Ep 29: Sharon Toerek of Legal + Creative on Intellectual Property
Host of the Innovative Agency podcast and Attorney shares her advice on how Marketing Agencies should face and prevent legal challenges.
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Hey, everyone, this is Rudy Fernandez from Creative Outhouse. If you’re in marketing, Sharon Toerek is someone you want on your side. She’s an attorney who specializes in legal challenges Marketing Agencies run into. For example, she talks about the kinds of legal documents you should have ready to go anytime you pitch or approach a new client, and where people in marketing make their biggest mistakes. This episode will make you ask questions like, “Hmm, if a freelancer does work for me, who owns that work?” Well, you know, if you don’t have your legal agreements in order, you won’t like the answer to that question. Sharon is also the host of the Innovative Agency Podcast, where she talks to the heads of agencies about the trends they see coming. As someone who’s an expert in our industry without actually being in it, Sharon gives a unique point of view on what she sees happening. We’ll check it out. Welcome to Marketing Upheaval.
Rudy Fernandez 1:51
Welcome to Marketing Upheaval. My guest is , Sharon Toerek, founder of Toerek Law in Cleveland, Ohio, and host of the Innovative Agency Podcast. Sharon is an attorney who specializes in helping marketing and advertising people with legal issues such as intellectual property, social marketing, compliance, vendor relationship contracts and so on. Her podcast helps agency heads answer the question: What’s next? And I was a guest on her podcast. So I’m very excited to turn the tables and ask her some questions. So thanks for joining me here.
Sharon Toerek 2:21
It’s my pleasure. Yes, nice to be on this side of the microphone.
Rudy Fernandez 2:26
So you’re an attorney, but why the specialization in marketing?
Sharon Toerek 2:31
I am an intellectual property attorney by training which means that I have experience as a paralegal and then a lawyer handling trademark and copyright issues. And earlier on in my practice, I started getting a lot of inquiries and work from marketers. I love intellectual property law. I think that intellectual property drives our economy, drives culture, so many other things. Advertising does that too, by the way, so do marketing. I loved working with marketers, I love the creativity, I loved the ideation. And so I started working more in the marketing space and eventually recognized a real gap or need in the agency community, especially independent agencies, that were smaller mid in size, didn’t really have anybody helping them with the kinds of legal issues they were facing on a regular basis.
Rudy Fernandez 3:32
I’m just thinking about what we do and a lot of its work for hire. So there’s not a lot of intellectual property in terms of the things we produce for clients. So what types of cases or issues do you normally handle for clients?
Sharon Toerek 3:46
Yeah, actually disagree with you on that.
Rudy Fernandez 3:48
Oh, okay. Well, then I’ve had to go back and talk to some people.
Sharon Toerek 3:54
So here’s why I think that ultimately the end goal and most client/agency relationships is that the client is going to end up owning the intellectual property. It is a question of timing. When you time that transfer, and as an advocate for agencies, a lot of our work is to help agencies understand that they shouldn’t be giving up the rights to their IP too soon. And by too soon, I primarily mean before you’ve been paid. So a lot of times agencies are not addressing and their master service agreements or their legal terms and conditions when the rights to the work that they create actually transfers. Secondly, usually in a new business pitch situation, if you’re an agency that pitches a lot or response to RFPs, RFIDs. You’re disclosing a lot of IP and ideation in that process, either in the proposal document or in the pitch meeting. When you want to make sure you control who owns that IP before you sign the line that is dotted with the client. I agree with you that is usually the intention. Both parties, the client ends up owning the work the work for hire is what the question is, when do they own it?
Rudy Fernandez 5:06
I know that there has to be consideration on both sides. Everyone knows an agency has had at least one story and unfortunately I have more than one where we didn’t get paid. And someone tries to use your work.
Sharon Toerek 5:18
Yeah, I hate those stories. And I hate stories of agencies that go through the time and expensive pitching for a piece of business, don’t get hired, and then find their concepts executed either internally by the client or by some other agency.
Rudy Fernandez 5:33
Been there a few times.
