If you provide design or other services for hire, the recent case of JCPenney’s being sued by a design firm is a lesson to learn from. The central conflict was this: JCP hired a visual merchandising firm (Hudson + Broad) to design a fixture for its stores (shown at right). It is claimed that JCP promised to order X quantity of the fixtures to be supplied by H+B but JCP went around the firm to source the fixture from lower cost suppliers. Sound familiar? I thought so.
This is my take on it from the context of the little guy -you and me- with two tips to avoid a similar or related problem:
Don’t do spec work. Many people are tempted to do work on spec thinking they’ll get a nice contract to fill the order but it often doesn’t happen. In this case, H+B is bigger than you but they’re still a relatively small company. If they will have a hard time recouping compensation, it will be even worse for you. The costs of attorneys, lawsuits, and expert testimony -to say nothing of the emotional energy drain pulling you away from day to day operations- is more than most can bear. If you’re small, it’s just not worth it. If you’re good, you don’t have to work for free to prove yourself. If the firm hiring you is reputable, they shouldn’t expect you to work for free either.
Charge design fees. Charge for design services separate and apart from an anticipated order. In fact, the client shouldn’t get any technical specifications that could be used to manufacture the item until they pay. [The case of JCP vs H+B is a bit different in that the fixture serves as a logo or icon of sorts so other issues common to graphic design (but not apparel) are brought to bear.] Your design fee needs to cover your costs of providing services whatever those may be, separate and apart from an anticipated order to produce the item or even an anticipated royalty (don’t hold your breath). I realize this doesn’t seem quite fair but this is the reality of offering services for hire.
It used to be common that designers, contractors and even some pattern makers provided free services in anticipation of an order but this is increasingly less common. Initially offshore Asian providers led the trend needing to differentiate themselves to offer greater value than a competitor; design fees were rolled into the per unit production cost becoming largely invisible. However, with costs in Asia increasing so dramatically, upfront “free” design services are being pared back.
In my own experience I can say it has been several years since someone has had the expectation I would work for free. That’s the lay of the land today, at least in our industry and don’t let anyone tell you otherwise. Again, a reputable firm, one you would want to do business with, should not expect you to work for free. If they do, maybe they aren’t as on the level as you had supposed so don’t be swayed by a big name. As any service provider will attest, you’d be shocked at who is bouncing checks or refusing to pay altogether.
Very good advice. Kathleen, what do you mean by ‘spec’? Speculative, or specification? ‘Spec’ can mean either in the Arch/Eng/Construction industry depending on the context.
You are right on the money (emphasis on money) regarding recouping fees in court. I speak now from painful personal experience: a written contract means absolutely nothing unless you have sufficient resources (time and money) to defend it. Money translates to staying power, stamina, in short the ability to win. If your ‘opponent’ has vastly more money than you do, guess what? And your attorney still has to do a better job than the opponent’s attorney of convincing a judge that you are 100% right and the other party is 100% wrong. Rarely a good bet even under the best circumstances. Mark Twain said it well: “never pick a fight with people who buy ink by the barrel”.
This way of thinking can be depressing, but it points out the importance of trust in a business relationship. If you don’t think you can trust the person/entity you are doing business with, then you probably can’t. If the other party has vastly more cash, then when things get dicey, they are in complete control.
I meant speculative.
I should have linked to an earlier entry I wrote called Contracts are not an insurance policy which directly addressed the issue of trust. It is a sad truth that in legal matters, it often doesn’t matter who is right or wrong, only who has the means to finance the dispute. The point is, paper isn’t going to keep someone honest. It is better to go with those who act honorably regardless of whether contracts are involved.
This couldn’t have come at a better time.
I am renaming Kathleen the Oracle.
Also writing up a set of standards for yourself when you freelance at anything, including this isn’t a bad idea. Control and confidence are in your corner which helps a lot when you are working like this. Then you know what you will & won’t do from the start to keep from dealing with crazy people as much. You can’t avoid them totally but you can save yourself some trouble by doing that.
According to what you all are saying, and not to make a grand generalization, but is it safe to say that until you have the money, all agreements that you’ll ever sign are just to go through the motions? That business is done with gut feelings about who you’re contracting with and faith that it’ll all work out for the best? I feel like I’m just crossing my fingers with every business encounter now.
Chi, to start, I recommend following the link I left above in my comment.
Admittedly, you’re coming in late to the party. While you didn’t want to make a grand generalization, that’s what you did and considering the hundreds of posts in the intellectual property category, I can’t generalize them to create a summation that will meet your satisfaction.
The central problem here is one of asymmetrical information. Being in a defensive position, you would like to use contracts to minimize your exposure over conditions you can imagine. However, owing to the nature of asymmetrical information (the other party knows more than you can), contracts can’t possibly cover every contingency even if you had the resources to pursue redress.
I’m the last person one could accuse of being New Age-y yet I don’t think gut feelings and intuition are so much woo-woo.
The only thing I can generalize is that newbies are known to very paper happy and that the partners they most need to hire will avoid them. This forum post describes an experience I had with someone who wanted me to sign a contract. If I could come up with a catchy title, I would post it to the blog.
I think the more important issue that Kathleen describes pertains to agreeing work and performing prior to a contract that spells out compensation for your efforts. Potential clients in my main line of work (Architecture/Engineering) sometimes ask for proposals (uncompensated) that seek design solutions, which they may want to implement with someone else, exactly as the example in Kathleen’s post. Once you have seen these folks in action once or twice they are easy to spot, and they usually give you all kinds of clues as to what they are up to. Not unlike the advice you would give someone who is dating… see all those red flags? They mean something!
I didn’t mean to scare anyone. Yes, you need to pay attention to your instincts. If I had paid more attention to my gut feeling at the time I may have avoided the problem. But probably more important is the need to walk away from a legal confrontation (in the situation I described) and not to think that taking matters to court is a sure solution, especially if the amount at issue is small, which in legal terms is less than $20k give or take $10k. Sounds like a lot of money, and your threshold may be different (higher, not lower), but in the legal world that’s small potatoes. You will spend nearly that to collect the same amount. And… if you win a judgement, the court does not collect for you, they just give you the right to collect. That’s when the game of ‘hide the money’ begins. So you can win, and still lose out when you can’t find anything to collect.