What Happens When a Freelancer Does Graphic Design Work for a Client Without a Contract: Mark’s Copyright Case Study

Photo Credit: No Contract by Leo Reynolds used under CC BY-NC-SA 2.0
Photo Credit: No Contract by Leo Reynolds used under CC BY-NC-SA 2.0

Mark is a self employed graphic artist.

He routinely works with clients on an independent contractor basis.

Mark decided to work on a particular client’s project without a written agreement or contract stating the terms of the association.

The client later refused to pay Mark for his work.

The client then began to freely use Mark’s work claiming (1) there was no written or verbal contract for services and no “course of dealing understanding” between them and (2) and that based on the lack of any formal agreement Mark retained no copyright ownership interest or rights in the work he contributed to the project.

Mark feels the client not only ripped off his creative input and artwork but he seems to have been able to misappropriate the copyright interest in his work. Mark has proof his client is using his artwork.

Is there anything Mark can do? You bet there is!

Valid Transfer of Copyright Ownership

Let’s assume that Mark has a valid copyright in his own artwork even when he has produced the work under a client’s requests and directions. Can the client claim ownership of Mark’s copyright in the work?

The Copyright Act of 1976 establishes methods of transferring a copyright. Rights can be transferred in an assignment of rights, a mortgage, an exclusive license transfer, a transfer by will or intestate succession, and any exchange of rights within a non-exclusive transfer of rights or a transfer of only specific rights but not all as in an exclusive license.

This transfer of rights is only valid when the individual transferring the rights signs a written agreement detailing the rights to be transferred as required by the Copyright Act of 1976, 17 U.S.C. § 204(a).

Multiple subsequent federal court decisions have also recognized the validity of an author’s transfer of his copyright interests using an electronic agreement such as the one used by Kunvay.

Federal courts now routinely accept an individual’s electronic “click” or “tap” within an electronic transfer of copyright document as a valid “electronic signature” fulfilling the signature requirements of the Copyright Act of 1976.

Based on this understanding Mark should assume that the copyright to his artwork did not transfer to the client due to the lack of the required “signed writing” that is necessary to effectively transfer his rights.

If Mark has proof that his client is using his artwork without permission or license then pursuing an infringement action in court may be an appropriate response.

Infringement Action Awards of Attorney Fees and Damages

What does Mark need to do to initiate an infringement action against his client?

Many times a demand letter, often called a “cease and desist” letter, addressed to a difficult client, whether an individual or entity, will provide a fast and somewhat painless resolution to the matter.

If a letter demanding that the author’s copyright interests be observed is not helpful then the author may want to move on reviewing the pre-litigation requirements of pursuing an infringement action.

Copyright registration may be required as a prerequisite to initiating an action for copyright infringement. The certificate of registration will usually be referenced in the complaint for infringement and will be attached to the complaint at filing.

Copyright registration creates the rebuttable presumption that the copyright ownership interest claimed is a valid one.

Actual and statutory damages may be awarded to a copyright owner that successfully prevails in an infringement action as well as a recovery of all attorney fees. Actual damages are those damages that are provable. This would mean that the plaintiff must be able to prove his losses in connection with the infringement activity.

For example, a plaintiff could show a loss anticipated revenue from the copyrighted material or a loss in actual sales of the copyrighted material. Actual damages can also be proven by reviewing that defendant’s profits from his marketing the copyrighted materials.

The Copyright Act of 1976 also provides the court with the discretion to award statutory damages to a successful plaintiff. Statutory damages can add up well into thousands of dollars and can be awarded concerning each separate instance of copyright infringement.

Damage award rates are set forth within the copyright statute itself. Statutory damages do not require proof of a plaintiff’s monetary loss or proof of a defendant’s unjust enrichment, or profit, before a court may award them.

The intent of the defendant is a factor in a court’s award of statutory damages. A court must determine whether the acts of copyright infringement were innocent or willful before an award.

Willful copyright infringement would be shown where the acts of copyright infringement are committed with reckless disregard for the rights of the plaintiff.

What is Quantum Meruit and How Might it Help Mark?

It is frustrating to any small business owner to have a client refuse to pay for work. Sometimes a proprietor has to make a judgment call as to whether or not a client genuinely has the ability to pay for the work.

However, if a client does have the ability to pay then it makes sense for an entrepreneur like Mark to appreciate that he does have a cause of action against his client for failure to pay even in situations where there was no written or verbal contract or “course of dealing” creating a reasonable expectation of a client’s agreement to pay.

Quantum meruit is a remedy in equity that measures a plaintiff’s recovery under a legally implied contract to pay and at a rate or a value generally reasonable for similar services within that specific trade.

In short, quantum meruit is an equitable doctrine based on the concept that nobody who benefits from the labor and materials of another should be unjustly enriched by that labor and those materials.

In Mark’s situation, there was no written or verbal contract to pay nor any historical course of dealing between the traders to be enforced in the event of the client’s nonpayment for valuable services received and so imposing an implied contract to pay on the recalcitrant client may be an equitable alternative that a court may opt to enforce in Mark’s favor. Quantum meruit recoveries include the possibility of damage awards and attorney fee awards to a prevailing litigant.

How to Write a “Cease and Desist” Letter

It is always good practice to try to stay out of a lawyer’s office and out of a courtroom by taking every possible option that might lead to productive litigation avoidance.

Writing a “cease and desist” letter to a client infringing on a copyright and at the same time demanding payment for work supplied to that client even where there was no formal contract for service exists is an excellent first response and plan of action.

The cease and desist letter must be drafted to inform the infringing party of the copyrighted on the work at issue, the nature of the acts of infringement and the remedies the copyright owner intends to pursue.

The letter is used to demand the infringer’s immediate cessation of all infringing activities and an accounting of all profits from those activities.

Mark should remember that the cease and desist letter he writes should be carefully worded as it will become an exhibit or addendum to papers filed with the court in any subsequent infringement action. T

he letter is an important step to secure rights prior to being forced into any good faith litigation on the issue.

In addition, any infringing party that refuses to cease the acts of claimed copyright infringement after receipt of a “cease and desist” letter will be determined to be an individual or entity engaging in willful acts of infringement for the purposes of statutory damages.

Because you care about navigating copyright smartly follow us on Twitter, or learn how to transfer copyright and IP ownership rights to freelance work online with Kunvay.

About the Author: Christine Varad is the principal writer and editor for Varacolors. She earned her JD in law from New England Law and holds a BFA from Massachusetts College of Art and Design. As an artist and a lawyer she has a long standing interest in Intellectual Property law and protecting the rights and interests of writers and visual and performing artists.