How to Hire the Right In-House Legal Counsel (and Save Your Startup Money)
Timing matters (and earlier is better).
Photo: ColorJoy Stock
If you’re looking to hire legal counsel for your company, be careful. Just because you’ve found a lawyer who specializes in startups, doesn’t mean they’re the right legal counsel for you or your startup. Here’s how to evaluate whether a lawyer is right for you.
Experience Is Important
In order to reap the benefits of hiring an in-house counsel early, you need to hire the “right” lawyer. Look for someone who has worked in your industry, and if possible, in the particular type of business your startup is involved in, which will make their existing knowledge and experience transfer easily to the company.
The right lawyer should bring real-world considerations into any legal analysis and be able to assess and articulate risks without making a startup feel that all roads to achieving its business goals are blocked. If a particular course of conduct is deemed to be too risky to pursue, an in-house lawyer should be able to suggest safer alternatives to consider, balancing legal requirements with the needs (and vision) of the business.
Consider Culture Fit
Fit within your company culture is also important. Your in-house legal team should be adept at forming relationships with the other key members of your leadership team, so that they, too, see the lawyers as a helpful source of guidance and strategic input, rather than simply naysayers.
Timing Matters (and Earlier Is Better)
It is much easier for in-house counsel to be viewed by your management team as a “partner” and not a “blocker” when that person is brought into the conversation early and is part of discussions about the vision and path of the company. Bringing a lawyer on board when there are already fires to put out makes it harder hard to view them as the strategic partner they can be.
By bringing on the right in-house counsel early in your startup’s life, you can build a legal department that is not simply a “cost,” but a true strategic partner of the business. This paradigm shift can end up saving you money, angst, and reputational damage, and will ultimately lead you and your company to be more successful.
“By bringing on the right in-house counsel early in your startup’s life, you can build a legal department that is not simply a “cost,” but a true strategic partner of the business.”
—Amy Rowland, Founder of Varia Search
About the Author: Amy Rowland is the founder of Varia Search, a boutique legal recruiting firm that uses a bespoke approach to fill legal department roles. Prior to starting Varia Search, Amy was a recruiter at another legal search firm where she focused on recruiting for in-house legal positions. She has also held in-house roles at two international companies and a large New York City law firm.
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What You Need to Know About Design Protection in the Modern Age
An attorney explains.
Photo: Christina Jones Photography
Although counterfeiting and “copycat production” happens around the world on a daily basis, the media has shed light on specific incidents such as the escalating dispute between a small Los-Angeles based illustrator and designer, Tuesday Bassen, and the Spanish retailer, Zara. Young designers should be wary of the lessons learned from this case and would be all the wiser by looking into what unique elements of their clothing can be protected. In addition, knowing how much “inspiration” they can take from other designers without it violating the intellectual property rights of another artist or designer is equally as important.
In the case of Tuesday Bassen, some fans believed that she had been secretly working with the big-time Spanish retailer. However, that was not the case. Tuesday Bassen first realized similarities in her designs and Zara’s later products in early 2016 and attempted to take legal action. However, for someone like Bassen, her funds have taken a hit from just these introductory legal exchanges. What we know from the press is that Bassen has already shelled out thousands of dollars in defense of her accusations. She also took to Instagram to voice her grievances to her followers, resulting in artists and bloggers publicly supporting and sharing Bassen’s, and even sharing their own stints with other alleged copycats. Zara later provided a statement detailing the company’s character as one of the utmost caliber with respect for all creators and the art they produce. The company even went so far as to suspend sales of the products in question when originally notified by Bassen’s legal representation and has stated that it wishes to stay in contact with Bassen to resolve this matter amicably.
In light of the lightning-fast pace of the industries, it seems that designers and artists are constantly copying, reworking, and building on the works of other creatives. Simply trademarking your name or logo only goes so far to protect designers in this day and age.
“Simply trademarking your name or logo only goes so far to protect designers in this day and age.”
So where does the modern artist or designer turn to in an effort to protect their designs?
1. Copyright Protection
Copyright is a legal right that grants the creator of an original work exclusive rights for its use and distribution. This is usually only for a limited time. The exclusive rights are not absolute but limited by limitations and exceptions to copyright law, including what is called “the doctrine of fair use.” A major limitation on copyright is that copyright protects only the original expression of ideas, and not underlying ideas themselves.
