articles <
blog <
design news <
studio bullitts <
offsite <
discussions <

design jobs <
design firms <
design vendors <
design portfolios <
design schools <
calendar <
materials <
design books <
how to <

about core77
contributors <
advertise <
newsletter <
contact us <


Copyright © 2004
Core77, Inc.

> archived articles      > write for core

Design is 9/10ths of the Law:

Behind the scenes of putting together a set of Legal Terms and Conditions for the Design Consultant
by Danae Loran Willson

Roundtable Participants:

Lisa Selvage, Business Analyst, Teague
Curt Bailey, President, Sundberg-Ferar
Tom McLinden, President, Evo Design
Gerard Furbershaw, COO, Lunar
David Franchino, Managing Director, Design Concepts

>>Get a sample page from the APDF Product T&C

In the past few years design contracts have turned ugly—at least from the designer's standpoint.

Clients now are routinely demanding that designers sign their lives away as the price for doing business. Design firms can spend thousands of dollars annually on legal fees—often hammering out the same issues with each new client over and over—but the worst part is that many designers are unaware of the huge risks they take in signing client contracts. Misunderstood Intellectual Property and Indemnification terms can put design consultancies at tremendous legal risk, and, until now, there has been no industry-endorsed set of guidelines to point out the pitfalls and provide guidance.

In the fall of 2002, the principles and senior managers of 12 esteemed US product and industrial design firms met under the auspices of the Association of Professional Design Firms (APDF) for a Terms & Conditions Summit. The goal of the Summit was to produce a draft of a terms document resulting from the brain trust of those 12 firms and with the input of legal counsel.

This initiative was the brainchild of David Franchino, Managing Director, Design Concepts, Inc. who saw the project as a potential benefit to his own company, APDF members, and to the design industry. Prior to the Summit, the participating firms had shared their own terms and conditions. David had compiled them and reduced them to the salient points that needed focus, detailing and clarification. During the two-day Summit the group worked through each point, and new language was developed, including a white paper appearing along side the main text which adds insight and options as negotiating points.

Afterwards, the draft was reviewed and edited by lawyers working with APDF
Board Director Tom McLinden of Evo Design, who was managing the project for
the organization. The text was reviewed by APDF as well as by IDSA as part of their consideration of endorsement, which they subsequently provided. With the additional input, the draft was made final and the document was published in PDF form and released for sale in September of 2004.

Now that the project is compete, Core77 invited all the participants to reflect on the process, and while all 12 participating firms had remained anonymous until now—for reasons discussed below—five have elected to go public for this article, sharing their experiences and insights.

CORE77: What convinced you to participate in the project of putting together a set of terms and conditions for the design consulting community, given the obvious challenges and potential pitfalls?

GERARD: Many people in our industry are concerned about the threat of offshore competition. But the biggest threat to the industry might in fact come from the contracts we are signing without understanding the implications or believing that nothing bad can result. I felt it was important to get together to see if we could create a document that was fair to both consultant and client.

CURT: Sundberg-Ferar had been quickly coming to the realization that we were signing contracts which were, in effect, locking us out of certain industries because we had been selling an inappropriate amount of intellectual property that would never be used by anyone. Additionally, we realized that we had, in the past, taken on some pretty ridiculous liabilities regarding product safety and patent infringement; liabilities that could potentially put us out of business.

LISA: As a newcomer to this specific industry, I thought it was extremely important to find out if the issues we were coming up against in this area were common. I had spent the previous year with our legal counsel going through the issues to our satisfaction, but felt we needed an industry perspective.

DAVID: Our desire to address our own terms and conditions had been prompted, in part, by the observation that our clients are becoming more aggressive in terms of seeking customized, and frequently, in my opinion, unbalanced, terms and conditions. From our perspective, this has the following negative impacts:

We spend significant time and effort reading, interpreting and negotiating contracts on a per-client basis; time we'd all prefer to spend doing great design. In the case of larger, more complex contracts, they frequently involved professional legal council that can be expensive and seldom makes anyone but our lawyers happy.

Also, we were seeing an increasing trend towards terms and conditions, drafted by our clients, attempting to negate our own terms and conditions and containing language heavily biased away from our interests. In my experience, the most troublesome terms had fallen into three distinct areas:

- Clients who wanted us to 'guarantee' intellectual property to the extent that they want assurances that any concepts or designs developed will not infringe on existing patents, or will, themselves, be patentable.

