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Designers: Before you collaborate keep these legal issues in mind

Designers: Before you collaborate keep these legal issues in mind

20th February 2015

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Designers often decide to collaborate on a project.  This could be because each of the designers has different strengths or because one of the designers has business connections with a particular client, while the other designers can contribute from their particular creative fields.  However, when designers work in collaboration, they should be aware of potential legal risks and possible ways for structuring their co-operation.

Designers should, from the outset, consider what the nature of their co-operation will be.  The relationship between them should then be formalised so that the parties are protected properly in order for them to have clarity regarding their share in the project.  Designers could choose to regulate their relationship by way of a co-operation agreement. That agreement should state how the income from the co-operation will be divided. 

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More importantly, the agreement must state who will own the intellectual property created through the co-operation.

When designers collaborate, they often work on one project together.  Often, it is not possible to split the ownership of the resultant intellectual property.  In that case, the parties could decide that only one of the designers will own the intellectual property, or they could co-own the intellectual property.  Co-ownership of intellectual property can often lead to disputes, particularly if the collaboration does not work out.  To deal with that, the agreement should regulate what will happen to the intellectual property if the parties’ collaboration falls apart.  In such an event, the parties could buy each other out.  They could also appoint a third party to resolve the dispute between them, although dispute resolution procedures can often be costly and time consuming.

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If designers collaborate only in respect of a particular project, they should still decide on the general terms that will apply to their collaboration. The terms need to cover each of the party’s responsibilities and deal with contributions towards costs and expenses. The parties need to decide how they will make money out of the intellectual property. They could charge royalties or once of licence fees. Their collaboration should also contain provisions that regulate how the designers will split any profits that are generated.

If the designers are going to be working together on a regular basis, it may be best to formalise their ongoing relationship.  One could do this by way of a partnership agreement.  In the case of a partnership, all of the partners share in the profits and losses of the partnership.  However, in a partnership, the relevant individuals are personally liable for claims against the partnership.  In order to deal with that, it is often better to do business through a company.  It has become easier to register a company and to handle its administration. 

As such, designers may choose to follow this route, but they should also obtain tax advice to make sure that it is the best route for them, based on their individual financial circumstances.

If designers decide to do business through a company, they should conclude a shareholders’ agreement that regulates their shareholding.  They will need to decide on the shareholding percentage that each party will own.  The shareholders’ agreement should also regulate what will happen if one of the shareholders wants to sell their shares. 

Working in a team can often benefit designers, particularly in view of the synergies involved.  However, in view of the potential risks, designers should consider the relevant legal issues and make sure that they protect themselves properly.

If you’re looking for more information on how to best to work in tandem, you may like to pay a visit to law firm Adams & Adams who will be exhibiting at world renowned multi-creative platform Design Indaba in Cape Town from 27 February to 1 March 2015.

Adams & Adams is the official legal advisor to Design Indaba and sponsor of the Design Indaba Expo Innovation Award.  The firm has extended its collaboration with Design Indaba for the next three years. 

Adams & Adams is also legal advisor to the Loeries and sponsor of the Loeries Young Creatives Award. It is the recent recipient of the 2014 Business Day Arts (BASA) Award for the “in-kind” category for the association with Design Indaba.

Written by Danie Strachan, partner, Commercial Section, at law firm Adams & Adams

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