Law & Marketing

Every year the pages of newspapers and magazines, both consumer and trade alike, are filled with stories of so-and-so suing such-and-such a company because of something-or-other. We all sit back and lap up the controlled combat of the court case, safe in the knowledge that it doesn’t make a blind bit of difference to us what the decision is.

When the shoe’s on the other foot, however, the courtroom scene might not be so much fun to watch, especially if it’s your company that’s being taken to task. Litigation is clearly not what anyone wants their company to have to go through, yet in the world of marketing (or, for that matter, journalism) it quite often rears its ugly head.

So how educated are Scotland’s marketing agencies in the nuances of the law? Where do they fall down?

Opinion is split on just how law-savvy Scotland’s agencies are. Some lawyers seem to find agencies reasonably clued up, while others aren’t so sure.

Euan Duncan, partner at McClure Naismith, says: “In my experience I have found that Scottish marketing and advertising agencies are fairly switched on as far as the ownership of copyright is concerned. For the most part they are aware they must try to retain control and ownership of their own work where possible. Clients will generally be advised, particularly in relation to material which is commissioned from a third party, that all the client will get is a licence to use the relevant material.”Stephen Harte, associate at MacRoberts Solicitors, however, says that agencies are often so concerned with the creative part of the marketing process that they neglect the legal side. He comments: “Marketing agencies are commercially focused on being as creative as possible. That often means that they are reluctant to turn their minds to legal risk management, which, admittedly, is not always exciting, or to put in place appropriate policies or documentation which, while aimed at managing risks, they fear may stifle creativity.”

So what are the key legal areas that agencies should be aware of?

Alistair Orr, partner at Maclay Murray & Spens, answers: “Scottish marketing agencies may be aware of the key legal issues affecting their business, but they often forget they can be in the firing line for what they say about or on behalf of their clients. As a result, it is important to ensure they have appropriate standard business terms in place ‘protecting’ them from their client. It is also sensible to put some thought into drafting an appropriate contract.

“Other key issues they need to consider are: have they cleared the materials they might want to use in a campaign, and how do they minimise any risks from key employees leaving?

“Although the need for a copy clearance process is generally recognised, it is not always followed. To counter this, it can be useful to think about setting up an ‘advice line’, which needn’t be very expensive to establish.”

Harte, at MacRoberts, says: “At a bare minimum they should make sure that they have in place two things: one – proper staff contracts, staff policies and procedures, and two – proper standard documentation for supplying their services and buying in goods/services. This makes sure their contractual position and intellectual property rights are protected. Even these are of little value if the staff using them do not know about the issues involved, however, and many law firms now offer training packages in addition to standard legal advice. It is also likely that they will have to consider their position under the Data Protection Act if they use personal data as part of their work, for example in direct marketing campaigns.”

The main problem marketing agencies seem to have when it concerns legal advice is the cost. However, as John MacKinlay, TMC partner at DLA, points out – it can be a lot more costly to ignore it. Can investing in legal advice save you money? “Absolutely,” states MacKinlay. “To take an example, using copyright material without permission or sending out a mail shot without having the correct permission for the recipients is likely to land the client and you in hot water. The most likely outcome of getting it wrong is the scrapping of a campaign. And, since the client will often be relying on the marketing agency's advice as to what is specifically permissible, the agency could end up bearing the cost. As well as the cost of a new campaign, there could also be a damages claim against the client, which the client will look to pass back to the agency. Finally, there is also the reputation issue – most, although not all, brand owners don't want the adverse publicity that would come from a campaign that was declared illegal, or at least wouldn't want this to come as a surprise to them. Advice at the right time can avoid all of these issues.”

“The greater the degree of legal uncertainty the more costly it is likely to be for the agency both from the point of prosecuting or defending an infringement of intellectual property rights or a breach of contractual obligations,” says Duncan, at McClure Naismith. “If proper legal advice is not taken in advance, it is more likely that an issue will not have been considered and dealt with in advance, resulting in legal uncertainty. The greater the degree of legal uncertainty the higher the legal fees, and without proper legal advice the advertising and marketing agency may be unsuccessful in any legal proceedings, exposing itself to potentially ruinous liability.”

Paul Carlyle, a partner at Shepherd & Wedderburn, said: “We had one famous story where we had a client who worked very closely with his agency on the creation of an identity. When it was finished they did a trademark search and found out that they had missed the deadline by three weeks. They’d been working on an identity for six months and then they couldn’t use it.”