Sharon Toerek 5:35
Yeah, there’s lots of nuance to it. And there are a lot of variables. So in addition to IP, which is what we’ve been talking about is primarily copyright and idea protection. There are a lot of agencies who do branding, and they need support in terms of the legal clearance for trademark reasons to help them propose brands that are going to be legal defensible. And so that was primarily my first entree into working in the marketing space and a lot of agencies that do branding need that support. Then on the other side of the house, we help agencies with what I would call the business affairs focused legal issues they face: negotiating their master service agreements, helping them properly contract with independent contractors and freelancers. A lot of our clients do social media and influencer marketing campaigns, so we help them with FTC compliance issues. And then privacy is becoming a big issue. And so helping them understand how to create appropriate privacy policies and practices.
Rudy Fernandez 6:40
We’ve been talking to a few people about data privacy – the laws have changed in California and who knows when the rest of the country will catch up?
Sharon Toerek 6:48
Well, and the hope is amongst the privacy experts who I you know, I read their content and occasionally get a chance to talk to them is that we’ll have federal standards before too long. So that marketers are not going to have to deal with a patchwork of 50 different sets of regulations. Because right now, it’s basically a regulated state by state in the US. So that’s a tall order for marketers to have to fill to be compliant everywhere.
Rudy Fernandez 7:15
You know, you mentioned new business pitches, and every now and then you’ll get an RFP that says something to the effect that the party that’s offering the RFP will own the intellectual property or the creative or whatever it is that you present. And I always ignore that because I know they don’t because they haven’t paid for it. So they obviously don’t own it. Is that something I should not ignore? Or is that something I should say, make a comment?
Sharon Toerek 7:41
I wouldn’t ignore it. In a perfect world. The relationship or the discussion will start with a nondisclosure agreement between an agency and a prospective client. So the reason you shouldn’t ignore it is that unless you are willing to give away your ideation as table stakes for being a part of that pitch or having that opportunity to pitch or unless you and the brand have agreed upfront that there’ll be some sort of compensation or cost defraying, as part of the pitch process, which you see happen with some of the very large, especially consumer packaged goods brands. My point is, make it be your purposeful business decision, either decide that you’re going to invest the value of that intellectual capital, and give it freely for the privilege of coming to the table. If you’re not good with that, then you should absolutely be pushing back on those terms and the RFP, either by outright refusing them or by making it clear in the assets that you show or the proposal that you write, that the intellectual property that’s contained in those things belongs to you using things like IP ownership, statements of legends, copyright notices. Those are things to do for the agency who’s not comfortable with doesn’t have the opportunity to use a nondisclosure agreement before they start sharing their smarts with a prospective client.
Rudy Fernandez 9:07
You said that you specialize in small and mid-sized agencies. And I’m also going to take a leap and say that a lot of them, like ours, that we don’t usually have attorneys on-hand. So I’m going to guess that a lot of times people come to you and sort of an “Oh, crap” moment. Yeah, what are those? What are those moments when they go “oh, we better call Sharon.”
Sharon Toerek 9:32
I would say the number one “Oh, no” situation we get faced with is we love the client. They love us. We want to do a deal. And we want to start yesterday and there’s no contract between the parties. Or we have a freelancer in place. And we didn’t sign an agreement with the freelancer and now they’re displaying the work that they did for our agency and/or client on their personal portfolio and the client is angry. We need this fixed immediately. Or we proposed a brand to the client. We didn’t do vetting, they love it. And now it’s not available. Those are the types of sort of emergency scenarios we typically see. And I, you know, it’s our goal, to help agencies build process around their legal affairs so that they’ve got a set of tools and agreements and templates to take some of the friction out of this so that they’ve already got something to manage a situation like this before it becomes, you know, a fire that needs to be put out.
Rudy Fernandez 10:39
Have the legal issues around agencies and creative and all this stuff. How has it changed over the last few years?
