalization factor: The value of the protection internationally is low since these kinds of patents are purely national rights and so far there are few international agreements dealing with them. At first glance, the requirements for obtaining a design patent are quite simple and demonstrate the logical effects of limiting ­copyright to form. 35 USC § 171:

Whoever invents any new, original, and ornamental design for an article of manufacture may obtain a patent therefore, (…) 101

But the devil is in the detail, and in the patent application process there’s detail as far as the eye can see. This renders protection of a design through design patents virtually impossible, or at least extremely difficult. Above all, the application process itself is tough and even risky to some extent. An individual who registers a design patent in the U.S. must undergo the regular patent review procedure. This means they have to submit extensive documentation and pictorial representations, the contents of which will then be thoroughly reviewed by the Patent and Trademark Office to determine if the design is new, original, and ornamental. Furthermore, during the process, there’s what’s called a formal disclosure. In the case of technical patents, this is supposed to enable scientific discussion. However, there’s a hitch: the disclosure takes place before the patent is issued. Thus, if the patent isn’t issued, the applicant not only stands there without any IP rights, but not even a nondisclosure within your own company would prevent copying. With that in mind, enthusiasm for going through this process is naturally somewhat dampened (and justifiably so). See Chapter 10 for more detailed information on technical patents and the application process. The Internet address of the U.S. Patent and Trademark Office can be found in the Appendix. On top of this comes the fact that, as explained in earlier chapters, many applications not only fall through during the issuing process, but on more than 70 percent of them are declared invalid in contested infringement proceedings. So the success rate of a design patent that’s in effect is somewhere in the same vicinity of the survival rate in an airplane crash. Since the cost of the application is also relatively high (between $ 700 and $ 1,400 for the initial application alone), a design patent really only rarely makes sense. There’s yet another disadvantage. Even if you do acquire a design patent, it prohibits a further registration at the Copyright Office. Thus, designers in the U.S. in all fields, are at present left virtually without any IP rights. 7.4 Registered and unregistered design rights (EU only)

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This section deals with design rights within the European Union. Below is a brief overview of the key factors of these rights, together with an assessment (low, medium, high) of the difficulty or advantage associated with each of these factors:

>> Entry controls: Very low. A design only has to be new and possess individual character. >> Bureaucracy factor: Naturally, this will be low if you forego a ­registration, and medium-high if you register (the relevant form is fairly simple to complete). >> Cost factor: Obtaining the unregistered rights costs nothing, while the costs for the registered design rights are low. >> Profit factor: The economic advantage is medium, however many exploiters don’t really know about this aspect of the right. >> Inheritance factor: The maximum protection period is 25 years after the application for registration. This means that generally you’ll be around to witness the end of the protection period. >> Globalization factor: The value of the protection is rather low internationally since these design rights primarily exist only within the EU. In contrast to the situation in the U.S., in the EU it’s much easier to acquire protection of a design, with or without registration. The Community Design right applies across the board in all member states and does not hinge on any national regulations potentially still in effect. The principle known as free movement of goods plays a big role in the EU when considering whether a design should solely be ­registered nationally, in a member state of the EU, or throughout the entire EU instantaneously. Free movement of goods implies that there are no customs borders within the entire internal market of the EU and that all legally produced or legally imported goods may freely circulate on the internal market. Thus, a design right that isn’t registered throughout the entire EU can inhibit the sale of goods that infringe upon (or conflict with) this design right in the territory in which it was registered. However, if these goods were legally manufactured in another member state of the EU, they could also be legally imported into the protected EU territory, after they have been purchased in that territory. This instance can be clearly illustrated with the example of a certain Italian manufacturer’s roaring business selling copies of well-known furniture classics. In advertisements, aimed at the German market, the manufacturer explicitly states that the buyer doesn’t purchase the goods in Germany, rather in the country of origin, and then imports them himself via a transport company recommended by the manufacturer. So, if you think it’s necessary for you to register for design rights in several EU states, it’s worth considering EU-wide registration.

European ­Community Design

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The EU-wide Community design right exists in two versions: >> Classic version, called a Registered Design right (RCD), with entry in the EU-wide central registry of registered design rights, at the Office of Harmonization for the Internal Market (OHIM) managed in Alicante, Spain. >> Economy version, automatic and free, called an Unregistered Community Design right (UCD). The Community Design right is the most important IP right employed today in the design realm in the EU. The legal basis for both versions is the already frequently referred to Regulation (EC) Nr. 6/2002 from 12.12.2001 on Community design rights (abbreviated: Reg [EC] 6/2002). Incidentally, the dual aspect has its roots in Great Britain. Although it’s more sensibly defined there than in the EU, given its modifications as a result of discussions with the other member states. For example, in Britain the protection term for the UCD is 15 years, while in the EU it’s 3 years. Optimistically speaking, however, it can be assumed that there will still be some improvements made and they’ll most probably tend in the direction of the British system. This duality also means, first and foremost, that you, as a designer, can possess both variations simultaneously and independently of one another. Outward appearance

The two- or three-dimensional outward appearance of a product (or a part of it) can be protected as a design. Art. 3 lit. a Reg (EC) No 6/2002:

Design means the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colors, shape, texture and/or materials of the product itself and/or its ornamentation.

The term outward appearance applies to any enduring design upon its disclosure. This manifestation can consist of a computer file, drawing, or even a model, and encompasses all further outward appearances up to the finished, ready-for-launch product. If a design is registered, naturally the version provided at the registration determines the protection. This means that if a design is registered too early, it might have to be reregistered if its final outward appearance varies greatly from the earlier version.

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In order to be protected, a design must also be new and have an i­ ndividual character. A design meets these criteria if such a form never existed before. There are no excessively great demands made on newness and individual character. The concept of photographic novelty applies, meaning that if an image of the design in question is laid next to an image depicting the closest-known product (from the entire known range of shapes), the design must give an overall impression of newness, in the eyes of an informed observer. Even minor deviations suffice for something to be deemed different. Contrary to frequently circulating rumors, no specific percentage rules are applied. In principle, your own disclosures will also enter the known range of shapes before a registration (legal term: prior art), thus it’s always recommended to exercise caution with any disclosures. However, a self-disclosure by the registree within one year before registration does not count as prior art. That’s why this period of time before the registration is called the grace period. There’s also a relatively unknown method of documenting first disclosure, namely through the exhibition priority, as described in Art. 44 Reg (EC) 6/2002. If a design is exhibited at an exhibition or trade fair and that design is registered within six months from the start of this exhibition, then the date of the start of the exhibition is used in deciding which design was disclosed first. So, if another designer registers an identical (or at least conflicting) design after exhibiting it but before registering the exhibited design, their registration will be retroactively annulled, by reason of exhibition priority. Thus it’s not the two dates of registration that are compared, but rather the date of exhibition and the date of registration of the second design.

Newness and ­individual character

Art. 44 of COUNCIL REGULATION (EC) No 6/2002 of 12 December 2001 on Community Designs:

Article 44 – Exhibition priority 1. If an applicant for a registered Community design has disclosed

products in which the design is incorporated, or to which it is applied, at an official or officially recognized international exhibition (…) he may, if he files the application within a period of six months from the date of the first disclosure of such products, claim a right of priority from that date (…). 2. An applicant who wishes to claim priority pursuant to paragraph 1, under the conditions laid down in the implementing

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r­ egulation, must file evidence that he has disclosed at an exhi­bition the ­products in or to which the design is incorporated or applied. 3. An exhibition priority granted in a Member State or in a third country does not extend the period of priority laid down in Article 41.

Trade fair organizers sometimes play hard to get when a certificate of exhibition priority according to Art. 44 Regulation (EC) 6/2002 is requested. As a rule, the emphatically expressed wish to obtain a certificate, combined, if necessary, with a presentation of the regulations in the appropriate national language (found on OHIM’s Web site in all the official EU languages) is sufficient. You’ll find the OHIM’s Internet address in the Appendix of this book. The certificate of exhibition priority is a very good way to document the existence of a design and attribute it to a specific designer at a point in time, regardless of when the actual registration takes place. In that respect it can also play an important role in deciding disputes over unregistered design rights or copyright. It is important to note that. As a final note regarding newness and individual character: according to Art. 4 Reg (EC) 6/2002, a product that is a component part of a more complex one (i.e. a product built from various components, such as a car) is only considered new and only possesses individual character if 1) the component remains visible in accordance with its intended purpose if built in, and 2) still possesses newness and individual character with these visible features. Limitations

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Just as copyright has its limitations, design rights have theirs – albeit not quite as many. Designs dictated solely by their technical function and designs that must by necessity be precisely fit are excluded from design right protection. Here again, the protection term presents the most substantial limitation with significant differences between registered and unregistered Community design rights. Unregistered design rights have a protection period of three years from the first disclosure. For registered rights, the protection term is a maximum of 25 years after registration, divided into five-year stages, each of which, requires an extension and gradually increasing fees. With regards to time limits, it should be noted that, upon disclosure, several terms begin to run in parallel. On one hand, the protection term of unregistered design rights, and on the other, the oneyear grace period of the registered Community design rights.

It’s completely senseless, and even extremely dangerous to disclose your designs on Web sites established for this purpose, for the following reasons: >> These do not provide reliable proof of the time of first disclosure. >> They’re not protecting anything. They’re just putting more time pressure on you to decide whether to register or not, turning the grace period into a race period. >> These Internet pages can be accessed worldwide, meaning that your idea may be used somewhere else in the world where there is no protection at all. You should always keep in mind that if you exceed the one-year grace period, the design rights run irrevocably with only the threeyear protection provided by the unregistered design rights, after which the design enters the public domain and becomes prior art. Aside from the different lengths of the protection terms, there’s another important point of difference between the two kinds of Com­munity design rights. A registered design right grants the owner exclusive rights, meaning that it can prevent conflicting designs regardless of whether or not they are actually imitations and whether or not this can be proven. An unregistered design right, in contrast, only protects against one-to-one imitation (much like copyright in the U.S.). In order to even make a legal case, the design must impart an initial impression of undeniable resemblance or sameness and you must be able to prove through the chain of events surrounding the disclosure that there’s a high probability that you were first. It’s unfortunately also entirely possible that your opponent will provide their own counterevidence and in that event it becomes a draw. There’s just no way to win. This is where members of the select club of registered design rights owners enjoy the benefits of their membership. All types of design rights really boil down to mere exploitation. This means designers don’t have moral rights in the pronounced manner seen with copyright. At best, designers have the right to be named as the designer. A design right is completely transferable and, there’s also no legal right stipulating payment of an appropriate compensation – regardless of any previous contractual agreement – unlike in copyright law. Thus a design right cannot only be more or less rented via a licensing contract (as in copyright), but also sold.

Exclusive rights and protection against imitation

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Registration

7.5 Design and ­product-affiliated rights worldwide

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Registration requirements for a design right are merely formalities. OHIM doesn’t review applications to see if designs meet the requirements for newness, individual character, adherence to the grace period, etc. This means that whether a design right is really in force won’t be determined solely on the basis of the registration, but it will only be established conclusively by a court if there’s a dispute. Furthermore, the exact same design may be considered new by one court, while another disagrees. The binding precedent of common law doesn’t exist in the EU. Design and product-affiliated IP rights are regulated differently from country to country. Unfortunately, there’s only space here for an overview. Get advice on cross-border cases from a lawyer specialized in international design law. You’ll find an initial overview of the IP rights systems in several particularly relevant countries in the Appendix. More detailed information on the regulations in place in individual countries, as well as the addresses of their handling authorities can be found on the World Intellectual Property ­Organization’s Web site (WIPO, see Appendix). A comparison of what are, subjectively speaking, the most important IP rights systems worldwide, reveals a somewhat comforting development. Since at least the end of the Cold War, national IP rights systems have markedly aligned with one another. What’s more, most countries have signed onto an international convention for the protection of intellectual property. However, these developments are somewhat dimmed by the fact that the protection of design rights in across almost all legal systems, nationally and internationally, is still far from optimal. This is not even measured against what designers consider the ideal standards, rather in terms of broader economic considerations. In most countries, design protection is integrated into the p ­ atent system, meaning a design can only be protected by registration (the EU is the exception). This may be appropriate for something like a product design, however in the other design industries it ­simply isn’t. Relatively short product life cycles in fashion and ­polymorphism in communications design make this form of pro­ tection impractical for them. A review of design revenues worldwide shows that, for these reasons, a high percentage of designs aren’t compensated. These shortcomings are also reflected in the respective national legal systems, where totally different interim solutions have been

cobbled together. As mentioned before, the classic American solution is to resort to brand-based protection. Before the EU-wide unregistered design rights came into effect in Germany, the courts constructed a solution based on the law against unfair competition, the ergänzender wettbewerbsrechtlicher Leistungsschutz. Roughly translated as the supplementary protection against unfair competition, it has over time been integrated into German law. Other countries, like India, exclude design itself from copyright, but include relevant design sketches and diagrams, so that a sort of subsidiary copyright protection is created via the design documents. Finally, protection is also created via professional confidentiality or comprehensive contractual agreements. Chapter 9 provides more detailed information on how you can ­create supplementary protection for your designs via the laws against unfair competition. Copyright is the only intellectual property right discussed in this book for which there is still no uniform provision in the EU. There’s only a directive, under which the national copyright laws are aligned with one another. While there’s also a directive for design rights, the aforementioned Regulation on Community Design rights (Reg [EC] 6/2002) really has more weight in practice.

European Union (EU)

There are several important international copyright treaties that contain the foundations on which member states agree to a reciprocal recognition of copyright:

International ­treaties

>> The Revised Berne Convention for the Protection of Literary and Artistic Works, ratified on September 9th, 1886 (RBC, Paris Act, July 24th, 1971); >> The Universal Copyright Convention, adopted on September 6th 1952 (UCC, within the same Paris Act from July 24th, 1971); >> Treaty instituting the World Intellectual Property Organization, adopted on July 14th, 1967 (WIPO); >> Agreement on Trade-Related Aspects of Intellectual Property Rights adopted on April 15th, 1994 (TRIPS). TRIPS is now the decisive legislation with regard to reciprocal recognition because it incorporates both of the older treaties, namely the RBC and the UCC. The way it works is explained fairly simply, even though in practice there are extremely complicated and detailed provisions: 109

1. Countries that have signed the treaty, commit themselves to confer upon the nationals of all other contracting states the same rights which they confer upon their own citizens (principle of equal treatment with nationals). 2. Furthermore, the member states commit themselves to granting nationals of all other contracting states the same advantages that are given to the nationals of the most-favored member state. (This is the complementary principle of most-favored nation, MFN). As many countries (especially the big shots) have already signed and ratified TRIPS, the situation for the citizens of these member states is quite comfortable and consistent. But what about countries, like China, that still use a registration system where awarding copyright depends on registering and depositing? The concept of the copyright symbol was developed in the UCC in order to bridge these different systems. To obtain copyright protection in a country with a registration system, you have to fulfill the formalities stipulated by the UCC and put this symbol on every distributed piece. If a design is (additionally) protected under copyright in one contracting state, is it also then copyright-protected in another contracting state, if design is only protected by patent there? Unfortunately, realistically, the answer here is most probably in the negative, as equal treatment with nationals and most-favored nation haven’t yet made the harmonization of legal systems (such as has long been taking place in the EU) essential on a larger international scale. In countries where domestic designs for the production of industrial goods are generally excluded from the protective realm of copyright, so are international designs. Designers from countries that grant designs copyright protection must therefore be content with the fact that in most other countries their designs can at best be protected with a design patent, as in these countries design protection is integrated entirely into patent right. The Treaty instituting the World Intellectual Property Organi­ zation (WIPO), in Geneva, is still of greatest importance in the realm of design. This organization is also responsible for the extension of the other intellectual property rights to countries worldwide, which makes it crucial in the area of trademarks. In fact, it has become possible to regulate trademark protection in all of WIPO’s member states through what’s called an international application to the central office. Due to WIPO’s immense practical advantages, nearly all the countries of the world are members. Nearly all important international treaties in the realm of intellectual property rights are over-

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seen and administered by WIPO, thoroughly justifying Geneva’s reputation as the global capital of intellectual property. The international legal situation for design rights is much more problematic. There are presently only a few countries even acquainted with this type of IP right. There’s also only one substantial international agreement, namely: the Hague Convention on the International Registration of Industrial Designs and Models, originally adopted in 1925, of which exists in three versions (the 1934 London Act, the 1960 Hague Act, and the 1999 Geneva Act). Each version is very different from the other and there are even some different groups of signatory states. The Hague Convention provides for a central deposit of designs along with specifications regarding the countries in which the designs should be protected. The designated protection symbol is the D in a circle, already mentioned already in the first section of this chapter. Unfortunately relatively few countries have actually signed on to the Hague Convention, which means that outside of the EU, protection of a design right – even one that is registered – boils down to sheer luck. >> Ideas in and of themselves are not legally protected in any country in the world. Because ideas build on each other by their very nature to further development and progress, it is impossible to distinguish when they are stolen. >> An intellectual property right only exists in relation to something concrete. In copyright, this is called a personal intellectual creation, whereas in design rights, it’s a two- or three-dimensional outward appearance of a product.

In summary

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Checklist for design and­ ­product-affiliated rights

Remember: only a design manifested in physical form can be protected – ideas are never protected in and of themselves, nor are designs that only exist in draft form. Double-check whether you’ve used the appropriate protective symbols on all the material you’re distributing or presenting: >> >> >> >>

Copyright: © + owner + year of first release Phonorecord: + year of first release + owner Trademark (see Chapter 8) Notice of confidentiality (see Chapter 9)

Calculate how long the estimated product cycle is, starting from the date of the first public presentation. It’s only worthwhile to acquire a Registered Community Design (RCD) for product cycles of more than three years. Due to the free movement of goods in the EU, making an EUwide registration is both advisable and efficient. A solely national registration is rarely advisable. Remember the grace period! A definitive registration must take place within one year of the first public presentation. Is it easy to reproduce your design or is this somewhat unlikely (due to technical or market factors)? If the latter is true, registration usually isn’t necessary. If your design needs to be registered, don’t exhibit it publicly (i.e. at trade fairs or on Web sites) before you’ve at least filed your registration!

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Never present your design on Web sites which supposedly offer legal documentation of your design’s date of origin or its first disclosure! These offers are extremely untrustworthy and only serve to provide plagiarists working on an international level with an all-too-welcome reservoir of designs. If registration is planned, you should register the design with the outward appearance with which it will actually enter the market. Have you used every available possibility for documentation? This may include self-documentation (sending registered mail to yourself), a certificate of trade fair and exhibition priority, printed documentation (trade fair catalogues, lookbooks, p ­ ublications in newspapers or magazines, etc.), audiovisual ­documentation (photos of booths, fashion shows, awards c­ eremonies, etc.). Are there any possibilities for placing your product in trade ­magazines or design museums? This will help you to obtain c­ opyright. Is registration as a three-dimensional mark an option (either additionally or as an alternative)? See Chapter 8 on brand-affiliated rights for more details. Is registration as a patent or a utility model an option (either additionally or as an alternative)? See Chapter 10 on technical rights for more details. Always pay careful attention to whether official-looking bills or requests for payment related to your registration are actually from the relevant representative agency. Anything else should be immediately thrown in the garbage – preferably unopened! As with every decision related to your IP rights: do as much as necessary, but as little as possible!

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8

Brand-affiliated rights – protecting trademarks and trade names

Trademarks, brands, labels, ad infinitum … the trademark is the “guiding right” of the global brand and the golden calf of the global economy in the 21st century. With it, marketing experts believe they can turn almost anything into gold. To a certain extent the trademark also functions as a backup right, covering areas that other intellectual property rights don’t. However, trademark right is also problematic, as the enormous demand for brands creates an equally enormous potential for conflict.

Trademark rights are hot tickets in the world of intellectual property rights. While the legal protection of a company’s brand has been around a lot longer than other intellectual property rights, the first artisan who proudly put their name or symbol on a product had no idea of the significance the trade name would acquire in the 21st century, especially with the advent of the Internet. Every legal system in the world recognizes trademark law and there are essentially only marginal deviations in the legal regulations. The process of internationalization is most advanced in the realm of trademark rights where by applying for a trademark abroad is almost a routine undertaking these days. The appealing possibility of using a descriptive domain name, rather than a numerical URL, plays a significant role in this and has led to trademarkable titles becoming rare commodities.

8.1 Trade names: so what’s in a name?

Süddeutsche Zeitung (SZ) Magazin 27/2008, p. 3:

It seems as if the names are running dry for all the nice new ­companies, brands, products, and Internet presences that emerge daily by the thousands.

The following statistics provided by the U.S. Customs and Border Protection and other sources offer some insight into the economic significance of brands.

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>> Estimated number worldwide (millions): >> of Web sites worldwide (2011): 555 >> of e-mail addresses worldwide (2011): 3,146 >> of registered trademarks worldwide (2008, estimated): 25 >> Top five Internet domains by price paid (million $): >> insure.com (2009): 16.0 >> sex.com (2006): 12.0–14.0 >> fund.com (2008): 10.0 >> porn.com (2007): 9.5 >> business.com (1999): 7.5 >> Top five global brands in 2011 (estimated value in billion $): >> Coca Cola: 71.9 >> IBM: 70.0 >> Microsoft: 59.0 >> Google: 55.3 >> General Electric: 42.8 >> Top five commodities by value seized by U.S. Customs and Border ­Protection Service in 2011 (million $): >> Consumer Electronics: 39.0 >> Footwear: 25.3 >> Pharmaceuticals: 16.8 >> Optical Media: 15.6 >> Apparel: 14.8 >> Top five countries by value of IPR seizures by U.S. Customs and ­Border Protection Service in 2011 (million $): >> China: 110.0 >> Hong Kong: 32.2 >> India: 4.5 >> Pakistan: 4.0 >> Taiwan: 2.3 Symbols

Use and usefulness

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Unlike product-specific intellectual property rights, there is no legally defined or stipulated symbol in the realm of trade names. For the most part: the designation + ® (for registered) indicates a ­registered trademark internationally. The designation + ™ (for trademark) or the designation + SM (for service mark) indicates that a mark is claimed in the U.S. and other English-speaking countries. When considering brand-affiliated rights, the question must be asked from the outset if and when registration as a trademark is worth it. There are two main things to be considered:

Since in today’s global economy a product is seldom offered in just one country where you register the product depends on where it is being traded. The underlying issue here is very similar to whether a design right should only be registered nationally or on a Europe-wide basis immediately. When in doubt, it’s preferable to register a national brand as a Community Trade Mark (CTM). So, in general: it’s better to think big in the realm of trademarks. In many countries, a nonregistered trade name is also protected to a certain extent by laws against unfair competition. At best, this helps nationally since regulations vary greatly from country to country and international treaties dealing with this matter do not exist. That’s why it’s better to have a registered mark, particularly when using the trade name beyond the borders of a country. It’s also advisable to match up the date of registration in the trading area as precisely as possible with the planned date of activation, because in most countries a trademark registration becomes invalid if it’s not used for a certain period of time in the territory of registration (three years in the U.S., five years in other countries). In the case of such nonuse or abandonment, the actual trademark registration won’t help in legal disputes since protection is always tied to usage of the mark.

1) Where do you want

If, as is almost always the case, a product is being financed by credit or investors, professional brand management is especially important since the stakes are higher. If a company starts up without a carefully researched trade name and only seeks to get a trademark registration after the fact, which then for some reason(s) fails (maybe another right has priority), not only does this present a financial strain, but it can mean the end of external financing and thus the whole company.

2) Do you need a

Key aspects of trademark registration are outlined below, together with an assessment (low, medium, high) of the difficulty or advantage associated with each one:

8.2

to use the brand?

trademark registration to prove your credibility to banks and investors?

The trademark

>> Entry controls: There are a few peculiarities regarding what can be protected as a trademark, thus, entry controls are assessed as moderately high. >> Bureaucracy factor: The application form is relatively simple to fill out, however the optimum description of the protected

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>> >> >>

>>

goods or services is not so easy to formulate, thus the difficulty factor here is medium. Cost factor: On the national level, this is medium, but in cases of cross-border protection, it becomes high. Profit factor: As brands have a high marketing potential, the economic advantage is high. Inheritance factor: The advantage here is high as the protection term is prolonged indefinitely on the basis of extensions applied for every 10 years. Globalization factor: As protection is international, this factor is rated highly advantageous.

Registering a mark is, in principle, not very difficult. The application form is not very long and with the help of information available online, can also be filled out relatively easily without legal assistance. You’ll find the Internet address for the U.S. Patent and Trademark Office in the Appendix. There are just a few more factors you should be aware of before you begin the registration process. What can you register as a trademark? The possible forms of trademarks are relatively manifold; however, word and pictorial trademarks predominate. Article 4 of COUNCIL REGULATION (EC) No. 40/94 of December 20, 1993, on the ­Community trade mark:

A Community trade mark may consist of any signs capable of being represented graphically, particularly words, including personal names, designs, letters, numerals, the shape of goods or of their packaging, provided that such signs are capable of distinguishing the goods or services of one undertaking from those of other undertakings. Distinction, meaning, and form

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In the case of word marks, it’s particularly important to choose a combination of letters with distinctive character. A mark is considered distinctive when it’s capable of distinguishing something. Those of you to whom this sounds like hairsplitting have forgotten that this aspect of the registration application is a very central area of conflict between companies, as well as between applicants and the handling authority. It seems pretty tempting to to monopolize a commonly used term by registering. For example, an oven manufacturer would probably be very keen to register the word oven as a trademark for themselves. This is not possible for several reasons,

among them that the word oven does not suitably distinguish their business and ovens from those of other oven manufacturers. Finding an appropriate mark that holds its own internationally as a word mark, has distinctiveness and, what’s more, doesn’t evoke any strange associations, has become increasingly difficult. On an international level, the same word(s) can often have a completely different, undesirable meaning. For example, if you wanted to use the advertising slogan No Riga No Fun throughout Europe as a trademark for the capital of Latvia, this would be somewhat problematic in Italy since a riga means a line, particularly the kind of line that is often inhaled through the nose off a mirror, namely cocaine. Even globally operating car manufacturers have been known to fall prey to this phenomenon, which is also subject to trends. For example, the car manufacturer Jaguar used the abbreviation SS (for Swallow Sidecar) as the name of a model in the first half of the 20th century, until the Nazi regime gave this combination of letters a totally different association and the Second World War ended production of the car. So, it’s not so surprising that in today’s age of brand saturation a six-figure sum is easily paid for a new, synthetic, and internationally trademarkable name. The lesson here is not just to invest in the development of a trademarkable hallmark, but also to devote resources in researching as many possible meanings and ulterior usages of this term as reasonably possible. With online databanks of registered trademarks offered by almost every trademark registry today, this has become relatively unproblematic these days. In terms of what form of trademark should be used, there are clear gradations in the attractiveness of the different forms of mark. Word marks are more desirable than pictorial marks, and pictorial marks are more desirable than all other forms of marks. This is because the word mark exerts the greatest protective effect through a word’s abstraction. No similar or identical wording can be graphically distorted or rearranged to such an extent that it doesn’t still bear a contravening resemblance to the original wording. However, there’s a possibility for a pictorial mark (i.e. logos as well as fonts in in certain optical arrangements) to offer you the same, or even a more effective protection. If, for example, a trademark consists of a word in a rather common font, then the pictorial mark has a scope almost as broad as a word mark. In other words, a pictorial mark can make the registration of an otherwise not distinctive term possible. The oven manufacturer could potentially overcome the registration hurdle by registering a pretty little oven 119

as a pictorial mark, in which the word oven is optically designed in a strongly stylized way. But the result would be a very limited scope of protection. If, however, they registered only the word oven in a very common font (such as Helvetica or Arial) as a pictorial mark the result would be a much broader scope of protection. So even if they weren’t allowed to register oven alone, the pictorial mark could replace the word mark as a more effective­ protection. This principle of a trademark’s abstractness offering it more protection becomes even more obvious when registering a threedimensional form as a trademark since the more abstract the ­depiction, the greater the scope of protection. Alexander Bretz: There was a case in my practice dealing with very eye-catching and uniquely designed women’s handbags, which were sold by my client over many years with only slight variations to the design. Due to the slightness of the variations, registration of the brand with a photo was not as advisable as registering it with something like a rough sketch. Keeping it simple is incidentally not that easy to adhere to anymore in the realm of trademark registration since over time almost all (even completely nonsensical) combinations of up to three letters or numbers have been registered. The need to keep a mark free for other traders to use

Disclosure

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Closely tied to the distinctiveness of a brand name is the most important entry obstacle, namely the need to keep a mark free for other traders to use. For example, trademarks that consist solely of characters or statements for the description of goods or services that have become a part of common everyday language fall into this category. This is the next hurdle for our oven manufacturer because the word oven is used in everyday language. However, one of these every­ day words used with an uncommon spelling, as a hallmark in connection with goods and services that would otherwise not be affiliated with it, would bypass the need to keep a mark free for the trade. You’ll find the Internet address of the U.S. Patent and Trademark Office and the Office for Harmonization in the Internal Market (OHIM) in Europe, with links to their trademark registries as well as those of other international trademark authorities, in the Appendix of this book. As with the design and product-affiliated intellectual property rights dealt with in Chapter 7, it also holds true that you shouldn’t present a trademark publicly before its registration or deposit. There are ways to prove that you were the first one in possession of a design.

These include self-documentation, as well as trade show and exhibition priority certificates (also discussed in Chapter 7). You should also avoid using the applicable symbol (®, ™, SM, etc.) before your mark has been registered. The (technologically) necessary individuality of a domain name is often at least as forceful as a trademark registration or deposit these days. Without a doubt, you should reserve a corresponding domain name even before registering a trademark. This reservation carries an additional positive side effect with it, namely it serves as qualified evidence of the start of serious usage, thereby documenting your prior rights. Furthermore, you prevent someone else from reserving your trademark name as a domain during the registration process only to sell it to you at a high price later (known as cybersquatting). Although in that case you could force release of the domain by legal means, you’d probably balk at the effort.

Internet domain

For the registration, you’re requested to provide a description of the goods and services for which the mark will be used. This is not so easy, but it’s very important since your mark is only protected for those goods and services described. An international classification system, known as the Nice Classification, is used for this description. You’ll find instructions on using the Nice Classification and tips to help with the classification and translation of the description of  our goods and services on the Office for Harmonization in the Internal Market (OHIM) Web site and on the Web sites of other trademark authorities (addresses in the Appendix). It’s also important that in the description you only specify those goods and services that you really offer or will offer within a maximum time period of three years, because if they are not used within three years they will be forfeited (abandonment). Frequently, old trademarks lead a wondrous life like hidden little plants, merely for the purpose of retaining the mark – as was the case with the GDR gas station chain, Minol. The chain was bought in 1994 by the French concern Elf-Acquitaine, whose legal successor, Total, rechristened all the Minol gas stations with its own brand name in the years that followed. The last Minol gas station disappeared in 2000. In order to prevent a possible lapse of the trademark, Total opened three new Minol gas stations in Berlin, Chemnitz, and Leipzig between 2003 and 2004, with substantial publicity fanfare. Of these, only the Minol in Leipzig still exists and maintains the trademark today.

Classification

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Length of protection

In Europe, once a Community Trade Mark (CTM) is registered, it gives the trademark holder protection from the day of registration, for an initial ten years. An unlimited number of extensions can be filed. Even in the case of trademark protection and protection of the trade name, the principle of first in time, first in right applies. This is the priority principle, introduced in the previous chapter. Prior usages, however, are usually only relevant in cases of protracted ­registration.

Three-dimensional

The registration of a three-dimensional mark in combination with the potentially unlimited term of trademark protection has created a great controversy. Firms, particularly large ones, register not only packaging but also actual three-dimensional product forms as threedimensional marks. For example, the three-dimensional trademark registration for the chocolate bar Duplo made by Ferrero is crispy wafers with a smooth nougat cream covered in milk chocolate in the shape of a chocolate bar with a surface structure based on a tree bark. Consider this next example. Before the term of protection for one of their speaker designs expired, the Danish company, Bang & Olufsen A/S, submitted an application to get a visual representation of this speaker recognized as a mark for electric and electronic equipment for the analog, digital or optical reception, or, respectively, playing back of acoustic signals, speakers, music furniture. The speaker is pipeorgan shaped, very tall, slim and freestanding. It stands on a support shaft that tapers to a point below anchored in a black iron base. OHIM refused the registration stating that there was insufficient distinctiveness. In the case of marks that consist of a drawing of goods, it generally holds true that no other measures of distinctiveness are applied except for form. However, for the average consumer, neither a product’s form nor the form of its packaging usually indicates its brand identity. Thus, in the case of three-dimensional trademarks comprised essentially of the form of the goods, it can be more difficult to prove distinctiveness than with other trademarks. Only a mark that considerably deviates from the norm, or branch standard, is capable of distinctiveness. Interestingly, the European Tribunal of First Instance (judgment from 10.10.2007 – T-460/05) nevertheless overrode the OHIM’s decision and granted the pipe organ-shaped speaker distinctiveness. This decision shows how difficult it is to distinguish the aesthetic intellectual property rights (design rights, copyright) from

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trademark rights. When a three-dimensional design is the sole indicator of a product’s origin, the time-limited protection of copyright and design rights can, indirectly, and within certain parameters, be extended indefinitely by registering the product as a mark. If this route is basically viable, or even conceivable, it begs the question why other intellectual property rights have any time limits at all. This question is relatively complex and the answer to it remains wide open. Clearly, it shakes the very foundations of the IP rights system to the core. If you want to go down this route, defining a trademark in terms of the form of the goods, you can expect a lot of problems. There’s certainly no guarantee that you’ll get your registration through at all. In any case, you shouldn’t venture down this path without the assistance of a lawyer. Once a mark has been registered, it grants its owner exclusive rights. The owner can take action against plagiarisms and all uses of the mark not authorized by them by filing claims for damages and injunctions, as in cases of infringement on copyright and design rights. The accompanying entitlements (i.e. right of access to information, to restitution, to discreation) apply, along with the applicable penal and customs law regulations. In the U.S., the applicable laws authorize the U.S. Customs and Border Protection Service (CBPS) to seize goods imported in contravention of intellectual property laws. The procedure is similar in all member states of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). The U.S. procedure requires that the owner of the IP rights register their protected work with the CBPS. All identical or strongly similar goods being imported are then provisionally seized. The owner of the rights is informed about the seizure and given a period of time in which to file an embargo on importation. The mark is almost limitlessly utilizable. It can be licensed (rented, you remain the owner and permit usage) as well as sold (the mark is completely transferred over to someone else).

Exclusive rights

There are also important international agreements that come into play in the realm of brands and their registration. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), adopted April 15, 1994, forms the overarching framework of legal relations in international trademark law as well as in copyright and design law (discussed in the previous chapter).

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Two recent treaties have contributed significantly to the standardization and internationalization of the trademark law since TRIPS came into force: >> The aim of the Geneva Trademark Law Treaty (TLT) of October 27, 1994, is to approximate and streamline national and regional trademark registration procedures. This is achieved through the simplification and harmonization of certain features of those procedures, thus making trademark applications and the administration of trademark registrations in multiple jurisdictions less complex and more predictable. >> The Singapore Treaty on the Law of Trademarks (STLT or Singapore Treaty) was adopted on March 28, 2006. The objective of the Singapore Treaty is to create a modern and dynamic inter­national framework for the harmonization of administrative trademark registration procedures. Building on the TLT, the STLT has a wider scope of application and addresses new developments in the field of communication technology. As compared to the TLT, the Singapore Treaty applies generally to marks that can be registered under the law of a Contracting Party. Most significantly, it is the first time that nontraditional marks are explicitly recognized in an international instrument dealing with trademark law. The Treaty is applicable to all types of marks, including nontraditional visible marks, such as holograms, three-dimensional marks, color, position, movement marks, and also nonvisible marks, such as sound, olfactory, or taste and feel marks. Here as well, these advances in international trademark law have only been made possible through other important, and much older agreements, which laid the foundations that are still effective today: >> the Paris Convention for the Protection of Industrial Property of March 20, 1883; >> the Madrid Agreement Concerning the International Registration of Marks of April 14, 1891. These agreements and their revision and amendments form what has become quite a well-organized body of international trademark law, and are the grounds for the previously mentioned extensive similarity between national trademark laws. The smooth workings of this system can be attributed to the fact that the principles of international agreements mentioned in Chapter 7 also apply here: 124

>> 1. The states that have signed the treaty are obliged to grant the same rights to the nationals of all the other signatory states that they would grant their own nationals (equal treatment with nationals clause). >> 2. The signatory states are further obliged to always grant the nationals of all the other signatory states, the benefits of the most-favored nation (most-favored nation, MFN). There is however an important distinction. Trademark rights in almost all countries can only be secured on the basis of an application and/or registration. In trademark law, equal treatment with nationals means that nationals of other signatory states have the same rights upon registration as the nationals of each signatory state. There’s no automatic recognition of marks registered in another state. There really should be a global authority responsible for the registration of all marks and assigning their relevant geographic territory, but here the global legal system is still lagging behind. However, one step in this direction was already taken some time ago in the shape of the aforementioned Madrid Agreement. The Madrid Agreement was conceived as a complementary agreement to the Paris Convention and it has served its purpose well. Essentially, it makes it possible via an application to WIPO in Geneva to register a mark already registered in the signatory state as well as in all (or several) other signatory states. Legal professionals call this process trademark extension. This doesn’t create a unified supranational mark (as is the case with the European mark), rather, a bundle of national marks each based on their respective national laws. This can lead to problems: for example, when an identical or similar mark is already registered in another signatory state. However, there is a 20-year threshold – longer than in most national legal systems – and only for the first five years of this 20-year period is protection dependent upon continuance in the country of origin, meaning a lapse of the mark there would consequently lead to a lapse in the other states. After these five years, a mark that has lapsed in the country of origin can develop a life of its own in the other countries to which it was extended. There are two possible means of extending a mark abroad. The registration may be undertaken directly by the applicant in individual countries, invoking the principle of equal treatment with nationals in other signatory states of the Paris Convention. In taking this course they acquire a mark that, from the start, is completely inde-

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pendent of continuance in its own country. The advantage to this method is that there is no dependence on the status of the mark in its country of origin. Disadvantage: the applicant is bound to the term of protection in the respective national trademark laws of the destination country. The second means is to extend the mark as per the Madrid Agreement, by filing an application in Geneva. The advantage here is the lesser bureaucratic effort and the stand-alone protection period of 20 years, after the first five years. A disadvantage, however, is the mark’s dependence in the other signatory states on the mark in the country of origin during the first five years. And only one national mark can ever serve as a basis for the extension, not the EU Community Trade Mark. So if protection in the EU and other non-EU countries is intended, a mark registration as a Community as well as a national mark (in an EU member state) must always be taken into account. You’re probably wondering which route is the more cost-effective one. Naturally, this depends in each case on the countries in question. Nevertheless, one rule of thumb has proven to be effective for rough estimation. Individual registration is worthwhile if done in up to three or four other countries. Extension of the mark at registration is advisable when registration is to be undertaken in more than four countries. You’ll find addresses, forms, and further information, including links to national trademark authorities, on the WIPO (World I­ ntellectual Property Organization) Web site. The address can be found in the Appendix. As has been mentioned already, the diverse national legal systems no longer have quite as many major differences these days in the mark registration process. This means that a thoroughly tedious and confusing experience can, generally, be avoided. Get advice from a lawyer specialized in international design law for cross-border cases. You’ll find an initial overview of the IP rights system of several particularly relevant countries in the Appendix. More detailed information on the individual countries and the addresses of the relevant handling authorities can be found on the World Intellectual Property Organization Web site (WIPO, see ­Appendix). Trademark ­infringements in China

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This is currently a very hot topic and one that is constantly being inflated in the press. Why is it that intellectual property rights don’t seem to hold much sway in China and what, if anything, can be done about this?

