Part 1: Top 10 ‘Must Haves’ in Every Digital MSA

The Digital advertising and marketing business is complex.

We straddle the line between sensory-rich storytelling, information dissemination, and software development.  We deal in innovation (habitually pushing technology), creativity (one of the most subjective subjects on earth) and more often than not we operate under extremely difficult production schedules.  Couple this with the inherent contractual challenges relating to work for hire, idea ownership, and payment schedules, and you have a great deal to concern yourself with when entering into an agreement for services.  Thus, there is an essential need to have a rock solid Master Services Agreement in place to protect your agency, the client, and the overall sustainability of the account.

A few quick points before jumping into the key clauses:

  • As with any good relationship, it is imperative that you discuss potential pain points with the hope of reaching consensus around sticky issues. Pre-defined, mutually agreeable terms (documented in a MSA) can be the difference between a potentially antagonistic relationship and a mutually beneficial foundation that can stand the test of time.
  • A Master Services Agreement is different than a Scope of Work. Ideally the MSA governs the overall terms of the corporate relationship and a SOW defines a particular project. One key benefit to having a MSA in place is the expeditious actioning of a particular project (just sign the SOW and off you go).
  • Lastly, the tone of the document is incredibly important in determining the parties involved (on both sides) and the mutual level of understanding surrounding the relationship parameters. At AgencyNet, we’ve chosen to write our MSA in a friendly and conversational tone, utilizing easy-to-understand language, with as little legalese as necessary.  I want our clients (CMO’s, VP Marketing, etc.) as well as the key stakeholders over here, to fully understand the terms of our relationship.  You’ll recognize this approach in the suggested language below.

Now that that’s out of the way, it’s important to note that the information below is not a silver-bullet to deal with all of your contractual challenges. Each project and relationship is unique and terms should be considered accordingly.  That said, if you evaluate the 10 topics listed below and develop your POV around each, you’ll go into contract negotiations knowing what you’re willing to accept and where you have to draw the line.

In today’s post I’ll cover the first 3, tomorrow I’ll cover clauses 4-7 (Confidentiality, Assumptions, Scope of Work, and Change Orders) and Friday we’ll round out the top 10 (with Poaching, Promotions/Credit, and Payment Schedule).

1. Term: When does the Relationship begin and when does it end?

Key Discussion Points: Can either party terminate the agreement at any time? Under what grounds can the contract be terminated? Did you incur hiring or technology costs related to this relationship? If so, will notice have to be provided? Is there a termination fee?  Does either side or just the client incur the fee?

Suggested Language:

Our relationship begins after both you and we sign this Agreement and deliver signed versions of this Agreement to each other.  We will continue to work together under this Agreement until either you send us, or we send you, written notice terminating this Agreement, which must be sent no less than three (3) months prior to the effective date of termination, unless special circumstances exist (as described below in this Agreement).  If no SOW’s or projects are outstanding at the time of termination, then this Agreement will end permanently; otherwise, the terms of the outstanding SOW(s) will continue under this Agreement until their natural expiration date(s). A particular project under a SOW may be terminated according to the terms contained in a particular SOW.

Either party may terminate this Agreement immediately if the other party commits a material breach of this Agreement, and that breach is not adequately and reasonably fixed within ten (10) days following notice of the breach. Alternatively, AgencyNet reserves the right to suspend upon ten (10) days written notice, but not terminate, services for as long as any overdue balance remains unpaid.

2. Ownership: Who owns what?

Key Discussion Points: Does everything you create fall under work-for-hire?  Are you utilizing any existing code as the basis of the build? If so, are you planning on using it again (potentially for another client)? Will you be incorporating any 3rd party materials into the build? Are you granting a worldwide license, in perpetuity or is there a predefined period of time that the client can use the materials? Are you comfortable turning over the source code prior to receiving payment for the entire project?

Suggested Language:

It’s actually not that complicated. There are certain materials that you will own, and there are certain materials that we will own.  Here’s how it works: until you pay for the services provided to you, we own everything that we create under this Agreement.  (To the extent we don’t own it, we are the licensor of everything we create).

Once you are fully paid-up, then:

AgencyNet owns, and will continue to own at all times, all know-how, methods, processes, templates (both electronic and printed), tools necessary to create materials and/or provide services to you, generic computer coding, generic designs, generic graphics, and related materials that AgencyNet (i) had before this Agreement was signed, and/or (ii) that AgencyNet developed during the course of providing services to you (collectively, “AgencyNet IP”).

You own and/or have rights to the final product created by us, which will consist of at least one, and perhaps all three, of the following things: (1) materials that we created for you that you own fully and completely (“Your IP”); (2) materials that we own, such as AgencyNet IP, that is inextricably intertwined with your IP, and (3) third party materials that are inextricably intertwined with your IP (“Third Party Materials”). With regard to AgencyNet IP, we will own those materials at all times, as described above.  If AgencyNet IP is included in the Project, then we hereby grant you a non-exclusive, worldwide, transferable license to use the AgencyNet IP in conjunction with Your IP.  You can’t separate the AgencyNet IP from your IP; however, you can use it in conjunction with the Project and your IP.  With regard to Third Party Materials, neither you, nor we, own those materials. Third Party Materials are materials that either you or we license, and have the right to include and sub-license as part of the Project.

3. Indemnification: What happens if either of us gets sued?

Key Discussion Points: Whose idea is it? Are you performing a patent search?  If so, who’s paying?  Will you be building on top of a legacy system?  If so, who owns the software?  Is it a license?  Open source? Is the client supplying assets or are you creating, licensing, or shooting them?

Suggested Language:

Let’s make this mutual.

We indemnify you for all assets we bring to the project, and you indemnify us for all assets you bring to the project.  If we create software or develop an idea that came from us, we will ensure it does not infringe on and indemnify against an existing patent or copyright. Alternatively, if we develop on-top of a legacy system that you provide or we develop an idea that came from you, you will ensure it does not infringe on and indemnify against an existing patent or copyright.  Indemnification liability on AgencyNet will be capped at the total project budget or the maximum payout from our current E&O policy, which ever is higher. Proof of coverage amount and policy status to be provided by AgencyNet.

Tomorrow, I’ll cover Confidentiality, Assumptions, Scope of Work, and Change Orders.  The last topic regarding Change Orders is an exceptionally challenging facet of our business. I think we’ve got a decent solution in place.