- Clients who wanted us to 'guarantee' the performance of a design on a development effort where the specifications are vague or poorly understood, and concept feasibility has not yet been established.

- Clients who wanted us to indemnify them for any and all liability associated with their product performance.

In addition to these three, there were probably other points of lesser contention, including non-competes, exclusivity, rights to articles of work, etc. I suspect that each of people participating in this initiative had a rather lengthy laundry list of horror stories. Indeed, the genesis of the project was prompted by a contract I'd been asked to sign which says, in essence, "Your design will conform to any specifications we have, and, if we don't have any specifications, it will conform to anything we decide it should at a later date." No exaggeration. When I told my contact I thought that was a bit unreasonable, his response was "If you don't sign it, I'll just find someone else who will."

CORE 77: Did the open sharing in a group of your competitors give you pause?

LISA: Quite the opposite. The way this group interacted, shared, discussed, re-worked, and listened was pretty great to watch. It was my first experience with other firms in the industry, and it was a great first impression.

CURT: I am amazed at how quickly and effectively we can draw the line between sharing vs. ethical/legal/corporate responsibility.

TOM: The APDF is famous for competitive firms collaborating for the advantage of all. This was a great example of that in action.

CORE 77: There was a concerted effort to keep the participants of this project anonymous. And given the nature of the legal beast here, those instincts seem reasonable. But perhaps you could comment more on the reasons for anonymity?

CURT: This is a sensitive subject that could potentially give a firm the reputation (with clients) of being prima donnas or “hard to deal with.” Ironically, we have found that, in the end, clients appreciate our thoroughness and attention to detail when negotiating a contract—and corporate attorneys seem to respect us more.

TOM: I don’t think there was a real effort to stay anonymous, just a sense that the effort would have power if it was seen as industry wide rather than being associated with the name or names of specific firms.

DAVID: I think there were a number of reasons. Perhaps we were subconsciously worried the whole thing would bomb and wanted the flexibility of distancing ourselves from the smoking wreckage. There was some initial nervousness on my standpoint as to whether our clients would find out what we were attempting and view it as an effort to “collectively bargain” or worse, collude. These proved unfounded as we later found plenty of examples of adjacent industries that do a far better job of organizing and leveraging their efforts.

In addition, I think both clients and consultants are frustrated by the time and expense of having to individually negotiate terms and conditions and would prefer to spend their time and efforts on more productive tasks. In some aspects, I suspect the team has distanced themselves from the results because we do believe that all we’ve done is collectively articulate the best practices of what is unfortunately a fairly fragmented industry. From our own selfish perspective it was crucial to be able to feel, in good faith, that the resulting product really did represent an industry perspective and was not the localized effort of a few firms. This adds additional credibility when we use the document during negotiations.

CORE 77: What was the most unanticipated aspect of the process?

TOM: I thought meeting in Madison Wisconsin was notable. I said after a while, “This is going to end up being in Chicago right?” and they said “No, Madison, really”. The other thing was the caliber of people in the room. I felt like we were writing the Declaration of Independence, with Adams, Jefferson, Monroe and the rest. As has become the case I found myself both inspired and intimidated by the collective intellect of the individuals who make up my competition. I know that we embrace and cultivate the perception of design firm principals being unsophisticated in business matters, but the reality is that this industry is filled with exceptionally sharp folks with keen intellect and sound instincts. Re-affirming this is predictably satisfying. It was tremendously gratifying to see that a group of very busy, important and focused individuals were willing to give the time and effort to this endeavor.

DAVID: I don’t think there were any unanticipated aspects other than the usual suspects that arise when creative people collaborate. I think we were all somewhat amused to learn how similar all of our individual terms and conditions were. This was funny/sad relative to the realization of just how much money we had collectively paid our individual attorneys to develop them.

GERARD: The funniest part was passing the document by our attorney. He once told me he was like a wolf—leaving his scent in the documents he writes. I knew he would find all kinds of problems with the document our group created.

CORE77: With a bit of distance from the project, knowing then what you know now, how would you have done this differently?

TOM: Someone said including the client in the development of the terms. I'm not sure that would have worked the first time around but I think it would be a great idea now. So often when I talk with client lawyers I find that we agree in principal. Finding the right words to keep both sides happy is the tricky part.

LISA: In my opinion, I don't think we should change a thing. Each of us will have items within our company that we may wish we could "do-over," but not this.