As seen in the U.S. Customs and Border Protection statistics at the beginning of this chapter, China does indeed lead the way as the number one country of origin for brand plagiarisms. On the other hand, the U.S. is the country of origin for brand plagiarisms in other countries. Who would expect to see the U.S. in this position? After all, the Americans are often the ones most vocally leading the way on the international stage, demanding that China implement more effective protection of intellectual property rights. The level of disparity in the amount of brand plagiarism in the two countries means there’s no real basis of comparison, though. The China-bias is also cast in a new light when you consider that the legal basis for intellectual property rights protection is in no way lacking in China. On paper, China is at par with major international players. However, in the actual implementation of those laws, the devil seems to lie in turning a blind eye. What stands as law in the central government in Peking, is frequently hazily seen from the distance of the provinces. A poorly paid police officer only works for additional motivation and only when the chemistry’s right. To create this chemistry, a so-called consultant (or what’s known as a detective in other countries) is needed. Since the occupation of detective was forbidden in 1993 in order to protect the one-party system from the trade in classified information, you now have to keep a sharp eye out to find one of the estimated 10,000 agents offering advice on procurement of business information, photographic services or simply just consulting. Commissioning them is also not exactly cheap. The fees begin at $ 7,000, but efficiency is guaranteed since not only do the consultant’s tasks include investigation, but also motivation and guidance of security authorities. It could be said, though, that things are starting to shift in terms of law enforcement in China. In a sensational, groundbreaking decision, a Shanghai court sentenced two U.S. citizens to prison terms of up to two and a half years in 2005, because they used Shanghai as a base to sell pirated DVDs over the Internet to over 25 countries. Not long ago, there was another decision in which a storeowner was ordered to pay damages for selling plagiarized clothing and accessories. So there are a lot of signs that the situation will improve in the near future. With increasing development, Chinese companies and developers will value effective protection for themselves. On the other hand, acquisition of foreign companies with legally protected know-how means that these Chinese purchasers are frequently ­confronted with IP infringement stemming from their own country. 127

Changing social norms are also playing an important role, where for example it is seen as uncool to purchase plagiarized products in circles with higher purchasing power since a great deal of value is placed on showing off the expensive originals. You’ll find more information on the current status of Chinese ­Intellectual Property law on the blog ipdragon, the address can be found in the Appendix. In summary

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>> Every legal system in the world recognizes trademark law, and for the most part there are only marginal deviations in ­regulations. >> Since the process of internationalization is most advanced in the realm of trademark rights, applying for a trademark abroad has almost become a routine undertaking. >> The two main questions to ask yourself when considering registering for a trademark is 1) where you want to use the brand, and 2) whether a trademark is needed to prove your credibility to banks and investors. >> Be sure to research as many meanings and ulterior uses of the term you want to associate with your brand as is reasonably possible. >> A pictorial mark can facilitate the registration of an otherwise nondistinctive term.

Checklist for brandaffiliated rights

Note: You must register a mark officially before you begin to use it, to prevent a dispute over its use. Aim to register – and don’t display the mark publicly (i.e. at trade fairs or on Web sites) before you’ve filed the registration at the very least! Be aware of the possibilities for self-documentation of your mark – and trade name – (via registered mail to yourself), so you can prove if necessary that you had the particular designation first (the principle of priority also applies in trademark law). A certificate of trade fair and exhibition priority may be obtained for trademarks as well. Unlike with the product-affiliated rights, there’s no legally defined or stipulated symbol for a business designation; ­however, generally speaking, the following can be said to apply: >> Designation + ® (for registered) is the common method of identifying a registered mark. >> Designation + ™ (for trademark) or designation + SM (for service mark) is the prevailing method of identifying a registered mark in the U.S. (and other countries under common law). >> PGI (protected geographical indication) seals of origin or GTS (“guaranteed traditional specialty”) are merely seals of quality (like environmental labeling), which are not independently evaluated or monitered, thus, at best, they serve an economic purpose as a form of marketing. Due to the free movement of goods in the EU, an EU-wide ­registration is advisable, and, by implication: a purely national registration is rarely advisable. With one exception: you plan to extend the mark via the Madrid System to circa 3–4 additional countries outside the EU. 129

Registration of a mark is particularly advisable in cases where a need for financing through credit is anticipated or taking on an investor is planned. Research as thoroughly as possible if an identical or similar mark is already in use in the intended region of registration. Registration of a domain name can and should be accomplished before the application for trademark registration – otherwise you put yourself at risk of cybersquatting! Take care in your description of goods and services that you only include those goods and services that you are offering or will realistically be able to offer within a time frame of maximum five years, as otherwise your mark may become invalid. Is registration as a three-dimensional mark (usually only ­additionally) or another kind of mark a possibility? These are the types of marks that exist: >> >> >> >> >>

Wordmarks (including abstract letters and number sequences) Pictorial mark Three-dimensional marks (also known as shape trademarks) Color marks (single color or color combinations) Sound or aural trademarks (tone sequences)

Carefully consider which type of mark you want to use. Here the principle applies: wordmark before pictorial mark before other forms of marks. A mark must be distinctive, and it must also be distinguishable in relation to the declared goods and services. A mark (in particular word marks) may not contain or use any terms that are stipulated to be kept free for other traders to use (see Chapter 8); in particular this includes words which are used as part of everyday language in relation to those goods and services registered to be offered under the mark.

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Always pay careful attention to whether official-looking bills or requests for payment related to your registration are actually from the relevant representative agency. Anything else should be immediately thrown in the garbage – preferably unopened! As with every decision related to your IP rights: do as much as necessary, but as little as possible!

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9

Activity-related rights – provisions in competition law

While IP rights tend to take center stage in terms of protection in most designers’s minds, there are also a number of relatively unknown statutes that can help solve many everyday issues, including preventing designs that have been disclosed from being stolen, deterring domain name hoarding and many more. In many countries these rules are commonly known as the laws against unfair competition whereas not being united in one uniform book of law. As mentioned in previous chapters this body of laws has particular importance in the U.S. due to the lack of other effective forms of protection for American designers. For this reason, and because some of you may wish to expand your business into the U.S. in the future, this chapter will predominantly focus on the subsidiary protection offered by antitrust law. Section 9.5 presents a brief overview of laws against unfair competition worldwide.

A good contract starts before it even exists. Caution is necessary because otherwise the idea may slip out of your hands before you’ve even had the chance to set it out in a contract. Unfortunately, there’s just no such thing as airtight or optimal protection when presenting designs, because ideas can’t be protected in and of themselves since they are tricky to define. The following tips will, however, help you put together a pretty good security system.

9.1

Before your first presentation, document exactly when you completed your designs in the form you’ll be presenting. Self-documentation (explained in detail in Chapter 7) is of particular importance before presentations and pitches, because otherwise a participant in your presentation can simply run off with your know-how. A subsequent self-documentation by you, even only a short time later, would then be completely ineffective. What’s more, try to avoid distributing handouts, or at least collect them again after a presentation. Don’t leave anything behind.

Self-documentation

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This includes: digital storage devices, transparencies, slides, sketches on flip charts, etc. If you do accidentally leave something behind, ask for an acknowledgement of receipt (which may not always be appropriate, but at least that way you’ll know the lay of the land) or immediately thereafter send a written statement of this (it’s better to do this by fax or letter than by e-mail) to the company who received the goods. If they don’t refute it, it’s considered to be an acknowledgement of the receipt and content of the letter. Most importantly, whenever possible, employ the Holy Trinity of copyright notice, nondisclosure agreement, and notice of confidentiality in your pitches and presentations. Copyright notice

You should always include a copyright notice on every page of the documents and design renderings that you present or hand out. >> © + name of author + year of first publication

Nondisclosure agreement

You should also consider whether there’s a realistic option to draw up a nondisclosure agreement (NDA) with your potential client. The NDA commits them to confidentiality and to only using the presented designs within the framework of a licensing contract with you. Naturally, the negotiating situation is not always conducive to such an agreement, or it may be that it’s possible, but the prospective client also wants something in return from you – usually the guarantee that you won’t present your designs elsewhere for a certain period of time. So it’s important to carefully weigh the advantages and potential dangers before you suggest that your client sign an NDA. Such agreements can be formulated either in brief or in extreme detail (even several pages long!). For all intents and purposes, the brief version as formulated below should suffice for your needs: >> client/company/manufacturer will treat all informations and ­documents that were disclosed or let to it confidentially and ­neither make any use of them nor disclose them to any third ­person.

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Despite the caution urged above, when you give presentations and pitches you’re not as vulnerable as you might think. The unauthorized use of presented designs, even if only attempted, is liable to prosecution. You can take the unauthorized user to court and even press charges against them. And since you haven’t yet estab-

lished a contractual relationship with them (and probably won’t in the future), you can pull out all the legal stops without hesitation. The most important thing for you to know is that the Economic Espionage Act of 1996 in 18 USC § 1832 extensively penalizes the use with intent of information labeled confidential, as theft of trade secrets: Economic Espionage Act (18 USC § 1832):

>> Theft of Trade Secrets – (a) Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly – >> (1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information; >> (2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photo­ copies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information; >> (3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization; >> (4) attempts to commit any offense described in paragraphs (1) through (3); or >> (5) conspires with one or more other persons to commit any offense described in paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy, shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both. >> (b) Any organization that commits any offense described in subsection (a) shall be fined not more than $ 5,000,000.

Exactly what trade secrets are is regulated in 46 states by laws, for the most part homogeneous, and based upon the Uniform Trade Secrets Act (UTSA). “Trade secret” is also defined in this Act: Uniform Trade Secrets Act (UTSA) § 1:

Definitions. (…) (4) “Trade secret” means information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or 135

potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

State laws enable action to be taken against a misappropriation of trade secrets through injunctive relief and claims for damages. However, in the four states that haven’t adopted any UTSA-based laws (Massachusetts, New Jersey, New York and Texas), corresponding principles either based on statutes or common law apply. Since chances are high that a prospective client will know even less about these legal regulations than you do up until now, you should immediately put your superior legal knowledge to good use in the form of a notice of confidentiality, which you, in addition to the copyright notice, should place at the beginning or end of your presentation – or better yet on each page: Notice of Confidentiality:

All sketches and designs are strictly confidential and subject to U.S. federal and state trade secrets laws. Any unauthorized copying, duplicating, sketching, drawing, photographing, downloading, uploading, altering, destroying, photocopying, replicating, transmitting, delivering, sending, mailing, communicating, or conveying of such information is a criminal offense and will be punished under Economic Espionage Act (18 USC § 1832).

While this notice carries no legal weight in and of itself, it makes it clear to your potential client that you have enough of a clue to protect yourself legally against any inspirations. Aside from the trade secret regulations, predominant sources of U.S. laws against unfair competition are the Lanham Act from 1946 (15 USC §§ 1051–1127) at the federal level (which primarily deals with the protection of trademarks), together with state-level laws and c­ ommon law. The Federal Trade Commission, which primarily oversees administration of the antitrust laws, has also issued numerous regulations defining permissible conduct under competition law. From this somewhat complicated and confusing area, only three points relevant to designers will be dealt with here, namely: palming (passing) off, cybersquatting and misuse of patent/copyright.

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Even without a registered trademark, the goodwill of a company, in other words a company’s nontangible value, is protected from intentional misrepresentation by another company. This kind of damnification is known as palming off or passing off and is a common law tort. It doesn’t matter whether the products of the copied party have been passed off as the copier’s own product, or the other way around (reverse passing off), it boils down to the question of whether the public is misled about the origin of the product or their relationship to the product. In order to support a claim of palming off, the so-called classic trinity must be in evidence (Erwen Warnick B V v J Townsend & Sons (Hull) Ltd [1979] AC 731, 742 (HL) [Advocaat] by Lord Fraser; Reckitt and Colman Products [1990] by Lord Oliver):

9.2 Palming off: the trademark’s tough little sister

>> Goodwill owned by a trader >> Misrepresentation >> Damage to goodwill It’s not that easy to successfully file a claim of palming off since you have to provide proof of the first two points, in addition to a ­realistic basis for actual damages to goodwill incurred and for the striking similarity between the marks/goods/services of both parties. To accomplish this, the marks/goods/services must demonstrate a likelihood of and/or actual deception/confusion to the public. Deception/confusion claims cannot be based solely on the perceptions of a so-called moron in a hurry. (Morning Star Cooperative Society v. Express Newspapers Limited [1979] and Newsweek Inc. v. British Broadcasting Corp., [1979] R.P.C. 441 by Lord Denning.) Time and again there are fierce battles over the usage of a particular Internet domain name. In this case, the (by now familiar) priority principle of first in time, first in right applies. From the Internet’s very beginnings, entrepreneurial individuals have made a huge business of indiscriminately registering existing brand and company names, in order to sell them for huge sums to the owners of those brands and company names. Cybersquatting has led to intense court battles worldwide. In the U.S., cybersquatting was the impetus behind the creation of the federal law known as the Anticybersquatting Consumer Protection Act: ACPA, 15 USC § 1125(d).

9.3 Cybersquatting: the rules of the game in conflicts over domain names

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Anticybersquatting Consumer Protection Act (ACPA, 15 USC § 1125[d][1][A]):

>> A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person – >> (i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and >> (ii) registers, traffics in, or uses a domain name that – >> (I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark; >> (II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark; or >> (III) is a trademark, word, or name protected by reason of ­section 706 of title 18 or section 220506 of title 36.

The act enables the owner of a brand or company name to protect themselves quite adequately against cybersquatting. Incidentally, the ACPA also allows for an appropriate procedure if the Web site’s owner or registrant cannot be contacted, making the ACPA one of the most cutting-edge laws in this area. An interesting example of a dispute over cybersquatting was decided in 2001 in the German Federal Supreme Court, the Bundesgerichtshof (BGH). The case dealt with the registration of the domain shell.de, which a German lawyer by the name of Shell had registered in his name. The oil company Shell took action in order to have this domain transferred to them. The Bundesgerichtshof decided that first come should be first served in principle, thus the first registrant of a domain should be able to continue to use the page exclusively. However, they also ­concluded that an exception should be made when the latecomer had a much higher profile than the earlier registrant, as was the case here with Shell, the company. The fact that Mr. Shell had attempted to sell his domain name to the Shell company created bad faith and intent, which may have also been a factor in this case (BGH, Sentence of November 22, 2001 – I ZR 138/99). As an alternative to a usually expensive and drawn out court case, the Internet Corporation of Assigned Names and Numbers (ICANN) offers an international arbitration procedure, for which it’s not necessary to have legal representation.

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The Internet address for the Internet Corporation of Assigned Names and Numbers (ICANN) can be found in the Appendix. Alas, it can’t be said that owners of IP rights such as patents and copy­rights are always the good guys. As previously mentioned, IP rights and their economic function basically boil down to a kind of time-limited monopoly for their owners. Therefore, it shouldn’t really come as a surprise that there are sometimes conflicts along these lines with antitrust laws that are all about preventing mono­ polies. This can be clearly seen in the example of a manufacturer who had a patent for a machine that deposited salt tablets in food containers. Purchasers of the machine were obliged to buy the salt tablets exclusively from the manufacturer and patent owner. The Supreme Court ruled that the manufacturer had misused their patent rights, thus the manufacturer’s own attempt to claim a patent infringement from those companies unwilling to use their tablets was thrown out (Morton Salt Co. v. G.S. Suppinger Co., 314 US 488 [1942]). This defense on the basis of infringement of patent law has also been brought into play for copyright. This is what underlies what’s known as the unclean hands doctrine. Those who dirty their own hands, in this case by taking unfair advantage of their patent or copyright monopoly position in order to misuse or overstretch it, don’t have the right to invoke that protective right while their hands are dirty. The case which established this doctrine, Lasercomb America v. Reynolds before the U.S. Court of Appeals, really demonstrates this point quite well. Lasercomb, a software company, stipulated in their licensing contracts that licensees or their employees could not program or run any competitor’s software for the term of the contract and for one year afterwards. Incidentally, this contract had a duration of 99 years. The U.S. Court of Appeals deemed this a misuse of copyright and denied the software company any claims against a licensee, who had indisputably violated the copyright (Lasercomb America Inc. v. Reynolds, 911 F.2d 970, 978 [4th Cir. 1990]). Misuse of patent/copyright is usually about the owner of an ­intellectual property right attempting, through contractual exclusivity agreements, to overstretch the boundaries of that IP right or to use it as a lever to gain a competitive advantage in another market (to which the right doesn’t even apply). Thus, it also tends to be the case internationally that only those stipulations are permitted in licensing contracts that are in line with those exclusivities which are

9.4 Misuse of patent and copyright as an issue of antitrust laws

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of necessity affiliated with the right, and don’t strive to achieve completely unrelated goals. You should also be careful when making arrangements for exclusivity and covenant[s] of noncompete (CNC) in your licensing contracts. One succumbs easily to the temptation to try to include a lot in such contracts, like in franchise agreements for example. But, as you’ve seen, the jurisdiction, both in the U.S. and elsewhere, tends to frown upon these kinds of agreements that may inadvertently constitute a misuse of patent/copyright or violation of antitrust laws. 9.5 Laws against unfair competition ­worldwide European Union (EU)

The fact that today there is still no international competition law, despite globalization and major globally interconnected businesses and organizations, presents one of the world’s greatest economic challenges. To date, it has only been possible for individual nation states in the EU to function in a solely subsidiary fashion, transferring responsibility for the monitoring of antitrust laws to a supranational agency. The provisions under competition law in the Treaty on European Union (TEC, Consolidated Version, 2008/C 115/01) consist of a small number of nevertheless quite far-reaching rules. Of particular interest with regards to the design industry are the effects of the free movement of goods (TEC Art. 34 to 36) and the provisions under competition law as they relate to licensing contracts (TEC Art. 101 and 102). Both of these matters may come into play when arranging licensing contracts, particularly when an exclusive right of use is set out therein. Consolidated version of the Treaty on European Union (2008/C 115/01):

>> TEC Article 101 (ex Article 81) >> 1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or ­distortion of competition within the internal market (…) >> TEC Article 102 (ex Article 82) >> Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.

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As an example, if a licensor grants a licensee exclusive use of a design, work, know-how, etc., this almost always inherently implies the creation of a monopolistic micromarket. If other companies are prevented from using a right that is the object of a license through an exclusivity agreement, it may constitute an agreement between companies, which is likely to impair trade between Member States, aiming to restrict competition within the internal market. At the same time, monopolization through a national IP right also functions as a measure with the same effect as a quantitative import restriction, or, more rarely, an export restriction. But don’t worry. This doesn’t automatically render all licensing contracts ineffective or illegal. It really has to come down to a restriction that goes beyond the restriction by nature inherent in IP rights. In other words, it’s effectively about an unnecessary appendix to or expansion of the rights. Alexander Bretz: In my legal practice over the years, I’ve seen a lot of buyers and licensees attempt to hoodwink designers; however, I’ve yet to encounter a restriction to competition or free movement of goods by the licensor (i.e. the designer) that results in perceptible damnification of cross-border trading. Unintentionally creating a monopoly is fairly unlikely when dealing with classical design licenses, mainly because the designer/ licensor is usually (at least somewhat) the weaker contracting partner. Furthermore, only when dealing with the licensing of strong brands could there conceivably be a resultant impact on trade bet­ ween Member States, but, of course, this cannot be automatically assumed. The situation in the EU is therefore somewhat different than in the U.S. since both the conditions for, and the legal consequences of, misuse of patent/copyright are quite different. At the end of the day, ensuring the integrity of competitive trading is still the responsibility of individual Member States. On the EU level laws in this area more and more tend to favor consumer ­protection. With the exception of the 1994 Trade Marks Act, Great Britain has to date essentially gotten by without a legal provision dealing with unfair or impermissible competition. Unlike the U.S. and the rest of the EU, there’s no legal material that falls under the umbrella term unfair competition. However, thoroughly adequate legal instruments, in terms of content, have been developed from the adjudication. These instruments comprehensively protect business against

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the danger of confusion (passing off), against intentional or serious negligence amounting to injurious falsehood or from all manner of ­denigration of competitors and detraction from their goods or services (slander or libel of title or of goods).

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Germany

In Germany, legislation against unfair competition is not only a completely independent legal area, there’s even an all-encompassing law, namely the law against unfair competition (Gesetz gegen unlauteren Wettbewerb, UWG). The provisions relevant to designers are, on the whole, on par with those regulations described in the section on the U.S., but they sometimes go one step further. It’s perhaps also worth mentioning that there’s even a provision in the German antitrust law (Gesetz gegen Wettbewerbsbeschränkungen, GWB, or Kartellgesetz) that enables a rejected applicant to a trade show or other similar presentation (for example a fashion show) to legally force their participation. Under German law, the organizer of such a trade fair or presentation is basically perceived as a monopolist and, as such, may not discriminate during the selection process against an applicant who will afterward be theoretically dependent upon them.

Japan

The law against unfair competition, created in Germany, was adopted by Japan in 1934 and built upon over the years. Last revised in 1993, it contains no sweeping clause, rather a nonexhaustive list of forbidden behavior. Its goals are protection of fair competition between companies along with the observation of international obligations. However, in actual practice, the law against unfair competition has only a marginal significance since numerous provisions aimed at protecting the consumer are governed under another law – the regulation governing free gifts – and enforced by an agency known as the Japan Fair Trade Commission.

China

China has a law against unfair competition that was established in 1993, and an advertisement regulation act, in place since 1994. Amongst other things, the law against unfair competition prohibits the use of confusingly similar labeling, misleadingly incorrect i­ nformation on goods or in advertisements, the damaging of business confidentiality and denigration through the dissemination of incorrect facts. In any case get advice on cross-border cases from a lawyer specialized in international design law. In the Appendix, you’ll find an initial overview of intellectual property rights systems in several par-

ticularly relevant countries. You’ll find more detailed infor­mation on regulations in place in specific countries, as well as addresses of representative agencies and government offices on the World Intellectual Property Organization Web site (WIPO, see Appendix). >> Self-documentation before presentations and pitches is vital in preventing participants from running off with your know-how. >> Always include a copyright notice on every page of the documents and design renderings that you present or hand out. >> Carefully weigh all benefits and potential dangers before asking your client to sign an NDA. >> The Economic Espionage Act of 1996 penalizes the “use with intent” of information labeled confidential as theft of trade secrets, making the unauthorized use (or attempted use) of ­presented designs subject to prosecution.

In summary

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10

Technical rights for designers – patents and utility models

The line between a design and a technical invention often becomes blurred, especially in the realm of industrial design. This is why it’s important that designers have a good understanding of available means to protect their inventions through patents and utility models. Torben Flanbaum, a retired Danish plumber, saw a report one night on television about the serving and decanting of red wine. The program made reference to a major problem of decanted wine, pointing out that once exposed to air wine doesn’t remain drinkable for very long, sometimes not longer than a few hours. On the following night, Flanbaum had an idea for a bottle spout that would decant wine only at the time of pouring, making it possible to decant just one glass of wine at a time rather than a bottle in its entirety. Flanbaum presented his invention in 1999 at the Danish Invention Center, who then put him in contact with what was at the time a relatively small-scale manufacturer of design-oriented products, MENU A/S. MENU A/S acquired the exclusive license from Flanbaum, and this was the birth of MENU’s Vignon wine pourer/aeorator, which since then has become one of the company’s best-selling products, with over 85 percent of sales abroad. This is just one example of a crossover between design and invention, but there are countless others. For MENU, which predominantly deals in designer objects, began to consider the best strategy for acquiring optimum protection through IP rights. While relying solely on a design right would have made a relatively long protection period possible, the design right would only have applied to the product’s outward appearance. Registration as a trademark, with a corresponding term, might have helped, but in the end couldn’t have prevented similar products from coming onto the market by applying the same technical invention. A technical IP right, patenting, remained the best option for protection. Some day you might just find yourself in a similar situation, so it’s worth knowing a bit in advance about technical IP rights.

10.1 Patents

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Exclusive and ­temporary monopoly

A patent is a vested and temporary monopoly issued by a particular country for an invention in all fields of technology that is novel, based on an inventive step and commercially utilizable. As opposed to all the other IP rights, a patent is only issued after what can be an appraisal of these aspects. The crucial element is the notion of novelty. If you’ve read Chapter 7, you’re already familiar with this important term in design rights. In that context, novelty was defined by the requirement that a design’s outward appearance lie outside the known range of shapes. In the realm of technology there’s no known range of shapes, rather there’s something called prior art. Patent Act 35 USC § 102:

>> A person shall be entitled to a patent unless – >> (a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or >> (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States, or >> (c) he has abandoned the invention, or >> (d) the invention was first patented or caused to be patented, or was the subject of an inventor’s certificate, by the applicant or his legal representatives or assigns in a foreign country prior to the date of the application for patent in this country on an application for patent or inventor’s certificate filed more than twelve months before the filing of the application in the United States, or >> (e) the invention was described in >> (1) an application for patent, published under section 122 (b), by another filed in the United States before the invention by the applicant for patent or >> (2) a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent, except that an international application filed under the treaty defined in section 351 (a) shall have the effects for the purposes of this subsection of an application filed in the United States only if the international application designated the United States and was published under Article 21(2) of such treaty in the English language; (…)

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What’s being said here is that any previous release or publication describing this technical solution is sufficient to prevent the issuance of a patent. And as you will see publication under this definition is by no means limited to trade publications. On September 14th, 1964, the freighter Al Kuwait sunk in Kuwait’s harbor with 5,000 sheep on board. As the sheep’s bodies decayed, Kuwait City’s water supply was in danger of contamination. Retrieving the bodies with cranes would have taken too long, and there was the further risk that the ship might break apart during such an operation. The Danish inventor, Karl Krøyer, had the idea of lifting the ship by pumping buoyant bodies through a hose into its stern. On December 31st, 1964, he filled the stern of the ship in this way with 27 million plastic spheres made of expandable polystyrene (EPS). (Incidentally, the total weight of these spheres, which were flown out of Berlin, amounted to 65 tons!) The salvaging was successful and, at a cost of only 345,000 U.S. dollars, saved the insurance company from paying much more in expenses. The ship alone was insured for 2 million U.S. dollars. Krøyer registered his invention as a patent in various countries. He was issued the patent in Great Britain (Patent number GB 1070600) and in Germany (Patent number DE 1247893). In the Netherlands, however, he was denied the patent (processing number NL 6514306) – reputedly because of a Donald Duck comic called The Sunken Yacht, published in 1949 by the American comic artist, Carl Barks. In the story, Donald and his nephews raise a sunken yacht by pumping ping-pong balls into its hull through a hose. Ping-pong balls are also buoyant bodies which is why, in the opinion of the Dutch (and according to the story), the salvaging procedure submitted by Krøyer in 1964 was long since prior art. Whether or not the legendary grounds for the Dutch patent office’s rejection really are true can’t be verified today, since the files have been destroyed. But the story is simply too good not to be told, and it demonstrates quite clearly what prior art can entail. Apart from that, this story has yet another dimension. You probably assumed, quite naturally, that Krøyer read the comic book when he was a child and got his inspiration from it. However, this charge is probably unjust. Krøyer was born on August 21st, 1914, and was therefore 35 when the comic book was published and 50 when he succeeded in retrieving the ship. In addition, here’s the rub. None of this is important according to the definition of prior art. What the

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inventor is actually familiar with or knew about at any point in time bears absolutely no relevance! Procedure and ­proceedings

Commercial ­exploitation

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The patenting procedure not only differs from other registration procedures in that the description of the invention is officially reviewed, the process entails relatively high costs for registration and annual fees as well as for a patent lawyer, it also includes a unique aspect of disclosure. Your innovation must be made accessible to the public no later than 18 months after the application has been submitted. Such disclosure naturally also increases the threat of refinements as well as development of superior solutions by competitors. It may sound strange, but that’s precisely the idea. Lawmakers want to expose an invention to the rough winds of competition in a controlled manner in order to ascertain whether or not it might be possible to solve the problem another way. They build a sort of turbocharger into the procedure – which probably isn’t exactly in the proud inventor’s best interests. It is extremely important to note that if the inventor made the invention accessible to a third party before the registration either in verbal or written form, including presentations at scientific congresses, the invention is no longer considered novel and thus no longer patentable. Thus, if Krøyer had filed his patent application after the publication of a newspaper article describing the spectacular salvaging of the ship, his invention would not have been considered novel for this reason. So not only can Donald Duck thwart an inventor’s plans, an inventor can also quite easily shoot themselves in their own foot. There is yet another problem in establishing whether an invention is commercially utilizable, something that doesn’t not automatically follow usability. The world is not waiting with open arms for certain inventions to come along. Often inventors must first find a ­licensee, usually firms that are willing to invest not insignificant sums of money in the development of the invention until it’s ready for market. Many an inventor has not lived to see the success of their invention, and sometimes an invention only really becomes germane in a context that wasn’t even conceived of at the outset. As a famous example, Post-it notes prevalent today came about because of an adhesive that, although it was patented several years earlier, was originally considered useless (because of its weak adhesive quality). A colleague of the developer, at the American company 3M, first had the idea for small, affixable slips of paper – supposedly because he

sang in a church choir and got frustrated with his bookmarks always flying out of his hymnal. Here are several more examples to demonstrate that there are frequently long time lapses between an invention and its commercial use. Time lapse between technical idea and successful market launch (in years): >> >> >> >> >> >> >> >> >> >>

ball point pen: 50 television: 45 silicon: 42 diesel locomotive: 39 zipper: 32 airbag: 30 gasoline engine: 26 credit card: 25 penicillin: 19 laser: 15

Protracted times-to-market are very frequent in the realm of ­patents, on top of which come high registration costs, yearly fees and a maximum protection term of 20 years – in most countries – after registration. So from your point of view as a designer, patenting only makes sense if it’s really essential in terms of sales and you see a realistic possibility for a speedy market launch. And even if this is the case, you should consider whether it wouldn’t be more worthwhile having a company finance the patenting for you. Just how far off the mark one can be with a patent registration is demonstrated with Patent No. 1310990, submitted by British Rail, in 1970, for a spacecraft powered by controlled thermonuclear fusion reaction, or as made apparent from the accompanying images, a flying saucer. With a passenger compartment upstairs, it would have been cheap to run and superfast. The original patent application said the reaction would be ignited by one or more pulsed laser beams. The application was made for the invention of Charles Osmond Frederick on behalf of the British Railways Board and the patent was granted in March 1973. The patent document reads: The present invention relates to a space vehicle. More particularly it relates to a power supply for a space vehicle which offers a source of sustained thrust for the loss of a very small mass of fuel. Thus it would enable very high velocities to be attained in a space vehicle and in fact the prolonged acceleration of the vehicle may in some circumstances be used to simulate gravity. 149

The patent later lapsed because of nonpayment of renewal fees. This is also a classic case of a registration that was made too early, because this technology doesn’t exist yet (at least not as far as far we know). However, if the flying saucer technology described really is invented some day, the previous patent registration will mean that it will be disallowed on the grounds of prior art! 10.2 Utility model

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Due to complementary laws many countries apply yet another kind of technical IP right that functions sort of like the patent’s ­helpful little brother, the utility model. The utility model is designed to protect inventions that are not necessarily as significant as those that are patentable. These are often only used as temporary measures, before applying for the actual patent. The requirements are often similar or even the same as those for a patent, namely an invention or an inventive step. Let’s return once more to the example of salvaging the ship. While it’s true that in many countries Krøyer, due to the Donald Duck ping-pong ball precedent, wouldn’t have been allowed a patent, he would by all means have been granted a utility model if he had placed the emphasis in his patent application on the use of polystyrene balls instead of buoyant bodies in general. The specific use of polystyrene balls would have meant an improvement to an already existing invention, rather than an attempt to pass off prior art as a completely new invention. A utility model is only a registry right, meaning that there’s no review and no disclosure procedure. Whether or not a utility model is in force is only established through common court proceedings or in proceedings for the cancellation of the utility model. The term of protection for a utility model is also considerably shorter. In Germany, for example, it’s only 10 years from the date of registration. Despite the strict requirements already outlined for novelty in the case of patents, it’s possible to register for a patent within twelve months after the registration of a utility model. This is called patent priority. Incidentally, if you imagine that you can successfully navigate the rough waters of patent procedures without a patent attorney, you’re mistaken. While it’s true that engaging a patent attorney would have been superfluous with the IP rights described in the previous chapters, this just isn’t the case with technical IP rights. A technical description that defines the invention is crucial to the wording of the patent claim. In Krøyer’s case, his description of the filling materi-

als as buoyant bodies was too general. This definition could have also been applied to ping-pong balls, something that had presumably not even occurred to Krøyer. As these kinds of obstacles also arise when applying for utility model, using the expertise of a patent attorney whenever there are technical IP rights to be dealt with cannot be emphasized strongly enough. There are similar forms of minor patents in many countries, most of which have shorter protection terms and don’t require the examination of the application contents even in the form of registry rights. You’ll find more country-specific information on utility models in the Appendix. Even in the EU, there’s no single, centrally enforceable patent to date. Although there have already been repeated attempts and drafts to this end, so far all of them have been unsuccessful. The European Patent Convention (EPC) of October 5th, 1973, didn’t create a unitary European patent, rather it merely allows for a centralized application for a group of independent national patents. This makes the name of the application office in Munich, the European Patent Office, somewhat overambitious. On an international level, all countries recognize patents as well as the patentability of designs. However, international legal coordination in this area is not yet very developed. You’ve already encountered the related international treaties in previous chapters:

10.3 Patents ­worldwide

>> The 1883 Paris Convention >> The 1925 Hague Convention on the International Registration of Industrial Designs and Models >> The 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Thus principles of equal treatment with nationals, most-favorednation (MFN) (see Chapter 7) and the extension of IP rights through WIPO (see Chapter 8), are also applicable here. In any event get advice on cross-border cases from a lawyer specialized in international design law. In the Appendix, you’ll find an initial overview of intellectual property rights systems in several particularly relevant countries. You’ll find more detailed information on regulations in place in specific countries, as well as addresses of representative agencies and government offices on the World Intellectual Property Organization Web site (WIPO).

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In summary

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>> A patent is a vested and temporary monopoly issued by a particular country for an invention in all fields of technology that is novel, based on an inventive step and commercially utilizable. >> As opposed to all the other IP rights, a patent is only issued after an appraisal of the novelty, inventiveness, and commercial utility of an object has been completed. >> A technical description that defines the invention is crucial to the wording (and thus effectiveness) of the patent claim, and it should only be entrusted to the expertise of a qualified patent attorney. >> The utility model is designed to protect inventions that are not necessarily as significant as those that are patentable, and is usually used as a temporary measure before applying for the actual patent.

III

Wording contracts

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11

The search for the ideal contract

When is a contract “fair”? When are agreed upon conditions “efficient”? If  you ask legal professionals these questions, most of them will throw their hands in the air and mutter something about a vast sea of regulations and court decisions. Some rare individuals may even rub their chins and start to ponder the meaning of justice. However, over the years an academic ­approach to answering these questions has been developed that has fascinating ramifications for you, as it can help you with your contract negotiations in very concrete ways.

Alexander Bretz: Several years ago, a fashion designer came to me with a legal problem. At first glance, it didn’t seem to be very complicated. She had designed several collections for a client, who hadn’t paid the invoices for the last collection. Since he didn’t pay, even after being issued a legal warning, I was forced to take him to court. Up to this point, there still wasn’t anything particularly unusual about this case, however, the reasons the client even­tually gave for refusing payment made the matter interesting. He asserted that the designer’s collection was not tailored to the target group and therefore hadn’t sold. So, in his opinion, it was a case of material defect on the part of the designer, the reason for  which the fees should be reduced to virtually null. This argumentation puts us right at the heart of our subject, because, while my client had indeed signed a written contract with her buyer, there was no provision dealing with this issue. So how could we best argue our case in order to convince the court of a duty of payment? Unfortunately, in order to answer this question, we first have to get a bit theoretical.

