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Design Law 2013

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Understanding key design laws and Introducing the 2012 Designers Institute contract set

Understanding key design laws and Introducing the 2012 Designers Institute contract set

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  • 1. Design Law March 2013The Designers Institute – Design Law © March 2013
  • 2. Goals1) Understanding key design laws; and2) Introduce the 2012 Designers Institute contract set Designers Institute – Design Law © March 2013
  • 3. Key design lawsDesigners Institute – Design Law © March 2013
  • 4. Case studies The informal – and seemingly innocuous - brief “I created a one-off design for an old acquaintance…now he wants to mass- produce the design, without paying me royalties.” “But I put my copyright notice on the bottom of the design…” ©Designers Institute – Design Law © March 2013
  • 5. Case studies The free pitch “My client asked me for some initial concept designs, before deciding whether to formally engage me as designer. The client decided to use someone else, but is using my concepts without paying anything. When I asked for payment, the (ex) client has now claimed that it owns copyright in the concept drawings.”Designers Institute – Design Law © March 2013
  • 6. Case studies The Disputed Terms of Trade “I produced some designs for a client, who is now claiming that the designs are flawed and demanding that I pay for damages including lost profits and project delays, even though these damages are excluded in my terms of trade. “My terms of trade are on the back of my invoice, which the client has already received and paid.”Designers Institute – Design Law © March 2013
  • 7. Key Design LawsSelected Topics:1. Intellectual Property2. Liability for Design Works3. Licensed Building Practitioner Regime4. Contract Formation Designers Institute – Design Law © March 2013
  • 8. 1. Intellectual Property• Intellectual Property = “creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce" (WIPO)• Types of IP: – Patents – Trade Marks – Registered Designs – CopyrightDesigners Institute – Design Law © March 2013
  • 9. Patents• Patents Act 1953• Protects an “invention” – Includes a new product, process, article or machine• Must be some degree of inventive ingenuity• Registration – allows monopoly protectionDesigners Institute – Design Law © March 2013
  • 10. Patent ExamplesDesigners Institute – Design Law © March 2013
  • 11. Trade Marks• Trade Marks Act 2002• Trade Mark: – Anything distinctive which is capable of being represented graphically – Must be applied to goods or used in provision of services• Registration – allows monopoly protection• Can trade mark designs (where appropriate)Designers Institute – Design Law © March 2013
  • 12. Trade Mark ExamplesDesigners Institute – Design Law © March 2013
  • 13. Registered Designs• Although probably already covered by copyright, new or original designs can be registered under the Designs Act 1953• Designs must be: – Novel; and – Purely aesthetic (no mechanical characteristics)• Registration – allows monopoly protection Designers Institute – Design Law © March 2013
  • 14. Copyright• Copyright Act 1994• What is copyright? Copyright gives AUTHORS of certain ORIGINAL WORKS the right to stop others profiting from his or her labour in producing that original work by COPYING it for their own commercial advantage• Copyright = The right to copy Designers Institute – Design Law © March 2013
  • 15. Copyright: How does it arise? Copyright subsists where: 1. The work is of a type protected; and 2. The work is original; and 3. The author is a NZ citizen or was living in NZ when the work was made. Registration is not required © Designers Institute – Design Law © March 2013
  • 16. Copyright: What is protected? Works protected by copyright include: – Literary works – Artistic works (including drawings) • Irrespective of artistic quality – Dramatic works – Musical works – Sound recordings – Films – TV and Sound Broadcasts – Computer generated works – Multimedia works and databases Designers Institute – Design Law © March 2013
  • 17. Copyright: OwnershipThe author of a work is automatically the ownerof copyright in that work, subject to twoexceptions:1. Employment rule2. Commissioning rule Designers Institute – Design Law © March 2013
  • 18. Commissioning Rule• s21(3) Copyright Act 1994 provides that a party who commissions certain types of works and agrees to pay for the works, owns the copyright in them.• Timing is important• Can also capture initial ‘free’ concept drawings, if there is an implied understanding that future work will follow if designs satisfactory to client: Oraka Technologies Ltd v Geostel Vision Ltd (CA, 2010) Designers Institute – Design Law © March 2013
  • 19. Case Study -Oraka Technologies Customer had been developing an asparagus grading machine and had arranged for an engineering firm to: 1) Produce drawings of the prototype that the customer had already made; and 2) Manufacture certain components of the machine. Firm completed the drawings for free, claiming that it offered a “free design service” to customers in order to secure later manufacturing work. Firm was then paid $26,000 for actual production and manufacture of the machine components. Designers Institute – Design Law © March 2013
  • 20. Case Study -Oraka Technologies The customer claimed that it had commissioned the works, there was an implied agreement to pay for them, and the designs were made pursuant to that commission. The customer claimed that it therefore owned the copyright, by virtue of the commissioning rule. The engineering firm denied there had been a commissioning as defined in the Copyright Act 1994, because the design was provided for free, and that it therefore remained the owner of the designs. Designers Institute – Design Law © March 2013