Sharon Toerek 10:46
The biggest change is probably the pace with which business is done as agencies have moved away from sort of those longer-term retainer based or Agency of Record based relationships with our clients. Where, you know, you’re signing a contract once, and that’s your deal for a year or sometimes even longer. Now, it’s a lot of project to project type. So you need a lot more documentation, there’s a lot more pitching. So just the sheer volume of new business situations and contracts that emerged is a big shift that we’ve seen. From a legal trends perspective, I would say that the two largest areas that have grown, I would say in the last five years are first of all FTC compliance for influencer marketing and social media. And then more recently, having to pay attention to privacy regulations, GDPR and 2018. And now the California Consumer Privacy Act, which just came into being in January 1 of 2020. This year, those are sort of the two biggest legal changes if you will. But day to day, I’m also seeing is that the pace of business has gotten so much faster. And so it’s so much more likely that an agency is caught without a legal tool or process and ahead of time to sort of manage those situations as they arise.
Rudy Fernandez 12:16
So let’s say you’re talking to a small midsize business person. Well, you actually are. So what contracts documents legal sort of elements should this person have in the toolkit ready to go?
Sharon Toerek 12:32
Every agency should have a nondisclosure agreement that’s appropriate for a prospective client, a template of a master service agreement. And that’s even look even if you’re going to sign the client’s version of the contract, which many agencies choose to do or don’t choose, but don’t have any choice but to do. Having your own master service agreement template enables you to get to the bargaining table faster, you can present your contract first. It also serves as a really good tool, blacklist or punch list, if you will, of things to look for and the clients contract that may not be favorable for you. So a Master Service Agreement, many agencies also need like a shorter form set of legal terms and conditions for those smaller projects or lower dollar jobs that they can attach to like a proposal or statement of work. And then in the independent contractor space in many circumstances, and a contractor specific non-disclosure agreement might be appropriate if you’re going to bring them in at a pitch before you actually get the work. And then certainly you need a good solid independent contractor agreement template, once you’re going to engage them to do some work. One of the primary reasons is the same reason why the master service agreement is so important from the perspective of intellectual property. You want to make sure that the agency owns the rights to the work that the freelancer or the contractor is doing for you, which you don’t automatically own even though you pay for the work. So it’s really critical to have something in writing.
Rudy Fernandez 14:01
Sharon Toerek 14:02
Yeah. It’s commercially unreasonable, right? You wouldn’t expect that if you paid for piece of work, that there would be any question about ownership. But the way the copyright laws work, you got to have something in writing between the Creator, which is the contractor, and the ultimate owner, which is you is an agency about who’s going to own that work. The other reason it’s important is because in many cases, you’ve promised your client in your contract with them that you’re going to assign them all the rights to the work and you can assign what you don’t know. Right?
Rudy Fernandez 14:37
You had mentioned that you really liked working with the creative, folks, but most people don’t associate the word creative with the profession attorney. So how did you get, what are the specifics in terms of how you got into this niche from intellectual property to specifically marketing instead of music or poetry? I don’t know.
Sharon Toerek 14:59
Yeah, you know, I think I’d love to say that it was all part of a grand master plan. But the way it really happened and evolved is I started getting a little bit of work and at the time it was in the trademark space for people in the marketing community. And I started getting more involved in our regional marketing and advertising industry. I really mean it with all my heart. I believe marketing and advertising matters for so many reasons. It matters to the economy, and matters to our culture. It matters just in the way we advance socially. If you think about the way a social cause advances, if you think about the way that we learn about the developments in science or art that affect us, whatever those things are, marketing is responsible for getting those messages out. And if you look at the ton of jobs that the industry creates as well, directly and indirectly, it’s just a fascinating industry to be tangential to. And so that was I have to say the most intoxicating part about working with marketers, first of all. And then second of all, you know, I don’t know if you’ve ever read the book Blue Ocean Strategy, but it basically it’s a business book and the tenant of it is: Don’t fish where the water is red, because that is where all your competitors are. And that’s where they’re looking for clients and helping clients and the waters are kind of bloody, because there’s a lot of stuff going on there, go to your blue oceans. Which is find the people who need what it is that you do, and in my case, there was nobody really, or very few people, I should say, helping independent agencies that were small and mid in size, navigate these kinds of legal issues. So it was a perfect opportunity for me to sort of marry my professional background with a client industry that really needed the help the advocacy, etc. So that’s kind of how it unfolded.
