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Do we own the files? If not, shouldn't we be paid for them?

Rockford, IL |

We are a design firm. We told a client we would no longer do work for them. The company's requests for discounts and his need to make things a rush made the company a non profitable client. We resigned, saying we no longer wished to do projects for them.

They are now demanding we give them ALL of the working files on our computers that were used to create work for them. We never included the working files on our invoices (only the final product) and our understanding of industry practices are to charge a fee for them. We sent them our request and cost, and they got a lawyer who sent us a letter saying the files are theirs and we have no rights to them.

Attorney Answers 5

Posted

This would likely be determined in the contract between you and the client. You should consider the cost of litigation versus the amount of the fee you might recover. Unless this is an extremely expensive job, you would end up paying a lawyer far more to defend a lawsuit than the fee you might get if the client chooses to purchase the working file from you.

If you think this battle is worth fighting, contact a local attorney.

Though we strive to provide accurate legal information in our answers on AVVO, our answer should not be construed as legal advice and it does not create an attorney-client relationship. Our firm only forms attorney-client relationships by written agreement signed by both our firm and the client. Please seek an in-person consultation with an attorney immediately as almost all legal matters are time sensitive and failing to meet deadlines can result in adverse consequences.

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Asker

Posted

Thank you.

Posted

Your understanding of industry practices doesn't mean anything.

The strength of your legal argument depends on copyright and contract law. So what's the language in your written contract - do you have one? Does it say you own the copyright to and proceeds of your work, and you only grant your paying client a license to use the final product? Federal copyright law says the creator of a product owns it, absent a "work for hire" contract shifting ownership to the employer. State contract law says that in most cases, the employer owns an employee's work.

As for the practical side of this, besides the cost of litigation which my colleague mentioned, your reputation and good will of this client is likely to greatly exceed the benefit of hanging on to these "working files." You get nothing but ill will from keeping them.

Avvo doesn't pay us for these responses, and I'm not your lawyer just because I answer this question or respond to any follow-up comments. If you want to hire me, please contact me. Otherwise, please don't expect a further response. We need an actual written agreement to form an attorney-client relationship. I'm only licensed in CA and you shouldn't rely on this answer, since each state has different laws, each situation is fact specific, and it's impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue.

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Asker

Posted

Thank you. In addition to demanding all files, the client is insisting we sign a release of all rights to them. Kind of like kicking us while we're down (and doesn't that mean we have rights?). I am trying to put ego aside, yet I don't know how much (if any) "good will" will be gained by cooperating. Unfortunately, we are a small company and they have very deep pockets.

Pamela Koslyn

Pamela Koslyn

Posted

No, asking for a release doesn't mean you have rights. Again, copyright law may give you rights, or your contract may do so. Practically it sounds like you can't afford a fight, so why engage in one over something you don't even want?

Posted

This situation isn't so much about who will win a lawsuit, but how to avoid one.

It is easier and cheaper to just give them the files and be done with it.

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Asker

Posted

Thank you.

Posted

I agree with my colleagues for the most part, but would probably not just hand over the working files (depending on how valuable the working files are to you). If the working files are something that you actually use for creating more than just this client's work, blindly handing over the files could cause issues if there is any litigation over copyright if you do end up using these files in preparing work for different clients.

I would recommend at least meeting with an intellectual property attorney and having the attorney read over the contract to see who does own the rights in the working files. If the attorney determines that you own the copyrights in the working files, you would likely be able to work out a settlement with the client that would be beneficial to both of you.

I do recognize that there is goodwill and reputation in dealing with the client, but you have already decided you do not work with this client. It is also better to have the client probably not want to hire you again than to hand over files that he could sell to others so they can complete the work themselves without having to hire you.

Answering of your question is merely general advice and does not constitute legal advice. None of the statements or implications made by this answer creates an attorney-client relationship with the attorney answering the question. The statements made in this answer are not to be solely relied upon and you should meet with a competent attorney to discuss any concerns you may have regarding this answer.

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Asker

Posted

Thank you. We are treating this as a learning experience by adjusting our procedures as well as our terms and conditions.

Jeffrey S. Marlink

Jeffrey S. Marlink

Posted

You're welcome. The hard part with being a small business is that you are often the ones who need the most help from an attorney, being that you are trying to set everything up correctly, and often don't have the money to spend on the attorney. That being said, having an attorney work with you in drafting your terms and conditions could be very beneficial. Another option for legal help, if you live by a law school, is to check if the law school has clinics that perform work for free, or possibly a small donation. Drafting a terms and conditions agreement would be a great experience for a law student trying to get some experience in intellectual property or general business law and the work would be performed for much less than an attorney can perform the work.

Posted

You should look to your contract, not your "understanding" of industry practices. The contract, if any, governs not one party's "understanding" of what is in other deals.

The default is that you own the files if you are an independent contractor and the employer if you are an employee, but the contract may say otherwise.

The client likely has an implied license to use the files, so you will likely need to turn them over so they can be used. You should see an attorney so the license can be analyzed and the client's use can be limited as much as appropriate. However, that costs money and so you need to evaluate whether keeping these working files is really worth the cost of hiring an attorney to fight their attorney. Normally a consultation is worthwhile but not extended lawyer negotiations - unless this is really a very valuable set of working files. You should keep copies for your archival purposes, even if you do release the files, so you can prove what was released and what was not.

Your reputation is at stake here. These files are likely less important than the bad words this ex-client can spread about your firm. That is a call for you to make. You certainly would not give them any CAD programs, graphics programs and the like, but only the actual designs along with the names of any programs needed to access or edit them.

I am not your lawyer and you are not my client. Free advice here is without recourse and any reliance thereupon is at your sole risk. This is done without compensation as a free public service. I am licensed in IL, MO, TX and I am a Reg. Pat. Atty. so advice in any other jurisdiction is strictly general advice and should be confirmed with an attorney licensed in that jurisdiction.

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