Wong’s legal hassles

Working as an employed designer for agencies or corporate position can sometimes give you the impression that purely exercising your profession can put you already in legal jeopardy. The fact that many designers are not very well informed about legal aspects does not help this feeling of frustration.

M. Ravindran of Ravindran Associates, an expert in intellectual property right based in Singapore and legal counsel for Designer Association Singapore, agreed to go with us through some of the typical scenarios of legal issues in the design profession and comment them in an interview based on the story of the stereotypical Singaporean designer Wong.

Wong is graduating from design school. He interviews with several design agencies and corporations. At one of the companies, the manager likes a design from his portfolio particularly and expresses interest to buy it. Wong remembers he was told that the right to the designs belong to the school, as he has done the project in his curriculum. He is not sure whether he can sell the design…….

Mr. Ravindran: Generally speaking in the law of intellectual property, if a person does the work being employed by somebody in a company, in the course of his employment, than the work is owned by the employer. The reason why this is the case is because the employer has taken the risk with the individual in paying him a salary. Naturally, if you didn’t produce anything, he took a bad risk. If you produce something, than he takes the benefit and he owns the intellectual property. So this is the general rule, whether it is patents, copyrights, designs. But I don’t believe that this is the case for schools. So if, for example, I go to a design school and come up with a design and somebody thinks it is a great design, than the design is owned in my opinion by the student, and he is free to sell it. In a classroom situation, in which there was instruction, it would be question of a collaboration. Just say, for example, if it was an assignment and the student came up with something and the teacher said ”Well I think you shouldn’t do it this way, you should do it some other way” so then I think there is collaboration between the two. So then it is just like, if you and I are sitting around a table and I draw a bit of the design and you draw a bit of the design, then who owns the design? It is not yours and it is not mine, it is a collaborative effort. Usually it is a joint ownership; both of us own the whole thing equally. It is difficult to find a percentage of each ownership. If it was a design done by the student, he would own it, but if there was a genuine input by the teacher and if he was being very calculative, than he could claim that he owns part of it. But the general rule would be that the student owns it.

Finally Wong manages to secure a good job at a design agency. When he receives his employment contract, a few clauses make him hesitant. There is a clause of non-competition which does not permit him, after leaving this employer, to work on similar projects (same product field) or for the same clients during a period of three years. He thinks it might create difficulties if he wants to move on to another agency, given that many agencies work on similar projects or for the same clients after all……………..

Mr. Ravindran: There are several parts to this questions. This touches on the law of what is called “restraint of trade”. The first thing is obviously, that the employee should not sign such a clause, that he should say, I don’t want to sign this, I don’t agree with this. But you and I know that the employee is usually not in a very good negotiating position. So he signs it. Therefore we take it as a given that he is not able to persuade his employer not to include that clause. Even if he signs it, then, strictly speaking, clauses which are a restraint of trade are non enforceable. That is the general rule. So if the matter would go to court, than it will be the burden of the employer to show that the restraint was reasonable. And it is not such an easy burden to overcome. If the restraint really means that the individual is not able to earn a living, than the court will say it is unreasonable. In this age of specialization, the same rule would apply in the case of product categories. If I have been working say in hand phones, than I am most valuable to people who are in the business of hand phones and they want me to design hand phones, they don’t want me to design a bag. It is still a question which goes to the rice bowl, the same considerations apply. So my company, for example, specializes in intellectual property and say I have got a legal assistant, and I train him for three years in intellectual property. I put a restraint of trade which says you can not work for another firm in intellectual property, but you can work in conveyancing, debt collection, shipping law…but he is not good in all these areas! After three years he is highly specialized and very valuable to my competitors who are in intellectual property – no shipping firm will take him. So I think, depending on the area of specialisation, the same considerations apply, whether it is a small area or a big area. The issue would be, does this restraint affect the individual’s ability to find a fair job, and if it does, then the restraint would be unreasonable.

