Legalities 31: Creating brand images for your client — who owns what rights?

Q. I have a question about trademark. I’ve been contacted by a client who’s trademarked a name for his brand. He had a mascot/character but wants me to create a new version, as he doesn’t like the one he has. We agreed to an advance and royalties. I want to keep copyright of my character. My question is, if he trademarks the character, does that give him full rights to it (does it transfer my copyright?)

What can I put in the contract that says he cannot trademark the new character, or if he does and the contract is breached/terminated, then all rights revert to me? Would this be classified as licensing an “image”? I have contracts for that but not specifically mascots/corporate characters.

If it helps, he plans to use it as part of his brand but also wants to model plush toys from it and use it on merchandise.

A. Trademarks and copyrights are two different systems of protection. But sometimes they overlap.

Trademarks

Trademarks protect brands and their function as a designation of the source of products or services (e.g., “Mattel” is a trademark for the toy company; the apple logo is a trademark for Apple computers). The scope of what can be a trademark is very broad – words, logos, sounds, colors and images can all function as trademarks. Even the entire packaging and promotional concept for a whole line of products can be protected as a trademark (e.g., Apple’s distinctive iPod ads).

Thus, the image of a character is often protected as a trademark, even apart from the character name. Think of, e.g., Mickey Mouse, or the Energizer Bunny, or my favorite client, Hello Kitty. All of these character images tell you who made the products.

Trademarks are infringed when someone else uses a similar mark for similar goods, so that consumers are likely to be misled into believing they come from the same source. The standard for trademark infringement is called “confusingly similar.”

Copyrights

Copyright protects creative expression, such as text, images, and soft sculptures like plush toys (also video, music, radio broadcasts, software, etc). Copyrights are infringed when someone actually copies the original work, and their work is so similar that ordinary observers would recognize it as a copy of the original. The standard for copyright infringement is called “substantially similar.”

So you can see that character images can be protected by both trademark and copyright. However, the owners of those two rights would be different.

Ownership and usage rights

In your case, your client is the one who would be using the character image as a brand for his company and products, e.g., on his product packaging and advertising. So he will be the trademark owner. He will have the legal right to stop anyone else from using confusingly similar images for confusingly related products.

Trademark rights are created just by using the trademark in commerce. Your client will own trademark rights in the character image as soon as he starts using the character image on products or promotions for his company. When you say that your client has “trademarked” the character name, I assume you mean that he has obtained a federal registration for the name. A registration is not necessary to create trademark rights, but it does enhance protection. If your client gets a federal trademark registration for the character image, the registration will give him a presumption of nationwide rights.

Thus, you can’t put anything in the contract to prevent your client from “trademarking” the character. That would not make sense, as his ability to use the character as a trademark is the entire purpose of the contract.

On the other hand, you are the creator, or “author” of the image, so under copyright law you are the copyright owner. Unless you assign your copyright to the client in a written agreement, you retain that copyright even if you give your client a license to use the image. This includes making plush toys based on your two-dimensional images. They would be a three-dimensional copy.

So as a legal matter, allowing him to use the image as his trademark doesn’t transfer the separate legal concept of copyright. However, as a practical matter, retaining your copyright in this situation would not be particularly valuable for you. Because your client will own the trademark rights, you will be quite limited re what you can do with the character. You will not be able to license the same or confusingly similar artwork to another client. If you did that, both this client and your new client could have claims against you for contributory trademark infringement.

Most clients who commission artwork for use as a trademark will want a full assignment of all rights, including copyright, to ensure that they will have complete control over their trademark. Generally, I think that is appropriate. The client is paying you to create something unique for his company. He does not want you to give similar work to his competitors. That would negate the value of his trademark.

Derivative works

Your situation has a second wrinkle that makes this analysis even more complicated. Because you are creating a new version of your client’s character, your copyright is more limited than for general copyrights. Your new character will probably incorporate some of the copyrightable expression from your client’s original description of the character, and/or his first character artwork (remember that copyright protects both text and imagery. So if your image includes characteristics from your client’s original description or the original artwork, your image will be incorporating some of that original expression). If that’s the case, your work will be a “derivative work.” Under copyright law, you must have permission (or a “license”) from the author (or copyright owner) of the original work, in order to legally create the derivative work (for example, Disney grants licenses to toy manufacturers to create plush toys based on their animations). When the author grants that permission, he can also set limits on how you can exploit the derivative work (for example, Disney can say that the plush toys can only be made out of certain materials, or sold in certain markets). So in this case, your client could decide that the derivative work may only be used for his business, as a matter of copyright law as well as trademark law.

Reversion rights

The main reason to retain your copyright in a situation like this is to ensure that you will be able to re-purpose the image if, in the future, your client stops using the artwork. You can do this by granting to your client an exclusive license with a reversion provision, which says that if he stops using the image, all rights revert to you. That way both of you are protected: your client gets exclusive rights to the image for so long as he continues to use it; and you retain the potential rights to re-license the work when he is through with it.

Here is a simple reversion provision (this provision reflects the general assumption under trademark law that a trademark has been abandoned after three years of non-use.):

In the event Client does not use the Licensed Art for three (3) consecutive years, Client shall be deemed to have abandoned the License granted herein, said License shall be deemed terminated, and all rights in and to the Licensed Art shall revert to Artist.

Rights to your artistic style

If the new character version you create for this client is consistent with a distinctive style that you work in, you may also want to ensure that you are protecting your rights to continue creating other characters in the same style. For more on that issue, see Legalities 29 — “Infringing Cartoon Characters.”

———————

You are invited to submit questions for upcoming Legalities columns. Please send your questions to legalitities@owe.com.

Legalities is a service mark of Linda Joy Kattwinkel. ©2007 Linda Joy Kattwinkel. All Rights Reserved. The information in this column is provided to help you become familiar with legal issues that may affect graphic artists. Legal advice must be tailored to the specific circumstances of each case, and nothing provided here should be used as a substitute for advice of legal counsel. Linda Joy Kattwinkel is an attorney, painter and former graphic artist/illustrator. She practices intellectual property law, arts law and mediation for artists in San Francisco. She can be reached at 415-882-3200 or ljk@owe.com.

See the index of previous columns for more answers to your questions.