Many brands demand that their agencies give up intellectual property rights - but some agencies are starting to push back

• Ownership of intellectual property, or the ideas that an ad agency pitches to win a brand's business, is an increasingly hot topic in the ad industry.
• Some brands have long demanded that agencies sign away rights to intellectual property they create.
• Recently, some agencies have begun to push back against this demand.
• General Mills got a lot of blowback when it required agencies to hand over IP ownership.
• And Crispin Porter Bogusky refuses to sign away IP rights - and is getting brands to change their approach 50% to 60% of the time, COO Ryan Skubic said.
• But the practice will likely continue as long as most agencies keep accepting brands' conditions.
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The traditional ad industry is facing threats from all sides, and one of the latest is clients demanding to own the ideas that agencies pitch to win new business.

Agencies have long feared signing away the rights to their intellectual property without knowing if they're going to win the business and be paid for them or not.

But Nancy Hill, a consultant and former agency executive who led the trade group the 4A's for nearly a decade, said the issue is more emotionally charged than ever because agency profit margins are shrinking along with the length and value of an average client contract.

As Ken Robinson, partner at search consultancy Ark Advisors, who is paid by brands to run agency reviews, put it, it may be worth it to an agency to hand over its IP for the chance to win an account worth $10 million in annual revenue, but not the four-month, $300,000 projects that have grown increasingly common.

Agencies are starting to push back harder

In another era, agency teams would mail themselves copies of their own pitch decks in sealed envelopes to prove the concepts they submitted were theirs, lest competitors steal those ideas, Hill said.

But now they're more likely to push back against these practices or opt out of the pitches altogether.

Hill recently posted on LinkedIn about a "large CPG client" that insisted on owning all the ideas pitched during its agency review. She advised agencies to stay away, and the post inspired dozens of comments.

In a similar case, General Mills received "quite a bit of flak" after Adweek reported that agencies participating in the food giant's review had to sign away IP ownership, CMO Ivan Pollard said at this year's Advertising Week in September. Agencies also had to agree not to get paid until four months after starting work on the account, despite having no indication of how long the contracts might last or how much revenue they might bring in.

Ryan Skubic, COO at the agency Crispin Porter Bogusky, whose clients include Domino's Pizza, said his agency refuses to participate in reviews with IP ownership clauses and gets clients to change those terms in their contracts "50% to 60% of the time."

Skubic also said that over the past year, Crispin Porter Bogusky has declined participating in at least three big-brand reviews - including one he wouldn't name whose conditions, as he described them, were identical to General Mills'.

Brands argue that IP clauses are a necessary legal defense

Robinson acknowledged there are unethical people in the marketing world. He said he's seen brand clients "hide" IP ownership clauses in the NDAs that agencies sign near the final round of a pitch, when they can't walk away because they've already spent thousands of dollars and work hours pursuing the business. And he said Ark Advisors does not run reviews where agencies aren't paid for their work.

But Robinson also said many brands require IP ownership as a legal defense. And in some cases their fears may be justified.

He recalled a review in which the losing agency, which had not signed an IP clause, threatened to sue after the client ran an ad closely resembling its pitch. But Ark's own notes showed that the winning agency had proposed a nearly identical idea.

An IP clause could have prevented this situation by requiring both agencies to agree that the client owned the rights to all their creative concepts.

Eric Lachter, the former head of brand marketing for Sony PlayStation and Roku who helped oversee reviews for those companies, said it's not uncommon to see five or more ideas that have "50% to 80% overlap," especially when clients ask competing agencies to focus on certain words, phrases, or sentiments.

But brands increasingly have the upper hand, and plenty of agencies agree to the clauses

Clients have been able to enforce IP clauses because plenty of agencies agree to them.

Lachter said brands have gained power over agencies in the past 20 years as Facebook and Google have brought down the cost of digital advertising and firms that specialize in areas like experiential marketing, influencers, and brand consulting, have proliferated.

As a result, clients feel empowered to cherry pick the services they want from agencies, Lachter said. And while brands like Nike and Coca-Cola will always need big agencies to produce flashy ad campaigns, Lachter said around 80% of advertising today is transactional work that's driven by short-term goals.

Hill said the only way to stop the trend is for agencies "to lock arms and say no," but that there's little sign of such an organized movement.