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11.1 The contract

First, let’s start with a really tough nut to crack, namely how to define a contract.

as concept (http://de.wikipedia.org/wiki/Vertrag)

The contract as social institution: A contract coordinates and regulates social conduct via a reci­ procal commitment. A contract is voluntarily closed between two (or more) parties. In a contract, each party promises the other to do or refrain from doing something specific (in order to render the desired service to one of the parties). The contract as a legal institution: As an institution of law, it is an agreement closed between two or more parties with the intention of accomplishing a particular end. A contract is completed through mutual declarations of intent, which, for their part, are directed towards achieving this success.

These definitions clearly show how the legal is ultimately conditioned by the social. The economic function of a contract also uses this understanding as its basis, it merely shifts the emphasis from the cause (voluntary commitment and mutual declarations of intent, respectively) to the effect. From an economic perspective, a contract is really about enabling an exchange of goods. Form: oral and written

Contracts and­ ­uncertainties

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A contract doesn’t just exist when a written (or electronic, as is often the case these days) document is signed to great fanfare. In fact, a contract comes into existence merely upon mutual consent over an exchange of goods (usually goods or services in exchange for money). This means that even a transaction sealed with a handshake is a contract. So when someone tells you: Yes, do that for us!, it’s considered a contract. The hardcopy form of an agreement is only a question of having solid evidence for purposes of simplification, especially to better be able to remember the details of agreements in complex cases. So far, so good. But how often have you been faced with (or might you possibly face) the question of whether you should accept a provision put forth by your contracting partner? Or perhaps you have a written contract, but you then fail to find an answer to questions that arise as in the case described at the beginning of the chapter. Legal professionals usually rely on their professional know-how in such situations, in order to reference the relevant legal provisions or judicial decisions. If, however, you didn’t study law before your design studies and don’t have any real desire to make law your hobby (there

really are much more pleasant hobbies!), then this route won’t usually be a possibility for you. So this raises the question of whether you should continue to handle your contract negotiations and disputes with a large degree of uncertainty, or call in a legal professional immediately, on a long-term basis. You might be happy to hear that the answer is neither. That’s because there’s actually something like a roadmap, which shows the way to economic fairness in contracts – whether it be in Europe, the U.S. or elsewhere. You can use this roadmap in your contract negotiations – once you know how it works. In order to reach your dream contract, we have to take our detour into theory a bit further. Around the mid-20th century, several scholars in the U.S. began to study the economic effects of legal regulations. Most prominent in this field in its early days was Ronald Coase, an economist and social scientist who wrote the essay The Nature of the Firm, published in 1937. In 1960, his work The Problem of Social Costs appeared. However, it was the publishing of Richard Posner’s book The Economic Analysis of Law, in 1973, that marked the first standard work in the academic field known as Law and Economics.

11.2

Law and Economics theory really boils down to something very simple. It applies the instruments of microeconomic theory to legal provisions, in order to determine whether they are efficient. A provision is considered efficient when limited resources in the economy are optimally aligned with demand. Let’s clarify a major misconception immediately. Efficiency doesn’t automatically equal justice. Even inefficient provisions can be considered right, i.e. more just, for ethical, ecological, or other reasons. On the other hand, efficient provisions might not be implemented for various reasons, usually political in nature. However, the economic angle is very interesting, because it allows many provisions to be seen in a different light. For example, it’s not efficient (and naturally not ecologically sound either) to fill bottles in Northern Italy with tap water and then sell this water as a delicacy, transporting it to all corners of the world by land, air, and water. The need for clean, good water can be much more efficiently satisfied via a pipeline system or, at least, via the consumption of locally bottled water. The question naturally arises then why this economic malfunction is so widespread. The answer is that the profit that can be made with the microeconomic,

Efficiency and

Law and ­Economics

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inefficient distribution system (i.e. the bottle transport) is much higher than that of the more efficient system (i.e. the pipeline network). This might spark a discussion on whether to instigate a ban on or implement different incentives for bottle transport. The most economically efficient provision would be one that reflects the real costs of transport in the product’s end price. For example, freight transport via roads could be taxed with tolls, or the actual disposal cost of bottles and packaging could be included in the end price. An advertising campaign could even be funded attempting to influence consumers’ preferences, along the lines of Tap water tastes so much better than bottled water! One could postulate that the field of Law and Economics really could only have developed in the U.S. (or another country using common law), because the nature of common law means that the laws governing contractual relations developed solely from the case law of the courts. Here, the search for justice could be described as a search for a golden mean. Each case being deliberated is considered within a broader context and only the distilled collective whole of these decided cases, provides the benchmark for future decisions. This is called precedence. On an abstract level, the same thing occurs in civil legal systems, which since Roman times have employed an overarching legal code as the supreme measure for decision. The ­difference here is that common law institutes an active process of analysis and employment of methodologies from the get-go. The findings from the field of Law and Economics also have significance for all other legal systems, which strive to reach econo­ mically-efficient decisions. Whether one has a multitude of pre­ cedent decisions with their abstract regulatory content or an existing legal provision in terms of its abstract regulatory content – the outcome should at the very least be similar. Interestingly enough, this is indeed the case, particularly in the field of contract law. It was p ­ recisely through the analyses of contractual provisions that Law and Economics worked out the methodology described in the following pages, which can also be argued very well in contract negotiations. Four-fold assessment of contractual provisions

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The real gift that Law and Economics has given us is a four-fold means of assessing contractual provisions in order to determine their efficiency, as well as how costs and risks should be fairly ­distri­buted between contract partners. You can employ this worldwide in matters involving contractual provisions. You can also use it to clear up any questions that weren’t addressed directly in the ­contract, and which you now have to negotiate with your client.

We’ve already alluded to this system as a kind of road map that helps you reach Destination Ideal Contract more swiftly and smoothly, but now we’re going to steer the analogy in a slightly ­different direction. It helps you keep the idea of a journey in mind and the dream destination is the: contract. What’s essential on a road trip to a sunny place? Why, sunglasses of course! Take a moment now to imagine that you have four pairs of sunglasses sitting on a table in front of you, each with different colored lenses. That’s kind of how each of these four points of assessment allows you to look at your contract, giving you fresh perspective and putting the focus on the information on which you need to concentrate. >> 1) Cheapest Cost Avoider: The lenses on these glasses (choose a color if it makes it easier for you to remember these points!) allow you to determine which of the parties can best bear the costs for an issue under discussion. This party is called the Cheapest/Least Cost Avoider (please don’t ask us why they’re called the “cost avoider” rather than the “cost bearer” …!). >> 2) Learned Hand’s Formula: When you put these glasses on they allow you to assess what measures are reasonable for risk management as this relates to your contract. What’s known as Learned Hand’s Formula is usually applied here (and no, this has nothing to do with palmistry, as you’ll soon find out). >> 3) Cheapest Insurer: With a little concentration, these lenses let you determine which of the contract partners can best underwrite an unavoidable risk. This is about identifying the party known as the Cheapest Insurer. >> 4) Superior Risk Bearer: This last pair of glasses enables you to assess which of the contract partners can best carry a risk that is both unavoidable and noninsurable, taking into account the big picture. This party has the impressive title of Superior Risk Bearer. Each of these is explained in more detail in the following pages. What’s important for you to keep in mind at this point is that obviously these colored lenses will not do all the work for you. You have to use your brain for the actual analysis and, in the realm of contracts most likely foreign territory for you this may seem daunting at first. Our best advice to you is to start by looking at any basic contracts that crosses your path and practicing on small-scale examples to which you can relate. Perhaps it seems weird to you that these four points of analysis are all about distribution of costs and risks, especially since with 161

contracts one thinks in terms of mutual demands that should be met and which aren’t always met. However, it’s only at first glance that contracts regulate mutual obligations by laying them down or making them more concrete. The real reason why a contract is made at all boils down to the mutual advantage that can be derived from it by the contracting parties. In other words, no one would enter into a contract if there weren’t advantages. A client hires your design company because they could only achieve the same results themselves with greater expenditure or, failing sufficient qualifications, not at all. You might also get a contract because the client can’t generate profit if they don’t remain active. You take on the contract because it pays you a fee and naturally helps you develop yourself ­further, both creatively and professionally. Examined a little more closely, contracts pretty much always boil down to a distribution of risk, namely the risk that a contract partner might not deliver, pay late, or provide poor services. There are two essential questions that always need to be considered. What happens if this risk is substantiated? And who bears the brunt of responsibility for these things? Fulfillment strategy and risk planning

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Contracts worldwide usually consist of two components. In one part of the provisions a fulfillment strategy is set out, regulating what the parties have to do, when and how, in order to fulfill the contract. The other part, known as risk planning, sets out provisions for the event that something goes awry, usually when one of these risks comes to pass. Put it to the test sometime. Have a look at any contract and you’ll see that, even if it’s not glaringly obvious, almost all the provisions either fall under fulfillment or risk planning. It may sound harsh to your delicate creative ears, but avoiding costs is really the crux of contracts, the reason they exist at all. ­Determining which party can best bear costs is therefore fundamental. It can also be said that, in terms of negotiation, even issues that at first glance don’t appear related to actual costs may be resolved through an understanding of the principles of Cheapest Cost Avoider. Here’s an example: Alexander Bretz: A client once asked me whether (and, if so, in what amount) it was advisable to include a penalty fee within a Nondisclosure Agreement (NDA). Since the designer could withhold very little key information in her presentation, effectively she had to put her entire design on the table before she had a written contract under her belt. In this case she was pretty much laying her head down on a block and giving

the prospective client an axe with which to decapitate her. Unfortunately, there was no alternative. The prospective client was, at least, prepared to sign an NDA. As the decision of whether to place an order for the design or not (and by extension any decisions regarding its unauthorized use) also lay solely with this individual, the first part of the designer’s question was answered. Due to the delivery situation, specification of a penalty fee was extremely advisable. By applying what we’ve learned so far about efficiency, we can deduce that it’s clearly more efficient for the designer to add to the client’s costs in the event of an unauthorized use of the design because the more risk is involved in a presentation, the more potential expense is incurred by the designer. Whereas, it would cost less for the client to bear the costs for this risk in the form of a penalty, making them the Cheapest Cost Avoider. (But beware: it’s not always as clear-cut as in this example.) It may be that you could’ve gotten that far yourself without using the Cheapest Cost Avoider principle, but there’s still the question of an appropriate sum for the penalty. Should it be 500, 5,000, or 50,000 dollars? How can the actual cost of the designer’s risk be measured? Well, in the event of an unauthorized use, the designer would have invested approximately two months’ work in vain. She could therefore determine the penalty amount based on her own average monthly or annual turnover. From the point of view of an unbiased observer, it wouldn’t be unreasonable for the prospective client to compensate the equivalent, that is, the money that the designer lost by not getting the contract, whether in the case of a violation of the NDA or in the event of an unauthorized usage of her design. The penalization aspect, which should absolutely not be overlooked, is masked in this approach, by using the revenues, not merely the designer’s profit as a basis. You’ll soon discover that the more the other contract party is initiated in the logic of Law and Economics, in general, and the concept of Cheapest Cost Avoider, in particular, the more amicable and straightforward negotiations can potentially be, and the less likely it is that you’ll need to rely on specialist knowledge. So, while Cheapest Cost Avoider may not be academia’s greatest gift to humankind, it can still have major implications for you. The example just cited, which incidentally led to the signing of the NDA and then, happily, to a commission for the designer, can also be used to illustrate the second form of assessment. Just to refresh your memory, these are the funky sunglasses – known as Learned

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Hand’s Formula – which allow you to judge what measures are reasonable for risk management. Now, let’s imagine that the designer started wondering whether it would be reasonable for her to additionally request that her prospective client stipulate that his coworkers and any external parties potentially involved sign NDAs. Learned Hand’s Formula can answer this question for us, but first you should know a little bit about where it comes from and how it works. Learned Hand’s Formula was first developed by the American judge, Billings Learned Hand, in the famous case of United States v. Carroll Towing Co. 1944. It dealt with a transport ship owned by the U.S. government, which was being towed by a company called Carroll Towing when it broke loose from its mooring cables and sank. In assessing whether appropriate measures were taken for risk management and the resulting liability of the towing company, Learned Hand came to this conclusion: Decision from the 2nd Circuit Court of Appeals, United States v. Carroll Towing Co., 159 F.2d 169 (2nd Cir. 1947):

Since there are occasions when every vessel will break from her moorings, and since, if she does, she becomes a menace to those about her; the owner’s duty, as in other similar situations, to provide against resulting injuries is a function of three variables: (1) The probability that she [the vessel] will break away; (2) the gravity of the resulting injury, if she does; (3) the burden of adequate precautions. Possibly it serves to bring this notion into relief to state it in algebraic terms: if the probability be called P; the injury, L; and the burden, B; liability depends upon whether B is less than L multiplied by P: i.e., whether B < PL.

From just this brief appearance, the formula became widely known among American legal professionals as the BPL Test. This for­mula is serious business. How can probability of damage be mea­ sured? Even if it’s expressed as a probability, with a ratio of 1:100 or 50:1, it still has to be taken into account that there’s always a subjective judgment underlying this. This means that huge values for determining the reasonableness of risk prevention may quickly be reached, leading to exaggerated demands on the responsibility of one party. Using Learned Hand’s Formula is therefore only advisable in so far as this formula specifies that the aspects of precautionary measures, extent of damage and damage probability, be taken into account. 164

With this, the question of whether it would be necessary for the designer’s prospective client to require discretion from a third party engaged by him is answered. The client is obligated to do this because for him this preliminary discretion presents a much lesser burden (B) than the gravity of the resulting injury (L), even when a normal damage probability is assumed. What you’ve learned so far means that it’s possible for you to devise a kind of itinerary for presentations, where you anticipate points of discussion and prepare calm, objective arguments for every step along the way. You can even write out a few basic guidelines for yourself. Here are some tips for starters:

Create an itinerary for your ­presentations

>> Don’t try to extract an agreement in writing from your prospective client before a presentation – because you risk them cancel­ ing the presentation altogether. >> Try to structure your presentations so that individual components of your NDA are organically built into the tension of your presentation. Unite dramaturgy with law! Gear the presentation towards a climax, aiming towards the unveiling of the absolutely fabulous partial design or details of the design. You can then, either immediately before or directly after the festivities, produce an ideally brief NDA and request a signature. Don’t pressure anyone, however. Allow your potential contract partner to send it to you later, but request that they do so by a specific deadline, usually within a few days. If this raises discussion, emphasize the significance of this point for yourself from an existential, economic point of view and express that this has nothing to do with mistrusting them. Also explain your wish to safeguard confidentiality through a penalty. You can even go so far as to offer your prospective client assistance in the preparation of the necessary statements. If you notice that this meets with resistance, ask about their possible confidentiality interests and suggest a reciprocal NDA. >> If the date passes, or you chose to forego the NDA for other reasons, there’s still the possibility of acquiring some form of documentation. Write a letter (preferably) or e-mail after the fact, in which you express your gratitude for the presentation and ­(perhaps once again) draw attention to your request that the presented designs be dealt with in strictest confidence.

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Cheapest Insurer

Now we’ve arrived at the third form of assessment and the ­question which of the two contract partners can best insure a particular risk. In other words, who’s the Cheapest Insurer? Here’s yet another ­example to help clarify what this means: It’s no secret that a newly designed, and thus also freshly programmed, Web site with an online shop can crash. And, while it’s not unlikely, it’s also ultimately not an avoidable risk. This then raises the question of whether a client has the right to insist on a clause in which the entire risk, including all the effects of such a crash, be borne by the design company. The question to be answered here is not so much who the ­probable source of the crash was, but rather, which of the parties can insure the crash risk at a better price. If the design company has a liability insurance that covers this risk without raising the premium, while the client would have to purchase a substantially more expensive loss of profits insurance, it would be both fair and justifiable for the design company to take on responsibility for this risk, because the insurance would incur no additional costs whatsoever on their side.

Superior Risk Bearer

Finally we arrive at the fourth pair of magical assessment sunglasses. These are the ones that show us in bright colors which of the contract parties can better carry the financial responsibility for an unavoidable and uninsurable risk. The question of the Superior Risk Bearer deals with certain general considerations, which tend to come up time and again, for example when a product designer’s client refuses to pay the fees, because the product doesn’t or didn’t sell very well. Yes, we’re finally ready to resolve the example at the beginning of the chapter, our expedition into theory is drawing near its end … In the example with the fashion designer and her client who refused payment, the solution can be arrived at as follows. The client approved the designer’s designs, in other words, he accepted them. He could have insisted they be altered or he could have refused them. In this case, he even had them tested. The decisive factor here is that the client has the final decision about what may be produced and therefore has full responsibility for putting it on the market. The client also makes the decision about what marketing measures to employ, including how, in addition to the product, he arranges the price, distribution and promotion. All of this points to the fact that they alone have the responsibility for bearing the merchandising risk. The designer should have no part in

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this risk whatsoever. Because design creations (whether in communications, fashion, or product) are what are known as complex creative products, they are characterized by the fact that the creative has to render their services in their entirety in order to hand them over to an exploiter, who then has the sole responsibility to steer the product to success. The American economist, Richard E. Caves, summed this up succinctly in the introduction to his seminal work on contracts between art and commerce, and the economic structure of these contracts. Richard E. Caves: Creative Industries – Contracts between Art and Commerce, p. 3:

Complex creative products … proceed from conception to finished product in a series of stages, with costs at each stage completely sunk [i.e. the funds are completely exhausted] when the product moves to the next stage.

In order to further clarify this point, it’s not necessary to quote from an academic text. Alexander Bretz: The district court of Landau decided along t­ heses lines in the case described between my client, the plaintiff, and her customer, the defendant. Judgment of the Landau district court, August 23rd 2004:

The defendant’s argument for reduction on the basis of material defect was unsuccessful. In so far as the defendant put forward that the collection was not tailored to the target market audience and this is not a matter of material defect. (…) The work is free from material defect when it has the agreed qualities. That the plaintiff’s work possessed the agreed qualities is demonstrated by the fact that the defendant accepted the collection (…). Orientation of the collection to the target market audience is furthermore a factor that concerns the defendant’s financial risk as client that he may not pass on to the designer. Namely, the risk of an article of clothing’s unsellability is expressed herein; this lies within the purchaser’s sphere [of responsibility].

So now we’ve arrived at the end of our road, and quite possibly you’re still asking yourself how all this can be of use to you. Aside from the enhanced insight into the workings of contracts that you’ve now gained (and the cool sunglasses), there are essentially two key aspects:

Working with the four-fold system of assessment

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For starters, there’s one certainty, namely that, nobody, admittedly not even top legal professionals, can foresee all the possible conflicts and problems that may arise in a contractual cooperation. As a result, you’ll probably never come away with completely watertight contractual provisions that take every possible eventuality into account. Secondly, and more importantly, you’ve now familiarized yourself with a system of contractual analysis that you can employ all over the world. Whether you’re negotiating issues related to contractual provisions, or attempting to clear up issues you didn’t lay down in the contract in the first place that have to be sorted out with your client. Alexander Bretz: When I explain the 4-fold assessment system in my seminars or workshops, quite frequently someone comes up to me at the end and says that they’ve just discovered a solution to a ­difficult problem with their landlord, employer or, client. If you didn’t experience a eureka moment immediately after reading the explanation of the 4-fold assessment system, just wait a little while. Remember that the method described is not so much a checklist, as a very flexible, multifaceted tool, whose usage demands a lot of practice, which will improve, with repeated use and practical application experience. Try applying it in inconspicuous areas – secretly wearing your new sunglasses around the house. You’ll get more and more accustomed to analyzing contracts and their affiliated issues in this way, get better at applying the method and feel less self-conscious about your new look. It should also be mentioned that this system is by no means a cure-all. There are a whole range of issues that are so difficult and complex that they either can’t be solved in this way, or, if so, only by advanced users. Naturally, there has to be some work left over for consulting attorneys. At the end of the day, it’s a question of whether you really want to invest so much time in what for you is, at most, a secondary field, or if you wouldn’t rather outsource such matters. 11.3 Sample­ contracts

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Sooner or later, as a designer, you’ll probably feel compelled to go in search of a sample contract. This reflex is so strong in almost every­ one who encounters the process of drafting a contract for the first time (and incidentally even in not-so-competent lawyers), that they can hardly restrain themselves, despite the fact that it’s really not good for them (or the lawyers). Why? Sample contracts create a false sense of security. You read the contract. It sounds exotic, impressive, and maybe it even sounds like a kind of clinical perfection in an odd or even repulsive way. But don’t let yourself be blinded by the glory! Sample contracts are like unisex, uni-size suits into which every

aspect of tailoring is crammed. As a result, that’s just how it looks in the eyes of experts. The sleeves and legs are a little too long, and the jacket is a bit tight around the waist, while at the same time, too wide in the shoulders. We have no clue who it’s supposed to fit, but it’s certainly not you! Before you protest that you don’t want to take up legal sewing and therefore prefer to wear something more or less poorly fitting as long as you don’t have to sew it yourself, you should know that it’s not exactly how it works with contracts. What’s more, you can drawup a pretty good contract that suits your needs without any extraordinary legal knowledge. That’s what this book is going to show you. All you need to do is to remember to put the cart before the horse, and to follow one simple rule, namely think, before you apply legalese wording. Don’t just start out by looking at any old contracts or sample contracts. Instead, ask yourself first and foremost what can be judged important from your own experience. Write down a few keywords or formulations of your own on paper and only after you’ve done that, have a look at the existing legal texts. Because you’re the one, no matter how great or small your experience, who is most familiar with your problems, no one can gauge the situation as well as you. And why just give away this advantage? With this think-for-yourself attitude you gain something that you’ll need later when reading through drafted contracts and in your cooperation with legal professionals, namely a blend of self-knowledge and an enquiring mind. This is the kind of self-knowledge and enquiring mind that will en­able you to approach your negotiation partner critically, and to examine what’s being put on the table with discerning eyes. These qualities will, in turn, empower you to develop your own solutions, where sample contracts perhaps don’t even begin to raise certain issues, let alone resolve them. You should never be afraid of coming out and asking when you don’t find answers to your questions. Are you surprised to be getting this advice from us? Are you ­asking yourself if the business coach and the lawyer want to put them­ selves out of work? Please don’t worry on our behalf. First of all, the coach works on your behalf, and on the other hand the lawyer naturally works with building blocks of content – in particular when they’ve gathered a lot of experience via consulting to a specific industry. (Plus: They both have enough to do working on more substantial responsibilities …) Even when the exact same building blocks are being built into several different contracts, without changes, this

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doesn’t mean that these can also be used in the same way in the next case. As a client, you are not buying standards and Lego-text, rather an evaluation of the situation by qualified and experienced specialists who’ll show you which solution is the right one for your situation. The Anatomy of a Contract in the Chapter 17 shows you a much more solid way of writing up a contract than anything you’ll ever be able to cobble out of a sample contract. At the end of the day, all this is about saving you from a widespread, and for that reason, especially dangerous, mistake that goes like this: I find myself a halfway acceptable contract somewhere, write in a few changes myself and in doing so not only save myself the effort of going to the coach or lawyer, but other, even greater, exertions. We can only warn you about such behavior, even though we know that quite a number of readers will remain resistant to this advice. You’ll only reach a reasonably robust result if you put considerable effort into looking after the contract yourself. However, even if you outsource the job completely, you’ll still need the actively rational approach of self-knowledge and enquiry in order to be able to communicate effectively with the coach or consultant you’ve engaged. Alexander Bretz: You’ll also find on my Web site: www.DesignLawForce.com a checklist that you can use to either develop your own licensing contract, or to cross-check one that is put in front of you. 11.4 Customization of the legal ­consequences

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OK, now let’s have a look around your scenic destination. Your new, comfortable contract is all nicely laid out like a beach towel and your four pairs of sunglasses are lying nearby in case you need them. Now the question is whether you still need anything else for optimum comfort in this swell place. Maybe some sunscreen? A piña colada? Some snorkeling material? You might be pleased to know that there are still a few more accessories that can increase your comfort level in contract negotiations just a little bit more … Earlier in this chapter we explained, the division of the content in contracts into two components, fulfillment strategy and risk planning was explained. This differentiation is not only important to the contract’s coherence, but also to its optimization. While it’s true that it’s sufficient in and of itself for you to concern yourself with perfect­ ing the fulfillment strategy, especially since almost all legal systems attach automatic sanctions to nonfulfillment, you can also find provisions in the area of risk planning, more precisely, concerning legal consequences that are perhaps more suited to your contractual situation. In particular, there are several sanctions and legal conse-

quences that can be agreed upon by the contracting parties in order to make the two-way service pledge firm. This is a frequently (incidentally, unjustly so) feared contractual penalty. A contractual penalty means that the party obligated to perform a service commits themselves to payment of a certain sum of money should performance of these services be unforthcoming or faulty. Such clauses are unjustly feared because almost all legal systems set limitations on contractual penalties. In common law legal systems, a liquidated damages clause may not be legally enforced when its purpose is more to punish the party in breach than to compensate the injured party’s damages. One r­ eason for putting such controls on liquidated damages clauses is that enforcement of such a clause would necessitate determination of an amount that is both specific and appropriate. In civil law systems, a kind of control is achieved in that a contractual penalty is only applicable if the violator is responsible for the contract violation. This is important because it prevents you from being liable for problems for which you are not directly responsible (i.e. a third party’s failure to deliver). You should also be aware that a contractual penalty may not be hidden from the other party in the Terms and Conditions clause. In general, it’s always better that the parties agree upon liquidated damages on a case-by-case basis and allow the violator to prove that a lower level of damage has occurred than the amount agreed upon as a contractual penalty. This agreement can take the form of a handwritten document, or a piece of paper stating that the parties have expressly spoken and have agreed upon a contractual penalty in this form. This document can even be drawn up as the minutes of this meeting, signed by both parties. In the earlier example of the designer and the NDA it might’ve been the case that the designer’s contract partner, while having nothing against signing an NDA, still had difficulties with the inclusion of a contractual penalty (despite all the good arguments in its favor). The probable source of this discomfort is the fact that a contractual penalty is usually unilaterally forced by the stronger contract partner. Naturally, a client can’t let this be inflicted upon them without developing a complex about themselves and their position in the world. Based on our experience, in such cases rational arguments are also of little use, no matter how good they may be. It’s advisable to draw the fairness card in this situation. If a contractual penalty that’s only to your advantage isn’t possible, what

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about a contractual penalty for both sides in the event of breach of contract? It may be that this arrangement is more agreeable to your contract partner. Of course, if the shoe is on the other foot, and the contract partner just wants you to commit to a contractual penalty, you can also turn this around. Simply suggest that you’d be happy to take on such a provision across the board meaning for both sides and observe their reaction. Either you’ll be able to derive some security for yourself as well, or the matter will be taken off the table. If you have any reservations about committing to the financial responsibility of a contractual penalty, then you should read Chapter 15 in order to make a more realistic risk assessment. If you still have reservations, you’ll unfortunately have to capitulate on this point out of fairness and forego a contractual penalty – even one that is to your advantage. After all, why should your contract partner agree to a ­contractual penalty if you’re not prepared to do so yourself? It may even be the case that a contractual penalty which is set for only one contract partner may be considered as unjust in a court of law. However, a penalty that’s agreed upon by both partners for any incidence of a culpable breach of contract really serves as oil in the contract’s works. It doesn’t represent any kind of threat to either contracting partner since a contractual penalty is only due in the event of a defaulted breach of contract. And to default means to intentionally or negligently breach the contract. The contractual penalty therefore is only a threat to a contract partner who doesn’t want to fulfill their duties or doesn’t really take them seriously. Right of termination

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Sometimes stipulation for one party of what’s known as right of  termination proves helpful. The right to terminate the contract can be on the basis of certain, specifiable incidences or provided for in the event of surpassing of a certain time limit. Sometimes (depending on where you live) both of these are even legally predetermined anyway. There’s also the legendary termination without notice, better understood as the right to terminate on substantial grounds. A substantial ground is always present when a violation of the terms of the contract makes further execution of the contract for the other contract party unacceptable. In the case of ongoing contractual obligations, this right of termination on substantial grounds is even statutory. However, the question of when substantial grounds are actually present can be a matter of great debate. So, if special right of termination is being arranged, it’s best if the terms and conditions for this are defined as precisely as possible.

It should also be mentioned that a termination penalty often acts like a boomerang that flies in the face of the party who put it in the contract in the first place. Such cases can resemble those in exhausted working or personal relationships. An individual wants to quit or file for divorce, but for whatever reasons they can’t or don’t, so they just irritate the other party until they quit. Needless to say, you should try to make sure this doesn’t happen to you, whichever foot the shoe is on. The best way to accomplish this is naturally through good lines of communication with your business associates, as repeatedly emphasized elsewhere in this book. The routine statute of limitations can be regulated differently via a contract, however only within certain parameters. In civil matters, the regular statute of limitations can be shortened or lengthened by arrangement between the contracting parties. However, according to the Uniform Commercial Code (UCC) that applies to contracts dealing with the sale and purchase of goods, the parties may not shorten the statute of limitations to less than one year, or extend it beyond the standard limitation period of six years. However, this still leaves a lot of room for give and take and allows you the possibility of at least one surprise you can keep tucked up your sleeve.

Altering the statute

Also often misunderstood is the role that collateral can take on in your contract negotiations. The following real-life example of a ­contract negotiation that was only successful thanks to collateral, serves to illuminate this: A client wanted a communication designer to create a comprehensive corporate identity, with all the bells and whistles. However, this client didn’t want to pay for the services provided in the same year of the assignment’s completion, possibly for internal budgeting reasons, but it was never made entirely clear. Understandably so, the communication designer wasn’t in a position to wait for nearly a year for such a substantial payment. The solution was a classic transaction with collateral. The communication designer received their fees upon completion of the job through a bank loan, the security and repayment of which the client committed to within a time frame that was more suitable for them. What at first glance appears to be an unusual solution is much more common in business dealings than you’d perhaps expect. It may also make sense to secure the promised service through what is known as loan security if a contract partner promises to provide sub-

Collateral

of limitations for claims

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stantial services and the other partner makes an advance payment towards this. While it’s true that collateral can basically include all established forms of security (i.e. mortgages, loan guarantees, etc.), in most cases, in the realm of labor contracts, it means a loan guarantee (or taking out of a loan oneself, as in the example). Insurance

Last but not least, taking out insurance is also an appropriate means of hedging potential problems, particularly when those concerned with liability. The question of what liability risks arise in connection with design contracts is addressed in more detail in Chapter 15. However, demanding that insurance be taken out only makes sense when the beneficiary contract partner can take out the ­insurance themselves at the other party’s expense, or the beneficiary ­contract partner receives written proof that insurance was taken out by the other party. If possible, this should happen before closing the contract. It only makes sense after closing the contract if the other party can withdraw from the contract in the event of failure to ­present this proof.

In summary

It is important to note that the legal aspects of a contract are ultimately conditioned by its social context. From an economic perspective, a contract is really about enabling an exchange of goods. >> A contract comes into existence merely upon mutual consent over an exchange of goods (whether it be orally or in written form). >> Efficiency doesn’t automatically equal justice. Even inefficient provisions can be considered right, i.e. more just, for ethical, ecological, or other reasons. >> Law and Economics have given us means that can be employed worldwide to determine a contract’s efficiency, as well as how costs and risks should be fairly distributed between contract partners. >> Contracts usually consist of two components: 1) a fulfillment strategy, regulating what the parties have to do, when and how, and 2) a risk planning section, which lays out provisions in the event that something goes awry.

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Checklist for presentations

Don’t attempt to force a written agreement from your potential client in advance of a presentation. You run the risk of them canceling the presentation altogether! Attempt to structure your presentations so that individual ­elements of data protection are organically integrated into the pre­sentation’s dramatic arc. Let law and narrative ingenuity work together in harmony! Focus your presentation towards a climax, by working towards an utterly breathtaking partial unveiling of a design or details. You may present a (preferably short) confidentiality agreement either immediately before or after this festive moment and request a signature. Don’t be pushy. Allow your prospective contractor the time to send you the agreement later, but do request it be sent by a specific deadline within a few days. If a discussion of the matter ensues, point out that it’s a question of existential and economic survival for you. Emphasize that this has nothing to do with mistrust of your prospective client. Explain your desire to safeguard this point with a penalty. If necessary, offer your prospective client support in preparing the requisite statements. If you notice that you meet with resistance, inquire about your prospective client’s own possible confidentiality interests and suggest a mutual confidentiality agreement.

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If the deadline passes or for some other reason you’ve forgone a confidentiality agreement, there’s still the possibility of “documentation,” via a letter in which you express your gratitude for the presentation and allude (if necessary, again) to the fact that you request that your presented designs be handled with utmost confidentiality.

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12

Defining your services in contracts

Not only is a product’s appearance dependent on the designer’s services, but every other aspect of the contractual relationship as well. This should be motivation enough for you to familiarize yourself thoroughly with this subject. What’s more, everything that’s clearly laid out in the contract, in terms of the description and definition of your provision of services, will only serve to strengthen your relationship with your client – so read on!

Contrary to what you might think at first, the services due the ­client as per the contract are not limited to the preparation of a design. In fact, just the opposite is true. A designer who limits themselves to designing only has for the most part neither a sufficient income nor a very promising career in the future. A designer’s services can, in reality, be very diverse and may include the following: >> >> >> >> >>

12.1 The range of ­services

Development of the design Granting of usage rights Consulting to the client (initial and/or supplementary) Procuring third-party goods and/or services Supplementary payouts for the client

Naturally the development of a design takes precedence in your mind. It’s what you studied, it’s what you enjoy doing and it’s something in which especially you are competent. However one thing must be made clear. This (alone) will not make you rich, because this activity, creative as it may be, is rarely particularly valued by clients. This boils down to the fact that your design services are, from the point of view of your client, the last phase of the development process (a breakdown of the work phases within the development process follows below). To put it another way, if you emphasize the provision of your design services, you put yourself, in your client’s eyes, in the same category as a tradesman, much like a plasterer or

12.2 Development of  the design

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a plumber. Furthermore, a tradesman’s services are usually only noticed when there’s something wrong with them. Do you sit around contemplating how well the pipes are laid in your home? You’re more inclined to think about them when they’re clogged or leaking, aren’t you? The key concept here is design development because it opens the door to the other services you’re providing as well as supplying an appropriate point of reference for what distinguishes you from other advisors (for example business economists, lawyers or engineers), making you distinct in the client’s eyes. The description of your design services is important, but you shouldn’t limit yourself just to this. The more you’re in a position to concretely expand your design service offerings, the more your possibilities and your flexibility is enhanced in negotiating your fee. Describe your ­services in work phases

How should you describe your services? We recommend that you break down your portfolio of services into work phases as architects frequently do. What’s essential here is using your logic to derive a basic structure for this system. Here’s an example using the work phases in architecture: >> >> >> >> >> >> >> >> >>

1. Basic evaluation 2. Preliminary planning (preparing of project and planning) 3. Design Development (D&D) (system and integration planning) 4. Approval planning 5. Implementation planning 6. Preparation of tendering 7. Awarding of contract 8. Site supervision (construction supervision) 9. Ongoing service and documentation

You should distinguish between basic and extra services within these phases. You’re probably thinking now that this all sounds pretty complicated, and it very well may be. However, it has a very interesting effect on people coming into professional contact with architects for the first time because it deeply impresses them. It would never even occur to experienced and professional building developers to refrain from using an architect’s services and not to take these seriously. Of course, defining work phases isn’t going to turn your life into a paradise overnight, but that’s not what this is about. What we’re talking about here is making an impression. And you can do this! 178

With regard to the description of your design services, this means you should: >> Break down your services into several work phases, the more, the better. This isn’t about bamboozling the client, rather about making the actual scope of your services clear. If you slave away quietly in your little room (workshop, desk, or computer) for your client, and they know nothing whatsoever about it, it’s unlikely that they’ll comprehend the real value of your work and compensate you for it appropriately even though they’ll happily accept your high-quality design. On the other hand, they’re apt to behave entirely differently if you parade the measure of your efforts right under their nose. On top of that, this system enables you to arrange as many interim deliveries as possible, which, in turn, gives you the possibility to write interim invoices. Detailed information on how to break down your total fee into as many interim payments as possible can be found in Chapter 13. >> Consider whether it’s possible for you to distinguish between basic and extra services in your tenders. This also applies to offers that are not yet particularly tailored to the needs of a potential client (i.e. are in an early phase of acquisition or have not yet reached the stage of a workable briefing). The more you learn about your client’s needs, the more you can work this into an offer tailored to them. However, if you’ve made the division between basic and extra services from the get-go, you have the option of presenting these extra services specifically as ­fee-based. You’ll find more information on how to deal with basic and extra services in terms of your billing methods in Chapter 13. In principle, you can define every completed interim result of your work along with the necessary assignments, as a work phase. In this, it’s best to work from an already established basic scope of functions or one you judge to be realistic. These are then the basic services. If you think there’s a possibility that the client will request further services, include those services, each with a unit price, and, voila: you’ve defined your extra services. The following example shows a project that has been divided into three work phases. In each work phase, the basic services are the first subsections, described here as 1.1 to 1.3, 2.1 to 2.3, and 3.1 to 179

3.2. Each work phase is then followed by additional points, which are the optional extra services (1.4, 2.4, and 3.3): >> 1st Work phase: Basic evaluation and conceptual planning and design >> 1.1 Basic evaluation and conceptual planning: material and color research >> 1.2 Development of three different design variations in the form of sketches or renderings >> 1.3 Presentation to client with decision by client on the ­preferred variation(s) >> 1.4 Development of further design variations, upon client’s request, after presentation of first three variations. (optional) >> 2nd Work phase: Design and Development (D&D) >> 2.1 Further development of the design up to provision of p ­ roduction-ready data in digital form agreed with client. >> 2.2 Finalization of design in a rendering, including necessary technical information and technical drawings. >> 2.3 Presentation of the final design to client with decision to be made by client on any possible final modifications. >> 2.4 If necessary, consideration and incorporation of the modifi­cations requested by client up to interim acceptance by the client. (optional) >> 3rd Work phase: Prototype development >> 3.1 Cooperation on further development of the final design up to creation of a production-ready prototype, to be p ­ roduced by client. >> 3.2 Presentation of the prototype to client, with decision by c­ lient on possible final modifications. >> 3.3 If necessary, attention to and incorporation of the modifications requested by the client, per day’s work required up to final acceptance by client. (optional) This method, which incidentally has been extensively put to the test in practice, incorporates possible extra services as optional addons to each work phase. Did other possible extra work phases occur to you while you read through the example? Great! Then get to it! Write out your own system of work phases and describe them in full.