Copyright law requires that the work (1) be of a sufficiently permanent nature that it may be reproduced or communicated for more than a transitory period; (2) be independently created by the author, and that it possesses at least some minimal degree of creativity; and (3) not be an “idea, procedure, process, system, method of operation, concept, principle or discovery.” Artwork, photographs, and three-dimensional sculptures are prime candidates for copyright protection. Another great form of protection for designers is to incorporate a unique and copyrightable fabric pattern into their designs.
Copyright protection protects unique designs on accessories and apparel, such as ornamental graphic logos, but not the designs themselves unless the design features sculptural or pictorial features. An entire body of law exists which extends copyright protection to certain unique jewelry designs, as well. While the copyright in and to an original work exists from the moment it is “published,” copyrights should be registered with the U.S. Copyright Office within the first sixty (60) days after publication in order to be able to recover attorneys’ fees and statutory damages from endeavoring copycats.
2. Trademark Protection
A trademark is a recognizable sign, design, or expression which identifies products or services of a particular source from those of others, although trademarks used to identify services are usually called service marks. The trademark owner can be an individual, business organization, or any legal entity. A trademark may be located on a package, a label, a voucher, or on the product itself. Slogans, logos, brand names, and similar all merit trademark protection, however, trademark protection does not protect unique designs in and of themselves, only identifiable signs. That being said, often clothing does not feature any identifiable name brand on the exterior.
“Trademark protection does not protect unique designs in and of themselves, only identifiable signs.”
Most men’s jackets, for example, may feature a label on the inner jacket pocket. Crafty designers have found ways to incorporate their brand into other design features of the clothing such as embroidery or emblazoning their insignia on buttons or lapel pins.
3. Trade Dress Protection
Trade dress, like a trademark, is a legal term of art that generally refers to characteristics of the visual appearance of a product or its packaging that signify the source of the product to consumers. Some of the best examples of trade dress in the fashion industry are Christian Louboutin’s red sole, Bottega Veneta’s intrecciato or “woven” leather designs, the red stripe on the heel of Del Toro’s slippers and the match stick, tucked into the brim of a Nick Fouquet hat. Colors, patterns, symbols, and other similar design features can classify as trade dress.
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), protects the author from infringement of the unregistered trade dress of a product. However, obtaining a registration for trade dress is often a costly and time-consuming process. Generally, trade dress is protectable only under either of two circumstances: (1) the trade dress is inherently distinctive or (2) has acquired “secondary meaning”, such that consumers have come to identify the brand simply by the appearance of the trade dress.
Trade dress protection is generally not available to works where (1) the design element is in any way functional, or (2) the claimed trade dress amounts to nothing more than an abstract image or marketing approach. In most cases, the U.S. Trademark Office only affords full protection to trade dress after five (5) years of use or if a designer can provide sufficient evidence that the industry and the general public recognize the design element as belonging to the designer. (For example, a consumer knows just by looking at the red sole of a high-heeled shoe, that the shoe was made by Louboutin).
4. Design and Utility Patent Protection
In general terms, a "utility patent" protects the way an article is used and works, while a "design patent" protects the way an article looks. Both design and utility patents may be obtained on an article if invention resides both in its utility and ornamental appearance. While utility and design patents afford legally separate protection, the utility and “ornamentality” of an article are not easily separable.
A design patent is a form of legal protection granted to the ornamental design of a functional item. Design patents are a type of industrial design right. While copyright law requires only that a work of expression be sufficiently original to be protected, patent law requires a much higher degree of novelty and “non-obviousness.” Design patent protection is much shorter than the duration of copyright. It provides a complete monopoly so that even if someone independently comes up with your design, your design is protected. The US Patent and Trademark Office will generally grant a design patent if a designer can prove that his or her design is: (1) new, (2) "nonobvious"—a legal term of art; and (3) ornamental only, not solely functional. Elements one and two are hard to meet in the fashion world.
Unlike under copyright protection where the preparers of derivative works based on the original copyright hold no rights, the second-comer who invents a patentable improvement on a design patent may apply for and receive a patent regardless of whether the first inventor authorized the improvement.
Alexander Wang is famous for filing design patents for his fashion items, particularly for his handbags. Many of his items that have been afforded design or utility patents are “hardware heavy”. Earlier this year, Wang successfully obtained a 14-year design patent on several of his "bags with corners"—the official title of the patents on his handbags with metal-covered corners.
