-
First Right to Refusal contract with a client
Hello everyone,
I am in a weird situation with one of my clients. I am in a very tight niche market, and for the sake of this post, let’s say the niche is swimming. (I don’t shoot swimming videos, but maybe I should).My client is the largest provider of “swimming” training videos in the world. I have met quite a few swimmers through working with my client.
With the amount of swimming videos I have done through my client, I am a very experience swimming video production company. With that experience, I am starting my own swimming video production business. A business that does not target my client’s clients, or even offer products that my client produces.
I told my client that I am starting to do this, and they told me that everything would be fine as long as I did not approach their current clients with similar products. They went a step further and said that they want me to sign a “First Rights of Refusal” to them. Meaning I have to tell my current client about ANY and ALL potential clients that I am marketing to. They then have the right to take that client as their own. So for example, I approach “swimmer X” and then immediately have to call my current client and ask if it is OK to produce this video with “Swimmer X”
My problem is, I am really not concerned with marketing to any of their clients or producing products that they offer. My fear is that if I sign this, ANY client or IDEA for a product can now be legally TAKEN by my current client. To me this seems like a no brainer to not sign the contract.
Sorry for all of the “swimmer” references, I just don’t want to disclose who this company is, or what they create.
If there are any thoughts on this, please let me know.
-
13 Replies
-
Let me continue your swimming analogy (metaphor? simile? hominy? whatever)
Our company routinely produces private label swimming videos for clients who produce swimming related products, such as chlorine, life preservers, diving boards, etc. These videos may demonstrate the breast stroke or backstroke, but the video is distributed by the chlorine sales reps.
We also produce videos teaching how to do the breaststroke or perhaps some new innovative method of propelling oneself in the water, and sell these on our swimming video website. We do not sell the chlorine manufacturer’s videos, because they distribute them as private label videos. We use direct marketing to sell our swimming videos, so it stands to reason our potential customers may hear from both companies.
We do not consider this a conflict.
However, if approached by a competing chlorine manufacturer to produce a video on the breast stroke, while this video would not directly compete with the similar video we made for the original chlorine manufacturer, the two manufacturers are in fact competitors. We need to weigh the benefit of working for both companies, against the risk of one or the other companies not liking the fact that we work for their competitor. This can be a slippery slope, and is taken on a case by case basis. Over many years, we have done work for both companies, but have recently chosen one over the other due to continuing new work. This loyalty has not however stopped us from making our own swimming videos.
As for getting permission from company A to work with company B, this is not company A’s business. However, since you volunteered the information to company A, you have opened the door to unknown consequences, and are now in this pickle.
Have your lawyer look at any contract or form you are asked to sign, keeping in my your own business interests above those of your client.
I don’t know about you, but I could go for a swim!
Mike Cohen
-
Hmmm. So, if you don’t sign, do they dump you? I can understand the “current client” part, but not the rest.
Steve Wargo
Tempe, Arizona
It’s a dry heat!Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD . -
Pretty much, that’s what they are saying. If I start my own business in their niche, regardless of whether or not I am offering a completely different product than what they offer, they will drop me if I do not sign the First Right of Refusal contract.
Like I said, I am not offering the same product they offer, and the only thing I am really concerned about is GIVING them my new product idea through this contract.
-
[Bryce Leverich] “the only thing I am really concerned about is GIVING them my new product idea through this contract.”
Pretty much tells the tale. Either way, you are probably not going to fare well in all of this.
Just curious though, why did you tell the in the first place and what, exactly, does “telling them in the first place” actually mean?
Steve Wargo
Tempe, Arizona
It’s a dry heat!Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD . -
Can you counter-offer that you would be willing to sign an NDA and a very specific non-compete instead? If they want for example to list all their current and past clients, would you be willing to not touch any of those for some specific period of time, say, three years?
I think I’d rather do that than have to play “mother, may I” every time I want to make a sales call.This is going to be a hard one to play right, no matter what, I think I would want to hint that I’m willing to play ball up to a point, but if they threaten to pull the plug, all bets are off and then all their clientele are fair game to me. Really, that’s your only leverage, if they can find someone else to shoot the, um swimming for them. And they can always find someone else, believe it.
So decide if you want to be owned by these guys and if said ownership is for a fair rate. Maybe what evolves is that they offer to put you on a retainer to keep you paid off and loyal, or you jack up your rate and stay loyal in exchange for not letting your eyes wander from your “steady date”.
-
I would not sign anything like that quite honestly. Your thought that they could then apply that rule to anything you can think of is justified.
The only way to sign something like that is to get a good lawyer, that is YOU get a good lawyer not your client, and draw up a VERY specific contract that includes ONLY the things in that contract. Nothing vague, nothing that says “this agreement may cover things not included in this agreement” type of garbage. Then, and only then, would I consider signing something.
Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.STOP STARING AND START GRADING WITH APPLE COLOR Apple Color Training DVD available now!
-
Second rule of negotiation:
You have to be willing to walk away, (or at least they have to believe you might) or it’s not really a negotiation.
-
Thanks guys! These are all great points.
I think I will counter offer with an amendment to their contract. I will probably just tell them that I need a list of their clients that they are most concerned with. It’s just that this company has the mentality that ALL SWIMMERS are their clients, which claiming an entire niche is pretty obsurd in my opinion. They contract they want me to sigh is very vague “Cannot approach our clients”… What does that mean? It’s very easily adjusted to mean “anyone that we see fit”, and I can’t do that. Pretty much, I approach a client and if the company sees value in that client, then they can snag them. Doesn’t seem very fair for a company to tell me, as a freelancer, who I can and cannot approach and do business with.
Too bad this client is currently my BEST client…
Thanks
Bryce Leverich
Co-Owner/Creative
Meijin Media LLC
http://www.myspace.com/meijinmedia
-
I like the secrecy followed by the link to your website.
-
[jon agnew] “I like the secrecy followed by the link to your website.”
I wasn’t going to say anything but that was kind of funny. I guess those martial arts guys are really good swimmers?
Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.STOP STARING AND START GRADING WITH APPLE COLOR Apple Color Training DVD available now!
Reply to this Discussion! Login or Sign Up