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As already mentioned, the granting of usage rights is often seen as a matter of course by the client even though it’s not. And given what you’ve learned so far, you probably won’t be surprised when we advise you to make this very clear. Usage rights are precisely what are interesting to a perceptive client. They are the legal basis with which they can actually do something with your designs, for example use them in manufacturing products. Thus, you should list this service as a stand-alone service and deal with it separately in your fees or fee agreement. You’ll find more detailed information on how to handle fees with regard to granting usage rights in Chapter 13. The best way to accomplish this is by breaking down the usage rights in terms of content, geographical, and time factors. Here, you should always be aware of the simple (in this context often disregarded) principle that the less you offer at least in the beginning of contract negotiations the better it is for you because what you don’t sell to one client in terms of usage rights, you can potentially sell to another. The question you may need to ask yourself is whether you transfer the entire rights for your design to your client (what’s known as a sellout of rights) or you grant them just the usage rights (what’s known as a license). This matter of the licensing is relatively easy for you to keep under control if you always take the precaution in your contracts that in the event of a termination of the licensing contract, all granted or transferred rights clearly either revert to you or are to be transferred back to you. Incidentally, whether or not a sellout of rights is at all possible, depends on various things. In Germany, for example, if your design is copyright-protected, a full transfer under contract isn’t possible. The general advice throughout this book to grant as few usage rights as possible doesn’t, however, preclude you from remaining absolutely flexible here. Clearly you shouldn’t badger a globally operating client with a demand for a regionally restricted license, for example. Likewise, the time factor seldom plays a role in licenses in the realm of fashion design since here the rapid succession of seasons creates a natural limit to production, distribution, and usage of rights. However, the question of what a client may get, including something like a corporate identity in communication design, is absolutely relevant, also with regard to your fees.

12.3 Granting of usage rights

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Content definition

Start off by specifying the nature of the usage rights in terms of content. The underlying question here is what exactly the client may do with your designs. Are they only authorized to use them for a limited edition or may they use them for unlimited production? May they make changes or develop your designs of their own accord? May they, in turn, grant usage rights for your designs to a third party, referred to as sublicensing? In how many and in what variations can they offer the product you designed? Don’t even try to find sample formulations for these clauses because there just aren’t any as good as your own answers. It’s precisely at this stage that it’s important that you put things in your own words and it’s very important that you have faith in your own capabilities and understanding. At the end of the day, it’s quite possibly the case that no one, not even your client, knows your designs as well as you do. In the event of a legal conflict, even a patchy or incomplete formulation to which you and your client have given some thought bears a lot more weight than some ill-considered, anonymous text. Need an example? We suggest using the formulation below to help you get the ball rolling: >> The Licensor (supplier, designer) grants the Licensee (client) exclusive license to the manufacturing and distribution of products using the Licensor’s design, the object of this contract. The Licensee is entitled to manufacture and distribute an unlimited number of products of this design. If you just skimmed over the above text: STOP! Go back and read it again! This is the heart of your licensing contract! And don’t forget to include some text incorporating the above-mentioned work phases of the design process in your version. The question of whether your client, the licensee is, in turn, authorized to sublicense, namely to grant others the usage rights to your designs, is of particular importance to you. You should always either prohibit this or make it subject to your permission. In any case, you should make it clear that the licensee is required to impose the same obligations on the sublicensee as they have to you. It’s essential to stipulate that you should receive the same cut of the sublicensee’s revenues as you do of your direct licensee’s. The Anatomy of a Design Contract in Chapter 17 provides more formulations and suggestions for your contract.

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It makes sense that it’s important to have a geographical definition of the granted usage rights, because if your licensee uses your design worldwide, your license is worth more than it would be if it could only be used within certain geographical boundaries. Here, the principle applies that an extension of the license geographically should be appropriate to the licensee’s distribution network as it currently exists or is available on short-term notice because otherwise both contract partners end up losing out. You lose out, because while it’s true that you could contract out the license for another region to another licensee, you could also lose out on the chance to earn money if a license isn’t used to its full geographical potential. The licensee also misses out, because the geographical gaps in their distribution ability causes them to have fewer possibilities for advertising and introduction on the market. A good example of a geographic partitioning of the distribution area with mutual advantages is the global apportioning of the distribution area for the furniture designs of Charles and Ray Eames, by the companies vitra and Herman Miller. Both companies distribute the products independently and exclusively in certain license areas, with completely differing variations of models, and both profit from this set up. The two partners have more resources and knowledge together than they would alone. Through their concentrated efforts, additional sales potentially lost in the region covered by the other are already more than offset in the medium term. This increase in efficiency in the sense of achieving greater distribution through a geographical specification of the license area is, incidentally, also the reason for the admissibility under cartel law of such clauses in licensing contracts. In any case, don’t let yourself be talked into accepting a definition of the geographic area of the license, as they’re known to appear in recording contracts: Area of license – the universe.

Geographical

The time aspect is also an essential part of properly defining a license’s scope. Here, the motto is: the shorter, the better – for you. Although, one shouldn’t forget that in fashion design the duration of the usage rights is naturally limited, to a certain extent, as well as that in the field of industrial and furniture design, the licensee frequently makes a substantial investment in market entry and therefore has a legitimate interest in a usage that’s as long as possible, in order to redeem their investment.

Time definition

­definition

183

So again, it’s important that you don’t approach this matter too dogmatically, but if the licensee expresses a desire for a longer license period, than you had in mind, then don’t hesitate to enquire about their reasons. You should also bear in mind in this process whether you have a realistic chance of relocating the product to another manufacturer should the contract be prematurely terminated. The reason for this is that it happens time and again that manufacturers persuade designers to agree to present a design at a trade fair without already having made a contractual obligation regarding the production and market launch of the design. If the manufacturer then decides against your design, perhaps due to lack of interest at the trade fair or other, more questionable, motives, then the situation immediately looks pretty bad for you. Suddenly you’re standing there, without a contract, the first public presentation at the trade fair has set the grace period for the design rights in motion. The company-affiliated presentation has ruined your chances to place the design elsewhere because other companies understandably have difficulty getting excited about something another company has already publicly presented as their own. Perhaps the best motto all around when it comes to license negotiations – even with renowned companies – is expect the best, prepare for the worst! 12.4 Client­ consultation

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Your service offering takes on an additional dimension if you define your consulting services and make them subject to costs. Be sure you understand here what’s meant by consulting. Of course, you consult with your client over choice of materials, for example. But beware, this isn’t what’s meant by consulting in this case! Your client expects this kind of consulting as an integral component of your design services – and rightly so. The inevitably frequently necessary consultations in the context of a rebriefing, in order to repair an incomplete (or even unprofessional) briefing are also not what’s being referred to here. What’s meant by consulting here, which you can use as the basis of further component parts of your fee, has nothing to do with the design of a product. It’s about project planning or – financially even better for you! – the basic strategic direction of the company, i.e. consultation on processes. Both of these are preconditions to professional development on the client’s side and therefore, by extension, the basis for the design of products (and communications). By par-

ticipating in this development process, you not only move yourself forward timewise, in the company’s processes, but also hierarchically upwards in the company structure. Thus, whenever the possibility presents itself, from the very first and smallest creative mission, attempt to not only allow your consulting and planning (or even management) competencies to shine through, but also integrate them as components in the contract for compensation. You can also define these as supplementary services, if your client is somewhat overextended at this phase of the business relationship. Your know-how, your knowledge of delivery possibilities and your contacts to potential clients also present a distinct service component. Even if these only distantly come under consideration in your contract, you should itemize them separately. This is about an entirely different form of service, which lies outside of your core competencies as a designer. For precisely this reason, it’s also important that you state this explicitly. Clarification of this point also serves to avoid disputes, as well as providing a basis for further fees. It’s not that uncommon that the client otherwise expects you to utilize your relationships with prospective purchasers to their advantage, as a matter of course, and then reproaches you, if you don’t do this. This must be prevented at all costs.

12.5

If you’ve managed to hang on this far, here’s a little bonus info for your stamina. When you describe your provision of services as precisely as possible, this enables you to claim compensation for expenses from your client. Expenses include everything necessary to do your job, which you spend alongside your actual provision of services, such as materials, transport costs, and assistants. By defining your actual services, as precisely as possible, you can exclude a lot of things that you can then claim as expenses. Obviously, it really makes a difference if the materials and costs for the creation of a prototype are included in your payment or not. On a practical level, it’s advisable to define in advance (in as much as it’s possible) what costs can be expected so the client doesn’t get an unpleasant shock. These include costs for transport, accommodation, food expenses, provision of samples, etc. Here again, you are the best person to define this because you know best what’s to be expected in accordance with the assignment.

12.6

Mediation ­ activities

Reimbursement of expenses

185

In summary

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>> A designer’s services can, and should, include a diversity of services, including development, granting usage rights, consulting, procuring third-party goods and/or services, and supplementary payouts for the client. >> Whenever possible, distinguish between basic and extra ­services, and break down your portfolio of services into work phases, which can include basic evaluation, preliminary planning, design development, approval planning, implementation planning, preparation of tendering, etc. >> As a designer, you should always either prohibit sublicensing or make it subject to your permission. >> Don’t let yourself be talked into accepting a universal definition of the geographic area of your license. >> Time is an essential aspect in properly defining a license’s scope. Here, the motto is the shorter, the better for you as a designer. >> Whenever possible, attempt to not only allow your consulting, planning, or management competencies to shine through, but also integrate them as components in the contract for ­compensation.

13

Calculating your fees

This chapter more or less brings you the flipside of the last chapter. There, the legal basis was set out for what’s especially interesting to you with regard to your contracts, namely your fee. Now we’ll explain the legal details you should take into account when structuring your contractual relationship with clients – so you don’t accidentally throw money away. The various forms your services can take, as presented in Chapter 12, each correspond to particular approaches to an optimal arrangement for your fees. Putting it bluntly, the explanations in the previous chapter served above all to integrate your fees as effectively as possible into contracts with your clients and to optimally safeguard them legally. The following fees may fall under your services as a designer: >> >> >> >> >> >>

13.1 The range of ­fee-based services

Design fee Usage fee Consultation fee Mediation fee Reimbursement of expenses Special case pitch fee.

You’ll learn more about the basic economic aspects of deter­ mining the design fee, along with extensive information on struc­ tu­ring fees and pricing, forms of fees, fee recommendations and tariffs, along with profit and loss calculations in Chapter 16 of the first ­volume in this series: Become A Successful Designer – Starting and Developing a Design Business. You receive a design fee for the preparation of the design. This design fee should at the very least cover the effort that you realistically require to come up with the design. In practice, the design fee is for the most part either agreed upon as a lump sum or set as a function of a specific time investment, which is, as a rule, given in daily or hourly rates.

13.2 The design fee

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Naturally, an agreement that uses a specific timeframe for the design work as a basis, is more advantageous for you than the mere specification of a lump sum. Because, if you end up having to invest considerably more effort due to requests for modifications or for some other reason(s) stemming from your client, then you absolutely can and should speak with them about charging for this. In the event that you (have to) agree to a lump sum fee, you should set out your services in a very detailed manner, drawing attention to the fact that services not included in your lump sum fee will be calculated at cost – which brings us back to the daily or hourly rate. Time and again we’ve experienced that when services are presented in more detail, clients agree to an increase of this lump sum fee. So, if you’re an industrial or product designer and you structured your work phases along the lines described in Chapter 12, your quote, and the resultant contractual agreement, might look something like this (based here on a daily rate):



1st Work phase: Basic evaluation and conceptual planning and design 1.1 Conceptual planning: research on materials and color. 1 × daily rate $ 1,000 Total 1.1 $ 1,000 1.2 Development of different design variations as drawings or renderings. 5 × daily rate $ 1,000 Total 1.2 $ 5,000 1.3 Presentation to client with decision by client on variation(s). 1 × daily rate $ 1,000 Total 1.3 $ 1,000 1.4 Development of further design variations/directions, upon client’s request, after presentation of the first three design variations (optional). – per day $ 1,000 W.P. 1 (1.1–1.3) Total $ 7,000 and so on …/etc.

Whereas, if you’re a graphic designer, your quote, along with the resultant contractual agreement, might look something like this (based here on an hourly rate):

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1st Work phase: Basic evaluation/conceptual planning and design 1.1 Conceptual planning: Research on paper, printing and binding. 4 × hourly rate $ 125 Total 1.1 $ 500 1.2 Development of three different design variations/directions in the form of drawings. 24 × hourly rate $ 125 Total 1.2 $ 3,000 1.3 Presentation to client with decision by client on variation(s)/ directions. 4 × hourly rate $ 125 Total 1.3 $ 500 1.4 Development of new design directions upon client’s request, after presentation of the first three design variations (optional). – per hour $ 125 W.P. 1 (1.1–1.3) Total $ 4,000 etc.

It’s also possible to break down your work process into distinct work phases for invoicing purposes, especially when you only receive one payment per design or per collection, as is often the case in fashion design. You can divide the fee up into successive portions, and in this way you at least have the possibility to write several interim invoices. As mentioned in Chapter 12, you can write an interim invoice after completion of the respective work phase, if the client gave their approval. Using your daily or hourly rate as a reference figure also helps you with the (separate) inclusion of your extra services (Pos. 1.4 in the example above) – because you can simply use the same base figure here that you used for your basic services. Furthermore, using your daily rate as a reference figure and approximate description of your work activity has one other advantage. You can request interim payments for the work time you’ve already invested. However, even when you can’t get your client to agree to this work phase invoicing arrangement (which really is optimal for both parties because it’s so clear-cut), any steps in this direction are advantageous. Accordingly, a lump sum for your development activity is better than a flat fee for all of your services, and a few work phases are better than none at all.

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13.3 The usage fee

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You receive a usage fee for granting (design, copyright, trademark, or other IP) rights for the use of your designs. This has nothing to do with your own efforts, rather the payment is permitting your client to use your designs for the manufacturing and sale of products. However, usage fees can also apply when there’s no direct sale involved. For example, if you design an Internet presence or business stationery for a client, they must pay you a usage fee – in addition to your design fee. Incidentally, the usage fee is really a strange bird. Because it’s basically possible in two pure-bred forms and a whole slew of hybrids. You must understand these variations before you attempt to negotiate licensing contracts for the first time. Alexander Bretz: My American colleague, the California-based lawyer, Donald Passman, explains usage fees in his fantastic book, All You Need to Know About the Music Business, using an example from his circle of acquaintances. This example concerns the selling of an English bulldog’s puppies. While I read Passman’s example, it occurred to me that there was a very similar story in my circle of acquaintances involving cats, so I’ll explain my version using cats. But if you prefer, just substitute English bulldogs. Doris, a woman in my circle of acquaintance, bred pedigree cats, more precisely Carthusians. Every year there was a litter of five or six kittens, which she then sold to acquaintances. However, as gradually all of her acquaintances had (at least) one little Carthusian cat, the selling became difficult because she was facing a – stagnating market. Therefore, it was necessary to boost sales. However, Doris worked as Head Teacher at a local comprehensive school and thus had very little free time on her hands. Her boyfriend was keen to help, but not of a very practical nature. So, in the end there was only one option. A friend from Doris’s choir who had a lot of time on her hands made a deal with her, offering to split the profit fifty-fifty every time she sold a kitten. This plan worked very well, but, unfortunately not for very long because the kittens got older and a production bottleneck occurred, what’s known as natural scarcity. So what do Carthusian kittens (or English bulldogs) have to do with usage fees? In order to grasp this, you have to imagine that you’re Doris and your client is her friend doing the selling work. This gives you a pretty good idea of what happens with a usage fee. Your client sells the products and gets money for it. However, they can only accomplish this because they have access to your kittens (let’s just call your designs that for the time being). The money that comes in is then divided up.

Unfortunately, you won’t get 50 percent for your kittens, as Doris did. This has less to do with the injustice in the world than it does with the fact that your manufacturer has more preproduction costs than Doris’s friend. That’s why a manufacturer has to claim a larger proportion of the total price. However, the example with the Carthusian kittens is just one of the two pure-bred forms of fees in this realm. To sum it up again, Doris and her friend split the money earned on each sale. This value rose and fell depending on the amount of profit from each sale. In other words, each of them got a profit-related share. This form of usage fee, a proportion of the sale price, is also called a commission, profit sharing, or royalties. In order to understand the other basic form a usage fee can take, let’s adapt the example with the kittens somewhat. Doris’s life stays the same, but her friend has noticed that she’s developed quite a knack for selling kittens. So she decides to ramp up her sales efforts. Maybe she has some elaborate brochures printed and puts on expensive parties, where the kittens are displayed and auctioned off. In short, demand increases and can only be met by other breeders. However, at the same time, it grows increasingly difficult to harmonize supply and demand. There are fluctuations in sales. Some litters sell well, others not so well. Despite her talents as a saleswoman, Doris’s friend has no way of predicting these fluctuations.

Royalties

If the friend is not so certain of success herself, she should simply leave things in the royalties mode. However, if she’s fairly certain that the kittens will sell well, she should pay the breeder a set purchase price outright and then attempt to sell the kittens as best as possible. In many cases her profit will, when converted to a percentage, far surpass the 50 percent mark. In exchange, she takes on the risk if, and at what price, the cats will sell. This option is known as a flat-rate payment or buyout. Doris, the breeder, receives a certain sum of money outright, regardless of the actual sales. The advantage for her is that she immediately makes revenues and isn’t involved in the merchandising risk. Cash on the nail is better than to wail. On the other hand, her profit doesn’t increase if the cats sell a lot better than expected, so she only has a greater potential for gains, if she’s prepared to share the merchandising risk. What’s better for the involved parties can only be predicted to a certain extent. If sales are going well, then for you as a designer, roy-

Buyouts

191

alties are better. If they’re not going well, a buyout is better. Exactly the opposite is true for your client. If sales are good, a buyout is better for them, and if they’re bad, royalties are the better way to go. Richard E. Caves, the American economist already quoted elsewhere in this book, incidentally calls this incompatibility of interests the problem of the motley crew. When success can’t be predicted, the cooperation of a number of participants whose contributions are all in some way important but of a completely different nature and therefore incomparable to each other, is required for the creation of the article for sale. That’s the description of a complex creative product and with it very often your problem as a designer. Combination of ­buyout and royalty

Industry differences

192

So, given the aforementioned conflict of interests with your ­client, what should you do? Alexander Bretz: Whenever I think about this problem, I always have to think about a student of mine who answered this question in the classroom with the short, snappy statement: First take an advance, then a percentage! Exactly! In other words, this means that the two approaches can be combined. The client first prepays you an amount (the advance) and then you get a profit-based payment (the percentage). Here, the advance will be less than a buyout would have been. On the other hand, the royalties will also be lower than the royalties without an advance would be. This solution is, objectively speaking, the most efficient distribution of the risk and revenue prospects for both partners. However, you still need a lot more information in order to be able to successfully develop your career as a designer with this knowledge. This solution isn’t applicable in all design fields since there are ­completely different traditions of doing business, which may vary from country to country. The aforementioned solution allows itself to be implemented most effectively in the realm of industrial and furniture design. In communication and fashion design, percentagebased profit sharing is absolutely the exception. Buyouts predominate in these fields. If you work in these fields, this doesn’t automati­ cally spell out the end of the world for you, but be on your guard. You’ll need to calculate well and get a good buyout, so that you can console yourself over the other possibilities for profit on which that you’re missing out on.

With royalties always pay careful attention to how they’re being c­ alculated! It’s quite common to use sales revenues as a basis for calculations since, they can be least manipulated internally by the manufacturer and are the easiest to verify. If you permit the profit to be used as the calculation basis, for example, your client can manipulate this basis via the expenses. If the cost of manufacturing is taken as the basis of calculation, this is hard to verify, even for a professional accountant. In addition, for every royalty agreement, you not only have to stipulate invoicing and payout periods, but also the possibility to carry out an inspection of the accounts. In conclusion, if possible, avoid profit- or cost of manufacture-based calculations if at all possible! You’ll find a sample formulation of this point in Chapter 17.

Basis and

Combinations of advances and royalties and usage and design fees are also possible, but they don’t boil down to the same thing at all. The advance might be a base rate, on top of which royalties are structured with a lower percentage rate. The advance might be a true advance, meaning that it could be clearable (or deductable) in full with royalties. At first glance, this looks worse for you, but it’s not necessarily the case. What’s important is that you think this through carefully, running through the different scenarios in your head, before you accept or reject the proposal. In addition, a base payment or advance may be combined with the design fee. Likewise, this isn’t simply good or bad, but you must make sure in this case that for the share of your real design payment the refunding isn’t possible. For this reason it tends to be more advantageous to separate the design payments and usage fees.

The rules of

If the contract partner wants to reduce the royalty rate upon achievement of certain sales volumes or after a certain time limit, you should ask them their exact reasons. Because if a manufacturer calculates on the basis of a royalty to the amount of a certain percentage rate, the amount per unit sold is, in effect, basically the same so it’s about variable costs, unlike the buyout for a set amount. Here the absolute cost actually mathematically decreases per unit sold with every item sold. This is what’s known as economies of scale. So, if your client wants the percentage of your royalty to decrease upon reaching of a certain sales figure, the goal of this exercise is to sink the calculative amount per item. In this way, the advantages of economies of scale are transferred, so to speak, onto the variable costs. There may also be practical grounds for this, for instance higher advertising costs, which are

Reduction of

­verification of ­calculations

­combining

the ­royalty rate

193

necessary to prolong the product life cycle when sales volumes would otherwise be inclined to drop. However, you should be aware of such a reason, and if possible, also explicitly include it in the contract. Calculating the standard amount for a buyout

194

You are responsible for calculating the appropriate amount for a buyout, on the one hand, estimating your licensee’s probable duration of usage, and on the other, the sales volumes that they can (­ realistically) achieve in this time period. This isn’t that easy, but every piece of information along the way can provide you with valuable clues. If, for example, a company currently generates a total turnover of 100 million dollars and your product is one of 100, then it’s unrealistic to assume a turnover of 10 million dollars for your product. 1 million dollars would be more realistic. Using the turnover as a basis, calculate the share in profit to be anticipated for the period of the license with the help of the explanations in the following section on the standard amount for royalties. Using the 1 million dollars a year as a basis and an average license rate of 3.5 percent, the result would be a license value of approximately 35,000 dollars a year. So the appraised value, in the case of a ten-year license, would be approximately 350,000 dollars. Ideally, you should then cross-check this by calculating your hourly rate. Now you just have to multiply the probable number of accumulated hours for the design in question by your hourly rate, and in this way you’ll obtain an approximate sum for a buyout from your perspective. If, for example, your hourly rate is $ 125, and you need 24 hours for the design, the amount of a buyout from this point of view would come out only to $ 3,000 (plus the applicable taxes, of course). Now, in this example there is an enormous gap between the license rate and the hourly one. But this shows you that you can still give in during the negotiating process with your client. Very often you’ll observe that the values calculated (one from the perspective of your contract partner, the other from your perspective) are not so far apart from one another. When this is the case, you have found a reliable value for a fair buyout, and there is absolutely no cause to go below this amount. If the two values are miles apart, carefully reconsider why this might be. In this case as well, the values (or just one of them, if you can’t calculate the other one) will give you a ballpark figure for the amount of an appropriate buyout. Everything else comes down to your negotiating skills.

The standard amount for royalties is dependent on various factors, including the cost of an individual unit and the projected sales figures. On top of that comes the fact that an internationally known designer can command a different level of royalties than a beginner who’s fresh out of college. Moreover, the industry and the complexity of the design also play a role, as well as the manufacturer’s inhouse calculations. Alexander Bretz: In my practical experience a realistic royalty lies anywhere between 0.7 and 7.0 percent, on the basis of sales revenues of course. If you use an other kind of basis the percentage will be d ­ ifferent, higher on the basis of profit, lower on the basis of production costs.

Calculating the

In the event of a combination of a buyout (or advance) and royalties, you should first calculate the approximate amount of the buyout and the royalties separately, as shown, and then see what seems realistic to you in the combination. Due to its nature, there’s no real way to provide a guideline for this.

Calculating the

If the contract provides that your client, as the licensee, may in turn grant sublicenses, you should by all means ensure that the following provisions are included in the contract, for your protection:

A word about

standard amount for royalties

standard amount for buyout-royalties combinations

­sublicenses

>> Your contract partner should obtain your consent, or at least must inform you, before granting a sublicense. >> In the event of granting a sublicense, your contract partner should be obliged to impose upon their sublicensee the same payment requirements in your interest(s) as they have with you. >> In the event that income is generated through other means than sales, it should be made clear that the percentage agreed upon applies to all revenues achieved in connection with the licensed design, regardless of the nature of these revenues. Regardless of the type or nature of the consulting activity, remuneration is typically based on units of time (daily or hourly rates) or depending on the object of the consultation, according to industrywide catalogues (i.e. for architects, lawyers, and tax advisors). In addition, the possibility for an agreement on a lump sum fee exists. This is more common in the U.S. and other English-speaking countries than in Continental Europe. Since there’s no industry-wide price catalogue in any of the design fields, the best solution for you remains a time-based hourly

13.4 The con­­sultation fee

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or daily fee since lump sums almost always turn out to be at the expense of the consultant. If you studiously overlooked the appeal to determine your hourly rate in the previous chapter, this has now come back to haunt you. Please get started now and calculate your hourly rate and, contingent upon that, your daily rate. Then you’re all set for the question of the consultation fee. And don’t let yourself be distracted by the fact that consultation by a designer may be considered a commercial activity in the eyes of tax authorities. Clearly distinguish your consultation activities, in terms of both your income and expenses, from your other freelance activities. You’ll find more information on this subject in the first volume of this series: Become a Successful Designer – Starting and Developing a Design Business, Chapters 11.2 and 17.3. 13.5 Your commission for mediation services

13.6 Reimbursement of expenses

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If you engage in activities involving the provision of contacts on behalf of your client to facilitate procurement or sales, you should also reach an agreement on remuneration for this. This is generally accomplished through what’s known as a commission. This is similar to a royalty – a percentage of the actual sales. Commissions for mediation are usually between 10 and 15 percent of the net mediated transaction value. But please be a bit indulgent with your licensee with regard to this amount since you are not a professional intermediary. Mediation may also be considered a commercial activity, thus, as already mentioned with consultations, it’s important to clearly distinguish your mediation income from that of your main freelance activity. This also applies to the corresponding expenses. You will find more information on this subject in the first book of this series, Become a Successful Designer – Starting and Developing a Design Business, Chapters 11.2 and 17.3. To have your expenses reimbursed, you must supply receipts. So if you make outlays on behalf of your client, that they should reimburse, you need an official bill or receipt. Here the following applies. If the bill or receipt is made out in your name, only give one copy to your client. If the bill or receipt is made out in your client’s name, they’ll need the original for their accounting purposes and you just keep a copy. Also, make sure that any invoices you write for expenses reflect pretax values so that your client doesn’t pay sales taxes twice.

If, for example, you have expenditures in the amount of 100 dollars net, plus 19 percent sales tax, resulting in an invoice balance of 119 dollars, please ensure that you only bill your client 100 dollars plus sales tax, not 119 dollars plus sales tax. Alternatively, a fixed fee for general expenses may come under consideration (often called a service fee or handling fee), which you can negotiate with your client, meaning that you then don’t have to account for each and every receipt. It’s in no way standard that you receive a pitch fee for taking part in a pitch. However, if your potential client doesn’t offer it to you of their own accord, you should inquire about it. If they refuse a pitch fee, you’re naturally in an the uncomfortable situation and you don’t want to make yourself unpopular from the start, so you’ll probably have to give up on the fee. That’s OK. Mind you, no one is preventing you, in the event of a lost pitch, from asking for remuneration to recover your cost after the fact. Legally, your lost client will find it fairly difficult to turn down this request since you’re completely in the right according to standard procedure. But please first consider the fact that you may want to be invited to another pitch sometime. What kind of repercussions do you think your request for a pitch reimbursement will have on your chances to work with this client in the future? >> In addition to getting reimbursed for expenses, you, as a designer, may charge fees for the following services: design, usage, consultation, mediation, and special case pitches. >> Generally, lump sum payments for design services are less advantageous than time-specific fee arrangements. >> A lump sum for your development activity is better than a flat fee for all of your services, and a few work phases are better than none at all. >> If sales are increasing, then for you as a designer royalties are better. If they’re not going well, a buyout is better. Exactly the opposite is true for your client. >> Given the above-mentioned conflict of interest with your client, a combined approach where the client first prepays you an amount (the advance) and then you get a profit-based payment (the percentage), is the most efficient distribution of the risk and revenue prospects for both partners.

13.7 The special case pitch fee

In summary

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14

Terms and conditions at your ­service

The goal of this chapter is to make yet another phenomenon of modern business life useful to you, Terms and Conditions (often abbreviated T&Cs). Let’s face it, T&Cs don’t really have a very good reputation. They’re often incredibly lengthy and written in excruciatingly tiny print, and even if you don’t read them, as is usually the case, they still manage to leave you with a lingering feeling of unease. However, this is no reason to bury your head in the sand and pretend they don’t exist. They do. The good news is that there are rules regarding their use and content on an international level. These rules are designed to prevent T&Cs from being unfairly used. By taking the time now to familiarize yourself with the rules as well as learn a bit more about the function of T&Cs, you just might avoid getting yourself buried up to your neck in the future in something that smells a lot worse than sand …

Like forms, Terms and Conditions are a product of industrialization. With the consequent increase in the speed and number of business transactions, it was inevitable that even complex contracts would no longer be settled individually via lengthy negotiations. It became the practice instead to include certain standards in the contractual terms from the outset when dealing with a large number of identical or very similar contracts. Users’ adaptation and streamlining of T&Cs went hand in hand with the attempt to transfer as many risks as possible to their clients. It was just too tempting to use T&Cs to exclude the buyer’s warranty rights or make the successful enforcement of these rights dependent on very strict formal requirements or time limits, which the client could hardly meet. Furthermore, the temptation to include unfair conditions was even greater since customers could only accept or reject the contract as a whole. Perhaps if saints had been involved in this historical development, it would’ve taken another, more charitable, direction. But

14.1 What are “Terms and conditions”?

199

with a general dearth of saints around, the call for new laws was quickly taken up. It’s obvious that no legal system can tolerate flagrantly granting advantages to one party of a contract at the expense of the other without risking social cohesion and the integrity of the entire economic system. Thus, it’s not surprising that the legal systems of almost all of the industrialized countries developed very similar regulatory mechanisms as a solution to this problem. In common law countries, general principles were developed via case law, based on the precept of good faith. In Europe, various policies were developed with a focus on consumer protection. Similarities on an international level

Although there’s a great deal of disparity in the regulation of T&Cs from country to country, there’s also a lot of common ground. This is demonstrated most clearly in the fact that whenever these regulations have been put to the test in judgments around the world, the judgments they’ve produced have been quite similar. These similarities boil down to a few general points: >> the conditions under which T&Cs are effectively incorporated into a contract; >> the standards according to which the included terms and conditions are reviewed in terms of their contents; >> the legal consequences in the event that a clause is invalid. This means that if you don’t know exactly under which legal system the incorporation and effectiveness of the T&Cs in your contract will be evaluated, you shouldn’t worry too much because if your business partner utilizes T&Cs in their dealings with you, these are subject to just as thorough an inspection by any court as when you utilize them.

Purpose and ­handling

200

T&Cs are generally understood as specifications of restrictions for the use of goods or services, irrespective of national definitions. In other words, conditions with which one party seeks to restrict the rights of the other party. We’ve become so accustomed to having our rights restricted via T&Cs, that we almost don’t notice it anymore. When we install software, we have to accept the Terms and Conditions for use first. If we don’t, installation simply isn’t possible. When we order something on the Internet, often, we also have to accept the seller’s T&Cs. Naturally, this isn’t the reason we’ve devoted an entire chapter to Terms

and Conditions. The heart of the matter is determining what components of the Terms and Conditions are important to you as a designer. The answer to this depends on whether we’re talking about the purchase or sale of goods or services, such as consulting and designing. Central to the usage of T&Cs is that you meet all of the formal requirements for their incorporation. As the requirements do d ­ iffer considerably from country to country, it’s strongly advisable to have your business partner explicitly verify that they’ve read the T&Cs and accepted them (i.e. by signing or, on a Web site, clicking). The documentation of this assent is, for you, the best way to ensure that you’ve met the formal requirements according to the strictest parameters of the various international legal systems. First we’ll examine the case where you sell or buy goods that you’ve either produced yourself or have had produced. In most legal systems, the contract of sale provides a kind of basic model for all contracts. After all, aside from bartering, it’s the most basic form of exchanging goods, whether the customer is ordering your products at a tradeshow or the showroom, or whether you’re purchasing your own equipment, fabric, notions, etc. With regard to T&Cs in contracts of sale (which, by the way, can be used either for the sale or purchase of things), a number of issues are important, ranging from protective and counter-protective clauses to the place of jurisdiction.

14.2

As strange as may it sound, enforcing your own T&Cs isn’t that easy if they conflict with your contract partner’s T&Cs. Contradicting T&Cs cancel each other out, like matter and antimatter, fire and water. Naturally, the idea will then spring to mind to use what’s known as a protective clause to veto or altogether bar the inclusion of deviant terms and conditions by the other party. However, this is precisely what will also occur to the other party, leaving you at a draw. The British call this battle of forms, a nicely descriptive term. Actually, when all’s said and done, this battle is very fair across-the-board because strangely enough it’s necessary that, as a precaution, you include an appropriate provision excluding or vetoing the inclusion of deviant or contradictory T&Cs by the other contract party. Although, you know that this provision is just a sort of bumper zone, and it usually dissolves into thin air when confronted with the other side’s counterprovision. The battle is both fair and necessary because, while such a provision won’t push through your T&Cs, it can at least prevent other, conflicting ones, from being foisted upon you.

Protective and

Terms and conditions for contracts of sale

­counter-protective clauses

201

How long are you tied to your bid?

Provisions stipulating a commitment period for your bid have proven to be very successful in practice even though it’s not a legal necessity because all legal systems have regulations regarding the duration of bids. Nevertheless, clarification of the duration is really of interest to both parties.

Price components

It’s also a good idea to indicate what factors or price components are included in your price. For example, imagine that although you’ve always expressly stated that your prices don’t include packing and transportation costs, you happen to forget it once. The matter instantly becomes unclear and can, at the very least, result in unpleasant discussions with your clients. So write into your T&Cs whether these are included or not. Also, just to be on the safe side, indicate whether or not sales tax is included in your prices.

Payment deadlines

Specification of payment deadlines is also wise, along with an indication of whether interest will be charged on late payments from what point in time and at what rate.

and interest

Delivery dates and deadlines

Reservation of title

Passing of risk

202

A stipulation of the delivery date or a delivery period is both sensible and appropriate, especially with goods purchased on order. Once again, be as precise as possible. Don’t put it in terms of weeks or months, rather provide an exact day or time frame. If you sell something and aren’t paid for it immediately, then your buyer has your product in their hands and you have nothing. For this reason, it’s important that you include a so-called reservation of title in your T&Cs. Reservation of title means that while the buyer is in possession of the object, they aren’t yet the owner, as they haven’t paid for it. In this way, you reserve your property – just as the legal term suggests. This is important, because in this way you can prevent bad payers from potentially using your products to cover their other open debts. For example, if you, as a fashion designer, sell your collection to dealers (collections are usually supplied on account) they can’t then turn around and use your products as collateral for their loans. So, in the event that the dealer goes bankrupt, you can at least recover your products completely. They won’t end up as part of the asset recovery during bankruptcy proceedings. Having a clear definition of when during the transaction the ­ownership risk is transferred from seller to buyer isn’t absolutely necessary, but it’s advisable in international business dealings.

Ownership risk means the risk of damage to property or even of destruction of property. This matter is of some importance to you if, for example, you produce goods overseas, which are then delivered by ship. Nowadays such transport is generally undertaken by container ships. On container ships, the containers are stacked relatively high above the deck and fixed with special clamps, called twistlocks. What makes these twistlocks special is that when the sea reaches a certain degree of swell or tilt, they detach and the container goes overboard to prevent the ship from sinking. Naturally, if goods ordered by you are being transported in such a container, passing of risk plays a major role. If the risk was transferred to you upon loading of the ship, then in legal terms you’re considered the owner and you have to bear the risk of the transport. In concrete terms, this means you would also still owe the supplier the purchase price, even if you never actually received the goods. Passing of risk therefore has a lot to do with who insures the transport and who’s responsible for the insurance costs. Including limitations and exclusions of liability in the T&Cs of ­contracts of sale is a very effective way to reduce risk. However, there are legal limitations to this. Chapter 15 provides more information on liability risks and how to limit them.