In Conclusion:
Designers should not limit themselves to only one of these options but should consult with an attorney who is well-versed in intellectual property protection to prevent the tragedy of having their work knocked off by companies large and small who are "inspired" by their hard work and ingenuity.
About the Author: Christopher Dischino leads Dischino & Company, a Miami-based law firm that provides legal advice and strategic consulting for the modern business, the entrepreneur, the free-thinker, and those looking for something outside the box. With a knack for the creative and an entrepreneurial attitude, Christopher specializes in business law, intellectual property, and corporate transactions, assisting private clients and corporate entities to establish and expand their businesses domestically and abroad. His experience allows him to create value for his clients by using resourceful structuring techniques to help minimize unnecessary costs and risks. Get more info on Christopher and his law firm here.
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This story was originally published on February 17, 2019, and has since been updated.
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Read This Before You Sign That Contract, Advises an Attorney
Don’t pick up your pen just yet.
Photo: Vlada Karpovich from Pexels
The Professional: Mary C. G. Kaufman, Attorney in Los Angeles, CA
The ladies over at Create & Cultivate asked if I could write a column providing some basic and general advice regarding contracts. I thought this was an excellent idea given that many otherwise accomplished creative entrepreneurs lack experience with negotiating and understanding contracts.
So first, some not necessarily legal advice: There’s always room for negotiation. Take a cue from Cher Horowitz in “Clueless”—even bad grades are negotiable. Until it’s signed, the terms of a deal are not set in stone just because someone sent you over a proposed agreement. For example, maybe there’s no wiggle room in raising your fee, but can the other side give you units of product, a discount for their goods, a special credit, or something else besides cold hard cash? There’s no harm in asking. Think about creative ways to benefit from the deal, even if you can’t get more money. As always, this is a do-your-research and know-your-audience situation.
Second, familiarize yourself with a few oft-overlooked standard legal provisions that can make a big difference. Let’s get into a few of them.
Indemnity Clauses
In short, these allow parties to seek reimbursements or damages for certain conduct or occurrences. For example, if you are creating content (i.e. an Instagram takeover) for someone else, that party may want reimbursement from you in the event that the content you created causes them to be involved in a copyright infringement lawsuit. These clauses can be mutual (going both ways) or unilateral (just going to one party).
Arbitration Provisions
These authorize a private judge to determine a dispute between the parties. Meaning, instead of going to court, the case could be mediated by a private judge instead. Arbitration has pros and cons. For example, it can be more expensive to go with a private judge, as you will be paying for the judge’s time (outside of arbitration, you are merely paying filing fees), however, it can be quicker and the dispute will not necessarily be made public (normally, all filings in a lawsuit are a matter of public record).
Forum Selection & Choice of Law Clauses
These determine where and which laws will apply to any disputes. Say, you’re in California but the company you’re working with is based in Texas, this clause would determine which state law would apply and where any disputes will be handled. Generally, you would want to have your state’s law apply and be able to handle any disputes in a place that is easily accessible to you to keep costs down. However, there may be reasons that you would want another state’s law to apply. For example, California law prohibits employers from using non-compete clauses for employees.
Integration Clauses
These make any pre-contract discussions irrelevant if the contract outlines different terms. For example, say that during negotiations, there was some discussion that you would be paid extra for any work you did on weekends. However, the contract simply states one standard rate. The integration clause would prevent those prior discussions from being considered by a judge if there was a dispute that went to court.
If you find yourself lost in legal jargon, make sure to do your research on the web, or even grab a book that introduces you to basic contract provisions. And better yet, if you can, consult a lawyer. Fees to have a professional look over a contract range, but it may be worth looking into, especially for big jobs. These are just a few types of clauses that are often overlooked by non-lawyers, but as I see every day in my work, they can have big consequences when you get into a dispute. Bottom line: Know what you’re signing, even if you think it’s not important!
Finally, if you’re not completely comfortable with the agreement, then don’t sign it. Always know what you’re getting yourself into, and never be too intimidated to ask questions (or if you are, send your question to us)! A good contract should spell out exactly what is expected of both parties (deliverables, deadlines, usage rights, etc.) and will protect both sides in the event of a dispute.