Rudy Fernandez 16:56
Now, I agree with you on all those opinions about marketing and marketing people, but I’m in it. So it’s hard to be objective. But I’ve I said this to someone in one of our previous podcasts as much of a bad rap as people and say advertising and PR, because they’re never the good guys in movies. But for as long as I’ve been in this business, I can tell you, almost everyone I’ve met and worked with and talked with is just so generous and kind and helpful. I know, that’s been my experience.
Sharon Toerek 17:31
I agree. I am really fortunate to be surrounded by really excellent relationships and your industry. But even if I weren’t, even if that wasn’t the case, I firmly believe it’s a discipline that really matters, like I said, to our culture and to our economy. It’s if you think about the amount of money and resources that are generated as a result of the disciplines of marketing and advertising, it’s pretty astonishing. And it’s, I suppose easy to be cynical about it, if you look at it as nothing more than either spin doctoring or selling people, things that they don’t need in the first place. And of course, there’s some of that. But really, it is about connecting the right people with the things that they need, and their lives are it’s about advancing society in some way. And it also, not for nothing, results in the creation of some pretty amazing art. Yeah, I am in awe when I get the opportunity to see some of the stuff that our clients create from a creative point of view.
Rudy Fernandez 18:35
I imagine it’s still pretty niche. It’s not there’s not like a lot of attorneys who specialize in marketing, or is that changed?
Sharon Toerek 18:43
No, it hasn’t changed. And, you know, the advertising law specialists out there primarily tend to work in large firms that have very sophisticated advertising law practices, and their primarily working either with corporate marketers or with large agencies that are in the, you know, the holding networks. So, still very few people focusing on the small and mid sized firms. And it’s really a cross section between understanding entrepreneurship and small business. And the way the people who own those companies think, and understanding the industry of marketing agencies.
Rudy Fernandez 19:26
I wanted to talk about the podcast, there’s a lot the and they’re wonderful, but they deal mostly with marketing issues and business ownership. How did you decide to make it about that and not about the legal issues they face?
Sharon Toerek 19:37
Well, thank you. I appreciate the warm words, first of all, and you were a great guest on the podcast. Also, I wanted to get ideas and content out there to the world primarily into my client industry that was helpful to them that was about them, by them, for them. And so that combined with the very real fact that no agency owner is going to listen to a weekly legal podcast about agencies. That’s worse than paint drying. It was a learning opportunity for me to interview experts in the agency world. And so we interview agency owners and agency adjacent consultants and experts. It has met my wildest expectations on a number of fronts. I’ve gotten such nice feedback from people who do listen to the show that we’re providing something useful to them. That’s really gratifying to me. I’ve learned a ton and met a ton of fascinating people. When I originally started it, I wanted it to really be sort of the hub of our content creation work here at the firm. And so we have been able to leverage our interviews to create other sorts of content to get it out to people in our client community and the relationship development that It’s enabled has been just fabulous.
Rudy Fernandez 21:02
I think that the best thing that I’ve learned from this, well, each podcast, I’ve learned something, there’s been just so many “I didn’t know that” moments, that it’s been so rewarding. And that was not something I anticipated going into it and meeting these people and talking to them. They’ve just to a person been just great.
Sharon Toerek 21:20
And don’t you love it when an interview sort of takes a twist or a turn that you weren’t expecting? And what that enables you to sort of peel back?
Rudy Fernandez 21:27
Yeah, like your comment about freelancers like, Oh, I better seal that hole.
Sharon Toerek 21:34
That’s fine. Give me a call.
Rudy Fernandez 21:37
So what are some important things you’ve learned from producing the podcast first, just about a podcast in general and producing a podcast?