In addition to the issues of infringing on copyright and ownership of intellectual property, every agency MD should also know what they’re doing when it comes to the legal side of staffing. Orr advises: “Where employees are concerned, it is important to consider not just appropriate – and enforceable – confidentiality undertakings, but also the establishment of what are known as restrictive covenants. These limit how employees can work after they leave an agency. However, as a highly specialist area, specific legal advice should be sought.”

The lawyers are clearly keen to stress the importance of their trade, but if some agencies still resist their talents, are they shouting loud enough?

“Realistically, law firms could probably do more to sell themselves to marketing agencies but, at the same time, marketing agencies are naturally cautious about their spend in this area,” says Orr. “A sensible solution would be to approach this issue as a prudent housekeeping measure for issues which may require legal support, rather than an ‘after the event’, fire-fighting one.”

Clearly, the legal side of running any business is important. But in an industry where creativity is such a key feature the protection of it the law is perhaps even more crucial.

At the end of the day, marketing agencies should, more than most other companies, appreciate how important it is to have experts advising you on how to progress.

With proper legal advice you can, hopefully, leave the courtroom dramas as a spectator sport.

Legal Scenario

You are the MD of a small Scottish ad agency. You receive a letter from a lawyer acting on behalf of a global advertising giant, alleging that the idea for a TV ad your agency has created was stolen from their agency. After some investigation, you discover that the creative at your agency responsible for your ad did at one time work at the agency making the allegation and therefore may have been in a position to steal the idea. What legal advice would you give the MD?

Stephen Harte

Associate

MacRoberts Solicitors

It is very hard in law to steal ideas. The law of copyright only protects the way in which an idea is expressed and not the underlying idea itself. Therefore, while it may be commercially embarrassing to be seen to have to have stolen an idea from a competitor, you will only have infringed copyright if you have copied the way in which the idea is expressed. If it is possible to express the idea without copying the way in which it was expressed by the other agency then it may be possible to proceed.

This doesn’t mean, though, that the other agency will not try to litigate and, even if you are successful, this will be expensive and time consuming and will involve a degree of commercial embarrassment.

The only way that an idea such as this could be protected is by keeping it confidential. It may be that the former employee did breach a duty of confidentiality owed to her or his employer in disclosing the idea to her new employer.

In these circumstances, a claim by the former employer may well be successful. The success of any claim, whether for copyright infringement or unlawful use of confidential information, would depend on the precise details of the case. To protect itself in future the agency should:

1. Ensure its employment contracts are properly drafted, protecting its own confidential information and forbidding employees from disclosing confidential information belonging previous employers.

2. Ask their solicitors to lodge “caveats” in their local Sheriff Court and in the Court of Session in Edinburgh. These inexpensive documents give you warning of anyone trying to get an interim interdict against you and are worth their weight in gold

Alistair Orr

Partner in the Intellectual Property and Technology Department

Maclay Murray & Spens

Ideas in themselves cannot be legally protected as intellectual property, but the situation is often more complicated than that. It may be that the idea was protected as confidential information, perhaps through the employee’s previous contract, or copyright infringement could be argued where the expression of an idea has been copied. Despite the disparity in size between the agencies, there may still be an opportunity to negotiate a mutually satisfactory arrangement.

Euan Duncan

Partner

McClure Naismith

First, lodge caveats with both the Court of Session and the local Sheriff Court in the name of the advertising agency to protect its position in the event of any ex parte application by the global advertising agency.

Second, acknowledge the letter reserving the agency's position but making no admission of any kind.

Third, consider in detail how much work (including research, test surveys, storyboards etc) had been done in relation to the “idea” at the time the “creative” worked for the global advertising agency. There is no copyright or any other form of intellectual property protection in ideas or concepts. The object of copyright is to protect the expression of an idea or concept. The law of copyright is concerned not with the originality of an idea but with the original expression of that idea. If it is only the idea that has been taken, however original, infringement of copyright can be denied. It is much harder to defend this position where an “idea” has been worked out in detail and it is the labour that went into the expression of an idea that is appropriated. It is generally a matter of degree whether the line between the copying of an idea and the copying of its expression has been crossed.

Fourth, review the agreement with the client for whom the advertising agency has produced the TV commercial to check, amongst other things, what warranties and indemnities have been given in relation to the services provided, the ownership of the intellectual property rights in the TV commercial, the duration of the agreement and the right of the agency to “pull” the TV commercial if necessary.