About the Author: Mary C.G. Kaufman is an attorney based in Los Angeles, CA, counseling clients in the entertainment, fashion, and financial industries, and occasionally translating Legalese for Create & Cultivate. She handles a wide range of strategic and commercial legal matters for clients including emerging companies and notable social media personalities. On her off-days, she likes to garden, find the best workout classes on Classpass, and cook Sunday suppers for friends. Get more info on Mary here.
This story was originally published on March 3, 2019, and has since been updated.
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5 Tips to a Successful Negotiation
Professionalism ensures a win-win in the long run.
Photo: Jess Bailey Designs for Pexels
Negotiation is an unavoidable occurrence in life. But, as the late John F. Kennedy said, “Let us never fear to negotiate.” And he’s right—there’s nothing to fear about negotiation, especially with these tips.
Be Prepared
Go into your negotiation with as much background knowledge as possible. This means you have to do your research! If you have a meeting with your boss about a raise, investigate what others in your position are earning in your company and in the market. If you’re negotiating a sale price, know the market for that particular product and know how much others are selling it for.
Likewise, know what you’re bringing to the table. Anticipate some of the more challenging issues that may arise and know how you’re going to handle them. Practice tip: Put yourself in the other side’s shoes. What would they want to know? What concerns might they have?
Have a Flexible Bottom Line
People sometimes use a “bottom line” to gauge when they are willing to walk away from a negotiation. The better practice is to use a flexible bottom line. Things can change during the negotiation—new facts pop up, new options are on the table, or you realize that the bottom line you established before is simply unrealistic. Being flexible enables you to consider all of the possibilities before deciding it’s time to walk away.
You should also know what you’re looking to get out of the negotiation (and why you deserve it —see #1). But again, be open-minded and don’t commit yourself to anything before you have all of the facts.
Choose an Interest-Based Approach:
Ask Questions & Listen to the Answers
There are two “types” of negotiation: distributive aka positional, and integrative aka interest-based. Positional is a win-lose mentality—there is one pizza and we are splitting it. Interest-based is a win-win mentality—there is one pizza and we are enlarging it.
People tend to engage in positional negotiation, especially if they are on opposite sides of an issue. However, using an interest-based approach increases the chance of success for both sides. (And who doesn’t want a bigger pizza?!)
The key to interest-based negotiation is identifying the other side’s interests. The easiest way to do this is to simply ask, “Why?”
For example, two little girls are having a fight over an orange. Both girls take the position that they want the whole orange. If their mom cuts the orange in half and gives ½ to each little girl, she would be using a distributive approach. But the mom decides to ask each little girl why she wants the whole orange. Girl A tells the mom that she just loves oranges and she wants to eat it. Girl B says she wants the orange peel to use in baking some cookies. The mom gives the whole orange to Girl A, Girl B gets the whole orange peel, and both girls are happy.
By simply asking the girls “why” they wanted the orange, the mom was able to ascertain each girl’s respective interests and realize that their interests did not conflict.
Engage in dialogue with the other side. Actively listen to what they are saying; repeat and ask questions if necessary to truly understand their interests and their concerns. Likewise, be transparent about your interests and concerns—but see the caveat in the next paragraph.
If the other side in your negotiation is being competitive and positional, don’t give in. If they’re attacking your ideas or slinging insults left and right, resist the urge to counter-attack. Recast the attacks on you or your ideas as attacks on the issue. Try using questions and strategic silence to figure out the other side’s underlying interests. You can also bring in a third party to talk to each side separately and try to understand each side’s respective interests. If the other side is simply not willing to cooperate, not sharing any information, engaging in trickery, or otherwise being untrustworthy, be very careful about what information you choose to divulge and don’t lay your best cards on the table upfront.
“Things can change mid-negotiation. Having a flexible bottom line is more important than a bottom line.”
Brainstorm Ideas Without Judgement
After you’ve figured out the other side’s interests, brainstorm ideas and encourage the other side to do the same. Don’t immediately throw any of the ideas out. Instead, after both sides have come up with every possible solution, go through each one, and talk about why an idea is satisfactory or not satisfactory. Use your flexible bottom line and your intentions to evaluate the ideas, but remember to be open-minded.
Don’t Lose Your Cool
Sometimes parties reach an impasse—and that’s ok. But don’t flip out on the other side and jeopardize all of the time and work you’ve put into this, and even worse, jeopardize your relationship with the other side. Separate the people from the problem. Take a break and resume, if possible, when both parties have had time to cool off. Always be gracious and take the high road. Professionalism ensures a win-win in the long run.