Sharon Toerek 21:44
I am an devout control freak, first of all, so it is for me and letting go of control because I knew nothing about podcasting, particularly on the technical side of podcasting. I still don’t know much about it. So having to rely on a team of professionals to do the production work. See it was getting the show out. There was a huge lesson for me in terms of just relying on a team, telling them what your goals are, and then trusting that they’re going to accomplish that. I’ve learned that and that’s no small lesson for someone who has trouble letting go of the details. The second thing was I was not expecting have as much fun with the actual interview process, as I do have. It is it’s tremendously enjoyable for me. It’s an opportunity for me to take a pre scheduled break in my day to talk to somebody smart about something interesting. Yeah. It energizes me to have the conversations that we get to have. No, yes. I think it’s also made me smarter about marketing in general. Those have been just some of the benefits from my perspective.
Rudy Fernandez 22:59
Yeah. I’m a bit of a control freak. I been in audio booths for a few decades, and usually preparing audio for broadcast quality. So I listened to the slightest little problems. So a podcast, you can’t do that. There’s a lot of imperfections in everything we put out and to me, I had to learn to go “Okay, that’s, that’s fine”.
Sharon Toerek 23:22
It’s interesting that you say that because I remember now that you’re telling me this, that you probably the guests that we’ve had on my show that was the most thoughtful ahead of time about the sound quality, you actually brought it up ahead of time in our pre interview and in some of our written correspondence.
Rudy Fernandez 23:44
And I sent you my own audio file.
Sharon Toerek 23:50
You to actually ghost recorded so we will have another version of it, and you’re right, I’m remembering this now.
Rudy Fernandez 24:00
Sharon Toerek 24:02
Should I be recording this?
Rudy Fernandez 24:03
No, I know I’ve got it, I think. I hope so. No, I got it. So yes, there’s a little bit about me. So when you talk to all these really smart people, what are some of the bigger trends you see coming?
Sharon Toerek 24:17
Probably one of the biggest trend driven interviews I had was an expert in the area of artificial intelligence, how that’s going to impact the agency world because it will eventually start to chip away at some of that lower priced, repetitive production work that many agencies are still offering as a part of their service to their clients. Some of the other most fascinating conversations we had involved this whole issue of talent in the marketplace, which is in my opinion, I mean, you can talk about, you know, legal trends and or regulatory trends and how those are challenging agencies. Or you could talk about how margins are squeezed because the way that brands are paying agencies, but the biggest problem because our challenge, I should say consistently in the industry of agencies is talent. It’s finding the right people, and then figuring out the best way to keep them sometimes as money and many times as other things other than money.
Rudy Fernandez 25:24
So, yeah, I actually, I’m trying to think about that whole talent thing because there is a migration. I know you’ve discussed it in your podcasts, from agency to client, right? Because agencies are still trying to rely on old revenue models while trying to find new revenue models and, you know, talents sort of starting to slip from that to internal departments.
Sharon Toerek 25:48
I thought so too actually, I kind of still do think so. I talked to a couple of people who think that that pendulum starting to swing back to agencies again. And so I have to say, I don’t know, I don’t know, which is the case, I think the most reasonable conversation I’ve had about this topic was with one of our guests who said, honestly, for some of the types of work and tactics that have to be executed in a campaign, they’re best done in house. The kind of stuff that you want that an agency is better suited for, is the strategic recommendations, insights, the concepts that get generated as a result of that. And the risk taking that sort of the more risk assumption, focused thinking that an agency has the freedom to do because the folks who are working in house have so many hoops to jump through to be really innovative.
Rudy Fernandez 26:50
Yeah, that’s true. When you’re internal you just know about the politics. You don’t want to, you can’t really separate yourself from them. Right. Has the podcast lead to new clients?
Sharon Toerek 27:06
So I would say, ultimately, yes, the podcast has created opportunities. And also be very candid and say for the benefit of you and anyone else who’s listening, that it is a very long play. Sure, you know, our show has a very discrete listenership. And my focus is a very narrow niche, right? I’m targeting a very narrow niche with the content that I curate. So yes, it has led to some opportunities, but they were not immediate by any stretch of the imagination. So it’s a long game. It’s a brand building game. It is a content generation and a relationship building game and all those things take a while to bear fruit. So if business generation is your goal, then you’ve got to be patient.