Limitations and

Consumer rights play a big role in the European Union. If, for example, a purchase is made through an online shop or catalogue, the consumer has the legal right to cancel the contract within a specified period, after you’ve informed them of this right. The length of this period and the formal requirements for informing the consumer differ from member country to member country. However, this isn’t as complicated as it sounds, because the applicable law in this case is the law of the country in which your online shop has its legal headquarters. In any case, you should seek a lawyer’s advice if you wish to open an online shop. Otherwise you may run into some unpleasant surprises … The right of withdrawal or return doesn’t apply to contracts where the purchasers are nonconsumers. This means that you don’t have to include a right of withdrawal or return clause in the T&Cs for commercial purchasers, particularly dealers. Dealers in the fashion and textile sector are, however, often granted an industry-standard, limited-time right of withdrawal in order to facilitate their order.

Right of withdrawal

exclusions of liability

or return

203

Amendments and additions to the contract

At some point, in some contract or another, you’ve probably come across this standard formulation for changes or additions to the contract. Written form clause in contracts: >> Changes or additions to this contract must be in writing. This also applies to the lifting of the writing requirement. The first sentence of the written form clause is understandable really, but the second is not necessarily clear. Oral agreements between the parties are as valid as written ones – the only problem is their provability. Through contractual wording according to which the contract document encompasses the whole intention of the parties and no ancillary verbal agreements exist, this eventuality is prevented until the conclusion of the contract – but not thereafter. Parties can verbally agree to contractual changes after signing the contract without any problems. This means that the clause prevents them from simply skating around written agreements with verbal ones.

Jurisdiction and applicable law

14.3 The design ­contract

204

In international contracts, as opposed to national ones, it’s ­crucially important to stipulate which courts are responsible for reaching a decision in the event of a dispute and which legal system is applicable to the contractual relationship. More detailed information on determining the jurisdiction and the applicable legal system (what’s known as applicable law) can be found in Chapter 16 of this book. The other major type of contract deals with a provision of services. Any contract that you, as a designer, conclude with your clients that is not about the sale of finished products, rather about your core competence as a designer, is what’s known as a service contract. You may well be thinking: Why should I even concern myself with classifying my contractual relationship to my clients? Well, this is of considerable importance when it comes to T&Cs. For example, it may be that in order to be able to claim your fee, prior inspection and approval of your design(s) by the client is required. Furthermore, there’s a possibility of material defects in your achievements, whose existence would grant the client relatively far-reaching rights to supplementary fulfillment, price reduction, withdrawal from the ­contract, and damages. So you need provisions from common civil law on:

>> >> >> >> >>

Definitions Nondisclosure Acceptance Termination by the client Warranty and liability

In addition, because of the distinctiveness of your creative work, you should include one or two points to your advantage from the realm of intellectual property rights: >> >> >> >> >> >> >> >> >> >>

Agreement to use/apply copyright, naming of copyright holder Granting of usage rights only upon full payment Further development only subject to approval Automatic reversion of rights in the event of contract ­termination Granting of usage rights only for accepted designs Party responsible for enforcing the design rights (designer or ­client) Due dates of royalty statements and payments Right to information regarding sales and inventory Ownership of design documents Insolvency policy

Alexander Bretz: On my Web site www.DesignLawForce.com, you’ll find a checklist, in both German and English, which helps answer questions regarding the content of a design contract as a licensing agreement. You’ll also find an annotated standard contract which includes provisions covering these points in Chapter 17 (Anatomy of a Design Contract). >> Terms and Conditions are designed as a means to allow one party to restrict the rights of the other party. >> As the speed and number of business transactions increased dramatically with industrialization, Terms and Conditions were invented to avoid dealing with similar complex contracts individually. >> Since the customer can only accept or reject T&Cs as a whole, almost all industrialized nations were forced to develop very similar regulatory mechanisms to dissuade the inclusion of unfair conditions for customers. >> However, T&Cs do differ considerably from country to country, so it’s strongly recommended that you confirm that the other

In summary

205

party has read, understood and accepted the provisions, either by signing or clicking on a Web site. >> Contradicting Terms and Conditions cancel each other out. >> Clarifying aspects such as the period of time you’re tied to a bid, price components, payment deadlines and interest, delivery dates, and deadlines are in the interest of both parties. >> With international contracts it’s crucial to stipulate which courts are responsible for reaching a decision in the event of a dispute and which legal system is applicable to the contractual relationship.

206

15

Liability and claims

Liability is a word that often sends shudders of horror down the spines of nonlawyers. This isn’t really warranted, especially since liability is a systematic and manageable approach to regulating your contracts – if you know how to use it … and that’s just what this chapter aims to show you! Sometimes the best examples can be found on your own doorstep. Alexander Bretz: When I walk around in my neighborhood in Berlin after there’s been heavy snowfall, I can see at a glance which residents have hired a company to clear away the snow and which residents do it themselves. The sidewalks in front of the households that have outsourced the job are very quickly covered in thick layers of sand, often even before the snow is cleared. The reason for this is what’s known as the duty of care to prevent pedestrians from slipping, for which the homeowner is normally liable, but which has been contractually transferred to the snow removal company. Sand is recognized as a relatively inexpensive and effective way to prevent slipping (salt may not be used in ­Berlin for environmental reasons). Thus, in this way, the snow removal service circumvents any liability and can very quickly serve all the sidewalks under their care. The system is not only an efficient, but also a near-perfect, l­ awful way for homeowners to avoid liability. They can sleep soundly, knowing they’ve fulfilled their commitment to snow removal by d ­ elegating it to a company, while the company provides an efficient basic service and has a public liability insurance, to cover itself. Incidentally, the owner of the building also most likely has a building owner’s liability insurance to cover themselves. For you as a designer, this example should spark your interest because it tells you a lot about liability and how to sidestep it. Liability-related matters can come up frequently, and not just in contractual relations. However, in your case, the foremost consideration should be the specific risks that arise during your work as a designer anytime from the initial phases of contract negotiation to the fulfillment of your contract, as well as what you can do to limit or even

15.1 Avoiding liability – an example

207

eliminate the issue of liability altogether. To what extent and for what risks do you have to take responsibility? What steps can be taken to avoid such risks? The answers to these questions can be divided into three areas in which liability can play a role in contracts: contractual obligations, ancillary obligations, and noncontractual liabilities. We’ll discuss these later in this chapter. 15.2 Contractual obligations

208

First and foremost it should be recognized that when you sign a c­ ontract you automatically assume a liability, at least in principle. As we already learned elsewhere in this book, each party in a contract is promising something and each expects the other to fulfill their obligations. A liability-free existence just isn’t conceivable, unless you happen to be of the opinion that society, meaning each and every member of society and, therefore, also your contract partner, owes designers something because of their creativity and other fine qualities. In a courtroom you might find yourself very much alone in that opinion. Liability is nothing more than a legal obligation, thus the flip side of a legal entitlement. It’s by no means something imposed from the outside as some kind of special form of torture for creatives. Liability means taking responsibility for your own affairs. If you’ve always wondered why company directors or department heads respond with the most reticence to particularly cutting-edge designs at pitches, the reason for this may be that these employees don’t want to make any mistakes in the first place. That’s why they try to cover their bases completely, ideally via market research and other marketing tools, but also through professional service providers (who will assume liability). If you became self-employed precisely to have more creative autonomy and decision-making power, then you should actually welcome the assumption of liability because it’s an expression of your independence and autonomy. And aren’t those the central features of entrepreneurship? You just have to accept that there are two sides to every coin, and the pure, limitless joy of self-employment will only persist until the day (if that day comes at all) your contract partner slaps a hefty compensation claim on you or doesn’t want to pay your fee because some kind of error has occurred. This is your entrepreneurial risk and it simply can’t be eliminated. As the saying goes, you can’t have your cake and eat it too.

The first, main consideration with contracts is precisely for what obligations you’re liable (and, naturally, for what your contract ­partner is liable for). In most jurisdictions, the agreement between the parties is foremost in determining the parties’ obligations. The respective legal systems only come into play (and to the rescue, if necessary) secondarily, either through laws or precedent. The most important obligation on the part of both contract partners is to provide their services free of material defects. If the service in this case is a cash payment, this shouldn’t really present a big problem, unless someone attempts to pay with counterfeit money. However, the question of delivery of goods or provision of services can be trickier. Is the gradual fading of a garment after many washings a material defect? What role do circumstances play here? For example, is the garment designed to be a work uniform that should withstand frequent washing or dry cleaning? What if the client doesn’t like the design from an aesthetic or technical point of view? No one else can address the question of what constitutes a material defect more clearly than the parties themselves. No abstract law or precedent decision can define this as well as you can in your contract – so please do so! Here’s an example: Let’s suppose that, as a communication designer, you take on responsibility for designing a Web site. You put something down to this effect in your (written) bid. After all, you’re far enough along in this book by now to know that defining your services is wise. The more accurately you define the scope of your services, the better it is for you in terms of liability. This means that if you describe your services vaguely, saying you’re responsible for the design of a Web site, an outsider, such as a lawyer who advises you, or a judge who has to decide in the event of a dispute, would understand that as meaning that you’re also responsible for the performance of the programming. You would, of course, in turn argue that this is not part of the usual scope of a designer’s services, unless it’s been expressly agreed. Naturally this can be argued quite well, if necessary, but it’s better to write it right into the contract in the first place. You could simply write something to this effect: the design services do not include programming. Taking the example a step further, your client may dig out some e-mails in which you may have casually mentioned that you’ll take care of everything. Now the client has a nice neat argument for why you owe them the programming services and thus are also responsible for any errors therein. To sum it up, it’s better not to rely on the interpretive skills and sympathy of legal professionals if you can clearly define things for yourself.

Fulfillment of ­contractual ­obligations

209

This underscores the fundamental rule already laid out in Chapters 12 and 13. You should be as detailed, accurate, precise, and meticulous as you can be in the description of both your services and those of your client. 15.3 Liability for  design

Although the legal approaches to liability with regard to contractual obligations differ greatly worldwide, similarities and trends can still be found. In the U.S., most product liability claims are connected with negligence, strict liability, breach of warranty, and various consumer protection claims. The laws and statutes are regulated at the state level and differ greatly. There are completely different conditions for each of the claims mentioned here, and these must be shown to be in existence by the respective claimant in order to be successful in court (or at pretrial hearings). Because of these differences from state to state, the American Law Institute, an association of the most influential scholars in the field of jurisprudence, has dealt with the subject of torts in several publications. The publications, known as restatements, are academic recommendations to the courts regarding how and by what criteria such cases should be handled. Most relevant to our topic, is the Third Restatement of Torts, where, in the second section on Product Liability, product liability claims are broken down into three major categories: Claims due to >> (a) manufacturing defect(s), >> (a) design defect(s), >> a failure to warn (also known as a marketing defect). A definition is also given here of what characterizes a product as defectively designed. Restatement (Third) of Torts: Products Liability, Section 2, subdivision (b):

A product is defective in design when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design … and the omission of the alternative design renders the product not reasonably safe.

210

We can illustrate this using another example from the realm of communication design. While working on a job, you unintentionally use a computer file that’s infected with a virus. As a result of this virus, your client’s computer system is put out of commission for several days and substantial financial losses are incurred. The bad news for you is that, in principle, you’re liable for this because it’s one of your contractual obligations not to contaminate your client’s computer with viruses. But there is some good news – your liability isn’t absolute. Whenever legal professionals use the words in principle it means, in plain English that there are exceptions. In the example above, one could possibly argue that your client should also have taken reasonable precautions to protect themselves against computer viruses. Incidentally, this is the Cheapest Cost Avoider argument from Chapter 11. This reasoning isn’t entirely watertight however, since at a much lower cost you could have installed a virus scanner, which quite possibly makes you the real Cheapest Cost Avoider. True, there’s still the question of what concrete damage was actually caused by this breach of contract. In the case of a virus this probably isn’t so difficult to prove, and in this particular example, it looks pretty bad for you with regard to liability. Incidentally, there’s also little hope of reprieve for you if you used a subcontractor or your employees were responsible for the damage. In these cases, while it’s true that the individual(s) concerned is/are liable, you’re also completely liable for them as well! But is all of this grounds for throwing in the towel of entrepreneurship? Remember your autonomy and independence! The good news is that there are two solutions to this problem. First, in so far as is possible, you can limit your liability through the contract. Not surprisingly, the official term for this is called limited liability. If you clearly and openly agree on such limitations with your contract partner then you can limit, or sometimes even eliminate, the matter of liability altogether. If you’ve ever spent any time reading through Terms and Conditions, you may have noticed this is often done very extensively. It may sound a bit tongue-in-cheek, but, as explained in Chapter 14, the existence of T&Cs for the most part is due to companies’ fear of liability risks. If you’re self-employed, you’re also a company of course, so there’s no reason why you can’t do this too in your own standard contract or T&Cs.

Contractual liability exclusion

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Please take note that even limited liability agreements have their limits. As these differ greatly between legal systems, it’s strongly recommended to seek the advice of a lawyer in such matters. Contractual limitation of liability is, however, not exactly the most dazzling instrument of business development. Imagine yourself first having to clarify to your potential client the significant risks involved in a project, only to then inform them that, for those same reasons, you want to arrange extensive liability exclusion. You can just picture the enthusiasm that will be written across your potential client’s face. Liability insurance

15.4 Typical liability risks for designers

As mentioned, there is yet another solution. You can take out a liability insurance. Here, you may again recall Chapter 11 and recognize that we’re in the realm of the Cheapest Insurer now. In these kinds of third-party liability claims, the contractor, you in this case, is always the Cheapest Insurer, since the client can only absorb the risk with other kinds of insurance that are usually much more expensive, for example a business interruption insurance. Taking out business liability insurance is not only a means to sleep more peacefully, but it also expands your client acquisition opportunities since it gives you more room to maneuver on the question of liability in your contract negotiations. The fact that liability risks can indeed be a threat to designers should also be considered within the context of two global trends in the field of liability: >> The issue of consumer protection is becoming more and more important, meaning that there are more detailed regulations motivated by this trend and not just in the EU. >> As a result of this, the victim of a liability case is increasingly in a stronger legal position. This can be observed not only in the higher claims for damages (and the sums awarded), but also in the ever-tougher requirements, especially for product manufacturers (strict liability). A designer has the greatest threat of liability risks in three key areas:

Product liability

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Product liability is the number one area of liability risk for designers, and it mainly comes down to material defects in a product. This naturally also encompasses defective design. While the manufacturer

of the product is usually liable for material defects, they may come back to you as the designer if your design caused the material defect. Even if you only create the designs for a manufacturer, you might be liable to third parties, although not necesarily in terms of ­product liability. Under certain circumstances, the manufacturer, as your contractor, then can file a claim against you for a defective design. If you sell products yourself, it may also be that product liability directly falls on you. The following real-life example demonstrates how this might work. A fashion designer used a certain denim fabric for jeans that she sold herself. A few months after buying them, a purchaser got in touch with her, because they had left a blue mark on a friend’s white sofa, which was caused by the bleeding of the denim. In principle, the fashion designer was obliged to pay damages to the sofa’s owners, due to product liability. However, the good news for her was that the German Product Liability Act requires the injured party to pay damages up to 500 Euros in cases of property damage. Since the piece of furniture in question was a Klippan sofa from Ikea, the designer was spared all expenses. However, if it had been a more expensive sofa or if it had happened in another country where there was no minimum limit, she wouldn’t have been able to avoid paying for the damages. Such cases are, however, usually covered by a business liability insurance. So if you take out such insurance, make sure that product liability damages aren’t exempt. And if, during the earlier example of the computer virus, you thought to yourself that you’re lucky to be a fashion designer with your own small operation rather than a communication designer, you’ll unfortunately have to concede that you aren’t immune to liability-related problems either. The increasing strain on the environment means that here, too, ­liability risks are on the rise. However, for all intents and purposes, liability for environmental damage is not a consideration for designers as it’s the operation, not the design itself, which is tied to a hazardous facility. Here, the term facility predominantly applies to industrial production plants. Small-scale equipment, such as computers, sewing and knitting machines, don’t usually fall into this category. At most, combustion heaters could be considered dangerous equipment. However, what’s excluded under this category of environmental liability may still be a danger in terms of product liability. In this realm as well, the growing trend is for a tightening of liability.

Environmental ­liability

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Children’s toys

In summary

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Thanks to an abundance of scandals over the use of hazardous substances in children’s toys, it can be predicted that in the foreseeable future there will be more stringent regulations in this area. What’s more, a further category of nonculpable liability can be expected alongside this. Although at the time of writing the introduction of such regulations isn’t immediately foreseeable, it’s strongly recommended that if you work in this field you review these regulations (or have them reviewed for you). >> Liability is nothing more than a legal obligation, thus the flip side of a legal entitlement. >> The most important obligation on the part of both contract ­partners is to provide their services free of material defects. >> If you know how to use it, liability can be a systematic and ­manageable approach to regulating your contracts. >> As a designer, your foremost concerns should deal with the f­ ollowing: To what extent and for what risks do you have to take responsibility? What steps can be taken to avoid such risks? >> If you clearly and openly agree on limited liability provisions with your contract partner then you can limit, or sometimes even eliminate, the matter of liability altogether. >> Business liability insurance can be an effective tool for your piece of mind and in expanding your client acquisition opportunities since it gives you more room to maneuver on the question of liability in your contract negotiations.

16

International business ­transactions

In the course of reading this book, the question of what you need to consider when preparing contracts with international business partners has quite probably crossed your mind. You’ll be happy to hear that there are a number of relatively simple principles that will help with contracts around the world. These principles are explained in the following pages.

Let’s start by imagining you’re a designer in country A and you enter into a design contract with a partner who’s sitting in country B. First of all, you should know that all the principles discussed in the previous chapters regarding structuring the contract’s content also apply here. Therefore, you should, as before, concern yourself with the general balance of the contract, describing your services and payment as accurately as possible. You may also wish to include some of what you learned in the chapters on Terms and Conditions and liability. Once you’ve taken care of this, then you’ve pretty much done almost everything correctly, even in international terms. However, there can, of course, also be disagreements and even disputes over international contracts. Such matters then raise the question of whether the courts in country A or country B have jurisdiction. Once this question has been resolved, the next one arises, namely: according to which legal system – that of country A or country B – should the court adjudicate? If you didn’t specify anything in your contract regarding these two questions, the answers are determined by more or less similar legal regulations within the national laws, which in turn are based on international treaties. All of this is in fact highly complex in legal terms, however the outcome is relatively simple. That’s why we’ll spare you the academic explanations on the legal particularities here, and simply brief you on the practical consequences of this extremely complicated machinery.

16.1 The basics

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International ­jurisdiction

Applicable law

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The first question regarding which court is responsible for ­rulings in disputes arising from your contract is about identifying what’s known as the international jurisdiction. Example: The South African national residing in Germany, Ms. Mbeki, can take the Brazilian national, Mr. Cunhal, who lives in France, to court in France. In these cases, there’s no international coordination of the national regulations. Meaning that, in the event of a lawsuit, each of the parties can, in principle, decide according to their national law where they’ll take the other party to court. Ms. Mbeki, a South African national residing in Germany, wants to sue the Brazilian citizen, Mr. Cunhal, who, let’s say, has moved back to his native Brazil. If there were a provision in Germany stipulating that one could only file suit in the country of domicile of the defendant and a rule in Brazil stipulating that one could only file suit in the country of domicile of the plaintiff, there would be virtually no way for Ms. Mbeki to take Mr. Cunhal to court. Only if there were a provision in both countries that the defendant could be taken to court in their country of domicile, could Ms. Mbeki then take Mr. Cunhal to court in Brazil. In general, the national legal systems solve such problems in a multitiered decision-making process, so that, at the end of the day legal protection is established, however sometimes with quite surprising results. The matter is somewhat more straightforward when it comes to determining according to which legal system the court (that has finally been established) must adjudicate. This is dealt with in the United Nations Convention on Contracts for the International Sale of Goods, from April 11, 1980 (colloquially known as CISG, UN trade law or the Vienna Convention), which presents an independent law of obligations system, which now applies in most countries. So there is, so to speak, an international contract law in place dealing with the sale of goods. Even if legal professionals often find specifics of the CISG disadvantageous in comparison to their respective national laws, it can be broadly stated that there’s a kind of global harmonization in this area. In general, it would be a great contribution to legal stability worldwide, if national legal systems and lawyers defending them were to give harmonization of laws precedence over the protection offered by potentially more advantageous national regulations. Unfortunately, most lawyers don’t see their job as being so much about solving problems, rather, primarily, about the pursuit of par-

ticular interests and positions, which sometimes makes them more part of the problem rather than the solution. With regard to applicable law, there’s only a more or less harmonized standard dealing with the purchase or sale of goods. If it’s about anything else, for example design services, then the respective national rules apply. In the EU, it’s usually the legal system of the contract party providing the service defined in the contract. In design contracts, this is naturally the designer’s service. Thus, one can assume with some certainty that in the case of contracts concluded by designers based in the EU, the legal system of the country where they have their registered office is applicable. However, this does not hold with 100 percent certainty. By now you know that just finding an answer to the two simple ­questions of what the jurisdiction and applicable law would be, in the event of a dispute over an international contract, is quite difficult in the absence of relevant provisions in the contract, and not entirely free of surprises, even with the assistance of legal professionals. However, a two-part rule can be derived from this, which should e­ nable you to protect yourself against these kinds of difficulties and surprises: 1. Always establish which courts will be responsible for a ruling in the event of disputes relating to the contract. It’s recommended that this be the court(s) that would normally be responsible in one of the two countries in which the parties have their registered offices. 2. Then establish which legal system is to be used for questions regarding the contract’s content, what’s known as the choice of law. In doing so, it’s advisable to choose the legal system of one of the countries in which one of the parties has its registered office. If you choose a different legal system without a good reason, this designation may be considered invalid. Incidentally, you can also apply these two important stipulations in your standard contracts or Terms and Conditions. For more information on this, see Chapter 17. In all countries, however, your determination of jurisdiction and choice of law is subject to binding provisions. In EU Member States, for example, these might be the provisions for protection of consumers. If a consumer based in the EU orders goods via the Internet, then the court and legal system of the country in which that consumer is domiciled apply. This cannot be specified otherwise via Terms and Conditions.

16.2 Defining the international jurisdiction and appli­cable law in your contract

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16.3 Is arbitration the solution?

In summary

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It’s frequently suggested in legal literature that problems related to international jurisdiction and choice of law be solved through arbitration. Arbitrary courts are either permanent or may be appointed by the contracting parties. The appointed courts may offer the advantage of a greater familiarity with the subject ­matter. If recourse is not made to a permanent arbitrary court, however, ­certain problems may arise. For example, appointment of the arbitrator might be an issue right off the bat if the parties are unable to agree on this. Another problem can be that the ways in which the national legal systems deal with the rulings of arbitrary courts differ greatly. German courts, for example, are very hesitant about enforcing arbitration rulings. The assignment of an arbitrary court only makes sense, therefore, if there are exceptional circumstances, such as when parties can’t agree on jurisdiction or choice of law, there’s a threat of high costs or there’s a danger that the national courts will take an inor­ dinately long time to carry out legal proceedings. Lower expenses are not usually a good argument for settling in an arbitrary court since the arbitrators are often paid fees along the same lines as lawyers and it’s advisable to have legal assistance for these proceedings, as well. >> In international business transactions, your greatest concern, as a designer, should still reflect the general balance of the ­contract, including describing your services and payment as accurately as possible. >> Always establish which courts will be responsible for a ruling in the event of disputes relating to the contract (international jurisdiction). >> Also establish which legal system is to be used for questions regarding the contract’s content, what’s known as the choice of law. >> Choosing to settle through an arbitrary court really only makes sense under exceptional circumstances, for instance if parties can’t agree on jurisdiction or choice of law, there’s a threat of high costs or there’s a danger that the national courts will take an inordinately long time to carry out legal proceedings.

17

Anatomy of a design contract

The design contract analyzed in the following pages is a standard contract between a designer and a manufacturer, covering licensing, manufacturing and distribution of a product via the manufacturer in accordance with New York state laws. This draft contract was supplied by a (U.S.-based) manufacturer and from the point of view of the designer concerned really wasn’t so bad. There were only a few places where further negotiations in the designer’s interest were necessary, and these negotiations went smoothly. For these reasons, the manufacturer’s draft is reproduced here in its original version, accompanied by commentary on possible alternatives and essential negotiation issues, from the designer’s perspective. Please note that this contract is, therefore, not a sample contract. There may be sections which in your case are unnecessary, or even inappropriate, while, on the other hand, other important elements, may be missing (as was indeed the case here). Even if the bulk of the contract appears boilerplate to you, the decision as to whether these are boilerplate clauses in your particular case – i.e. whether they’re necessary or dispensable – and/or whether an individualized solution is required to meet your needs, should only be made in consultation with a specialist. For this reason, obtaining advice specific to your circumstances and having a contract drafted to your individual needs by a lawyer specializing in design are strongly recommended. This Design Agreement (License, Manufacturing, and Distribution) (the Agreement) is entered into as of the effective date set forth on the signature page below, between _____, a New York Corporation (the Manufacturer) and _____ (Designer). IN CONSIDERATION OF THE MUTUAL PROMISES set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows:

Design Agreement (License, ­Manu­facturing, and ­Distribution)

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17.1 Purpose

>> 1.1  The Manufacturer hereby undertakes to license from Designer the design (hereafter, the Design) for a heart-shaped bottle opener, which shall then be manufactured, distributed, and sold by the Manufacturer pursuant to the terms and conditions set forth below. This section explains what the contract is about. In this case, the designer has been contracted to create a heart-shaped bottle opener. The more precisely this is set out in advance, the better. In cases with very complicated designs or when there are a ­number of designs being licensed, reference is often made to an appendix, where the designs are specified in more detail.

17.2 License

>> 2.1  Designer hereby grants to Manufacturer for the term of this agreement the exclusive right to manufacture and market product based on the Design. Designer retains all product licensing rights not specifically granted in this agreement. This is the very essence of the contract, the granting of usage rights (licensing) to the manufacturer. In this contract, these rights are exclusive, meaning under the license, the manufacturer alone is entitled to use the design. Exclusive also means that even the designer can no longer use the design. An exclusive license is the second most extensive concession of rights (after the complete sale of rights, which is only possible in some countries). It is a kind of rent. A nonexclusive license is not quite as extensive. Here the designer retains the right to license the design to other manufacturers as well. The second sentence of this clause should also be noted. It prevents the manufacturer from obtaining more than exclusive licensing rights, specifically the rights to precursors of or variations on the ultimately licensed design. >> 2.2  Manufacturer shall also have the right to grant sublicensing to third parties for contract manufacturing and worldwide distribution purposes. Third parties shall be bound by the same terms as the Manufacturer. This clause is logical in an exclusive license, however it’s not regulated in this way in some legal systems, i.e. it’s not auto­matically understood that an exclusive licensee may grant sub-licenses to others. That’s why it’s important to regulate this ­explicitly. But merely permitting the granting of sublicenses would be a great risk for a

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designer if, according to the provisions dealing with the royalties, they were only entitled to a share of the manufacturer’s revenues and not to any share of the revenues from sublicensing. It would supply the manufacturer with a simple way to cut corners on royalties. Therefore, the second sentence is extremely important for designers. From the designer’s perspective, it would be even better to make the issuing of sublicenses subject to their consent. This way, they could keep a close eye on the manufacturer’s potential sublicensees. >> 2.3  Manufacturer shall not manufacture, market, sell or distribute any products which are confusingly or substantially similar to the Licensed Product. This, too, is an important clause for the designer, as even in countries with specific design rights a manufacturer may undermine the secured license and dodge the payment of royalties via the above means. This is coupled with the convenient side effect that, as owner of the exclusive license, they don’t even have to produce the licensed design in the first place (see commentary on Clause 3). >> 2.4  With the exception of the rights being granted in this agreement, all other rights relating to the Licensed Product are expressly reserved by Designer. This isn’t an extraordinarily important clause because it is actually self-evident (from the second sentence of Clause 2.1 as well as from legal regulations in most countries). But an explicit provision is always better than relying on laws or courts. >> 3.1  This Agreement shall be effective as of the date of execution by both parties and shall extend for the sale of the products in stock or on order or for a period of two (2) years from the date of execution, whichever is longer. >> 3.2  On the condition that the Manufacturer is not in default of any term or condition of this Agreement the Manufacturer may renew this License for two (2) additional two (2) year terms by written notice to the Designer given ninety (90) days prior to the end of the term hereof.

17.3 Term

Clause 3 is the great alternative. It is good for the designer because determination of this automatically spurs the manufacturer’s interest in the quickest possible usage of the license by beginning to 221

produce and sell as soon as possible. Alternatively, the designer can grant the manufacturer the license for a very long time (usually the term of longest statutory IP protection). While this, at first glance, may appear more congenial, even from the point of view of the designer, it may turn out to be a nasty trap. If the manufacturer retains the rights but not the obligation to utilize the license, they can simply leave the license sitting in a drawer. This way, some unwelcome designs competing with the manufacturer’s own products have been rendered permanently harmless. Thus, in a longterm license, an obligation for the manufacturer to produce and market the design must absolutely be included. Even then, the manufacturer could still reduce the sales (and thus royalties) via poor marketing (like bad timing, insufficient advertising) but, doing so, would also harm themselves. It only happens infrequently, but if you want to rest assured, see to it. 17.4. Compensation

This contract takes a middle path between the two, fundamentally opposing, possibilities for a license fee, buyouts, and royalties. However, the other service elements, designing and consulting, are not paid for. Therefore, this draft contract can only be categorized as mediocre for the designer (for more details, see Chapter 13). >> 4.1  In consideration for the licenses granted here, Manufacturer agrees to pay Designer a nonrefundable royalty of 7.5 percent of the Manufacturer’s net sales of the Licensed Product. This is really a very good royalty! Compare it with the standard amounts referenced in Chapter 13. The important thing here is use of manufacturer’s net sales as the licensing basis. It’s so important that manufacturer’s net sales are even precisely defined in Clause 4.6 as generally accepted, because it’s easy to verify. The profit, on the other hand, can be manipulated with various costs, making it just as inappropriate to use as a licensing basis, as something like the manufacturing costs would be. >> 4.2  Manufacturer agrees to pay Designer an advance against royalties of $ 1,000 to be paid upon the effective date of this agreement. The advance shall be deducted from the first $ 1,000 of royalties accrued. In contrast, this is a relatively small advance, which will even be deducted from royalties. But a higher advance wouldn’t be of any use

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to the designer, because it would be offset anyway. But now, have a look at clause 4.3. >> 4.3  Furthermore Manufacturer guarantees a total royalty for the two-year term of the agreement of at least $ 2,000. If royalties accrued during the term do not exceed $ 2,000, Manufacturer shall pay Designer a supplementary royalty payment equal to $ 2,000 less the total accrued royalties. This clause lays the entire fee arrangement on the table: the designer receives a relatively low, deductible advance (clause 4.2), combined with a very high royalty (clause 4.1), which is, however, at least guaranteed on the basis of the advance per annum (clause 4.3). It’s fair, but not amazing, in spite of what appears at first glance to be a very high royalty percentage. In the event of receiving such a draft contract from a manufacturer, a lawyer ­representing the designer would try to get the manufacturer’s profit and loss statements or other informations about the manufacturer’s proficiency in the market. Without these information, negotiating this point would remain wooly. >> 4.4  The Royalty owed Designer shall be calculated on a quarterly calendar basis (the Royalty Period) and shall be payable no later than fifteen (15) days after the end of the preceding full calendar quarter, except that the first calendar quarter may be short depending on the effective date of this Agreement. Billing periods and payment deadlines are crucial. In this case, the billing period on a quarterly calendar basis is standard, while the billing and payment deadline of within 15 days after the end of the quarter is very short. Up to one month is standard and quite acceptable, if the manufacturer adheres to the deadlines. >> 4.5  For each Royalty Period, Manufacturer shall provide Designer with a written royalty statement. Such royalty statement shall be certified as accurate by a duly authorized officer of the Manufacturer. The report will state the period covered, the item number, name, units sold, sales value, return values, net sales, and royalty amount. The statement shall be furnished to the Designer regardless of whether any of the Licensed Products were sold during the Royalty Period or whether any actual Royalty is owed. 223

This might seem trivial, but you can’t imagine what masquerading goes on in practice. Because it helps avoiding long discussions and possible frustrations, this clause is extremely important! >> 4.6  Net Sales is defined as Manufacturer’s gross sales (the gross invoice amount billed customers) of the Licensed Product, less discounts and allowances actually shown on the invoice, less returns and refused shipments. No costs incurred in the manufacturing, selling, advertising, and distribution of the Licensed Product shall be deducted nor shall any deduction be allowed for any uncollectible accounts or allowances. The precise definition of net sales in this clause is a good thing as, it is the basis of the royalty computation (see clause 4.1). But it’s not so good that potential revenues from sublicensing are not included in this clause. Hence, it’s essential from the designer’s perspective, to insert a simple sentence here: Net sales by sublicensees of Manufacturer shall be deemed net sales of Manufacturer (see clause 2.2). >> 4.7  In the event the Licensed Product is sold in a currency other than United States dollars, Net Sales with respect to such sales shall be computed on the basis of a publicly documented currency conversion rate the same as that used by Manufacturer in the preparation of its financial statements. While boilerplate, this is important in a globalized economy. >> 4.8  Royalties shall accrue when the Licensed Product is invoiced regardless of the time required to collect funds from the customer. Another small clause that’s important, for the sake of clarity. >> 4.9  All payments due Designer shall be made in United States currency, unless otherwise specified by Designer. This clause is easily overlooked, and yet it’s important if the designer is based in a country other than the United States. The conversion is then dependent on the respective foreign exchange rates and this may very well turn out to be to the Designer’s disadvantage. Therefore, it’s better that the actual payment be made in the designer’s own currency, so that the risk of currency conversion is not transferred to the designer. 224

It may be that all the provisions in Section 5 aren’t interesting, perhaps even seem irrelevant to you. Wrong! They’re fundamental because a contract isn’t drawn up just for the periods of sunshine between the parties, but also for times of suspicion and differences of opinion. Imagine you doubt your manufacturer’s payment practices or accounting: what would you do without this section? Yes: go to your lawyer, of course. But even they’ll be much happier if this clause exists!

17.5 Record inspection and audit

>> 5.1  Manufacturer shall prepare and maintain accurate accounting records to fulfil Manufacturer’s specific obligations under this Agreement. Designer shall have a right, upon reasonable notice, to inspect Manufacturer’s records with respect to the Licensed Product. >> 5.2  In the event that any inspection by Designer reveals an underpayment by Manufacturer of actual Royalty owed Designer, Manufacturer shall pay the difference, plus interest calculated at the rate of one percent (1 %) per month. >> 5.3  Manufacturer agrees to retain accounting records in regard to Licensed Product for a period of at least three (3) years after the end of this Agreement. >> 6.1  Designer warrants that he/she has the right and power to grant the licenses granted herein and that there are no other agreements with any other party in conflict with such grant. Designer further warrants that he/she has no actual knowledge that the Design submitted to Manufacturer infringes any valid rights of any third party.

17.6 Warranties, ­acknowl­edgements, and obligations

Many designers are irked by this clause. Is it because they have reservations about being responsible for their own actions? In any case, this clause is really a matter of course, because what else is the manufacturer paying the designer for? The designer must be owner of the licensed rights. And must not have already closed other contracts for these rights. And must not have copied the design from somewhere else. Therefore, this clause is totally fine. However, be cautious with a very similar sounding, but more far-reaching formulation, which lets the designer warrant anything more, like absolutely no infringement. Even with the best of intentions, a designer can’t guarantee this, and any such suggested formulation should be modified into the formulation used above.

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>> 6.2  Designer shall supply Design in such form and style as is usable for stated manufacturing purposes. This should be a matter of course, as defined by the designer’s quality of service, but apparently there have been designers who, at this point, stubbornly insist on their own file formats and want to overburden the client with the costs for conversion to another format or the purchase of new software. There’s no more flattering and more unprofessional way to present yourself! On the other hand, you may define form and style more precisely. >> 6.3  Manufacturer shall be solely responsible for the manufacture, production, sale, and distribution of the Licensed Product and will bear all costs associated therewith. Also a matter of course and therefore, unnecessary. >> 6.4  Manufacturer acknowledges that it has not acquired any ownership rights to the Design and that neither Manufacturer nor any person or entity claiming through Manufacturer shall acquire any such ownership rights by reason of this Agreement. This is another important point for designers, although in Europe, these words would be superfluous, if not incomprehensible. In the U.S., this clause is fundamental. It effectuates a reversion of all rights to the designer upon termination of the contract. Without this clause, one might conclude that the rights should remain with the manufacturer because of their considerable expenditure even after the contract is terminated. >> 6.5  Designer acknowledges Manufacturer’s exclusive right to manufacture, market, and distribute the Licensed Product. This, again, is a matter of course since the wording of the license in clause 2.1 already covers this. On the other hand it certainly doesn’t hurt. >> 6.6  Manufacturer acknowledges that the Design is unique and original to the Designer and that the Designer is the owner thereof. This is, in and of itself, an unnecessary variation on clause 6.1.

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>> 6.7  Designer shall not grant any license for the manufacturing or sale of the Licensed Product made from the Design to any third party during the term of this Agreement. This is, once again, self-evident, because the designer has already granted the exclusive license and therefore, logically, cannot otherwise dispose of the related utilization rights. >> 7.1  The Manufacturer shall provide Designer with 24 sets of production samples of the Licensed Product, free of charges, shipping costs, and taxes as soon as the same become available. Designer pledges the use of these samples for archives, exhibitions and promotion of the project only. Designer shall not make these samples available for sale. In the event that Designer desires additional samples, the Manufacturer agrees to provide such samples to Designer at its manufacturing cost, free of charge except for shipping and taxes, and Designer agrees to use such additional samples for promotional purposes only, and not for resale.