Alex LoCasto is the founder of The Fashion Brief, a fashion blog for professional women that refuse to dress within the expected confines of “corporate attire.” Check out her blog here. Alex is also an attorney in the Dallas office of the firm Locke Lord LLP. She focuses her practice on business litigation and dispute resolution. Get more info on Alex and her firm here.
DISCLAIMER: This article has been prepared for informational purposes only and is not intended to provide, and should not be relied on for legal advice.
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This story was originally published on April 20, 2019, and has since been updated.
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Ask an Expert: How to Get Legal Protection for Your Small Business
An attorney explains.
We’ve been spending a lot of time at Create & Cultivate HQ discussing how we can best show up for and support our community during this uncertain time. Community is at our core, and connecting with others through one-of-a-kind experiences is what we love to do. While the world has changed, our mission has not. We’re committed to helping women create and cultivate the career of their dreams, which is why we’re proud to announce our new Ask an Expert series. We’re hosting discussions with experts, mentors, and influencers daily at 9 am, 12 pm, and 3 pm PST on Instagram Live to cure your craving for community and bring you the expert advice you’ve come to know and love from C&C. Follow Create & Cultivate on Instagram, check out our Ask an Expert highlight reel for the latest schedule, and hit the countdown to get a reminder so you don’t miss out!
“
Although we’re in the middle of a pandemic, there is going to be a large wave of new businesses. If you don’t take the time to protect your business now, you will end up spending 10-20x more money in the long run defending yourself.”
—Andrea Sager, a small business attorney
As a small business owner, or someone wanting to start a small business, there’s one part of your business you can’t ignore: LEGAL. In reality, it doesn’t matter what size business you are. No matter what stage you’re in, there are legal protections you must take into consideration if you want to keep the money you make.
Enter: Andrea Sager, a small business attorney shaking up the legal industry with her Legalpreneur plan which provides all-access to her firm for small businesses. Every day, she works with business owners who are on the verge of losing everything because they don’t have the right legal protections in place. Don’t let that be you.
Below are three ways you can protect your business during this pandemic and beyond, according to Sager.
Entity Protection
Sole Proprietor
It’s important for your business to operate as some type of legal entity. If you have not created a legal entity for your business, then by default, you are a sole proprietor. Sole proprietors get no legal protection for their business.
A sole proprietor is personally liable for the debts and obligations of their business. Personally liable means if your business owes a debt or is sued, then creditors can come after your personal bank account and personal assets. Operating as a sole proprietor is risky. It’s scary to be in a position where your personal assets are on the line. The good news is that setting up a legal entity will provide you with the protection you need. And it doesn’t have to be expensive or complicated.
Unlike a sole proprietor, legal entities provide personal liability protection for business owners. When you operate under a legal entity, if your business owes a debt or is sued, the creditors can only come after the business’s bank accounts and assets, not your personal bank accounts and assets. It’s nice to know that you’re not at risk of losing your house because your business fell behind on some payments.
Limited Liability Company (LLC)
The most common legal entity small businesses operate under is a Limited Liability Company, a.k.a. an LLC. Operating under an LLC is usually the best legal business entity your business can operate under, because it is easy to setup and it provides great liability protection to its owners.
To set up an LLC, you must file paperwork with your state and pay a filing fee. Before you file the paperwork, you need to have a few things figured out so you’ll be able to complete the paperwork. Some of the things you need before filing your LLC are the name, a registered agent, and how it is going to be managed. Once you’re approved through your state, the LLC does not give you any federal trademark rights. Trademarks are discussed further below.
Corporations
A corporation is typically not the best fit for a small business. Corporations have more fees and maintenance involved. However, if you plan on having investors, a corporation may be the best choice.
Contracts
I’m sure you have heard the term “get it in writing.” That is always a good rule of thumb in business. Contracts essentially define a relationship between parties. Contracts are important whether your business sells goods or services. With goods, contracts define price, delivery, the refund policy, shipping, when and how payment is due, and quantity. Issues can arise in any of those areas so it’s important to have them defined in writing.
Services contracts may need additional terms to help protect you. Service contracts can define what exact services will be provided. Some services are dependent on client response. Service contracts can allow you to terminate the contract if the client isn’t being responsive. Sometimes the result of a service can be subjective. Service contracts can protect you from a client saying, “I’m not satisfied with the service and I’m not paying.”