GERARD: The only thing I would changed would have been to include some experts from the insurance industry. Some of our clients' procurement groups would like design firms to cover all of the design liability issues, many of which are beyond the control of the firms. We are in effect providing liability insurance. It would be useful to have a number of insurance brokers/policies identified. We could then direct clients to them (or purchase the insurance ourselves and pass the cost on.) If the insurance is not even available (as seems to be the case with IP infringement insurance), it strengthens a design firm's position for not assuming the liability.

CORE77: This project is a great example of a collectively produced 'best practices' guide. Historically the ID industry is loathe to share information like this among competitors. Are there any other areas of operations that might benefit from a collaborative process like this?

DAVID: Hmmm...not sure I agree that the ID industry is loathe to share information. I've actually found people to be quite open. I would be interested in efforts to share best practices in terms of project accounting and tracking, cost management, client billing schedules, etc.

In some aspects, if we were to develop a more consistent industry-wide position, our clients would collectively benefit and the client/consultant interface might be easier to manage.

TOM: Designers have typically been very weary of their competitors, not so in the APDF where the culture is one of sharing information for the good of all involved. APDF publishes its Financial Performance Survey—currently for its members—but the 2005 edition is slated to include members and nonmembers alike. Given the depth and breadth of all or our experience, there is no limit to the areas where a sharing of best practices would be greatly beneficial, to each of us and the industry as a whole.

LISA: At this time I believe we have most of the operational items covered through the APDF. We have forums regarding sales, general business practice, royalties & licensing, and project management. The financial side is covered through the Financial Performance Survey and any financial forums we have had over the last couple of years. All participants in the APDF are very comfortable with sharing, we just need more members in the APDF to widen our perspective on these operational issues.

CORE 77: So now that the "Terms and Conditions Reference For Product Design Consultants" is published, do you use the document?

LISA: I have been using what came out of our meetings since the day I returned to the office. When I was finally able to send the final piece out, I received some great reactions from our staff.

GERARD: Most of our clients have their own contracts. However, exposure to developing the T&Cs has helped us become more aware of issues and we have referred to the white paper to develop rationales for positions we have taken.

DAVID: As one of the originators of this effort, I don’t think we ever envisioned that established firms would use the terms in a boilerplate fashion. New firms could presumably just adopt the terms and be off and running, but most established firms will have idiosyncrasies tied into firm-specific issues such as payment, etc. For us, and presumably for other firms, the real power is in being able to state that our current terms and conditions are “based on industry accepted terms developed by APDF and endorsed by IDSA.” We have found that during negotiations, being able to state that our position will be identical to those of any of the APDF member firms carries tremendous power. Towards that end, anything we can collectively do to drive these further into the fabric of our industry will only help.

CORE 77: Looking back, what was the most valuable thing you got from participating in this initiative?

LISA: The knowledge that each firm has the same issues. We all may approach them in a different manner depending on size, age of firm, risk/reward, but we will all need to address them. I trust that as new issues come up in our industry we will update this wonderful document so that it stays current and useful.

DAVID: First and foremost was the opportunity to make new friendships and renew existing ones. Relative to the exercise I gained tremendous confidence when negotiating on certain key issues, knowing that competitive firms are grappling with the same issues and taking the same stance. The document has provided me with important ammunition in being able to make an articulate case with our clients—and being able to get them to understand the rationale for the stance I’m taking.

>>Get a sample page from the APDF Product T&C

The Product Terms & Conditions are offered for sale at, discounted to APDF and IDSA members ($149/members, $249/non-members). APDF charges for this document for two reasons: The first is the real value of the document—as the serious and extremely valuable business tool that it is. The second is that, as a business itself, APDF looks to raise funds that will allow it to continue doing good works such as this for the benefit of its members and the design industry as a whole. APDF offers the Product T&C at a remarkably discounted rate specifically so that it will reach as wide an audience and use as possible.

As use of the APDF Product T&C is growing, APDF has received numerous positive comments. One firm now using the document reported:

"During re-negotiation with our client of many years the intellectual property (IP) issue came up for the first time. The client was bound and determined that we accept all responsibility for all designs. We were finally able to reach an end to this particular discussion (our last point to clear for the contract) with a letter from our counsel explaining our point of view that contained some of the items from the white paper portion of the Product T&C as well as the contractual wording. The clincher was the reference to an 'industry standard' set forth by the APDF and the IDSA. It is amazing what happens when we establish an 'industry standard'!"

> back to top

> back to core