  • 21. Case Study -Oraka Technologies Court Decision:• “Free design” supplied on the mutual expectation of subsequent paid manufacturing work was sufficient to create an intend-to-pay commissioning.• Design and manufacture were all part of the same transaction, the design work had therefore been commissioned.• Copyright in the works was owned by the customer (Oraka), not the industrial designer.Lesson: Clearly agree on copyright ownership in advance Designers Institute – Design Law © March 2013
  • 22. Industrially-Applied DesignsTreatment of Industrial Designs under theCopyright Act Where an artistic work has been industrially applied (i.e. when more than 50 copies of 3- dimensional reproductions are made for sale or hire) copyright protection will expire: • Works of artistic craftsmanship, 25yrs after made • For other artistic work, 16yrs from date madeDesigners Institute – Design Law © March 2013
  • 23. Digital Rights Management• Copyright (New Technologies) Amendment Act 2008• DRM: Use of technological systems to protect creators’ rights in digital media – Technological protection measures – Electronic rights management informationDesigners Institute – Design Law © March 2013
  • 24. 2. Liability for design works Designers are exposed to a variety of trading risks, often involving:• Disputes over performance by designer (including quality of design works); or• Disputes over work/products from third party suppliers.Designers Institute – Design Law © March 2013
  • 25. Managing trading risks Most trading risks can be managed by combination of:1. Quality control procedures;2. Appropriate insurance cover; and3. Effective use of appropriate contract terms. There is no principle of law which precludes reliance on a contractual limitation clause which applies to works that were negligently executed: CIV 2010-404-584Designers Institute – Design Law © March 2013
  • 26. 3. Licensed Building Practitioner Regime• The LBP Regime established licensing requirements for design works falling within any of the prescribed Design Areas of Practice (1 – 3);• “Building Work” under the Building Act 2004 includes design services where the services are of a type declared to be “restricted building work”• The introduction of residential “Restricted Building Work” occurred on 1 March 2012.Designers Institute – Design Law © March 2013
  • 27. LBP Regime (cont…)• The Building Act 2004 creates various criminal offences for failing to hold necessary certifications (fines up to $20,000) e.g. s 314 Building Act 2004• Related offences include providing false or misleading information (s 369, $5,000 fine)• The Act also imposes specific implied terms into contracts for Building Works involving household/residential units “despite any provision to the contrary in any agreement or contract.”Designers Institute – Design Law © March 2013
  • 28. LBP – implied contract termsImplied Terms under s 397: The building works must be carried out in a proper and competent manner, and with reasonable care and skill (Several other implied terms apply also) s397(f): if contract states the particular purpose for the building work, or the result that the owner wishes to achieve, then building work must -• (i) be reasonably fit for that purpose; or• (ii) be of such a nature and quality that they might reasonably be expected to achieve that result.Designers Institute – Design Law © March 2013
  • 29. 4. Contract FormationIt is essential to ensure that the designer’s contract is adopted in a binding and enforceable manner:• Adoption by signature is usually conclusive.• Adoption by notice: Also effective, but essential to obtain/retain proof of notice & acceptance.• Particularly onerous clauses may require ‘flagging’ – depends on the circumstances.• Timing is critical – terms must be agreed/adopted when contract is formed, not imposed later.Designers Institute – Design Law © March 2013
  • 30. Case studies revisitedThe informal – and seemingly innocuous - brief “I created a one-off design for an old acquaintance…now he wants to mass-produce the design, without paying me royalties.” “But I put my copyright notice on the bottom of the design…”Designers Institute – Design Law © March 2013
  • 31. Case studies revisited The free pitch“My client asked me for some basic concept designs, before deciding whether to formally engage me as designer. The client decided to use someone else, but is using my concepts without paying anything. When I asked for payment, the (ex) client has now claimed that it owns copyright in the concept drawings.”Designers Institute – Design Law © March 2013
  • 32. Case studies revisited The Disputed Terms of Trade “I produced some designs for a client, who isnow claiming that the designs are flawed anddemanding that I pay for damages including lostprofits and project delays, even though thesedamages are excluded in my terms of trade.“My terms of trade are on the back of my invoice,which the client has already received and paid.”Designers Institute – Design Law © March 2013
  • 33. Designers Institute Contracts Designers Institute – Design Law © March 2013
  • 34. Important things to include in your contract: – Specific details of work required (to avoid scope- creep or subsequent disputes) – Payment terms – Intellectual Property protection – Indemnity for materials provided by Client – Use of contractors (including 3rd party contractors) – Limiting legal liability, including for suppliers’ acts – Retention of title in goods until payment Designers Institute – Design Law © March 2013
  • 35. Important things to include in your contract: – Late payment rights and procedures – Notice of defects procedures and expiry – Agreement termination provisions – Dispute Resolution Procedures – Entire Agreement – And others! Designers Institute – Design Law © March 2013
  • 36. Limiting Designer’s RiskPotential risks include: A. Claims of defective design works B. Client refuses to pay you C. Non-performance by third-party suppliers D. Breach of third-party copyright E. Archiving/BackupsDesigners Institute – Design Law © March 2013