Now the more difficult question is in relation to clients, if he signs a contract which says he can not act for clients of his previous firm for a given time. In my view, if this individual was just an employee and not a partner, didn’t have equity, the restraint is unreasonable again, unless there are special factors. Prima face it is unreasonable again, because firstly it is against public policy if a client can not choose the designer of his choice. If I like you, and you left the firm and joined another firm or started your own, it is against public policy if I can not still choose you. But more importantly, in professions whether it is medicine, law, design…clients come to you because of relationships which have been built. So if you ask somebody, when you leave and start your own company you can not take the clients, then he is really without work for two years or so, and that is unreasonable. I think that in situations where the employee is remunerated for not taking clients, then maybe there is a chance that the employer will succeed. So, for example, in a partnership where there are 5 partners and one partner leaves, and he has 30% of the equity and a restraint of trade clause that he can not take the customers of the company. If he is payed for his share of the goodwill, than I think in that situation the clause is enforceable. The reason why the clause is enforceable is because, goodwill is defined as the attractive force of the business. So if I am paying you for the goodwill, and you walk away and you still take the clients, than you are having your cake and eating it. In such a situation the court will say the clause is reasonable. But in the case an employee goes, I don’t think the clause can be enforced. Now there are extralegal issues here as well, which is good to talk about. Firstly, if I am a really big design company and one of my employees was maybe three to four years in business, leaves and takes some of my clients, although he has a restraint of trade clause in his contract, I would think twice about suing him. Because in the industry people would say, these guys can’t even keep their clients, a person with three years standing takes away their clients. Most people wouldn’t sue on such a clause unless it is really a bread and butter issue. It would look bad in the community, because the community values creative people and people who are able to stand on their own two feet. On the other hand, if you are starting a new company the last thing you want is to get sued, because you need all your energy to building up the company. So naturally you are worried about it. In conclusion I would say try not to sign it, but if you did, all is not lost, because it is not an easy clause to enforce.

Another clause in his contract states that he is not permitted to take any documents or artwork, soft or hardcopy of such out of the agency. He is also not permitted to take any photographs. The clauses sound very intimidating. Wong is wondering how he will establish his professional portfolio, the most important element for getting him another job one day. Wong signs anyway and starts to work on interesting projects. His friends in the design scene tell him to document well all the good projects he does, for his portfolio. He is in a dilemma. His employers tell him he can’t take anything, they would give him portfolio pieces when he wants to leave. His friends say, “everybody does it! Your employer will never give you anything, besides, you might not want to tell them when you start to interview again!”. So he makes softcopies and hardcopies of his project work for himself, takes photos of mock-ups when nobody is around……he feels guilty and wonders whether he is violating ethical practises in doing so.………

Mr. Ravindran: It is correct, that you should not take items from the firm, whether it is a diskette belonging to the company or even paper belonging to the firm, that’s theft. But he should be able to show his portfolio. So if you agree to this clause you are stuck in a way. Therefore he should ask for this clause to be changed to “not to take any documents, artwork or softcopy out of the agency except in order to demonstrate his portfolio…” Such a clause should be an industry standard so there is no quibbling about it. The Design Association should make it an industry standard. DAS can put out a circular, saying, designers should be able to make copies of their work and use it. And all members would sign it so it becomes a standard. So not withstanding what is in the contract, if you go to court, experts in the design world would come up and say: “Look, this is normal, we do this. If we don’t have this opportunity, how would a person who is unknown be able to convince a potential employer”. In order for young designers to be employed, they have to show their portfolio and it should be an industry practice that their portfolio should be available for them. They should be allowed to collect their portfolio as and when they do it. So this is something the Association could do. And in such a situation the employee should use his own diskette and his own paper. The trouble is, if you sign such a contract, Singapore’s contractual law is such that, with the exception of the restraint of trade, for most other things you are bound by it. Otherwise you break the contract. But even if you break the contract, and say you use your own material or you email files of your work to your home adress, what would be the damage the employer can claim? On the other hand, taking such elements could be grounds for termination of the employment contract if such is the clause. Also taking photos of projects, if it is prohibited by the contract, could be grounds for termination.

Wong has switched to a new company where he gets a more interesting employed position. However, some projects he did at his previous place have been very successful. He would like to be recognized personally for them, in order to build his reputation in the design scene. He thinks of submitting them directly (not over his previous company) to design competitions to obtain a design prize, as well as to design publications (magazines, year books) in order to make sure his name is credited. He intends to credit the agency and other designers involved as well, however, he is still not sure whether he has the right to submit. He knows his previous employer would not want Wong’s name linked to the projects, as he is not part of this company anymore…..