Why It’s Important to Have Terms and Conditions
If you run a website for your business, you’ll want to make sure you include terms and conditions. Terms and conditions are not required by law, but they’re are something you will want to include because it’s the contract between you and the visitors of your site. Terms and conditions can protect you if someone uses your website to make defamatory comments or infringe on someone else's intellectual property rights. Those are things you are not going to want your business to be liable for. There are lots of sample terms and conditions on the internet, however, it is best to have a licensed attorney draft terms and conditions for your website to fit the specific needs of your business.
Why It’s Important to Have a Privacy Policy
If you collect any kind of personal information from your customers/clients then you will need to have a privacy policy in place. Personal information includes names, addresses, mobile telephone numbers, email addresses, and so forth. A lot of states have privacy laws that require you to disclose what personal information you store and how you use it. There can be big penalties for not complying with privacy laws. Like terms and conditions, there are lots of sample privacy policies on the internet, however, it is best to have a licensed attorney draft a policy that fits your business.
Intellectual Property
There are three types of intellectual property: trademarks, copyrights, and patents. It’s important to understand the difference between these because they protect different aspects of your business. And whether you know it or not, many times intellectual property is the most value part of your business.
Trademarks
A trademark is a word, symbol, or combination thereof that is intended to identify and distinguish one merchant from another. Essentially, trademarks allow consumers to distinguish who is offering what goods or services. You can apply for a federal trademark registration for goods or services that let consumers know your goods and services come from you, such as your business name, logo, slogan, podcast name, service name, product name, and many more.
In order to obtain federal protection, meaning you are the only one that can use that term or logo throughout the United States, you must apply with the United States Patent and Trademark Office. The trademark application process takes at least six months, and the average amount of time is nine months. Filing a trademark application can be difficult, so it’s best to work with a licensed trademark attorney when filing.
Copyrights
Put simply, copyrights protect original works of authorship (content): podcast episodes, photos, videos, this blog post, books, songs, movies, and many more. The purpose of copyrights is to award creators for their creations by protecting the expressions of their ideas.
The neat thing about copyrights is that you don’t have to obtain a registration to have rights. Once you create a work, and it meets the qualifications, it’s automatically protected by copyright law. However, you can register your copyright with the United States Copyright Office, which does have its benefits. First, having a copyright registration allows you to sue someone for copyright infringement in federal court. Additionally, a registration allows you to recover attorney’s fees in a copyright infringement lawsuit. Meaning, if you win an infringement lawsuit, the other side will probably have to pay for the cost of legal fees.
Although we’re in the middle of a pandemic, there is going to be a large wave of new businesses. If you don’t take the time to protect your business now, you will end up spending 10-20x more money in the long run defending yourself. Do what you can now to protect yourself.
About the Expert: Andrea Sager is a small business attorney shaking up the legal industry with her Legalpreneur plan that provides all-access to her firm for small businesses. After working for a large law firm working with large businesses, Andrea realized her true passion was helping small businesses embrace and protect their business and intellectual property. In just under 2 years, Andrea has become the go-to attorney for entrepreneurs, protecting everything from their brand names to their courses and blog posts.
Tune in daily at 9 am, 12 pm, and 3 pm PST, for new installments of Ask an Expert.
Follow Create & Cultivate on Instagram, check out our Ask an Expert highlight reel for the schedule, and hit the countdown to get a reminder so you don’t miss out. See you there!
10 Glaring Contract Red Flags You're Not Paying Attention To
A lawyer breaks it down.
Photo: Smith House Photography
Unless you’re a lawyer, navigating a contract is a veritable minefield. Reading the fine print can be daunting, to say the least, especially for content creators who are hustling for every dollar. That’s why we tapped Christopher Dischino, a lawyer who specializes in business law, intellectual property, and corporate transactions, to break down some of the most common mistakes for us.
“Drafting contracts for freelancers often requires a delicate balance of terms, which both protect you and your intellectual property but are not overly onerous to your client,” Dischino tells Create & Cultivate. “When we discuss creating standard form contracts for many of our freelance clients, we discuss not only how they operate but who they are doing business with.”
While it’s important to note that everyone’s particular business operations are unique, below are ten of the most important items Dischino takes into consideration when drafting contracts for freelancers.