17.7 Samples

The relatively large number of samples is due to the relatively low value of the product (a bottle opener). With more expensive products, it’s common to provide only one sample, free of charge. However, it’s important that the designer may obtain further samples at manufacturing costs. And it’s logic that they mustn’t resell these. >> 8.1  Designer may seek appropriate legal protection for the Design, in his or her own name and at his/her own expense. If Designer chooses to not do so, Manufacturer may at its discretion and sole option make the appropriate registrations in and to the Licensed Product, at Manufacturer’s expense. Copies of all applications shall be submitted for approval to Designer prior to filing. The Manufacturer and Designer agree to cooperate with each other to assist in the filing of said registrations.

17.8 Copyright

This arrangement gives the designer the option to protect their own rights first, which probably seems like a good thing. However, if you consider the potential costs for protecting rights worldwide and the consequences of lack of protection, then suddenly this self-sufficiency takes on a completely different dimension. As an alternative, it’s frequently arranged that the manufacturer take responsibility for the protection of the rights, however they must then transfer these to 227

the designer upon termination of the contract. In this draft, due to the short duration of this contract, this provision is not reasonable for the manufacturer. >> 8.2  Design credit shall be provided by Manufacturer via notice in such form as approved by Designer, to appear on product, packaging, and promotional materials, insofar as manufacturing limitations may allow. This is not as self-evident as it may appear at first glance. Although designers in Europe have the right to be named under copyright law as creators of a work, if copyright doesn’t apply (see Chapter 7 for more details on this), they simply don’t have this right. So in almost all countries this clause is very important, if having their name affiliated with the piece is important to the designer. On the other hand, if the designer doesn’t want their name affiliated, this should, accordingly, be stated otherwise here. 17.9 Termination

>> 9.1  Designer shall have the right to immediately terminate this Agreement by giving written notice to Manufacturer in the event that Manufacturer fails to make any Royalty payment hereunder and such default continues uncured for a period of thirty (30) days after Manufacturer’s receipt of written notice thereof. Designer agrees that any dispute as to the actual amount of Royalty payable shall not trigger Designer’s right of termination. Besides the general entitlement to early termination, this clause regulates the designer’s possibilities in the especially aggravating case of improper or untimely payment of their royalties: a must in every contract! >> 9.2 Either party may terminate this Agreement: a. For the breach of any term or condition of this Agreement provided that the nonbreaching party gives written notice to the other party of such breach and the breaching party fails to cure such breach during the thirty (30)-day period following the receipt of such written notice. b. If the Manufacturer shall fail to manufacture, market, sell or distribute the Licensed Product within one (1) year from the date of the execution of this Agreement. c. If the Manufacturer ceases to manufacture and sell the Licensed Product in commercially reasonable quantities.

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This section deals with general breaches of contract, no matter which party has committed them. Under this contract, in this event, the other party may terminate the contract. Often, payment of liquidated damages is also agreed for breaches of contract (see Chapter 11, section 11.4). >> 10.1  Within ten (10) days of termination of this Agreement, M ­ anufacturer shall provide Designer with a complete schedule of all inventories of the Licensed Product then on-hand (the Inventory). >> 10.2  Upon termination or expiration of this Agreement, ­Manufacturer shall be entitled, for six (6) months on an exclusive basis, and thereafter on a nonexclusive basis, to continue to sell such Inventory. Such sales shall be subject to all the provisions of this Agreement including the payment of all Royalties.

17.10 Posttermination rights

Clause 10.1 is important because it means the designer knows how much of their product is still in stock when the contract ends. According to clause 10.2, the manufacturer then still has the right to continue selling the product for six more months. Even if it’s a nonexclusive right, meaning the designer could theoretically license their design to another manufacturer during this period, their prospects for doing so are quite slim. On the other hand, if it’s a very popular product, the new manufacturer may find the opportunity to piggyback on the previous manufacturer’s marketing during the transition period very appealing. Whether this provision really meets everyone’s respective needs or not should therefore be very carefully considered. >> 10.3  Except as provided in Section 9.2 above, upon expiration or termination of this Agreement, all rights granted the Manufacturer under this Agreement shall forthwith terminate and immediately revert to Designer. Here we have a clause presumably used without much consideration, because it doesn’t entirely fit to clause 9.2. The reversion of rights should only be excepted in the event of termination as a result of breach of contract by the designer. That’s why it’s important to amend the first sentence as follows: Except in cases of a breach of contract by Designer as provided in Section 9.2 above … >> 11.1  Manufacturer shall have the first right to proceed against any and all infringers of the manufacturers, distributors, and

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sellers of the Licensed Product, at Manufacturer’s expense. Designer agrees to cooperate in any necessary manner in any such action undertaken. Any recovery of damages or settlement monies obtained by Manufacturer due to infringement action shall be the property of and retained by the Manufacturer. Should Manufacturer decide not to proceed against an infringer within ninety (90) days of notification, then Designer shall have the right to proceed against such infringers, at Designer’s expense. Any recovery of damages or settlement monies obtained by Designer shall be the property of and retained by Designer. Yet another game of back-and-forth, not unlike the one in clause 8.1. The manufacturer may proceed against any violator of the rights to the product first, at their own expense, and if they don’t take action, the ball is in the designer’s court. Whoever wins keeps all the proceeds from the trial. This scheme is reminiscent of the eating hierarchy in wolf packs: the wolves help themselves in turn, with the strongest one first in line and the weakest getting whatever’s left. So the strong are more than satiated while the weak sometimes end up hungry. It’s not exactly fair. It’s better to agree that while the hierarchy remains in place when deciding on a course of action, potential trial proceeds, after deducting the respective costs, be split equally between the parties, regardless of who instigated the trial. 17.12 Indemnity

>> 12.1  Manufacturer hereby agrees to indemnify Designer against all costs, expenses, losses, liabilities, damages, penalties and suits, and reasonable attorneys’ fees and expenses incurred or suffered by Designer arising out of any actual or alleged manufacturing defect, failure to warn or instruct, breach of warranty, negligence, strict liability in tort, fraud, or any other product liability legal theory associated with the Licensed Product. With this clause the manufacturer assumes all liability associated with the product and its sale (see Chapter 15). >> 12.2  Designer hereby agrees to indemnify and hold Manufacturer, its officers, directors, agents and employees, harmless against all costs, expense, losses, liabilities, damages, penalties and suits, and reasonable attorney’s fees and expenses incurred or suffered by Manufacturer arising out of any claim that the Licensed Property infringes the patent(s), trademark(s), trade dress, or copyright(s) of any third party.

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One good turn deserves another: in this clause, the designer assumes the risks of any violation of the IP rights of third ­parties. This isn’t totally unproblematic, as the designer only guaranteed in clause 6.1 to not knowingly violate the rights of third parties. It’s therefore advisable to adjust clause 6.1. and/or this clause. The following clauses 13 to 19 are classic boilerplate; however, in most cases they’re necessary. >> 13.1  Any notice required to be given pursuant to this Agreement shall be in writing and mailed by certified or registered mail, return receipt requested, or delivered by a national overnight express service, to the respective address of each party as set forth above.

17.13 Notices

The requirement of the written form makes it easier to verify agreements made by the parties outside the contract. However, if such a clause is agreed, one must really then take care to agree everything in writing, because verbal agreements no longer have any legal weight whatsoever! >> 14.1  This Agreement shall be governed by the laws of New York and all disputes hereunder shall be resolved in the applicable state or federal courts of New York. The parties consent to the jurisdiction of such courts, agree to accept services of process by mail, and waive any jurisdictional or venue defenses otherwise available.

17.14 Jurisdictions and disputes

This clause may seem unremarkable, but it’s extremely important in contracts between nationals of different countries, along with agreement of the reciprocal principle services, sections 2 and 4 of the contract (see Chapter 16). >> 15.1  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their heirs, administrators, successors, and assigns.

17.15 Agreement ­binding on ­successors

This clause ensures that in the event of a transfer of rights from one party to a third party (caused, for example, by the manufacturer’s insolvency or the sale of rights to another company) this party then readily enters into the rights and obligations under this contract. This is also important in the event of a change of designer, because 231

only in this way can their rights and obligations be transferred, collateralized or bequeathed. 17.16 Assignability

>> 16.1  The license granted hereunder may not be assigned by any act of Manufacturer or by operation of the law unless in connection with the transfer of substantially all the assets of the Manufacturer or with the consent of the Designer. In connection with clause 15.1, this clause makes a complete transfer of the manufacturer’s rights and obligations under this contract to a different company subject to the designer’s consent. If the manufacturer were only to transfer a portion of the rights (and obligations), it would be a sublicense (see clauses 2.2 and 4.6), which should also only be possible with the consent of the designer. The complete transfer of all the rights and obligations under all the manufacturer’s contracts (i.e. including from contracts other than yours) is excluded from this requirement for consent. This is to facilitate changes in the manufacturer’s legal status and is harmless for the designer because of clause 15.1.

17.17 Waiver

>> 17.1  No waiver by either party of any default shall be deemed as a waiver of any prior or subsequent default of the same or other provisions of this Agreement. One might come to the conclusion that the whole contract should be contested if one party takes action against a particular clause. This is barred by this clause, unless the party expressly takes action against other clauses or the entire conract.

17.18 Severability

>> 18.1  In the event any provision of this Agreement shall be determined to be invalid, the remainder of this Agreement shall continue in full force and effect. To legal lay people this clause probably seems strange, to say the least. But it’s important. Behind it lies the eventuality that a clause is declared invalid by a court. In this case, the question arises as to whether the parties should hold to the rest of the contract in the knowledge of this invalidity or whether thereupon the rest of the contract then collapses. The clause ensures that the remainder of the contract stays intact in this event, at all costs and even as a ruin.

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>> 19.1  This Agreement constitutes the entire understanding between the parties, and supersedes any prior agreements (whether oral or written) with respect thereto. This Agreement may not be amended except in a writing signed by a duly authorized representative of both parties to this Agreement and failure to enforce any provision of this Agreement by a party shall not constitute a waiver of rights under that provision.

17.19 Integration

This clause bars secondary or previous agreements between the parties, an arrangement which, as can also be said of clause 13.1, is significant in establishing legal clarity in such long-term contractual relationships. IN WITNESS WHEREOF, the parties hereto have executed this Agreement intending to be legally bound as of the effective date set forth below. DESIGNER By: (name on signature) Title: Date: MANUFACTURER By: (name on signature) Title: Date: To summarize: from the designer’s perspective, there’s only a need for further negotiations on clauses 2.2, 4.6, 10.3, 11.1 and 12.2, possibly also on clause 8.1. The text of this contract which, as mentioned, was proposed by the manufacturer, is therefore already pretty favorable for the designer and, if they were to get the suggested improvements through the manufacturer, almost perfect.

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18

The future of intellectual ­property  rights

In the course of reading this book you probably noticed that its authors don’t shy away from criticizing the existing infrastructure for the protection and exploitation of intellectual property. Some of you will find that, via various means, you’re more or less able to cope with or work around the system’s shortcomings, while others of you will feel the system is unbearable. Though it does have to be said that some very promising steps have been taken towards improving the situation in recent years, for example the introduction of design rights in the EU, on the whole, the situation globally is still a long way from being ideal, from the perspective of designers. In closing, we asked ourselves two key questions. Toward what goals should those committed to upholding both the future of design and the livelihood of designers strive? How do we, as professional consultants to the industry, envision a best-case scenario for the regulation of intellectual property on an international level in the years to come?

As Eckart Maise, vitra AG’s head of design management and development, says in his interview for this book: Harmonization and strengthening of the legal foundation for design protection on an international level would be ideal. We couldn’t agree more. Everybody everywhere seems to be talking about globalization. The fear of it and the need for it. But globalization has already been a reality for centuries, the process is merely accelerating. The future isn’t just coming closer, it’s been here for quite some time. It won’t be long until in formerly industrial countries, industry plays hardly any economic role at all. And it’s widely agreed that the creative industries in general, and the design industry as a subcategory of this, as well as an interdisciplinary field in itself, will be of paramount importance in this postindustrial future. Some countries have already drawn the only possible conclusion. Both Denmark and India have put together national design policies with the full understanding that design is at the forefront of almost

18.1 An internationally harmonized legal system

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all other, classic or creative, industries. This means that improved regulations will follow elsewhere as well, but still only on a national level. That said, it’s essential that all of the highly paid politicians and legal professionals finally do what they’re actually paid to do – create straightforward, globally standardized regulations for managing intellectual property as quickly as possible. The fact that, up to now, they haven’t made much time for such policies, is simply because the matter isn’t considered urgent right now. But it’s time for an end to national boondoggle because when the importance of regulations for creativity it becomes clear to everyone and massive economic interests enter the picture, it’ll be that much harder to reach a global agreement. An open competition for the best legal system would perhaps be the right way to approach this if we still had plenty of time to spare. Looking at the current state of design competition among nations, perhaps the most effective right would be a combination of Great Britain’s unregistered design (because it has the longest term of protection for designs, without requiring registration) with Japanese copyright law, (because of its explicit inclusion of industrial design), and Indian trademark law (which has the strictest definition of trademark in terms of limiting it to graphic representation). But where are the national lawmakers to be found that would both accept and understand the thinking behind this streamlining? It should also be said that the fact that the only sound arrangement is a global one, has less to do with the belief in globalization, per se, as with the reality of the situation and legal effectiveness. Ideas and intellectual property can only be regulated globally – if they’re going to be regulated at all. Only in this way will competition be generated for that which is at stake here, ideas and their increasingly effective implementation. This will put an end to sneaky profit making that thrives on exploiting of the differences and gaps in national legal systems. And there’s yet another facet to this. Justice often looks very different from case to case. What’s the right concept of justice on a worldwide level? Here’s a citation from the winner of the 1998 Nobel Prize in Economics, the Indian economist, Amartya Sen, which shows just how difficult this can be to determine. Amartya Sen: The Idea of Justice, 2009, p. 12:

At the heart of the particular problem of a unique resolution of the perfectly just society is the possible sustainability of plural and 236

competing reasons for justice, all of which have claims to impartiality and which nevertheless differ from – and rival each other. Let me illustrate the problem with an example in which you have to decide which of three children – Anne, Bob, and Carla – should get a flute about which they are quarreling. Anne claims the flute on the ground that she is the only one of the three who knows how to play it (the others do not deny this), and that it would be quite unjust to deny the flute to the only one who can actually play it. If that is all you knew, the case for giving the flute to the first child would be strong. In the alternative scenario, it is Bob who speaks up, and defends his case for having the flute by pointing out that he is the only one among the three who is so poor that he has no toys of his own. The flute would give him something to play with (the other two concede that they are richer and well supplied with engaging amenities). If you had heard only Bob and none of the others, the case for giving it to him would be strong. In another alternative scenario, it is Carla who speaks up and points out that she has been working diligently for many months to make the flute with her own labor (the others confirm this), and just when she had finished her work, “just then” she complains, “these expropriators came along to try to grab the flute away from me”. If Carla’s statement is all you had heard, you might be inclined to give the flute to her in recognition of her understandable claim to something she has made herself.

But what if you heard all three arguments? Depending on whether you’re a utilitarian, economic egalitarian, or no-nonsense libertarian, each of the individuals could be perceived as being in the right. Extending this example beyond the pages of the book, the journey toward one, just solution worldwide, is either hopeless, or, at the very least, looks like an extremely long road. It’s yet another argument for not getting caught up in the advantages and disadvantages of the different national solutions, rather to put your energies into striving to create a uniform acceptable provision that unites the different modes of thought, beliefs, and legal systems. The content of this global policy should be based on a uniform intellectual property right for all forms of intellectual property. There’s simply no rational explanation for why most elaborate inventions must first go through a complicated process of patenting, only to then enter the public domain after 15 or 20 years, while the writer of

18.2 A uniform IP right for all forms of i­ntellectual property

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banal lyrics can feed their descendents for up to 70 years after their death. Away with copyrights, patents, design rights, trademarks, etc.! Let’s bring on the uniform IP right for all tangible products of intellectual-creative activity, with a realistic protection period of perhaps 25 years after market introduction on the basis of a registration. To this end, an automatic design right, which has a limited protection term of five years after market introduction, should be granted without registration as is already the case in the EU and Britain. However, registration of this right should still be possible throughout the entire five years. The first public presentation would also create an entitlement that protects against verifiable imitation, and registration would turn the legal protection into complete protection, in other words, a limited-time monopoly. A uniform IP rights system that works independently of historical roots, artistic or economic motives, or political constellations is needed. The conditions for obtaining this right should be: >> an in some way concrete work, in physical or computer file ­format; >> the intended or actual commercial use of this work. The reason for the second point is that, ultimately, even in discussions about the most sublime cultural assets, it only ever boils down to the advantage to those participants involved in the discussion – and this is, at its core, economic. Therefore protection is only necessary for something with a commercial value. The very limited period of protection might scare you at first glance, but there’s no company that won’t have achieved return on their investment in the development and market entry of a product much earlier. And there’s also no creative to whom anyone owes the favor of feeding their unproductive descendants through such rights. The principle of efficiency suggests granting of a protection period that is, across the board, much shorter than a copyright, and based solely on the date of first disclosure. Such an IP right should also protect against plagiarism, inspiration, or resemblance. At the same time, there should be a possibility of accumulating intellectual property rights with the most efficient marketer and exploiter, even in the case of collaborations (and these don’t even necessarily have to be creative). In most cases, this party would take the form of the manufacturer and marketer of a product, 238

who, in return for their gathering of rights would be the central point of contact for the respective creatives. These representatives would only be authorized to act on behalf of creatives on the basis of adequate compensation for creatives’ works. Oversight of registration of the uniform IP right, as well as ­monitoring of compliance, might be entrusted to a network of internationally coordinated, national authorities. If the global community maintained fairness in competition for the creative industries’ essential goods in the first place, and this fairness were more effectively controlled by a government agency, it wouldn’t be absolutely necessary for individual creatives to take their IP-related legal m ­ atters into their own hands. On the other hand, any use should be unlimited and free as long as it is exclusively for personal use, i.e. there’s no intent for commercial gain. There should only be limits to using intellectual property rights in connection with unauthorized commercial use, but not, when it’s being used as a lever to any legitimate commercial interest. The kids should be able to remix music as long as they are making music for fun. Only in this respect, can critics of the current system who argue that regulating intellectual property impedes innovation (for example, Lawrence Lessig, Danny Quah, and others) be considered to be in the right. A complete abolition of copyright would lead to a freefor-all, which would only favor those market participants already equipped with stronger economic resources. This can be seen in the discrepancies between the situations for founders of fashion labels in the United States and in Europe, also described earlier in the book. In Europe, there’s real opportunity to set up one’s own venture, even with limited resources, while in the U.S., market entry is only possible with considerable financial resources. This again illuminates the need to continue to ensure that the boundaries are drawn through provisions on an international level. It really comes down to problems of distribution and entitlements, as Amartya Sen demonstrates them in his famous book Poverty and Famines – An Essay on Entitlement and Deprivation. In this book, Sen’s not talking about the origins of famine, rather about a spiritual poverty brought on by a malfunction of the market due to an incorrectly adjusted legal-economic system that should be eliminated. This way kids everywhere can keep on downloading and remixing tracks.

18.3 Protecting solely against ­commercial usage

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18.4 Employment of ­modern information technologies

In summary

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The developments in information technology, in particular the Internet, offer an entirely new way of paying for the use of creative services, for example by setting a relatively low, flat rate fee per usage, for the use of all available intellectual property goods. In this way, a realm for usage of intellectual property could be created globally, which would be much more useful to the individual creative than desperately trying to prevent use of their own intellectual property by various means. Alexander Bretz, Arian Hassani, Joachim Kobuss: In the future, we hope to be able to present these first – still only very superficially and roughly outlined – ideas more simply and from an even more global perspective. It’s our professional mission to help shape the future of design and the design industry by making the needs of designers in all fields heard in current and future debates over intellectual property rights worldwide. You’ll find more on this subject on the Web site: www.unternehmen-design.de (in both English and German). >> There is growing global consensus that the creative industries in general, and the design industry as a subcategory of this, will play an important role in the postindustrial era. >> Policymakers and legal professionals have an important task at hand – to create straightforward, globally standardized regulations for managing intellectual property as quickly as possible. >> The time to act is now. If we wait until massive economic interests enter the picture, it will be much more difficult to reach a global agreement.

Introduction Interviewer Protecting and managing design rights internationally is a day-to-day reality. To this end, we asked designers, managers, and a legal expert how they tackle these matters and about the experiences they’ve had in their fields. Brand and communication designer Anja Engelke explains why clients are so very often impressed by already existing communication designs – and how this sometimes leads to disappointment all around. You’ll find her interview on page 245

Anja Engelke

The designers behind German top fashion label kaviar gauche, A ­ lexandra Fischer-Roehler and Johanna Kühl, stress the difference between written law (both in codes and contracts) and its enforcement. You’ll find their interview on page 249

Alexandra

Karsten Henze, Head of CD/CI and Creation at Deutsche Bahn Mobility Logistics AG (German Rail), talks about the multifaceted role of a designer at one of Germany’s biggest companies. You’ll find his interview on page 251

Karsten Henze

Award-winning communication designer Fons Hickmann speaks about the disturbing experience of discovering his own designs under new authorship and his dream that the terms “design” and “designer” reclaim their original meaning and value. You’ll find his interview on page 253

Fons Hickmann

When confronted with certain clients, Paris-based international ­furniture designer Arik Levy sometimes gets epidemic feelings: these lead him to demand written contracts. You’ll find his interview on page 255

Fischer-Roehler, Johanna Kühl

Arik Levy

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Eckart Maise

Eckart Maise coordinates the design policies of Vitra AG, Basel (the company that produces Charles and Ray Eames’ and George Nelson’s furniture designs); as well promoting the international coordination of IP rights for designers. You’ll find his interview on page 257

Justus Oehler

Berlin-based communication designer, Justus Oehler, explains the particular problems in everyday practice that occur in his design field. You’ll find his interview on page 259

Sabine Zentek

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Sabine Zentek, one of Germany’s most renowned lawyers in the design field, delves into the topic of what could be improved for designers, legally speaking. You’ll find her interview on page 261

Anja Engelke is owner and founder of aenorm, an agency for corporate design and communication in Cologne. She’s achieved recognition for her cross-disciplinary approach to web, print, interior, exhibition, and film media.

Interview with Anja Engelke, Cologne

What’s your relationship to intellectual property rights for designers including copyright laws, trademark, design patents (or design rights)? In my first years working as a designer, I worked on an edition of intentional homages. As the employee responsible for the packaging design of various cosmetic products, the rule was: no matter what the form and visual design look like in the end, the packaging must be blue, more precisely: Pantone 072, the same shade as the famous cream, i.e. Nivea, one of Germany’s biggest brands! We didn’t want to compete with the cream in any way, we wanted to use a color that radiates trust and quality and – admittedly – to explore the boundaries of trademark law. We certainly succeeded in the latter: there was promptly a dispute. However, that didn’t stop us from continuing to use the color and then waiting with bated breath to see if we’d get the assignment to resume the work after market launch. This story remains a vivid example for me of the fine line between a source of inspiration and a plagiarism. Today, as a designer who flits around advising in the periphery of business strategy, product positioning, corporate design, and corporate communication, I recognize that it’s actually not all that straightforward – or at least it shouldn’t be. Often clients reference a product in a briefing, whose image or target audience is put forth as an excellent model. But just the attempt to project their idea onto a new product falls apart due to the complex interplay and individual agendas that every client has. My clients’ personal relationship to their products or services, the stories and personalities behind it, make it impossible to simply a make a copy of existing solutions. From your point of view how important is it to draw up written ­contracts? Do they play a large role in your business? In my first years of self-employment, I had experiences with big agencies, as well as with my first clients, which very quickly demonstrated to me the enormous value of clear contracts. True, it may be a nice compliment when illustrations and the layout concept from one of my brochures are suddenly used for web pages and other means of communication, but if it’s done without permission – and without payment of a separate fee, it’s exasperating. Good contracts 245

help to avoid such misunderstandings in advance and, if it’s already happened, to at least get appropriate compensation. How would you rate the possibilities to defend oneself against plagiarism and other unlawful usages? In the above-mentioned example, it was easy to claim the additional usage fees with legal support. To date, I’ve had very positive experiences with engaging lawyers. I have the impression that many designers don’t think about their intellectual property rights and enforce them where necessary. I was always reinforced legally in this and thus had success. In the medium and long term, a trusting relationship with clients is really the only way. This requires mutual understanding and shared values. To this end, written contracts, clear general business terms and conditions and usage rights, tailored to the client, can be extremely useful. I frequently encounter uncertainty on the client’s side when it comes down to dealing with design as a service, to prevent this, it’s better to start out by clarifying things and getting to know one another. It’s better to have a little more debate and discussion in the beginning than a tornado of misunderstanding in the end. What forms of protection or precautions do you think are important when it comes to designers working with international partners? I haven’t been able to identify any big differences between clients who operate nationally and those solely active in Germany. Design appears to be a relatively global language, in any case. In case of doubt, a very good translator and legal professional with a knowledge of design as well as the client’s sphere of activity certainly can’t do any harm. Imagine you could make a wish. What would be your greatest wish with regard to design protection? I would wish that the value of design and intellectual property rights be self-evident. Naturally, every designer looks around with open eyes, and allows themselves to be inspired worldwide, across all media. It doesn’t matter if the template for ratios, materials, ­surfaces, or stage designs is taken from an opera or an Internet site. My designs are enriched through my observations. What’s important, however, is that inspiration and integration consciously depart from imitation. In times of global, instant access to design, in my field it can’t just be about the design rights to a single design anymore. Corpo246

rate design is a complex conception of designed interconnectivity, which is developed via a long process and constant exchange with the interests and desires of the client. The formal aesthetic can ­perhaps be imitated, but the concept behind the holistic corporate design definitely can’t be. In my opinion, initiating a legal case over copyright and design rights should be a last resort; however, the value of design as an economic factor should clearly be focused on and supported, both in the minds of business people and clients. Design protection should define the value of design.

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Upon completion of their design diplomas in Berlin, Alexandra ­ ischer-Roehler and Johanna Kühl founded the label kaviar gauche. F Today, kaviar gauche is one of the most internationally renowned fashion labels based in Germany.

Interview with ­Alexandra FischerRoehler and Johanna Kühl, Berlin

What’s your relationship to intellectual property rights for designers including copyright laws, trademark, design patents (or design rights)? Well, our lawyer’s really the one who has the relationship. We’re a fashion label, which means that we sell our fashion ourselves. Licensing agreements only play a role in merchandizing and limited or special editions. For us, protecting our brand from imitation is the most important aspect, and we’ve discovered that we have some difficulties with intellectual property rights. On the one hand, we’d like to rely on them, on the other hand, in reality, it’s quite difficult to protect oneself against imitation. There are certain legal cases which we haven’t even bothered to take on, because in the end it would’ve either taken much too long or been much too expensive. Generally designers aren’t well enough informed about the possibilities for protection – and it’s difficult for smaller brands to raise the money for protection. From your point of view how important is it to draw up written­­contracts? Do they play a large role in your business? Naturally, just to avoid misunderstandings and have clear-cut agreements. They’re also very useful in court, when disputes do arise. How would you rate the possibilities to defend oneself against ­plagiarism and other unlawful usages? As already mentioned, it’s very difficult. Someone has to manage these things effectively in a company. For a young company, that’s quite an expense, because that money could really be used for better things. What forms of protection or precautions do you think are important when it comes to designers working with international partners? In this day and age fashion is completely global. Most of our sales are made abroad, therefore, naturally, it’s important for us to set out contractual agreements as clearly as possible in writing. But even with legal agreements, enforcement is really difficult; usually you have to be content with an amicable settlement, in order to get justice, more or less, quickly.

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Imagine you could make a wish. What would be your greatest wish with regard to design protection? Simply that no one was allowed to copy an original piece and that anyone who copied and sold something would be punished immediately with a fine.

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Karsten Henze is Head of CD/CI and Creation at Deutschen Bahn Mobility Logistics AG (German Rail). Deutsche Bahn was formerly a public administration and became a private company after the German reunification in 1989. Henze is also Chairman of the International Design Center Berlin (IDZ).

Interview with Karsten Henze, Berlin

What’s your relationship to intellectual property rights for designers, including copyright laws, trademark laws, design patents (or design rights)? I’m responsible for the external image of a global enterprise with approximately 230,000 employees. Naturally there are many points of contact to IP rights, from the securing of the brand itself, to the designing of our vehicles, our day-to-day dealings are shaped by matters concerning design-related IP rights. The public perception of Deutsche Bahn presents a particular challenge in this regard because when people in Germany say rail nowadays, they don’t just mean German Rail anymore. There are several departments within the concern working on an international level to monitor the brand and subbrands and deal with all of their associated problems. Brand management, protection of the brand and trademarks on a worldwide level, plays a particularly large role here, in addition to the design itself and its concrete applications. Any related legal aspects are processed solely through a central legal department. In addition to the classical areas of protection such as the ­correct use of a logo, softer aspects like the protection of the product’s appearance, also play a significant role. Shaping and distinctive color scheme of rail vehicles, for example, have resulted in the development that individual appearances can command protection under enhanced distinctiveness. For example, the predominantly red external appearance of the Deutsche Bahn regional trains is recognized as a color mark. There’s an enormous potential, often not sufficiently recognized by designers, inherent in the consistent and stringent use of an appearance over many years. It can have competitive advantages that extend far beyond the use of the brand itself. From your point of view how important is it to draw up written ­contracts? Do they play a large role in your business? When it comes to IP rights, contracts should always be made. These may just turn out to be brief and to the point, but there’s no alternative to the written form. Even further concessions to licensees

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should be agreed to in writing, regardless of whether there are any financial aspects to consider or not. How would you rate the possibilities to defend oneself against­­plagiarism and other unlawful usages? This question only applies in a limited way to a company providing services in the transportation sector. However, even without having plagiarizeable products, it’s true to say that all the options available for protection should be utilized. The aspect of enhanced distinctiveness already mentioned and the resultant protectability of the color scheme of our offerings make imitation nearly impossible for competitors. What forms of protection or precautions do you think are important when it comes to designers working with international partners? Designers should have in-depth knowledge of local conditions, precise understanding of the market in question and prior protection of their rights. To this end, legal support in the domestic market is essential in any case, while, on an international level, the use of foreign associates who oversee local protection and monitor the situation is also advisable. Imagine you could make a wish. What would be your greatest wish with regard to design protection? I would wish for greater awareness amongst the public for the worthiness of and capacity for protection of intangible goods and brands. What has become accepted, to some extent, for the different realms of classic product design, is still in its early stages for many softer aspects of design (color marks and the like). More comprehensive protection and a stricter interpretation of legal terms would increase the acceptance of design and the importance of brands, adding value in all areas.

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Fons Hickmann is a communication designer and runs the design studio Fons Hickmann m23. He is one of the most well-known designers on the international scene and has won numerous awards. He works as a professor and is a member of ADC, TDC New York and the Alliance Graphique Internationale (AGI).

Interview with­ ­Professor Fons Hickmann, Berlin

What’s your relationship to intellectual property rights for designers including copyright laws, trademark, design patents (or design rights)? Well, the stupidest thing I’ve experienced in relation to IP rights was when a client claimed, after I’d made a design and it was successfully produced, that he’d made the design himself. I still ran into enormous problems securing the rights to the design, despite having abundant supporting documents, data, and correspondence. There’s an enormous need for an update in the legislative body’s definition of the point from which a design enjoys protection as a creative work. Fine artists get much better protection in this area than designers. Ever since this experience, I make contracts, and I lobby tirelessly for better copyright laws for designers. From your point of view how important is it to draw up written ­contracts? Do they play a large role in your business? It’s precisely because we make contracts that they don’t play a large role. In other words: they play their role in the background, like good diplomats. We found a competent lawyer early on and drew up an adequate template contract, which we modify according to our needs. Since we’ve adopted this procedure, conflicts and discussions have become less frequent. A friendly reference to what’s been agreed upon in the contract is often all that’s needed to prevent more serious conflicts from arising. A contract not only protects the rights of both parties, but also ensures a good atmosphere. Good atmospheric conditions with ­clients are essential to us. We cultivate a kind of partnership with the client because, at the end of the day, we’re after the same thing: we both want a project to succeed, because only success proves quality. For us, contracts have proven themselves to be the ideal way to prevent wars with clients. How would you rate the possibilities to defend oneself against ­plagiarism and other unlawful usages? There’s a book lying on my desk from the Type Directors Club in New York, in which a poster was awarded a prize. Another poster, almost identical in form, was awarded a prize there two years ago. 253

The original poster was by me and two years ago I was thrilled to receive the prize, and now, this plagiarism. I just have to accept the fact that prizes and their associated publicity haven’t brought me new jobs, they’ve brought me imitators. The best designers feed a huge of army of idea-less imitators. But what’s worse: when good design is copied or bad design is made? Design’s shelf life has been enormously diminished. Often even the experts can’t remember what was current a year ago, not to mention 30 years ago. We’re in the process of losing our awareness of design history. I’ve been a member of maybe 100 juries and I’m constantly astounded by the ignorance and/or the porous visual memory of some of my colleagues. Flowery statements like: plagiarism is the most honest form of tribute really get on my nerves. What forms of protection or precautions do you think are important when it comes to designers working with international partners? We’re cautious with our contracts when we work on international projects. This is not necessarily advisable, but a certain reserve can’t be avoided, maybe it’s a question of outlook. My experience with international exchanges is that usually all sides make an enormous effort to avoid complications, and even though my experiences with verbal agreements here in Germany have been very good, I still advise against them. I worked outside of Germany for many years, and in some countries a lot of value is put on verbal agreements. A suggestion that one might not be able to rely on them may even cause deep mortification for the other party, however it’s worth bearing in mind that the working out of the details may completely fall apart. This is my warning: verbal contracts can drive you crazy. Imagine you could make a wish. What would be your greatest wish as regards design protection? I wish that the words design and designer would be protected. It’s the curse of my profession that any idiot can call themselves a designer. There are design hotels, designer drugs, designer children, and that stuff you have to put up with in display windows called design, which mocks every sense of aesthetics. The term design is a rape victim, which has been defiled beyond recognition. It’s already enough of a tragedy, in my opinion, that ever since Joseph Beuys came along, everyone’s an artist.

254

Hailing originally from Israel, Levy moved to Europe in 1988. He has lived and worked in Paris for 17 years, and currently oversees a 20-strong team of designers and graphic artists at his company, L design, which produces brand identities, packaging, signage, exhibition, and interior design. Considering himself more of a “feeling” designer (not sure what this means: is he designing “feeling/sensations/experiences” or designing based on his feelings/emotions or is it about tactility?), Arik Levy continues to contribute substantially to both interior and exterior locations, in the form of public sculpture – his signature rock pieces (interior and/or exterior?) – as well as complete environments that can be adapted for multiuse.

Interview with Arik Levy, Paris

What’s your relationship to intellectual property rights for designers including copyright laws, trademark laws, design patents (or design rights)? My work is about ideas and innovation ... therefore intellectual p ­ roperty rights play a vital role. From your point of view how important is it to draw up written ­contracts? It comes down to the person in front of me and my epidemic ­feeling. How would you rate the possibilities to defend oneself against ­plagiarism and other unlawful usages? I mostly invest my time in creating … in the event of these kinds of problems I look for partners that work on a percentage of the results. And then I let them bite. What forms of protection or precautions do you think are important when it comes to designers working with international partners? Respecting and knowing the people you work with. But one is never entirely protected. Imagine you could make a wish. What would be your greatest wish with regard to design protection? That the notion of what a design is really worth would be what is taken into consideration rather than what it costs.

255

Eckart Maise has worked with Vitra (design manufacturing company and long-standing producers of Charles and Ray Eames’ and George Nelson’s furniture designs) since 1995. He is currently Head of Design Management and Development.

Interview with Eckart Maise, Basel

What’s your relationship to intellectual property rights for designers, including copyright laws, trademarks, design patents (or design rights)? Vitra’s approach to designers as authors started in the fifties and was shaped by the relationship with Charles and Ray Eames. This approach sees designers not only as creators of products, but also as cocreators of a company, it’s values and direction. The correspon­ ding legal basis is clear since the principle of originality applies here. In order to be able to speak in terms of something as an original, the designer must contractually transfer the manufacturing rights to the manufacturer. The personal relationship between the designer and manufacturer, which finds its expression in close cooperation on all production and quality control matters, is equally important. It’s also clear that on a purely material level, a manufacturer must show a readiness to pay licensing fees and royalties, to honor the artistic achievement. From your point of view, how important is it to draw up written ­contracts? Written agreements are indispensable as a means of setting down the legal foundations, particularly as, from a legal perspective, licensing contracts aren’t confined to a rigid form. The parameters have to be defined on a case-by-case basis. Variables might, for example, include: a description of the license’s object, specification of the market area permitted for usage, the licensing term and the remuneration. This is, for example, what’s enabled Vitra to maintain its position as the only legitimate manufacturer of Eames furniture in Europe and the Middle East since 1957. How would you rate the possibilities to defend oneself against ­plagiarism and other unlawful usages? There are regions where this can be achieved using various legal instruments, in others it’s more difficult. As everyone knows, nowadays pirating of products has become a social problem. It inhibits the spirit of innovation and creativity. One elegant alternative to ­taking legal action, however, is dissemination of the positive aspects of originals. In the case of Vitra, this means above all telling the story of Charles and Ray Eames, whether it’s in the form of books or ­exhibitions. In doing so, awareness is raised of the fact that Charles 257

and Ray Eames’ designs have earned a central place in the history of design. What forms of protection or precautions do you think are important when it comes to designers working with international partners? Depending on the creative approach, there are various legal foundations for protecting designs. Classics are protected by copyright, design rights apply to new designs, while technical innovations are typically protected by patents. Depending on the case, one might also fall back on trademark protection or laws protecting against unfair competition. However, the understanding should prevail that these legal foundations serve to protect design processes. As a rule, good products are the result of an intensive development process. It’s just not the case that a stroke of inspiration or a sketch is sufficient. Both designers and manufacturers are involved in the development of a product. It can, however, extend over a long period of time, and it entails an enormous risk. If a product is successful, a manufacturer with an inclination to innovation will reinvest the profits gleaned from this into the development of new products. Incidentally, the later recognition and success of classic designs often obscures the fact that most designs only become commercially successful after a ­great deal of time has been invested in them. Imagine you could make a wish. What would be your greatest wish with regard to design protection? Harmonization and upgrading of the legal foundations for design protection on an international level would be ideal. In practice, how adequate are the remedies offered by laws against unfair competition? In addition to copyright, trademark law, and design law, the laws against unfair competition offer a complementary possibility to defend against plagiarism, particularly in the case of identical copies or in the event of appropriation of a large portion of a product line by a plagiarist. Unlike trademark and design law, laws against unfair competition, however, aren’t even harmonized on a European level, meaning the possibilities for invoking these laws vary from country to country.