Mr. Ravindran: I think that the work is owned by the company and the company has the right to decide what should be done with the work. Let’s take the easiest example that the work was designed by one individual for a customer. The work is owned by the company and then this individual leaves the company. The work and all the benefits of the work go to the company. I don’t think the individual can put the work in the competition without the approval of the company, because the design and the credit for it should be owned by the company. Although, there is something which is called “right of paternity” which is not come under a law yet. Under the french law, there is the right of paternity, where individuals can claim that they are the authors of a creation, and the owner must acknowledge the author. So let’s say there is a piece of sculpture which is owned by a bank, then the bank must acknowledge who the sculptor was. But that has not come into our law yet. We have international obligations which are going that route where there is the right of paternity.
The question of copyright would come in. I think the company would be in a better position than the individual designer. I don’t think he can enter the competition without the approval of the company because of the copyright issue.

After some time, Wong is on the job market again. He puts together his portfolio with the latest and most interesting work. Some of the best projects are not in the market yet. He is wondering, what happens if there is a leak; if the agencies which invite him for an interview work for clients who are competitors of the corporations for which he developed these projects. They might talk to them about the projects he showed them; so, could he be held responsible for the damage this might cause……………

Mr. Ravindran: I would think it is the responsibility of the designer not to reveal anything confidential. The designer wants to be treated as a professional so he has to act as a professional. So if a client gives me some information, I am bound by my law society rules not to reveal it to anybody else, even a potential employer; otherwise I would be disbarred. So if a design is a confidential design, the employee should not show it to another potential employer. I think to be on the safe side, you should only show work which is public. You don’t know whom you are talking to, this person might be talking to somebody else. So you should not be showing work which has not come out. Your client would not be happy, not just your employer would not be happy.

After some weeks of deliberation, Wong decides to go freelance, to start a small office which might grow to an agency later. When he tells the clients he worked for that he will be self-employed, certain indicate that they would like to continue collaborating with him. He would be very relieved to secure some clients for his independent work like this, however he is not sure whether it is legal……

Mr. Ravindran: Generally speaking, if there is no contractual inhibition it is legal, and you have to do it, because otherwise you are not going to be able to survive. This is a normal source of business in law firms, architectural firms, your first clients are your old clients from your old practice. That’s normal you should not feel guilty about it. The more complicated question is where there is a restraint of trade clause. We have talked about this already earlier. But generally speaking, a restraint of trade clause is unenforceable, so it should not be a problem. Unenforceable means the court will not enforce it, the court would struck off that clause.

In order to find more clients for his freelance work, Wong intends to make a little brochure, create a CD and launch a web site with his portfolio. As all the projects on which he wants to communicate were done previously, when he was an employed designer, he intends to credit the agencies at which he has developed them. But would it be legal under these circumstances to use the references of the agencies he worked for……………

Mr. Ravindran: Showing the portfolio of your work in private to prospective employers is probably different from showing the work to potential clients in competition with your old employers. The position is not that clear. What we are talking about is copyright infringement. Every time you reproduce a drawing, that is an infringement of copyright. So saying “I worked on the Stamford House Design” while we are sitting here, seeing it, is fine. But reproducing the drawings and showing them to a person, that is actually copyright infringement. There are, however, some defenses to this, and these defenses are what is called “fair dealing”. If you reproduce an artistic work, which is owned by your employer and you have worked on, prima face that’s a copyright infringement. But one of the defenses is where the reproduction is used for criticism or review. If it is used in a fair manner and acknowledgement is given, than it is OK. So I would think that the portfolio situation falls within the defense. It is a narrow defense, so if you do it in a private manner I think it is fine, but if you open it in a CD ROM or web site, I think it doesn’t become fair anymore. It is not an easy distinction: showing it privately to a potential employer, showing it privately to a potential client and showing it publicly on a web site. This is like a slope. But certainly, in all three instances there is copyright infringement because there is reproduction. If you use photographs, the copyright of these photos is with your employer if you or somebody else has taken it for the company. In general it is mainly a question of fairness.

The advise given above is for general knowledge purposes only for specific fact situations you should consult your lawyers.