Business or Personal
“In order to insulate yourself from personal liability, consider forming a small business corporation or limited liability company and signing all contracts in your company’s name as opposed to individually. Operating through a company may have tax benefits, asset protection benefits, and adds a flair of professionalism to your business.”
Work for Hire
“If you are being hired to create a project or product, it is important to understand who owns it upon completion. Specifically, you should discuss with your client the extent of ownership by both parties upon completion. The U.S. Copyright Act provides that, as an independent contractor, copyright to the work product you create belongs to the creator of the work, unless otherwise agreed in writing. While most clients will expect ownership to be transferred, pay particular attention to any references to “Work for Hire.” If your client expects to receive ownership of the work product, make sure that it is expressly conditioned on payment in full.”
Indemnification Clauses
“Liability is always a concern when completing a project or product for a client. Whenever you see an indemnification clause, read it carefully. Many agreements state that if the work product created infringes on the intellectual property rights of a third party, the party creating the work remains liable for any damages. Likewise, a freelancer should make sure they are indemnified by their client and held harmless if the client utilizes the work in a way, which creates liability due to their own negligence or willful misconduct.”
Choice of Law and Venue
“Almost all contracts will have a clause that establishes where legal proceedings take place, should a dispute arise, and the law that governs the dispute. Make sure that the contract is not governed by laws that you and your lawyer are unfamiliar with and doesn’t require you to show up to court in a faraway land, especially if the dispute is over non-payment.”
Payment Method and Schedule
“Payment terms are often the elephant in the room when negotiating a contract. All too often, individuals or companies neglect to set a payment and deliverable schedule which leads to controversies as time goes on. Moreover, always consider requesting an initial deposit to bill against. Many contracts now require clients to sign a credit card authorization.”
Force Majeure
“Force majeure, which means superior force in French, is often an important red flag to be attentive of when drafting a contract. A force majeure or “unavoidable circumstance” prevents one or both parties from fulfilling their obligations under the contract. In practice, most force majeure clauses do not excuse a party's non-performance entirely, but only suspend it for the duration of the event. For example, a freelance photographer who setups for a beach photoshoot only to find himself in middle of a hurricane, would benefit from a force majeure clause that excuses his non-performance of the contract due to a circumstance beyond his control.”
Expenses
“Who covers the expenses of creating a work and when will they be paid? It is important to differentiate between payment for your services or work and the added expenses that were necessary for the completion of a project or product. From the beginning, establish if hard costs are included within your fee (and if so, consider a larger upfront deposit) or if costs are up and above your fee (if this is the case, establish what costs must be approved or which are pre-approved). Finally, make sure to define if the expenses will be paid upfront or if you will be paying out-of-pocket and requesting reimbursement.”
Scope of Work
“When do you start and where do you finish? Often times, projects are taken on or products begin with no true direction or trajectory. This lack of organization and parameters may lead to situations where a client continues to request work beyond the scope of what was originally contemplated. It is important to set parameters regarding the project or product so that you comply with what is requested, but also so that you are properly compensated for your work. The more specific and objective the scope, the better.”
Revisions, Drafts and Changes
“Just as important as the scope of your work is the amount of times you will go back to the drawing board, make changes, edits and revisions. For the sake of compensation (and your sanity), it is important to agree upon the amount of changes a client is able to request prior to the start of your work and the rates (whether a flat fee or hourly) at which additional work is billed.”
Termination Clauses
“It is important to set out the exact reasons or basis for which your agreement can be terminated. Termination clauses should not only consist of the client’s basis to terminate you but also considerations for when you need to terminate your client. It’s especially important to make sure that your client cannot terminate you for any reason or no reason without compensating you in full for the work you completed.”
About the Expert: Christopher Dischino leads Dischino & Company, a Miami-based law firm that provides legal advice and strategic consulting for the modern business, the entrepreneur, the free-thinker and those looking for something outside the box. With a knack for the creative and an entrepreneurial attitude, Christopher specializes in business law, intellectual property, and corporate transactions, assisting private clients and corporate entities to establish and expand their businesses domestically and abroad.
DISCLAIMER: The materials contained in this article has been prepared for informational purposes only and are not intended to provide, and should not be relied on for, tax, legal or accounting advice.
This story was originally published on April 10, 2016, and has since been updated.
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