258

Justus Oehler is a communication designer, a partner at Pentagram since 1995 and member of the Alliance Graphique Internationale (AGI) since 2003.

Interview with Justus Oehler, Berlin

What’s your relationship to intellectual property rights for designers including copyright laws, trademark, design patents (or design rights)? As a communication designer, I’m frequently occupied with this subject, for example when we’re generating names for companies or products. Thankfully, it’s easy to research names on the Internet, but you can only really be certain whether or not a name is already in use by hiring a professional to search and research it. From your point of view how important is it to draw up written ­contracts? Do they play a large role in your business? I consider written contracts regulating the approach to design ­projects and their remuneration absolutely essential, and not just for those projects which are drawn out over a long period of time. How would you rate the possibilities to defend oneself against ­plagiarism and other unlawful usages? In the realm of communication design, this is less of a problem, but the issue of a design for a company logo or a corporate design being copied or at least emulated elsewhere does arise repeatedly. This isn’t really a problem for communication designers themselves, as they’re compensated for their work so they don’t incur damages when a logo or corporate design designed by them for a client is copied elsewhere. It’s more of a problem for clients, who then have to check whether the company with the copied logo or corporate design is a competitor and can potentially do harm. What forms of protection or precautions do you think are important when it comes to designers working with international partners? Clear conditions and contracts. We always communicate very clearly that the copyrights for the designs we’ve developed are only transferred to the client when all the bills are paid. In doing so, ­however, we always reserve the right to use the designs for our own promotional purposes. We had a client once who simply didn’t make any effort to pay our invoices, but in the meantime had begun to use the corporate design we’d developed. We waited until he’d just launched the new design and then let our lawyer write him a nice letter in which we gave him the option either to pay our invoices immediately or have 259

everything printed be turned into pulp, because, according to the written agreement signed by both parties, the full usage rights still belonged to us. Those outstanding invoices were quickly paid. Imagine you could make a wish. What would be your greatest wish as regards design protection? There are two aspects here: on the one hand, there are those who knowingly copy designs, either with or without the joint knowledge of the client. Either way, it’s malicious, but in the latter case the client is the idiot. I constantly see German advertising campaigns that I’ve either seen in the exact same, or in a very similar, form in England, where I lived for 15 years. On the other hand, there are those who, by coincidence, design something which already exists in the exact same or a similar form without malicious intent. What I wish for most is an online database in which all designs are archived and can be accessed. For example: you’d only have to type in corporate design for pharmaceutical companies or designs for electric irons and all preexisting designs could be viewed, although this could also easily be misused. So what I really, really wish for is for all designers, working in both 2-D and 3-D, to have the aspiration to make something themselves, and to fight against the copying of existing designs. It’s a dream, I know.

260

Sabine Zentek, is a lawyer based in Dortmund. She began her career in 1993 and has since become one of the most prominent specialists in the field of design law. In 2005, she founded FIDIUS, an association dedicated to making design competitions fairer for designers.

Interview with ­Sabine Zentek, Dortmund

What’s your relationship to intellectual property rights for designers, including copyright laws, trademark laws, design patents (or design rights)? In my capacity as a lawyer, author, and lecturer, I’m regularly engaged with these topics. From your point of view, how important is it to draw up written ­contracts? Do they play a large role in your business? Written contracts are the cornerstone of a functional cooperation. With careful preparation, conflicts can to a large extent be avoided. Unfortunately, contract negotiations are often sloppily conducted, or people rely on verbal agreements. It’s especially unpleasant for everyone involved when a contract has to be cobbled together out of incredibly long, complicated e-mails, because a contract partner wants to enforce certain demands. How would you rate the possibilities to defend oneself against ­plagiarism and other unlawful usages? The possibilities for protection through Germany’s national laws and EU directives are really quite good these days, but it’s just that in many courts there’s a lack of implementation of current legal principles. In particular I mean the lowering of the standards needed to acquire copyright protection for functional design, which, for over a century, has had to be evaluated under the term applied art. What’s more, the judicial (main) proceedings take far too long, and not all judges possess the necessary empathy for the creative process. When designers and companies complain about inadequate design protection in Germany, the reason is not a lack of legal instruments, rather a nonuniform and barely gaugeable legal practice. What forms of protection or precautions do you think are important when it comes to German designers working with international partners? In addition to a written contract, naturally the registration of ­formal European, and as necessary, international, IP rights is important. The Community Design plays a large role in this since pan-European protection is possible via an application at the OHIM in Alicante. The maximum three-year protection term offered by 261

un­registered Community Design rights is in no way ­comparable, however it does offer an extremely effective protection for pre­ sentations. If a company makes use of a confidentially presented draft design, the designer in question can take action immediately against the company on the basis of an unregistered design right. Before March 2002, there was no such advantageous position. In view of this, one can really only welcome the developments in European law. Imagine you could make a wish. What would be your greatest wish with regard to design protection? My wish indisputably and quite simply is for a fairer and more decent interaction between designers and their licensees. This principle that lies at the heart of fair trade is no longer honored. Whereby the scales hang heavier at the expense of designers, as for many companies the maxim applies, minimum risk, maximum fun. This positioning is particularly highlighted in calls for submissions to design competitions and pitching. Rather than receiving assignments, participants are supposed to concede comprehensive usage rights, preferably free of charge. The prize then consists of the contract and the special honor of being able to present oneself in public having accomplished such a buyout. In my opinion, this development is almost a plague. And, incidentally, it precipitates serious macroeconomic consequences, because designers increasingly work for free and their existence is threatened. I can’t comprehend the fact that those in government positions responsible for the creative industry, look on idly as the tumor of unreasonable competition increasingly becomes customary practice. After all, there was a long-fought-for copyright reform not all that long ago. In practice, how adequate are the remedies offered by laws against unfair competition? In 2008 I wrote an article extensively discussing a specific German statute that allows designers to take action against companies stealing ideas they’ve presented in pitches. This statute has a long history. However, it regrettably lives a kind of hand-to-mouth existence. Despite the many claims that arise from the unautho­ rized exploitation of materials entrusted to third parties, due to its low profile, there have only been isolated cases of courts having to grapple with the statute, resulting in few relevant decisions to date outside the realm of technical inventions. The statute, which also allows for criminal action, is also of particular interest when the 262

entrusted design can neither be protected as a copyright or a design right. I consider this potential to take criminal action ineffective in ­protecting designs because law enforcement agencies have little experience with this statute, and as a result many criminal proceedings end up temporarily suspended. Unfortunately, in most cases, one can spare oneself the effort of drawing up a complaint at all.

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Appendix

Acknowledgments

The writing of this book was only possible thanks to the assistance – both directly and indirectly – of many individuals. We’d like to extend our gratitude now to everyone who supported us along the way. Special thanks are owed to our nearest and dearest, whose love and affection was enduring through thick and thin. Thank you also to Dr. Robert Steiger of Birkhäuser Publishing, who did everything in his power to make this book possible. We’d like to thank our editor, Arian Hassani, for her critical­ s­ upport and expertise. Her contribution is fittingly addressed in her naming as coauthor. We also extend a big thanks to Rose Tizane Merrill, responsible for the translation into American English. Thanks to Erik Spiekermann for his outstanding layout. It gives this book (as well as the German edition), a distinctive appearance, while still ensuring a comfortable reading experience. We’re also profoundly grateful to Liv Andrea Mosdøl for her brilliant illustrations. We’d like to thank our interview partners: Anja Engelke, Alexandra Fischer-Roehler with Johanna Kühl, Karsten Henze, Fons Hickmann, Arik Levy, Eckart Maise, Justus Oehler and Sabine Zentek. And lastly, this book wouldn’t have been possible without our ­clients, whose questions and problems we’ve had the pleasure of engaging with in the field, and the privilege of helping solve. For legal reasons, there are many we cannot name here, however their presence is felt on every page of this book. Our most heartfelt thanks goes to them.

Joachim Kobuss Alexander Bretz

267

Authors’ biographies

Joachim Kobuss, born 1954, is an author, coach, scout, and owner of the DesignersBusiness® trademark. He advises designers from all fields on entrepreneurial development, and guides them in the process of becoming self-employed. Furthermore, he offers support to businesses looking to hire designers and assists them throughout these collaborations. At the heart of Kobuss’ activities is his consulting work to designers on increasing the profitability of their businesses. He’s also partner in Unternehmen:Design, an institute which aids companies and political institutions in finding, funding, and collaborating with designers – with the aim of safeguarding the design industry for the future. Both enterprises are based in Berlin. Kobuss is also an active participant in a number of design networks, works closely with design funding institutions and serves as an expert advisor on the design industry as part of the German government’s Cultural and Creative Industries Initiative. In 2007, Kobuss authored the first German edition of the first book in this series: Become a Successful Designer – Starting and Developing a Design Business. In 2009 and 2010, respectively, Protect and Manage your Design Rights Internationally cowritten with Alexander Bretz, and the second edition of Starting and Developing a Design Business were released. In May 2012, the third book in the series was published: Understanding your Future in Design – Conceptualizing and Creating. Further German titles are currently in the preparation and planning stages. Kobuss lives and works in Berlin and Cologne.

Joachim Kobuss

Alexander Bretz, born 1964, is a Berlin-based lawyer. Since 1995, he has specialized in providing legal counsel and representation to fashion, product, and communication designers. His services for professional designers span the entire spectrum of business and legal consulting – from business modelling and planning in the start-up phase, to representation in negotiations (both in and out of court) and financial management to general stra-

Alexander Bretz

269

tegic matters. As a contract lawyer to the German trade union, ver.di, he advises its members in the Berlin-Brandenburg area on all questions related to IP laws. He is also advisor to the Berlin Senate for Economics and, for many years, has served as lecturer and speaker at several well-known universities and academies, among them ESMOD International College of Art for Fashion Berlin, MD.H Mediadesign University of Applied Sciences Berlin and Burg Giebichenstein College of Arts, Halle. Arian Hassani

270

An American national, born in Tehran in 1977, raised in Germany, and based in Paris, Arian Hassani is an economist working in the field of culture and development at UNESCO, where she manages the International Fund for Cultural Diversity. Before joining UNESCO, Arian headed Hope Street Group’s efforts in developing the Economic Opportunity Index, an evidencebased approach, designed to quantify the personal, economic, social, and environmental factors that are most likely to generate broad-based income growth in the United States. She also worked with presidential campaigns and later with the administration’s ­policy advisors in the field of education and job creation. Arian started her career in the media and global communications investment banking team at Merrill Lynch in New York. She holds a Master’s in International Development from Harvard University and a Bachelor’s in economics and German studies from Brown University, where she was awarded a Fulbright scholarship.

International Survey

271

Argentina

Propiedad Intelectual

Diseños Industriales

What is protected?

Literary, artistic, and academic works.

The two- or three-dimensional ­ utward appearance of the whole o or a part of a product.

>> Novelty >> Individual character

Requirements

Is there a registration form?

Yes. Registration is a necessary ­prerequisite. The work should be registered within 3 months of ­disclosure.

Yes. Registration is a necessary ­prerequisite.

Term of protection

70 years after the death of the ­author.

Maximum of 15 years after r­ egis­tration (in 3 terms of 5 years).

More information

Relevant to design?

Recommendations

272

http://www.inpi.gov.ar

Explicitly deemed employable in combination with commercial IP rights; thus also applicable for ­designs.

Created specifically for the ­protection of designs.

Marcas

Patentes

Any symbols represented graphically, which are capable of distinguishing the goods or services of one business from another.

Inventions

>> Graphic representability >> Distinctiveness

>> Novelty >> Inventive step >> Industrial applicability

Yes. Registration is a necessary ­prerequisite.

Yes. Registration proceedings include review and disclosure; utility model available as a registry right.

Unlimited; upon registration ­indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.inpi.gov.ar

http://www.inpi.gov.ar

Suitable as protection for labels and product packaging; unsuitable as protection for products.

Only worth considering for technical aspects of a design.

Registration as a trademark is always a priority since marks can be extended virtually worldwide without problem, and they represent a distinct economic value that can be sold.

Due to the extensive and costly r­ egistration process, only advisable if protection of the technical ­solution can strengthen the Unique ­Selling Point on the market.

273

Australia

Copyright

Design

What is protected?

Literary, architectural, musical, dramatic, choreographic works.

Outward appearance of a product.

Requirements

An intellectual creation particular to its author.

The design must be new and ­distinctive.

Is there a registration form?

Protection is automatic.

Yes, registration is a necessary p ­ rerequisite.

Term of protection

70 years after the death of the author.

Up to max. 15 years from the receipt of application (extendable in 5-year terms).

More information

http://www.copyright.gov

http://www.ipaustralia.gov.au

Relevant to design?

The design itself is excluded from protection; however design sketches are protected.

Conceived of specifically for the ­ rotection of designs; verification of p application is purely a formality.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

With the merely formal review of the application and the pretty rapid registration, this protection is relatively effective.

274

Trademark

Patent

Words, names, symbols, or agents that indicate a product’s origins, including odor.

Any useful apparatus, substance, method, or process that is innovative and new.

No resemblance to other registered or applied trademarks in the description of goods or services.

An invention that is state of the art (i.e. prior art); the requirements for the existence of an invention roughly correspond to those for an inventive step.

Yes.

Yes. As either a Standard Patent or Innovation Patent.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Standard patent: 20 years after r­ egistration. Innovation patent: 8 years after ­registration.

http://www.ipaustralia.gov.a

http://www.ipaustralia.gov.au

Suitable as protection for labels and product packaging; to a certain extent also suitable for the protection of the product itself.

Only worth considering for technical aspects of a design.

275

Brazil

Copyright

Industrial Design

What is protected?

Intellectual/artistic creations in every form of expression or medium, material or immaterial, set in physical form.

The ornamental, three-dimensional form of an object or ornamental arrangement of line and colors, which can be used on a product, producing an original visual result in outward appearance and serving as a model for industrial production. >> Novelty >> Distinct visual configuration

Requirements

Is there a registration form?

No. Copyright protection starts automatically with the existence of the work, though registration is possible and recommended.

Yes. Registration is a necessary ­prerequisite. Procedure includes scrutiny of the design for the ­requisite qualities.

Term of protection

70 years after the death of the author.

Maximum 25 years from registration (10 years plus three extension periods of 5 years each).

More information

70 years after the death of the author.

http://www.inpi.gov.br

Relevant to design?

It’s made explicitly clear that commercial IP rights are not conflicting; thus protection is also possible for designs.

Created specifically for the protection of designs, but not feasible for fashion and communication design.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

276

Trademark

Patent / Utility model

All distinct, visually distinguishable symbols.

Inventions

>> Graphic representability >> Distinctiveness

>> Novelty >> Inventive step >> Industrial applicability

Yes. Registration is a necessary ­prerequisite.

Registration proceedings include review and disclosure; utility model available as a registry right.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 15 years after regis­ tration.

http://www.inpi.gov.br

http://www.inpi.gov.br

Suitable as protection for labels and product packaging; explicitly excluded as product protection. Moreover, any registration as an industrial design takes precedence over the registration as a mark.

Only worth considering for technical aspects of a design.

A registered trademark represents a distinct economic value that can be sold globally.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market. 277

Canada

Copyright

Industrial Design

What is protected?

Literary, architectural, musical, dramatic, choreographic works.

New, original external design of an object for (industrial) production.

Requirements

Original works of authorship that are fixed in a tangible form of expression.

>> Novelty >> Uniqueness

Is there a registration form?

No. Protection starts automatically, but registration is possible and­ ­recommended.

Yes. Registration is a necessary ­prerequisite.

Term of protection

50 years after the death of the author.

Up to max. 10 years from date of issue (renewable after 5 years).

More information

http://www.cipo.ic.gc.ca

http://www.cipo.ic.gc.ca

Relevant to design?

Excluded for the design itself, but design drawings are protected.

Specially created for the protection of designs, but relativley high requirements.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

278

Trademark

Patent

Words or symbols to distinguish goods and services.

Invention or discovery of processes, equipment, products, or a combination thereof, including any improvement that is both new and intended for use.

In use before registration.

>> Novelty >> Usability and usefulness >> Inventive step

Yes. Registration is a necessary ­prerequisite.

Yes. However the registration p ­ rocess, including review and ­ isclosure, is much shorter than d in other countries.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration.

http://www.cipo.ic.gc.ca

http://www.cipo.ic.gc.ca

Suitable as protection for labels and product packaging; possible for product protection through inclusion of the logo in the product design.

Only worth considering for technical aspects of a design.

Registration as a mark only ­possible for labels and labeling. Not really suitable for protection of the actual product.

279

China

Copyright

Design Patent

What is protected?

Works by authors (may also be ­creators).

The outward appearance of a­ ­product.

Requirements

The design must constitute “an intellectual creation particular to its author.”

Novelty, but limited definition of novelty: only publication in China negatively affects novelty.

Is there a registration form?

No. Protection is automatic for all works that satisfy the requirements. However, registration with the NCAC is strongly advised for the sake of providing evidence.

Yes. Note: >> Foreign registrants must hire a ­patent agent for this. >> All documents must be submitted in Chinese. >> Protection contingent on payment of yearly fees.

Term of protection

50 years after the death of the author.

Maximum 10 years.

More information

http://www.ncac.gov.cn

http://www.sipo.gov.cn/sipo_English

Relevant to design?

The design itself is excluded from protection; registration of design sketches potentially too laborious.

Protection as a subform of a patent, however only after a formal review.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

What is in itself quite an easy registration is made more difficult by the formal requirements, in particular the patent agents. Thus, there is only limited feasibility for non-Chinese designs.

280

Trademark

Patent / Utility Model

Words, logos, symbols, numbers, etc. with a significant function.

New, commercially utilizable­ ­technical inventions.

Distinctiveness.

Novelty, however limited definition of novelty: only publication in China negatively affects novelty.

Yes. Note: >> Foreign registrants must hire a trademark agent. >> All documents must be submitted in Chinese (language and characters).

Yes: registration procedure, including review and disclosure: >> Foreign registrants must hire a ­patent agent. >> All documents must be submitted in Chinese. >> Protection contingent on payment of yearly fees.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.ctmo.gov.c

http://www.sipo.gov.cn/sipo_English

Suitable as protection for labels and product packaging.

Only worth considering for technical aspects of a design; however mostly only in terms of a utility model.

Trademark registration in China is relatively difficult and very protracted (it can take up to 4 years). Piracy is the biggest problem in China; in light of this, the IP rights play a relatively small role.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

281

Denmark (EU)

Copyright

Design Right

What is protected?

Literary and artistic works.

The two- or three-dimensional ­outward appearance of the whole or a part of a product.

Requirements

The design must be new and possess individual character.

Is there a registration form?

No. Automatic protection upon publication of the work.

3 years protection is granted ­ utomatically, without registration, a longer protection is only possible with a registration within one year of disclosure.

Term of protection

70 years after the death of the author.

UCD (EU): 3 years. RCD (EU): maximum 25 years after disclosure.

More information

http://www.oami.eu http://www.dkpto.org

Relevant to design?

Excluded for the design itself, but design drawings are protected.

Specially created for the protection of designs; in fashion and graphic design protection granted without registration is quite short.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

Send images or copies of the designs and design sketches to yourself in a sealed envelope by registered mail. If registration is planned, it’s best to register immediately for a Community design.

282

Trademark

Patent / Utility Model

Distinctive symbols.

Inventions.

Symbols, shapes, form, color, etc., that are capable of distinguishing the goods or services of one business from another. Yes. Registration is a necessary prerequisite.

Yes. Costly and protracted registration procedure including review and ­disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.oami.eu http://www.dkpto.org

http://www.dkpto.org

Suitable as protection for labels and product packaging; despite some registrations, not suitable for product protection.

Only worth considering for technical aspects of a design; however mostly only in terms of a utility model.

Denmark is not a member of the Madrid System; international registration is only possible by application to the Madrid System and this is disproportionately expensive. Therefore registration as an EU mark (Community Trade Mark, CTM) is always preferable.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

283

France (EU)

Droit d’auteur

Dessins et modèles

What is protected?

Works by authors (may also be creators).­

The two- or three-dimensional ­outward appearance of the whole or a part of a product.

Requirements

The design must demonstrate a certain level of design.

The design must be new and possess individual character.

Is there a registration form?

No. Protection starts automatically for all works that meet the requirements.

3 years protection is granted automatically, without registration, ­longer protection is only possible with a registration within one year after ­disclosure.

Term of protection

70 years after the death of the author.

Unregistered: 3 years. Registered: maximum 25 years after disclosure.

More information

http://www.oami.eu http://www.inpi.fr

Relevant to design?

For the design itself, only ­permitted to a limited extent; design drawings are protected.

Specially created for the protection of designs; in fashion and graphic design protection granted without registration is quite short.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail; try to be included in museum collections and ­exhibitions.

See copyright. If you’re registering, then it’s best to immediately register for a Community design.

284

Marques

Brevets

Distinctive symbols

Technical innovation: products or processes for technical problem solving.

Symbols, shapes, form, color, etc., that are capable of distinguishing the goods or services of one ­business from those of other ­businesses. Yes.

Yes. Registration proceedings include review and disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.oami.eu http://www.inpi.fr

http://www.inpi.fr

Suitable as protection for labels and product packaging; despite some registrations, not suitable for product protection.

Only worth considering for technical aspects of a design.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold. If you’re registering, then it’s best to immediately register for a Community Trade Mark (CTM).

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

285

Germany (EU)

Urheberrecht

Geschmacksmuster

What is protected?

Works by authors (may also be ­creators).

The two- or three-dimensional ­ utward appearance of the whole o or a part of a product.

Requirements

The design must constitute “an intellectual creation particular to its author.”

The design must be new and possess individual character.

Is there a registration form?

No. Protection starts automatically for all works that meet the requirements.

3 years protection is granted automatically, without registration, longer protection is only possible with a registration within one year of disclosure.

Term of protection

70 years after the death of the author.

Unregistered: 3 years. Registered: maximum 25 years after disclosure.

More information

http://www.oami.eu http://www.dpma.de

Relevant to design?

For the design itself, only permitted to a limited extent; design drawings are protected.

Specially created for the protection of designs; in fashion and graphic design protection granted without registration is quite short.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail; try to be included in museum collections and e­xhibitions.

See copyright. If you’re registering, then it’s best to immediately register for a Community design.

286

Marke / Geschäftsbezeichnung

Patent / Utility model

Distinctive symbols

Inventions

Symbols, shapes, form, color, etc., that are capable of distinguishing the goods or services of one business from another.

Patent: “Inventions that are new, involve an inventive activity/inventiveness and have commercial applicability/applications.” Utility model: “Inventions that are new, involve an inventive step and have commercial applicability.”

Not necessarily. Protection without registration as a trade name for titles (of works) and company brands. With registration as a comprehensive trademark.

Patent: extensive and costly regis­ tration process including review and disclosure. Utility model: Registration.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.oami.eu http://www.dpma.de

http://www.dpma.de

Suitable as protection for labels and product packaging; despite some registrations, not suitable for product protection.

Only worth considering for technical aspects of a design; however usually only in terms of a utility model.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold. If you’re registering, then it’s best to immediately register for a Community Trade Mark (CTM).

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

287

Great Britain (EU)

Copyright

Registered / Unregistered Design

What is protected?

Original works, resulting from independent, creative efforts.

The two- or three-dimensional ­ utward appearance of the whole o or a part of a product.

Requirements

Authenticity, embodiment

The design must be new and possess individual character.

Is there a registration form?

No. Protection is automatic for all works that meet the requirements.

Unregistered design: 15 years protection granted automatically, without registration; longer protection only possible with a registration within one year of disclosure.

Term of protection

70 years after the death of the author.

Unregistered (GB): 15 years. Registered (GB and EU): maximum 25 years after disclosure.

More information

http://www.ipo.gov.uk

http://www.oami.eu http://www.ipo.gov.uk

Relevant to design?

The design itself is excluded from protection, but design drawings are protected.

Specially created for the protection of designs; in fashion and graphic design protection granted without registration is quite short.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

See copyright. If you’re registering, then it’s best to register for a Community design right off the bat.

288

Trademark

Patent

Distinctive symbols

Inventions

Symbols, shapes, forms, colors, etc., that are capable of distinguishing the goods or services of one business from another.

>> Novelty >> An inventive step not obvious to someone with knowledge and experience in the field in question >> Industrial applicability

Yes.

Registration procedure, including review and disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

ttp://www.oami.eu http://www.ipo.gov.uk

http://www.ipo.gov.uk

Suitable as protection for labels and product packaging; despite some registrations, not suitable for product protection.

Only worth considering for technical aspects of a design; however usually only in terms of a utility model.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold. If you’re registering, then it’s best to register for a Community Trade Mark (CTM) from the start.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

289

India

Copyright

Design

What is protected?

Intellectual creations particular to their author(s).

New, distinctive outward appearance(s).

Requirements

The design must be new and ­distinctive.

Is there a registration form?

Not necessarily. Protection is automatic, but registration is strongly encouraged for the sake of providing evidence.

Yes. Registration is a necessary ­ rerequisite. p

Term of protection

60 years after the death of the author.

Up to 15 years from registration.

More information

http://copyright.gov.in

http://ipindia.nic.in

Relevant to design?

Protection excluded for the design itself, but design drawings are protected.

Specially created for the protection of designs. Due to the procedure and costs not suitable for all realms of design.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by­ ­registered mail.

Note: The design should not have been previously made public anywhere in the world.

290

Trademark

Patent

Symbols indicating the affiliation of certain goods or services to a specific person or persons.

New products or processes, pharmaceutical, chemical, and biotechnological innovations.

>> Graphic “representability” >> Distinctiveness >> Usage – in order to demonstrate affiliation with a specific person or persons

>> Inventive step >> Novelty >> Commercial applicability

Yes.

Yes. Standard registration process, including review and disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years from filing of ­application.

http://ipindia.nic.in

http://ipindia.nic.in

Suitable as protection for labels and product packaging. Due to the required graphic “representability,” employment as a form of direct product protection is virtually impossible.

Only worth considering for technical aspects of a design.

India has the most clearly defined requirements for trademarks. Other countries would do well to learn from this.

291

Israel

Copyright

Design

What is protected?

Original literary, artistic, dramatic, or musical works fixed in any form; sound recordings.

Every industrial object or product that has form, shape, or decoration that is visible to the eye.

Requirements

>> authenticity (originality) >> embodiment

>> Novelty in Israel >> Originality >> Not previously disclosed or­ ­published in Israel

Is there a registration form?

No. Protection is automatic for all works that fulfill the requirements.

Yes. Registration is a necessary ­ rerequisite. During the process, p in addition to the basic requirements, the design will also be checked against other designs for resemblance or sameness.

Term of protection

70 years after the death of the author.

15 years after registration.

More information

http://www.patent.justice.gov.il/ MOJEng/RashamPatentim

Relevant to design?

Designs themselves are explicitly excluded from protection; design drawings are protected.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

292

Specially created for the protection of designs; in fashion and graphic design protection not feasible.

Trademark

Patent

Distinctive symbols serving as a trade- or service mark.

Inventions

Symbols, shapes, form, color, etc., that are capable of distinguishing the goods or services of one business from another.

>> Global novelty >> An inventive step not obvious to someone with knowledge and experience in the field in question >> Commercial applicability

Yes. Registration is a necessary ­prerequisite.

Yes. Registration proceedings include review and disclosure.

Unlimited; after initial protection period of 10 years, renewable in terms of 14 years.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.patent.justice.gov.il/ MOJEng/RashamPatentim

http://www.patent.justice.gov.il/ MOJEng/RashamPatentim

Suitable as protection for labels and product packaging; not suitable for protection of products.

Only worth considering for technical aspects of a design; however usually only in terms of a utility model.

Registration as a trademark is always a priority since marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

293

Italy (EU)

Diritto d’autore

Modelli e disegni ornamentali

What is protected?

Works by authors (may also be ­creators).

The two- or three-dimensional ­ utward appearance of the whole o or a part of a product.

Requirements

Comprehensive protection for works of art of all kinds.

The design must be new and possess individual character.

Is there a registration form?

No. Protection is automatic for all works that meet the requirements.

Protection is granted automatically for 3 years, without registration. Longer protection is only possible with a registration within one year of disclosure.

Term of protection

70 years after the death of the author.

Unregistered (EU): 3 years. Registered: (I) 5 years, (EU) maximum 25 years after disclosure.

More information

http://www.oami.eu http://www.uibm.gov.it/it

Relevant to design?

Designs are explicitly included under copyright protection.

Specially created for the protection of design. In the fashion and graphic design realms the protection granted without registration is quite short.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by­ ­registered mail. Italian copyright law is extremely designer-friendly.

See copyright. The protection term for registered designs is only a bit longer than for an Unregistered Community Design (UCD), and due to the explicit inclusion of design under copyright, at most an EU-wide registration should be undertaken.

294

Marchi

Brevetti / Modelli di utilità

Distinctive symbols

Inventions, either as a product of manufacture patent or as a process patent; utility model as registry right.

Symbols, shapes, forms, colors, etc., that are capable of distinguishing the goods or services of one business from another.

Patent: >> Novelty >> Intrinsic novelty (originality) >> Suitability for commercial use >> Permissibility

Yes.

Yes. Registration proceedings include review and disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after filing of ­registration.

http://www.oami.eu http://www.uibm.gov.it/it

http://www.uibm.gov.it/it

Suitable as protection for labels and product packaging; despite some registrations, not suitable for product protection.

Only worth considering for technical aspects of a design; however usually only in terms of a utility model.

Registration as a trademark is always a priority since marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold. If you’re registering, then it’s best to immediately register for a Community Trade Mark (CTM).

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

295

Japan

Copyright

Design Right

What is protected?

Works that express thoughts or feelings in an artistic way, and which are in the literary, academic, artistic, or musical realm.

The two- or three-dimensional ­ utward appearance of the whole o or a part of a product.

>> Novelty >> Individual character

Requirements

Is there a registration form?

No. Protection is automatic for all works that meet the requirements.

Yes. Registration required. Note: each design must be marked with a notice of registration.

Term of protection

50 years after the death of the author (likely soon to be extended to 70 years).

15 years after registration.

More information

http://www.cric.or.jp/cric_e/index. html

http://www.jpo.go.jp

Relevant to design?

Industrial designs protected as industrial arts.

Specially created for the protection of designs; there are usually no registration requirements for fashion and graphic design.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail; try to be included in museum collections and ­exhibitions.

This protection is of little importance due to the inclusion of design under copyright, but registration is recommended – both as a means of protection and of securing evidence – if the relatively high requirements are absolutely present.

296

Trademark

Patent / Utility model

Graphical representation of a ­symbol.

Inventions, i.e. highly advanced ­creations of technical ideas utilizing natural laws. Utility model as registry right.

>> Distinctiveness >> Existing business >> Registration or use

>> Commercial usability >> Novelty >> The invention must not be easily derivable by an expert, based on a prior, state-of-the-art disclosure.

Yes. Registration required.

Registration procedure, including review and disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration.

http://www.jpo.go.jp

http://www.jpo.go.jp

Suitable as protection for labels and product packaging; despite some registrations, not suitable for product protection.

Only worth considering for technical aspects of a design.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

297

Kenya

Copyright

Industrial Designs

What is protected?

Literary, architectural, musical, dramatic, choreographic works.

Entire outward appearance of a product, as determined by its form, composition, patterning, or ornamentation.

Requirements

>> Intellectual creation particular to its author >> Embodiment

The design must be new and ­distinctive.

Is there a registration form?

No. Protection is automatic.

Yes, registration is a necessary p ­ rerequisite. Grace period of 12 months.

Term of protection

50 years after the death of the author.

Maximum 15 years from filing of application, extendable every 5 years.

More information

http://www.kipi.go.ke

Relevant to design?

Protection excluded for the design itself; however design sketches are protected.

Conceived specifically for the ­ rotection of designs; review of the p application is purely a formality.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

With the merely formal application review and fairly rapid registration process, this protection is quite effective.

298

Trademarks

Patents / Utility Models

Symbols that serve to distinguish an industrial or commercial enterprise’s goods from those of another.

Invention, i.e. any useful device, ­substance, method, or process that is innovative and new; utility model available as a registry right.

Distinctiveness

An invention that is new and useful when viewed in light of the current state of technology (prior art); an inventive step is necessary. For utility models only a formal review is required.

Yes, registration is a necessary ­prerequisite.

Yes. Regular patent proceedings with review of application and ­disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

20 years after registration.

http://www.kipi.go.ke

http://www.kipi.go.ke

Suitable as protection for labels and product packaging; not suitable for protection of the product itself.

Only worth considering for technical aspects of a design.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

299

Korea

Copyright

Industrial Design

What is protected?

Creative output in the form of ­original literary, academic, or artistic works.

Shape, pattern, color, or any combination thereof applied to an object, so that an aesthetic visual impression is created, as well as objects or styles of calligraphy.

>> Novelty >> Individual character

Requirements

Is there a registration form?

No. Protection is automatic for all works of art of this description.

Yes. Registration is a necessary ­ rerequisite. p

Term of protection

50 years after the death of the author.

15 years after disclosure.

More information

http://www.kipo.go.kr/kpo/eng

Relevant to design?

Designs, as creative works, explicitly protected under copyright.

Specially created for the protection of designs; in fashion and graphic design protection not feasible.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

The extensive procedure, which is similar to the patent process, together with the relatively short protection term, make registration of industrial designs in Korea relatively unattractive.

300

Trademark

Patent

Symbols, letters, figures, threedimensional shapes, or any combination thereof, and other visually recognizable constructs.

Inventions, i.e. highly advanced ­creations of technical ideas utilizing natural laws.

>> Business use >> Suitability as designation >> Distinctiveness

>> Novelty >> Highly advanced creation >> Use of the laws of nature >> Industrial applicability

Yes. Registration is a necessary­ ­prerequisite.

Registration procedure, including review and disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration.

http://www.kipo.go.kr/kpo/eng

http://www.kipo.go.kr/kpo/eng

Suitable as protection for labels and product packaging; not suitable for protection of the product itself.

Only worth considering for technical aspects of a design; however usually only in terms of a utility model.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

301

Latvia (EU)

Autortiesibas (Copyright)

Design Right

What is protected?

The original creation of an author in any material form.

The two- or three-dimensional ­ utward appearance of the whole o or a part of a product.

Requirements

>> Creation >> Authorship >> Originality >> (Any) material form

The design must be new and possess individual character.

Is there a registration form?

No. Protection starts automatically for all works that meet the requirements (also before completion).

3 years protection is granted ­ utomatically, without registration, a longer protection is only possible with a registration within one year of disclosure.

Term of protection

70 years after the death of the author.

Unregistered: 3 years. Registered: maximum 25 years after disclosure.

More information

http://www.oami.eu http://www.lrpv.lv/

Relevant to design?

Yes; “design works” are expressly included in copyright protection.

Specially created for the protection of designs; in fashion and graphic design protection granted without registration is quite short.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail; try to be included in museum collections and ­exhibitions.

See copyright. If you’re registering, then it’s best to immediately register for a Community design.

302

Precu zime (Trademark)

Patents (Patent)

Signs used to distinguish goods and services.

Invention that is new, possesses an invention level (inventive step) and is industrially applicable.

Words, numbers, graphic symbols, combinations of colors, threedimensional shapes (including those of goods themselves), combinations of the aforementioned, other types if they can be graphically represented.

>> Invention >> New >> Invention level (inventive step) >> Industrially applicable

Yes.

Patent: extensive and costly regis­ tration process including review and ­disclosure.

Unlimited; upon registration indefinitely renewable in 10-year terms.

20 years from the filing date of a ­ pplication.

http://www.oami.eu http://www.lrpv.lv/

http://www.lrpv.lv/

Suitable as protection for specific shapes of products, labels, and product packaging.

Only worth considering for technical aspects of a design.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold. If you’re registering, then it’s best to immediately register for a Community Trade Mark (CTM).

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

303

Russia

Copyright

Design

What is protected?

Works by authors (may also be ­creators).

The two- or three-dimensional ­ utward appearance of the whole o or a part of a product.

Requirements

An intellectual creation particular to its author.

>> Novelty >> Individual character

Is there a registration form?

No. Protection is automatic for all works that meet the requirements.

Yes. Registration is a necessary ­ rerequisite. Grace period of p 6 months after disclosure.

Term of protection

70 years after the death of the author.

Maximum of 15 years after ­disclosure (single extension of 5 years possible after 10 years).

More information

http://www.fips.ru/ruptoen/index. htm

http://www.fips.ru/ruptoen/index. htm

Relevant to design?

Protection excluded for the design itself; design drawings are protected.

Specially created for the protection of designs; in fashion and graphic design protection not feasible.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

304

Trademark

Patent / Utility model

Distinctive symbols.

