The start of a new year is the perfect time for a PR firm to make sure it not only has a preferred form of its agency-client agreement, but also that this form adequately addresses its current needs.
Many agencies prefer a brief, bare-bones agreement that addresses only such issues as the scope of services, payment, and termination, so as to avoid protracted negotiations and to minimize "legalese." However, the changing nature of the PR firm-client relationship may require an elegant – albeit slightly more complex – agreement to reflect an enhanced scope of services.
Over the past several years, the services PR agencies have provided their clients have broadened significantly. Today these include creative and social media, branding, and data analytics, among other specialties. Although this should prove lucrative for the agency, it also comes with a multitude of potential legal land mines. Examples include patent liability, as well as social media and data-security issues. Therefore, it is prudent to update the client agreement to address this new landscape.
In addition to the standard terms of a client agreement, a well-constructed PR agency-client agreement for 2015 should also address these seven key issues:
•Protect your own intellectual property. It is typical for the client to own any work product the PR firm provides, especially any creative work. However, the agreement should differentiate between any work the agency created specifically for its clients and the firm’s pre-existing intellectual property, such as its templates, source code, and methodologies for data analysis. The PR firm should retain ownership of these materials.
An agency may wish to grant a client a limited license to use its intellectual property to the extent necessary to make use of the work product. A license and outright ownership are, however, completely different. In addition, if a PR firm grants a license to a client, it should be non-exclusive so that the agency can use it for its other clients and for its own benefit.
•Do not be on the hook for any user-generated content. Social media has become a standard component of an agency’s services. It is therefore important for firms to recognize the corresponding legal risks. Tweets, posts, and other user content may infringe on another party’s intellectual property rights or violate the law (such as those dealing with false and deceptive practices) when used by the client. Therefore, the client agreement should include a provision that states the firm is not responsible for any user-generated content in connection with its social media work.
•Do not be the client’s bank. If the firm will be incurring significant third-party expenses for the client, the agreement should include "sequential liability" language. This means the agency will not be liable to pay these third parties unless and until it receives the applicable funds from the client. In addition, the agreement should state the PR firm reserves the right to request pre-payment for any substantial third-party outlays.
•Firms should not be legal experts. Increasingly, clients seek to impose legal liability on agencies in areas of law where the client should have greater expertise. Examples include pharmaceutical law, securities law, and other areas of law in heavily regulated client businesses. The PR firm should resist this legal exposure. The agreement should state that the client, not the PR agency, is liable for any material it provides or approves before it is disseminated.
•Protect yourself from patent trolls. When a firm provides digital content, it is at risk for claims of patent infringement. "Patent trolls" are companies that buy up patents and lie in wait to sue unsuspecting users. In recent years, patent trolls have become the bane of many agencies’ existence. Legal action from patent trolls can lead to substantial liability, ranging from five-figure settlements to multi-million-dollar judgments. Therefore, the client agreement should specifically exclude liability to the firm for any patent infringement claims.
•Understand your data-security obligations. When negotiating a master agreement, the client often seeks to impose its standard data security language on the PR firm. These provisions can impose onerous obligations, regardless of whether or not they apply to the agency’s services. If an agency will not be collecting or otherwise using personally identifiable information, it should not assume these obligations. Compliance with data-security procedures can be time-consuming, expensive, and can undermine a firm’s profit margin. For these reasons, the PR agency should think twice before undertaking these obligations.
•Limit your liability. As the services provided by PR agencies have become more multifaceted, their potential legal exposure has increased in lockstep. As such, a PR firm should consider adopting the recent practice of ad agencies by seeking to limit its liability under the agreement, which should state that the agency is not responsible for any indirect damages, such as lost profits. In addition, the PR firm’s overall liability should be limited to an amount equal to the fees it receives under the applicable statement of work.
These seven provisions should be part of a firm’s updated client agreement. If done correctly, the agency’s new agreement can help it enjoy the revenue from an increased scope of services while protecting it from the greater legal risks that may come with it.
Columnist’s note, February 11: In my most recent column advising firms how to improve their client agreements, I advised firms to shield themselves from liability from claims by "patent trolls." The purpose of this statement was to provide a "self help" tip on how firms can protect themselves from frivolous patent litigation brought by entities that did not design, manufacture, or distribute products that were patented or patentable. Unfortunately, in my legal practice, I have seen numerous such patent claims brought against my clients. However, I would like to clarify that my remarks were in no way intended to impugn inventors or other legitimate patent rights holders, including non-practicing entities that help foster innovation by helping others monetize their intellectual property rights. It is important to make this distinction, especially since the House Judiciary Committee just reintroduced a patent litigation reform bill known as the Innovation Act. While the bill seeks to restrain bad actors, it may also unduly burden legitimate holders of patent rights.
Michael Lasky is a senior partner at the law firm of Davis & Gilbert LLP, where he heads the PR practice group and co-chairs the litigation department. He can be reached at email@example.com.