Rudy Fernandez 27:54
Yeah, I think that it’s funny not just with podcasting, but with many elements of our agency or any agency, is the things that we tell our clients that they have to do, We don’t actually do for ourselves. And that means yes, it’s a long game. And anything you do, there is a brand you have to build over time. You’ll bring a specialist and they’ll and they tell you the exact same things you tell your client you like, I’m an idiot. Why did I pay for that?
Sharon Toerek 28:22
Because sometimes what you need is even if something is your specialty, or you’re focused on a discipline, you need the accountability of paying that third party to come in and force you to do the thing that you need or want to do whatever that thing is.
Rudy Fernandez 28:38
Yeah. So of all the changes of marketing, what are you most excited about? And what are you most concerned about?
Sharon Toerek 28:44
I am excited about….as for agencies, I think there’s never been a better time to be a small agency. I think the economic realities of the business do not favor large holding company Agencies over the agencies that are small and mid in size that can be more nimble, that have lower costs of operation, that can turn things around more quickly. I just think fortune right now favors those more entrepreneurial, small and midsize agencies. And then what concerns me, I am concerned that we’re going to get overwhelmed by trying to be compliant with privacy rules and marketing without a firm plan for harmonizing some of these rules, I think it’s going to be painful if we have to wait for a handful of states to each enact their own blueprints. I guess I’ll feel better if it ends up emerging that it’s going to be a copy/paste situation and that most of them are going to end up following like the California trend. But that concerns me because compliance can be costly, and we don’t really know enough about how these rules are going to be enforced. We don’t really know how GDPR is going to be enforced yet. I’m on the fence about how the economy is going to affect the industry over the next 12 to 18 months. Some agency owners are expecting a recession sooner than later. Some are, you know, think we’ve got a little bit longer. Marketing always tends to be one of those first costs that traditional wisdom has it that is going to be evaluated harshly when money gets tighter. And so if that ends up coming to fruition, that’s going to mean some adjustments for some people in the industry.
Rudy Fernandez 30:33
Ditto on my concerns. We’ve had a few conversations with folks. And you’re the third person to say that privacy issues are – it’s very questionable. What’s going to happen, like you brought up pendulums. And right now nationally, so far we’ve done nothing. And usually the way we operate as a nation is, we’re going to do everything. And for a small midsize business. We don’t have a staff of attorneys, and I can see that being a problem. And yeah, recession is going to probably hit at some point and, and we’ll have to figure out how that works.
Sharon Toerek 31:08
Yeah, I mean, right now, our climate, from a political point of view does not favor the emergence of any kind of federal standard anytime soon. It’s just not the regulatory climate we’re in right now. But that’s the change.
Rudy Fernandez 31:22
Well, Sharon, thank you so much for taking the time. I really enjoyed this.
Sharon Toerek 31:26
It’s my pleasure. I really appreciate you asking me on and thank you so much for being a great guest on Innovative Agency as well.
Rudy Fernandez 31:34
Hey, thanks for listening to Marketing Upheaval from Creative Outhouse. If you want to get Sharon’s advice, visit LegalandCreative.com. That’s LegalandCreative.com. You’ll also see a link there for the Innovative Agency podcast. So check that out. Big thanks to Susan Cooper, our Producer. And also big thanks to our listeners. You know, our listeners are in 514 different cities and 47 different countries. And some of you send us some really kind emails. It really pumps us up and encourages us. So if you have anything that you’d like to listen to that you haven’t heard on the show, let us know. Just go to CreativeOuthouse.com/podcast and there is a contact us button somewhere in there and check it out. And if you liked this podcast and you haven’t already, subscribe and give us five stars. Share it with your friends. Well that’s it for this episode of Marketing Upheaval. And remember, if the current state of marketing has got you confused, don’t worry, it’ll all change. See ya.
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