  • 37. Designers Institute Contracts New 2012 Contract Set: 1. Spatial Design 2. Procurement Services 3. Product Design 4. Graphics/ Interactive Design 5. Non-Disclosure / Confidentiality Agreement 6. Contractor Agreement Designers Institute – Design Law © March 2013
  • 38. Designers Institute Contracts –Liability Limitations/Exclusions, including:A. Limit amount of liability for claims by Client to amount paid for contract, plus contracting out of the Consumer Guarantees Act 1993 where the client is obtaining services for business purposes;B. License dependent on payment, retention of title in goods until payment, plus late payment interest;C. Specific indemnity for materials provided by client;D. No responsibility for 3rd party suppliers engaged by (or at the request of) the Client;E. No obligation for archiving/backups by designer. Designers Institute – Design Law © March 2013
  • 39. Designers Institute Contracts Core Commercial Terms• Notice of defects/complaints mechanism and dispute resolution;• Fees and payment, • Payment within 10 days of invoice • Late payment interest at 2% per month• Retention of title (work product) pending payment;• Security Interest (PPSA) in goods supplied to Client Designers Institute – Design Law © March 2013
  • 40. Designers Institute Contracts Core Commercial Terms• Employees and Contractors: • Acceptance of contractor use; • Non-solicitation of contractors and employees;• Termination provisions• General/boilerplate clauses• Remedial Services Designers Institute – Design Law © March 2013
  • 41. Graphics/Interactive and Product Design Contracts: Core IP Terms Core intellectual property terms, including: • Default IP Licence (unless alternative option selected – see next slide) • Preliminary art / tools/ working drafts / technical files and non- final products, including plans and sketches, remain property of designer and are not licensed or transferred to the client • Client warranty for use of client-supplied intellectual property • Client confidentiality where requested • No DRM removal/interference Designers Institute – Design Law © March 2013
  • 42. Graphics/Interactive and Product Design Contracts: Optional IP Terms A. Limited usage, non-assignable, conditional license dependent on payment. Client may not modify or reproduce work. B. License for unlimited usage, exclusive, non-assignable, dependent on payment. Client may not modify work C. Unlimited usage, client may both reproduce and modify work, exclusive non-assignable, dependent on payment. D. Full transfer of all intellectual property dependent on payment. Client has full rights to modify/reproduce work. Designer reserves promo/portfolio usage rights. Designers Institute – Design Law © March 2013
  • 43. Protecting your IP – Dealing with Clients How to explain to your clients why it is appropriate for you to retain IP in your designs …Designers Institute – Design Law © March 2013
  • 44. Dealing with Clients1. A design for a particular client is often a derivative of earlier designs varied to client’s particular requirement. Impractical for copyright to vest with client.2. A licence is ample for one item. Paying for unlimited use of a design would be costly – client would be paying for use that they do not need e.g. buying a car to make one journey when you could have hired a car for a fraction of the cost.Designers Institute – Design Law © March 2013
  • 45. Dealing with Clients3. Clients benefit from experience of designer → the design fee for a derivative design is lower than full design costs. Client benefits from earlier works, which are already copyrighted. In summary, lower costs and efficiencies are achieved, a client still receives tailored design for their use, with copyright retained by designer.Designers Institute – Design Law © March 2013
  • 46. Dealing with Clients4. If client wishes to use the design for production of multiple items, that can easily be agreed at outset, or in due course, by negotiation5. Reputation of designer (quality)6. Designer retains control of quantities in use/production (enables designer to preserve exclusivity/limited nature of design, which benefits licensees)Designers Institute – Design Law © March 2013
  • 47. Dealing with Clients7. Designer often better placed, and better motivated, to protect and enforce copyright if breached, which again benefits lawful licensees.Designers Institute – Design Law © March 2013
  • 48. Initial Tender / PitchingPractical ways to secure your IP before pitching:• Non-Disclosure/Confidentiality Agreement; – E.g. Designers Institute Non-Disclosure Agreement• Expressly reserve ownership of copyright (i.e. expressly contract out of Commissioning Rule); and• Agree in advance that the client may obtain a license only if the designer is formally retained and paid. Designers Institute – Design Law © March 2013
  • 49. Designers Institute Non-Disclosure Agreement• “Fill in the gaps” – party and project names• Protects both designer and client/supplier/manufacturer etc• Provides for confidentiality in discussions• All information disclosed remains the property of the disclosing party Designers Institute – Design Law © March 2013
  • 50. Procurement Services Agreement Procurement services can include: Consulting with Client on procurement needs; Researching/presenting potential supplier information to Client; Negotiating with potential suppliers; Call and receive quotations; Evaluate and report to Client on quotations; Confirm Client’s decision on selected supplier(s); Notify selected and unsuccessful suppliers; Manage the supply and delivery process; etc… Designers Institute – Design Law © March 2013
  • 51. Procurement Services AgreementThe Client appoints the Designer to be the Client’sagent for the procurement of the Goods andServices. The Designer is authorised to providethe Procurement Services on behalf of the Client,including negotiating and signing contracts withsuppliers (Clause 3(a))The Designer may accept and retain commissionsfrom any suppliers (Clause 18) Designers Institute – Design Law © March 2013
  • 52. Further Resources www.clendons.co.nz www.dinz.org.nzDesigners Institute – Design Law © March 2013