For as long as there has been advertising, there have been RFPs. And for as long as there have been RFPs, there have been ad agency executives losing sleep over one question: “Am I going to get paid for this?”
As demonstrated by the reader comments posted in response to the Oct. 31, 2010 Adweek article “AutoZone Latest to Demand Ownership of Pitches,” protecting ideas and ensuring compensation has long presented a significant challenge for agencies of all sizes.
But while at first glance attempts by AutoZone and others to purchase ownership of pitched ideas may seem an unethical assertion of power, agencies would do well to view this as an opportunity. Entering into a pre-engagement agreement, if structured correctly, can result in a win-win scenario for both parties.
Too often, agency executives view RFPs as take-it-or-leave-it documents, frequently ignoring the risk of giving away ideas “for free” for a chance at a lucrative contract. At the same time, some RFP issuers have long viewed the process as an opportunity to solicit creative ideas from a range of sources without having to pay. Neither of these scenarios is desirable.
On its face, it may seem prospective agency clients like AutoZone are devaluing the advertising process by requesting ownership of pitched ideas in exchange for what many view as meager financial compensation. On the other side of that coin is an indication of a shift in mind-set among those evaluating agency proposals. The AutoZone news shows agency clients are actually recognizing property lines. They’re realizing they cannot just take ideas from non-winning proposals and use them without consequence or, at the very least, without violation of basic ethical principles.
This is an invitation for agencies to explore pre-proposal negotiations with prospective clients. Agencies should take note and educate themselves on their right to negotiate compensation for ideas before responding to the RFP.
Even if the RFP issuer and the agency aren’t interested in direct financial compensation for ideas, there are other options. For example, agencies can enter into a contract with the prospective client that includes provisions for a “concept development fee” based on the number of hours and expenses incurred in development of the concept.
These pre-RFP response agreements should, at a minimum, include language stating:
• The copyright and ownership of the concept belong to the developer until payment is rendered. This gives the agency some legal protection if the idea is used without payment.
• All claims are to be litigated in the venue where the agency is located using that state’s law. This prevents the agency from pursuing someone 3,000 miles away and hiring an attorney in an unfamiliar state.
• The agreement between the parties includes only what is explicitly stated in the document. Known as a “merger clause,” this prevents the “he said, she said” scenario.
Agencies and their attorneys can include many other “essential” clauses as well, depending on the matter being pursued and the state where they are located. In all cases, the agreement should be tailored to meet each agency’s needs.
The legal reality is that without these protections, clients accepting RFPs usually cannot be held accountable if they utilize pitched ideas because an idea alone is generally not protected by copyright statute. A mutually agreed upon contract is the only preemptive measure available to ensure the agency is protected. A well-structured contract can guarantee concept ownership rights are established from the outset of the engagement. This ensures agencies are paid for the ideas in the RFP response, even if the proposal is not selected.
On a similar note, several readers commented on AutoZone’s request for a two-year ban preventing agencies participating in an RFP to pitch competitors. This is essentially a non-compete clause, and whether it is enforceable depends on state law. Some states, such as California and Hawaii, void contracts that restrain anyone from engaging in a lawful profession, trade or business, with only a few exceptions.
Meanwhile, other states allow non-competes as long as they’re narrowly drafted and limited within scope, geographic area and duration. A two-year ban from pitching to competitors, such as the one AutoZone proposed, appears excessively long and restrictive. Any bans on pitching competitors that are not desirable to the agency should be negotiated prior to submitting an RFP response.
An alternative to the non-compete may be to agree upon a non-disclosure agreement of a particular concept. If the client is purchasing the idea or intellectual property rights, the agency may as well agree to keep it confidential. As one commenter pointed out, “If the solutions were crafted for a specific problem, what good are they anyway?”
Zana Tomich is a partner in the law firm Dalton, Tomich & Pensler. She can be reached at email@example.com.