Inventions, utility model available as registry right – but not for processes.

No combinations of letters that cannot be pronounced as a word.

>> Commercial applicability >> Novelty >> Inventive activity

Yes. Registration is a necessary prerequisite.

Yes. Patent registration proceedings include review and disclosure (utility model is a registry right – no review).

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after ­regis­tration, can be prolonged for ­additional 3 years.

http://www.fips.ru/ruptoen/index. htm

http://www.fips.ru/ruptoen/index. htm

Suitable as protection for labels and product packaging; not suitable for protection of products.

Only worth considering for technical aspects of a design; however usually only in terms of a utility model.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

305

South Africa

Copyright

Design

What is protected?

Literary, architectural, musical, dramatic, choreographic works.

The entire outward appearance of a product: >> Exterior impression and visual appearance in the case of an a ­ esthetic design >> Form and function in the case of a functional design

Requirements

An intellectual creation particular to its author.

The design must be new and ­distinctive.

Is there a registration form?

No. Protection is automatic.

Yes. Registration is a necessary ­ rerequisite. p

Term of protection

50 years after the death of the author.

Aesthetic design: 15 years. Functional design: 10 years.

More information

http://www.cipro.co.za/2/Home

Relevant to design?

The design itself is excluded from protection; however design sketches are protected.

Devised specifically for the protection of designs; review of application is purely a formality.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

With the merely formal application review and fairly rapid registration process, this protection is quite effective.

306

Trademark

Patent

Words, names, symbols, or devices, – including odor – which indicate a product’s origins.

Useful devices, substances, methods, or processes that are innovative and new.

No similarity with other registered or applied trademarks in the description of goods or services.

An invention (not already prior art); the requirements for the existence of an invention roughly correspond to those for an inventive step.

Yes. Registration is a necessary ­prerequisite.

Yes. A “provisional specification” affords a 12-month window of protection for experiments and improvements; no formal examination process for “complete specification” registrations, however not possible if colliding with priority patents.

Unlimited; upon registration in­definitely renewable in 10-year terms.

20 years after registration.

http://www.cipro.co.za/2/Home

http://www.cipro.co.za/2/Home

Suitable as protection for labels and product packaging; to a certain extent also suitable for the protection of the product itself.

Only worth considering for technical aspects of a design.

The registration process is relatively protracted, taking up to circa 30 months from the date of documentation (registration).

307

Spain (EU)

Propiedad Intelectual

Modelos Esteticos

What is protected?

Literary, artistic, and academic works.

The two- or three-dimensional ­ utward appearance of the whole o or a part of a product.

Requirements

The design must be new and possess individual character.

Is there a registration form?

No. Protection is automatic for all works that meet the requirements.

3 years protection is granted ­ utomatically, without registration, a longer protection is only possible with a registration within one year after disclosure.

Term of protection

70 years after the death of the author.

Unregistered (EU): 3 years. Registered (EU): maximum 25 years after disclosure.

More information

http://www.oami.eu http://www.oepm.es

Relevant to design?

Explicitly deemed employable in combination with commercial IP rights; thus also applicable for designs.

Specially created for the protection of designs; in fashion and graphic design protection granted without registration is quite short.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

See copyright. If you’re registering, then it’s best to register immediately for a Community design.

308

Marcas

Patentes

Any symbols represented graphically that are capable of distinguishing the goods or services of one business from another.

Inventions

>> Graphic “representability” >> Distinctiveness

>> Novelty >> Inventive step

Yes. Registration is a necessary ­prerequisite.

Yes. Registration proceedings include review and disclosure; utility model available as a registry right.

Unlimited; upon registration in­definitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.oami.eu http://www.oepm.es

http://www.oepm.es

Suitable as protection for labels and product packaging; despite some registrations, not suitable for product protection.

Only worth considering for technical aspects of a design.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold. If you’re registering, then it’s best to register for a Community Trade Mark (CTM) right off the bat.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

309

Sweden (EU)

Copyright

Design / Registered Design

What is protected?

Literary and artistic works.

The two- or three-dimensional ­outward appearance of the whole or a part of a product.

Requirements

See: “Relevant to design?”

The design must be “new and ­possess individual character.”

Is there a registration form?

No. Automatic protection upon publication of the work.

3 years protection automatically, without registration; longer protection only upon registration within one year of disclosure.

Term of protection

70 years after the death of the author.

Unregistered (EU): 3 years. Registered (EU): maximum 25 years after disclosure.

More information

http://www.oami.eu http://www.prv.se

Relevant to design?

Designs are explicitly protected under copyright, even if they’re also registered as a design.

Specially created for the protection of designs; in the fashion and graphic design realms protection granted without registration is quite short.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

Send images or copies of the designs and design sketches to yourself in a sealed envelope by registered mail. If you’re registering, then it’s best to register for a Community design right off the bat.

310

Trademark

Patent

Special symbols for the purpose of distinguishing goods or services in trade.

Inventions

Symbols, shapes, form, color, etc., that are capable of distinguishing the goods or services of one business from another.

>> Novelty >> Intrinsic distinction from current state of the art >> Industrial applicability

Yes. Registration is a necessary ­prerequisite.

Yes. Registration proceedings include review and disclosure.

Unlimited; upon registration in­definitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.oami.eu http://www.prv.se

http://www.prv.se

Suitable as protection for labels and product packaging; despite some registrations, not suitable for product protection.

Only worth considering for technical aspects of a design.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold. If you’re registering, then it’s best to immediately register for a Community Trade Mark (CTM).

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

311

Switzerland

Urheberrecht

Design

What is protected?

Works by authors (which may also be creators).

Outward appearance

Requirements

The design must constitute an “intellectual creation particular to its author.”

>> Novelty >> Individual character

Is there a registration form?

No. Protection is automatic for all works that meet the requirements.

Yes. Registration is a necessary­ ­ rerequisite; before this, only p ­entitlement will be granted.

Term of protection

70 years after the death of the author.

Maximum 25 years (in 5- year terms).

More information

http://www.ige.ch

http://www.ige.ch

Relevant to design?

For the design itself, protection is only permitted to a certain degree; design sketches are protected.

Designed specifically for the ­ rotection of designs, protection p in fashion and graphic design realms not realistic.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail; try to be included in museum collections and exhibitions.

312

Marke

Patent

Symbols that are capable of distinguishing the goods and services of one business from another.

A useful device, substance, method, or process.

>> Distinctiveness >> Nondescriptive >> Not misleading

>> Commercial applicability >> Novelty >> Inventive activity >> Comprehensibility to an expert

Yes. Registration is a necessary ­prerequisite.

Registration procedure, including review and disclosure.

Unlimited; upon registration in­definitely renewable in 10-year terms.

Patent: 20 years after registration.

http://www.ige.ch

http://www.ige.ch

Suitable as protection for labels and product packaging; not suitable for protection of the product itself.

Only worth considering for technical aspects of a design; however mostly only in terms of a utility model.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold. Switzerland’s location as an island in the middle of the EU is occasionally strategically advantageous.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

313

Turkey

Copyright

Industrial Designs

What is protected?

All nature of intellectual or artistic products that express the personality of their owners and are regarded as academic, literary, musical, artistic, or cinematographic works.

The outward appearance, perceptible with the human senses, of the whole of a product, a part of it, or its ornamentation.

Requirements

The design must constitute “an intellectual creation particular to its author.”

>> Novelty >> Individual character

Is there a registration form?

No. Protection is automatic for all works that meet the requirements.

Yes. Registration is a necessary ­prerequisite.

Term of protection

70 years after the death of the author.

Maximum 25 years; extendable in 5- year terms.

More information

http://www.tpe.gov.tr/portal/ default_en.jsp

Relevant to design?

The design itself is excluded from protection, but design sketches are protected.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

314

Specially created for the protection of designs; in fashion and graphic design protection not feasible.

Trademarks

Patents / Utility Models

Distinctive symbols, i.e. characters, shapes, forms, colors.

Inventions

Suitability for distinguishing the goods and services of one business from another.

>> Novelty >> Surpassing of the state of the art >> Commercial applicability

Yes. Registration is a necessary­­ ­prerequisite.

Registration procedure, including review and disclosure; utility model available as a registry right.

Unlimited; upon registration indefinitely renewable in 10-year terms.

Patent: 20 years after registration. Utility model: 10 years after regis­ tration.

http://www.tpe.gov.tr/portal/ default_en.jsp

http://www.tpe.gov.tr/portal/ default_en.jsp

Suitable as protection for labels and product packaging; limited suitability as product protection.

Only worth considering for technical aspects of a design; however mostly only in terms of a utility model.

Registration as a trademark is always a priority, as marks can be extended virtually worldwide without problem and they represent a distinct economic value that can be sold.

Due to the extensive and costly registration process, only advisable if protection of the technical solution can strengthen the Unique Selling Point on the market.

315

USA

Copyright

Design Patent

What is protected?

Literary, architectural, musical, dramatic, choreographic works.

New, original exterior design of an object for (industrial) production.

Requirements

Original works of authorship that are fixed in a tangible form of expression.

The design must be new and ­original.

Is there a registration form?

Not necessarily. Protection starts automatically, but registration is possible and recommended.

Yes. Registration is a necessary ­ rerequisite. The procedure is essenp tially a patent issuing procedure: the Patent Office determines whether the prerequisites have been met. The proceedings can take up to 2 years.

Term of protection

70 years after the death of the author.

Up to 14 years from the date of issue.

More information

http://www.copyright.gov

http://www.uspto.gov

Relevant to design?

The design itself is excluded from protection, but design drawings are protected.

Devised specifically for the protection of designs; due to the high requirements, protection is virtually unobtainable.

Recommendations

Send images or copies of the designs and design sketches to yourself in a sealed envelope by ­registered mail.

Obtaining protection of designs is very difficult in the U.S. – virtually impossible.

316

Trademark

Patent

Words, names, symbols, or devices that indicate the origin of a ­product.

Invention or discovery of new ­ rocesses, equipment, products, p or their composition – including any improvement – meant for use.

No similarity in the description of goods or services with other ­registered or applied trademarks.

An invention that is state of the art (prior art); the requirements for the existence of an invention roughly correspond to those for an inventive step.

Yes. There may be a difference between a federal and a state ­registration.

Yes. However the registration ­ rocess, including review and p d ­ isclosure, is much shorter than in other countries.

Unlimited; upon registration in­definitely renewable in 10-year terms.

Patent: 20 years after registration.

http://www.uspto.gov

http://www.uspto.gov

Suitable as protection for labels and product packaging; possibly suitable for product protection via inclusion of the logo in the product design.

Only worth considering for technical aspects of a design; however, it’s easier to obtain a patent here than in Germany.

Even more so than in other countries, trademark registration is the only way to secure protection from imitation of products. 317

Glossary of Legal Terms

Term

Commentary

abandonment,

Holders of registered trademarks are (usually) required to use their trademark in the area of registration within 5 years from the time of application or protection is void – even if the trademark is still registered.

­nonuse

acceptance

Once a person accepts the services they received, they lose all rights arising from any defective or insufficient services which were recognizable at the time of doing so.

acquired ­distinctiveness

A mark is not inherently distinctive, but acquires distinctiveness through use, i.e. market penetration; see distinctiveness.

action, legal action

Normal procedure in a court of law.

agreement, contract,

Arrangement between two parties with legally binding content for both.

deal, treaty arbitrary court

Extrajudicial board before which arbitration proceedings are ­conducted, usually consisting of one or three arbitrators.

arbitration

Extrajudicial procedures for dispute resolution initiated by the ­contending parties and conducted by an arbitral tribunal with the right of final decision. This process, like a lawsuit, is concluded with a settlement or a verdict.

buyout

License fee in the form of payment of a single lump sum regardless of the sales success of a product.

cease and desist

Positive response from a party who has received a cease and desist letter, consisting of a written statement in which they promise to refrain from the alleged conduct in future, see cease and desist letter.

declaration

319

Term

Commentary

cease and desist

(Extrajudicial) letter from a party who allegedly has had their IP rights violated, wherein the alleged infringer is accused of unlawful conduct and requested to refrain from this conduct in the future.

letter

common law

(As opposed to civil law) is the legal system used in most countries formerly under British rule. It uses binding precedent as the principal basis for adjudication rather than a legal code.

compulsory license

Statutory obligation of a holder of intellectual property rights to license these rights under certain conditions to any interested parties.

contractual penalty,

Promise by a contractual party to pay the other party an amount of money in the event of their committing a breach of either general or specific contractual obligations.

liquidated damages

copyright

In countries under common law, copyright primarily relates to the economic exploitation of a copyright registration, whereas in Europe, copyright primarily refers to the personal rights of the author arising from publication or disclosure of a work. Never­ theless, legal structures worldwide continue to be brought ever closer in alignment with one another.

covenant of

Prohibition of competition

­noncompete cybersquatting

Registering and/or using a domain name with the intent to profit from a trademark or trade name that belongs to someone else. ­Usually the cybersquatter offers to sell this domain to the person or company who owns the trademark at an inflated price.

damages

In the realm of violation of intellectual property rights, damages can be determined in three ways, see also treble damages.

design patent,

Intellectual property right specifically for the external (aesthetic) design of a product, generally subject to a registration – except in the EU.

design right

320

Term

Commentary

disclosure

De facto announcement of an innovation by which legal consequences are frequently triggered – in particular registration ­deadlines.

discreation

Formal, legal term for annihilation (i.e. of a plagiarized design). God creates, lawyers discreate.

distinctiveness,

The central concept behind trademark law, through which ­confusion on the market is prevented.

­distinctive character equal treatment with nationals

Principle in international agreements, whereby a state must provide equal treatment to the citizens of other states that are participating in the agreement.

exclusivity

Under intellectual property law, owners are granted certain ­ exclusive rights to a variety of intangible assets. Exclusive means that the owner or licensee is the sole party to possess these rights.

exhibition priority

In the event of registration of a design right, the backdating of the date of priority on a (possibly earlier) exhibition date must be ­certified by the exhibition organizer. See priority.

extension

Extending a trademark’s area of influence – usually geographically.

good faith (equity)

The mental and moral state of honesty, conviction as to the truth or falsehood of a proposition or body of opinion, or as to the rectitude or depravity of a line of conduct.

goodwill

The value of a business over and above its tangible assets.

grace period

The period of time permitted by the handling authority to elapse between public disclosure and registration for an IP right.

individual character

The central concept behind design protection, which above all focuses on the distinct, original derivation of a design.

injunctive relief

Right to demand another party to refrain from certain damaging acts or behavior. This can be enforced via the relevant legal mea­ sures on the basis of a ruling declared enforceable.

321

Term

Commentary

intangible assets

The precise definition of these words varies in international accounting law. Usually the meaning is that of intellectual property rights as a part of assets.

intellectual property

Collective term for all protective rights of an artistic or commercial nature.

(IP), intellectual property rights (IP rights) invention

Innovation in the technical realm consisting of a solution to a ­problem, a method, or a formulation.

inventive step

Requirement for a patent; in most countries this is understood as the stipulation that for an advancement to be recognized as such, informed experts shouldn’t be able to arrive at the result using ­simple derivations of existing knowledge and laws.

licence, license

Contractual granting of the usage rights to an IP right without t­ ransferal of the ownership, much like a rental.

mediation

Extrajudicial procedures for dispute resolution initiated by the ­contending parties and moderated by a mediator who is not authorized to make decisions.

mediator

A moderator between the conflicting parties in a mediation process who is not authorized to make decisions.

most-favored

A status or level treatment accorded by one state to another in international trade. The country which is the recipient of this treatment must, nominally, receive equal trade advantages as the “mostfavored nation” by the country granting such treatment.

nation clause

the need to keep a mark free for the trade nondisclosureagreement (NDA)

322

Statutory Regulation by which trademarks are forbidden to consist solely of characters or statements for the description of goods or services which have become a part of common everyday language use. Agreement on the obligation of one or both contracting parties not to communicate information to third parties. This enables de facto secrecy as well as usually a legally valid disclosure with all its consequences.

Term

Commentary

novelty

The central concept of design protection, which emphasizes the ­dissimilarity of a design from the known range of shapes.

palming off,

A form of product piracy: someone intentionally sells his own ­product with another party’s trademark (or one closely resembling theirs) – naturally without being authorized to do so.

passing off

patent

IP right for a technical innovation, granted after reviewal and ­disclosure procedures.

plagiarism,

Sale of a product under pretense of being of genuine origin or design.

rip-off (sl.) prior art

Entirety of the achieved state of technical-scientific knowledge and skills, as embodied in the documented patents and utility ­models, by the published state of research as well as the known laws of nature, or entirety of the achieved state of external appearance, as embodied in the registered and generally accessible designs and their corresponding representations.

priority

Legalese for “the early bird catches the worm.” The first party to disclose or register a right is normally the one who obtains it; problems naturally arise in this area when one party registers an IP right which was disclosed first by someone else.

Registered / Unreg-

A special form of design patent available in the EU either auto­ matically upon disclosure (UCD) or upon registration (RCD).

istered Community Design (RCD / UCD) registry right

An IP right obtained solely by registration as compared to auto­ matically granted (“unregistered”) rights and scrutinized rights (those which are scrutinized before being registered).

restraining order,

A speedy, temporary court decision on an injunctive relief because of an infringement of IP rights.

temporary restraining order reverse passing off

See passing off. Reverse passing off is when one party intentionally sells another party’s (original) product with a different label of their own (without authorization to do so). 323

Term

Commentary

royalty

Usually a percentage received from the sales of a product, less ­commonly, a percentage share of the profits or of the production costs.

scope of agreement

The abstract subject, which is the object of a contract.

service mark

Equivalent to a trademark, but related to services.

trademark

IP right for protecting and designating the origin of goods from a particular business.

trade name

Name of a company, which is protected by law without registration, usually simply on the basis of use.

treble or triple

Fixing of the amount of damages as equal to three times the normal royalty rate. This is the standard procedure in civil cases dealing with IP rights infringements in the U.S. with a view towards “prevention through deterrence.”

­damages

Unregistered

see: Registered / Unregistered Community Design (RCD / UCD)

­Community Design (UCD) utility model

A “mini”patent, available purely as a registry right, in other words as a registration only on the basis of a formal application, without implementation of the patent process.

warrant of rights

Guarantee by the licensor that the rights granted or transferred by them are free from third-party rights.

324

Addresses

www

Addresses (A–E)

inpi.gov.ar

Argentina: Instituto Nacional de la Propiedad Industrial (INPI)

ipaustralia.gov.au

Australia: Patent Office of IP Australia

fionabennett.com

Bennett, Fiona

inpi.gov.br

Brazil: Instituto Nacional da Propriedade Industrial (INPI)

cipo.ic.gc.ca

Canadian Intellectual Property Office (CIPO) / Office de la propriété intellectuelle du Canada (OPIC)

ncac.gov.cn

China National Copyright Administration (NCAC)

sipo.gov.cn/sipo_

China State Intellectual Property Office (SIPO)

English ctmo.gov.cn

China Trademark Office (CTMO)

citieslant.com

Citieslant: Arian Hassani’s Web site exploring matters involving ­creativity, innovation, and job creation in cities

dkpto.org

Danish Patent and Trademark Office (DKPTO)

designersbusiness.

DesignersBusiness®: Web site of Joachim Kobuss

de www.designlawforce.

DesignLawForce®: Web site of Alexander Bretz

com aenorm.de

Engelke, Anja

325

www

Addresses (E–I)

erfolgreichals­ designer.de

Erfolgreich als Designer: more information on the “Become a Successful Designer” book series

oami.europa.eu

EU: Harmonisierungsamt für den Binnenmarkt (OAMI / HABM)

kaviargauche.com

Fischer-Roehler, Alexandra; Kühl, Johanna

inpi.fr

France: Institut National de la Proprieté Industrielle (INPI)

existenzgruender.de

Germany: Bundesministerium für Wirtschaft (D): information for start-ups

dpma.de

Germany: Deutsches Patent- und Markenamt (DPMA)

kuenstlersozi-

Germany: Künstlersozialkasse: information on social security for artists

alkasse.de verdi.de

Germany: Vereinigte Dienstleistungsgewerkschaft ver.di: trade union for employed creatives; association of self-employed designers

bahn.de

Henze, Karsten (Deutsche Bahn)

fonshickmann.com

Hickmann, Fons Prof.

ipindia.nic.in

India Controller General of Patents, Designs and Trademarks (IPO)

copyright.gov.in

India Copyright Office (ICO)

icann.org

Internet Corporation of Assigned Names and Numbers (ICANN)

Ipdragon.blogspot.

IPDragon: excellent blog about IP and related topics in China

com patent.justice.gov.il/

Israel Patent Office (IPO)

MOJEng/RashamPatentim/default. htm uibm.gov.it 326

Italy: Ufficio Italiano Brevetti e Marchi (UIBM)

www

Addresses (J–U)

cric.or.jp/cric_e/csj/

Japan Copyright Research and Information Center (CRIC)

csj.html jpo.go.jp/index.htm

Japan Patent Office (JPO)

kipi.go.ke

Kenya Intellectual Property Institute (KIPI)

kipo.go.kr/kpo/eng

Korea Intellectual Property Office (KIPO)

ariklevy.fr

Levy, Arik (personal and Ldesign)

ldesign.fr pentagram.de

Oehler, Justus (Pentagram)

opendesignclub.com

Open Design Club

fips.ru/ruptoen/ index.htm

Russia: Federal Service for Intellectual Property, Patents and ­Trademarks (ROSPATENT od. FIPS)

oepm.es

Spain: Oficina Española de Patentes y Marcas (OEPM)

cipro.co.za/2/Home/

South Africa: Companies and Intellectual Property Registration Office (CIPRO)

prv.se

Sweden: Swedish Patent and Registration Office (SPRO)

ige.ch

Switzerland: Eidgenössisches Institut für Geistiges Eigentum (IGE)

ip4all.ch (barrierefrei) tpe.gov.tr/portal/

Turkey: Turkish Patent Institute (TPI)

default_en.jsp ipo.gov.uk

UK: Intellectual Property Office (IPO)

copyright.gov

United States Copyright Office (USPTO)

uspto.gov

United States Patent and Trademark Office (USPTO)

327

www

Addresses (U–Z)

unternehmendesign.de

Unternehmen Design (Un:D): German institute promoting ­entrepreneurship in design

stopfakes.gov/

USPTO: information on IP particularly relevant to small businesses

smallbusiness vitra.com

Vitra AG (Eckart Maise)

wipo.int

World Organization for Intellectual Property (WIPO)

wipo.int/directory/

WIPO: List of national offices and supranational Organizations for IP

en/urls.jsp sabine-zentek.de

328

Zentek, Sabine

Literature

Author(A–F)

Title/Publisher/ISBN

Thomas Bärnthaler

(…) Hilfe! Uns gehen die Namen aus! Süddeutsche Zeitung, Magazin 27/2008, July 3rd, 2008 http://szmagazin.sueddeutsche.de/texte/anzeigen/25348

Carl Barks

Uncle Scrooge: The Sunken Yacht Walt Disney’s Comics and Stories 104, Burbank, Ca., May 1949

Leslie Davis Burns,

The Business of Fashion: Designing, Manufacturing, and Marketing Fairchild, New York, N.Y., 3rd ed. 2007 978-1563675706

Nancy O. Bryant

Richard E. Caves

Creative Industries – Contracts between Art and Commerce Harvard University Press, Cambridge, Mass., 2000 0674008081

Ronald Coase

The Nature of the Firm Economica, Vol. 4 (1937), p. 386–405 The Problem of Social Costs Journal of Law and Economics, Vol. 3 (1960), p. 1 ff.

Tad Crawford, Eva Doman Bruck, Carl W. Battle Roger Fisher, William Ury, Bruce Patton

Business and Legal Forms for Industrial Designers Allworth, New York 2005 978-1581153989 Getting to Yes: Negotiating Agreement Without Giving In Random House, London 2008 978-0140157352

329

Author(H–M)

Title/Publisher/ISBN

Tina Hart,

Intellectual Property Law Palgrave Macmillan, Houndmills, Basingstoke, Hampshire, 4th ed. 2006 978-0230006331

Linda Fazzani, Simon Clark

Steve Jobs

Thoughts on Music Cupertino, Ca., February 6th, 2006. http://www.apple.com/hotnews/thoughtsonmusic/

Immanuel Kant

Von der Unzulässigkeit des Büchernachdrucks (1785) republished in: Archiv für Urheber-, Film-, Funk- und Theaterrecht (UFITA), vol. 106, July 1987, p. 137–144

Michael Kittner

Schuldrecht. Rechtliche Grundlagen – Wirtschaftliche Zusammenhänge Vahlen, München, 3rd ed. 2003 3800629747

Lawrence Lessig

Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity Penguin, New York Penguin, 2004 1594200068 http://free-culture.org/freecontent/ Es geht nicht darum, Madonnas Musik zu stehlen Interview mit Andreas Zielcke, Süddeutsche Zeitung, December 22nd, 2006 http://www.sueddeutsche.de/kultur/641/404420/text/

Wolf Lotter

Die Gestörten. Deutschland begibt sich auf die Suche nach der Creative Economy, dem Schlüssel zur Wissensgesellschaft. Und stößt dabei auf eine Klasse, die irgendwie nicht ins Konzept passt. Brandeins, 5/2007, p. 53 http://www.brandeins.de/archiv/magazin/schwerpunkt-ideenwirtschaft/artikel/die-gestoerten.html

Wolfgang Münchau

Das Ende der Sozialen Markwirtschaft Hanser, München 2006 978-3446405592

330

Author(P–S)

Title/Publisher/ISBN

Donald Passman

All You Need to Know About the Music Business Free Press / Simon & Schuster, New York, 7th ed. 2009 978-0743293181

Matthias Pierson,

Recht des geistigen Eigentums Vahlen, München 2007 978-3800634286

Thomas Ahrens, Karsten Fischer Richard Posner

Economic Analysis of Law Aspen Publishers, Aspen 1973 (current edition 2007) 978-0735563544

Pricewaterhouse-

US-GAAP und IAS/IFRS TEIA, Berlin 2003 http://www.teialehrbuch.de/Kostenlose-Kurse/­US- GAAP-und-IAS-IFRS/

Coopers, Christian Böttger

John Rawls

A Theory of Justice Harvard University Press, Cambridge, Mass., 1971 (current edition 2005) 978-0674017726

Dieter Rebel

Gewerbliche Schutzrechte. Anmeldung – Strategie – Verwertung Heymanns, Köln u.a., 5th ed. 2007 978-3452256898

Fritz Riemann

Grundformen der Angst. Eine tiefenpsychologische Studie Reinhardt, München, 37th ed. 2006 978-3497007493

Danny Quah

Clifford Barclay Memorial Lecture: Managing and Respecting Intellectual Assets in the 21st Century Oxford, November 13 th, 2003 http://www.lse.ac.uk/collections/LSEPublicLecturesAnd Events/events/2003/20030915t1457z001.htm

Matthias Schranner

Der Verhandlungsführer Deutscher Taschenbuch Verlag, München, 2nd ed. 2006 978-3423343190

331

Author(S–Z)

Title/Publisher/ISBN

Amartya Sen

Poverty and Famines – An Essay on Entitlement and Deprivation Oxford University Press, Oxford 1982 0198284632 The Idea of Justice Allen Lane / Penguin, London, 2009 978-1846141478

Richard Stim

Patent, Copyright & Trademark. An Intellectual Property Desk Reference NOLO, Berkeley, Ca., 9 th ed. 2007 978-1413306460

Jens Weidner

Die Peperoni-Strategie. So setzen Sie Ihre natürliche Aggression­ k­ onstruktiv ein Campus, Frankfurt/Main 2005 978-3593377889

Alexander Wulf

A Comparative Approach to the Protection of Fashion Innovations Berkeley, Ca., 2007 URL: http://repositories.cdlib.org/bclt/lts/39

Sabine Zentek

Designschutz. Fallsammlung zum Schutz kreativer Leistungen in Europa Lelesken, Dortmund, 2nd ed. 2008 978-3981232608

332

Index

A

aggression, positive 72 amendments and additions to the c­ ontract  204 American Law Institute 210 antiaggression training 73 Anticybersquatting Consumer Protection Act (ACPA) 137 antitrust laws 139 Apple 35 application 91 arbitrary courts 218 arbitration 45, 218 assertiveness 74 assessing rights 77 assets 78 avoiding liability 207 B

balance sheet 78 Bang & Olufsen A/S 122 Barks, Carl 147 Basel II 84 basis for calculations 193 battle of forms 201 Bauhaus designs 96 best-case scenario 61 Bohmte 31 brand-affiliated rights 129 brands 33 brand symbol 91 British Rail 149 brownnoser trip 16

bureaucracy factor 93, 101, 103, 117 buyouts 191 C

capital 78 Caves, Richard E. 167, 192 cease and desist declaration 41, 44 cease and desist letters 41, 43, 44, 49 challenge trip 16 Cheapest Cost Avoider 161, 162, 211 Cheapest Insurer 161, 166, 212 children’s toys 214 chili pepper strategy 73 China 27, 126, 142 classification 121 Coase, Ronald 159 collateral 84, 173 Commander 61 commercial exploitation 148 communication design 32, 51, 52 Community Trade Mark (CTM) 117, 122 Constitution of the United States of America 24 consultation fee 195 consulting services 184 content definition 182 contract 158 contract of sale 201 Contracts for the International Sale of Goods (CISG) 216 contractual obligations 208 contractual penalty 41 contractual provisions 160

333

copying 38 copyleft symbol 90 copyright 25, 93 Copyright Act 95 copyright laws 24, 94 copyright law system 25 copyright legislation 25 copyright notice 134 copyright-protected 52 copyright protection 55, 93 copyright symbol 90 cost factor 93, 101, 103, 118 COUNCIL REGULATION (EC) 105, 118 Creative Commons 25 creative commons symbol 90 creative industries 235 creative skills 59 cultural and creative industries 24 cybersquatting 137 D

debts 78 Decision Maker 61 delivery date 202 demerger 82 Denmark 235 Design Agreement 219 Design Business 58, 74, 81, 187, 196 design contract 204, 219 design disciplines 51 designer’s services 177 design fee 187 Design Future 58 design industry 13, 52, 235 design patent 53, 95, 101 design patents 32 design rights 89, 113 design symbol 91 Deutsche Bahn 251 development of a design 177 Digital Rights Management (DRM) 35 334

diplomatic service training 60 distinction 118 Donald Duck comic called The Sunken Yacht 147 Duplo 122 E

Eames, Charles and Ray 183 Economic Espionage Act 135 economy of scale 70 Elf-Acquitaine 121 Engelke, Anja 245 enlargement of the cake 66 entrepreneurs 16 entry controls 93, 101, 103, 117 environmental liability 213 equal treatment with nationals 28, 125 EU Community Trade Mark 126 Europe 239 European Community Design 103 European Patent Convention (EPC) 151 European Patent Office 151 European Tribunal of First Instance 122 European Union (EU) 27, 102, 109, 140 EU-wide registration 103 exclusive rights 107, 123 exhibition priority 105 F

fashion and textile design 52, 54 fashion designs 32 Federal Trade Commission 136 fees 187 Ferrero 122 Fischer-Roehler, Alexandra 249 Flanbaum, Torben 145 form 118 form follows function 96 Frederick, Charles Osmond 149 fulfillment strategy 162 future 235

G

General Agreement on Tariffs and Trade (GATT) 123 general considerations 166 Geneva Act 111 Geneva Phonograms Convention 91 Geneva Trademark Law Treaty (TLT) 124 geographical definition 182 German antitrust law 142 German Federal Supreme Court 138 German Product Liability Act 213 Germany 142 globalization 235 globalization factor 93, 101, 103, 118 granting of usage rights 181 Great Britain 26, 104, 141 Great Britain’s unregistered design 236 gross sales figure 69

interest 202 interior design 51, 54 International Accounting Standards (IAS) 80 international business 215 international contracts 215 international copyright treaties 109 International Financial Reporting Standards (IFRS) 80 international jurisdiction 216 internationally harmonized legal system 235 international terms 215 Internet Corporation of Assigned Names and Numbers (ICANN) 138 Internet domain names 121, 137 inventory 81 IP rights 99, 102, 108, 123, 139, 145 iTunes Store 35

H

Hague Act 111 Hague Convention 151 Harvard University 60 Henze, Karsten 251 Herman Miller 183 Hickmann, Fons 253 I

ideas 89 Indian design law 97 Indian trademark law 236 individual character 105 industrial and product design 51, 53 industrial design patent 26 industry differences 192 inheritance factor 93, 101, 103, 118 injunctive relief 42 insolvency 82 insurance 46, 174 intellectual property rights 24, 89 intellectual property rights disputes 44 intellectual property rights systems 54

J

Jaguar 119 Japan 26, 142 Japanese copyright law 236 Japan Fair Trade Commission 142 Jefferson, Thomas 31 Jobs, Steve 35 judgement creditor 39 jurisdiction and applicable law 204 K

Kant, Immanuel 94 Krøyer, Karl 147 Kühl, Johanna 249 Künstlersozialabgabe 70 L

Lanham Act 136 Lasercomb America 139 law against unfair competition 142 Law and Economics 159 Learned Hand’s Formula 161, 163 335

Learning From Those Without Rights 33 legal fees 44 legislative safety nets 33 Lessig, Lawrence 25, 239 Levy, Arik 255 liability for design 210 liability insurance 212 liability risks 212 liable party 39 license contract 80 licenses 83 licensing fee 68, 69, 80 limitations 99 limitations and exclusions of liability 203 limited liability 211 liquidated damages 171 loan security 174 logos 33 London Act of the Hague Agreement 91 Lotter, Wolf 17 M

Madrid Agreement Concerning the International Registration of Marks 124 Maise, Eckart 235, 257 market launch 70 mark free 120 meaning 118 mediation 45 mediation activities 185 mediation services 196 MENU A/S 145 microeconomic theory 159 Minol 121 music market 35 mutual obligations 64

336

N

namely copyright 89 negotiation process 58 negotiations 57 Negotiator 61 Netherlands 31 newness 105 Nice Classification 121 nightmare trip 16 Nondisclosure Agreement (NDA) 134 , 162 nongovernmental court of law 45 notice of confidentiality 134 O

Oehler, Justus 259 OHIM 27 Open Design Club 25 open-source 25 outward appearance 104 P

Paris Convention 151 Paris Convention for the Protection of Industrial Property 124 passing of risk 202 Passman, Donald 190 Patent and Trademarks Office (PTO) 95 patenting procedure 148 patent lawyer 148 patent priority 150 patents 26, 145 patents worldwide 151 payment deadlines 202 pedestrian lights 15 Pentagram 259 personal intellectual creation 89 phonorecord symbol 91 photographic novelty 105 pictorial marks 119 pitch fee 197 plagiarism 38 Posner, Richard 159

Post-it notes 148 precedence 160 preproduction costs 69 presentations 165, 175 price components 202 primary rights 23 prior art 146 priority 96 product-affiliated rights 113 product liability 212 product’s life cycle 70 product symbol 91 profit factor 93, 101, 103, 118 prompting 65 proof (self-documentation) 92 protection of ideas 89 protective clause 201 public court of law 45 Q

Quah, Danny 239 R

reciprocity principle 64 reduction of the royalty rate 193 Registered Design right (RCD) 25 , 104 registration 91, 108, 125 reimbursement of expenses 185, 196 reservation of title 202 resolutive condition 60 Revised Berne Convention (RBC) 109 Reynolds 139 Riemann, Fritz 72, 74 right of termination 172 right of withdrawal or return 203 rights, moral 99 rights worldwide 108 rigths, exploitation 99 risk planning 162 Rome Convention 91 royalties 191 rules of combining 193

S

sales figures 70 sample contracts 168 self-knowledge 169 self-motivation 58 Sen, Amartya 236, 239 service design 52 shared space 31 Shell 138 sheltering 69 Singapore Treaty on the Law of Trademarks (STLT or Singapore Treaty) 124 SMART formula 61 specialized financial backer 47 standard amount for a buyout 194 standard amount for royalties 195 standard bank loan 47 statute of limitations 173 Stim, Richard 94 sublicenses 195 Superior Risk Bearer 161, 166 suspected infringer 41 symbols 90, 116 T

tactic, circumstances 70 tactic, empathy 71 tactic, patronizing 68 tactic, relief 72 tactic, surplus 66 tactic, surprise 67 temporary restraining order (TRO) 42 Terms and Conditions 199 The FBI Method 61 The Harvard Method 60 Third Restatement of Torts 210 three-dimensional marks 122 time definition 183 Total 121 trademark 26 trademark extension 125 trademark infringements 126 337

trademark licenses 83 trademark protection 82 trademark rights 115 Trade Marks Act 141 Trade-Related Aspects of Intellectual ­Property Rights (TRIPS) 109, 123, 151 Trade Secret 33 traffic lights 15 Treaty on European Union (TEC) 140 U

Uniform Commercial Code (UCC) 173 uniform IP right 237 Uniform Trade Secrets Act (UTSA) 135 United States Copyright Office 95 Universal Copyright Convention (UCC) 109 Unregistered Community Design right (UCD) 104 unregistered design right 26 UN trade law 216 Ury, Roger 60 Ury, William L. 60 USA 26 usage fee 190 U.S. copyright law 28 U.S. Court of Appeals 139 U.S. Customs and Border Protection Service (CBPS) 123

338

use 98, 116 useful article doctrine 95 usefulness 98, 116 US-GAAP 79 U.S. Patent and Trademark Office 102 utility model 150 V

value 77 Vienna Convention 216 Vitra 183, 235, 257 W

Web site design 32 Weidner, Jens 73 win-win situations 60, 73 WIPO 27 word marks 119 work phases 178 World Intellectual Property Organization (WIPO) 108 World Trade Organization (WTO) 123 worst-case scenario 43 WTO 27 Z

Zentek, Sabine 261

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