What Solo PR Pros Need to Know About IP, AI Legal Risk and Building a More Valuable Agency

That Solo Life, Episode 343 – What Solo PR Pros Need to Know About IP, AI Legal Risk and Building a More Valuable Agency

Karen Swim, APR (00:18):
Hey, Michelle. I'd love to ask you something that has kind of just been rattling around in my brain ever since we started prepping for today's episode.
Michelle Kane (00:29):
Oh, this should be good.
Karen Swim, APR (00:30):
Yeah. So when you think about the work that you do every day, the frameworks that you bring to every client engagement, the way that you structure campaigns, maybe the approach that you take to earn media, that have taken you years to develop. Do you protect all of that formally, legally?
Michelle Kane (00:52):
I mean, I have contracts.
Karen Swim, APR (00:55):
Right. Contracts. But is the methodology itself protected the way you think? The actual process?

Michelle Kane (01:05):
Honestly, probably not. I really never thought about it from that point of view.
Karen Swim, APR (01:12):
Well, that's why I am so excited for our guest today. Welcome back to That Solo Life.

Michelle Kane (01:20):
Yeah, yeah, yeah. Hey, everyone. It's Michelle Kane here. You are listening to the That Solo Life podcast, the podcast for solo and microagency PR and communications pros who are doing the work and building something that is actually theirs. I am here as always with my wonderful co-host, Karen Swim of Solo PR Pro.

Karen Swim, APR (01:42):
Hey. Hey, Michelle. Hey, everyone. So today we have a conversation that I have genuinely been looking forward to for a while. Our guest works exclusively in the world that we all live in, independent marketing, advertising, PR, creative services agencies. And she has spent her career making a case that honestly, most of us have never fully heard before.

Michelle Kane (02:07):
And the case is this: legal protection is not a cost center for your business, it’s a profit center. Think of it that way. And right now we're in the middle of an AI revolution that's upending how we charge for our work. And so that argument has never mattered more.

Karen Swim, APR (02:26):
I am so pleased to introduce you to Sharon Toerek. She's the founder and principal of Toerek Law, which you may know better through her brand, Legal Plus Creative. She's an intellectual property attorney whose entire practice is devoted to agencies like ours. She created the agency protection system and more recently the AI agency legal toolkit, a practical resource for navigating the fast-moving legal landscape around artificial intelligence. She speaks at Inbound Content Marketing World, the Build a Better Agency Summit, and she's a member of the 4A's legal consultants panel.

Michelle Kane (03:03):
And she's here to tell us among other things that the workflows and methodologies we've developed over years, the ones that we use every single day without even thinking about them as assets may be the most valuable things that we own and we might be giving them away.
Karen Swim, APR (03:20):
Sharon, welcome to That Solo Life.

Sharon Toerek (03:24):
Hello, Karen. Hello, Michelle. I'm very excited to be here today. I think the conversation that we started off the interview with today or that as you were doing your preamble to our interview, was not unique in this industry and it's something that agencies talk about or don't talk about a lot. And so I'm so excited to be here. I'm excited to have the conversation with you both.

Karen Swim, APR (03:51):
I am so glad too. We're excited. So let's dig in. Let's start right at the foundation of how you think about this. So you have been making an argument for years that most lawyers do not make and you say that legal should be a profit center for an agency, not a cost. That's a really bold reframe. So today we want you to make that case. How does investing in legal protection actually impact an agency's top line?

Sharon Toerek (04:25):
I think it's in a couple of ways and to be honest, it took me quite a few years of doing this and serving this audience to really think about framing it in exactly this way. But when you think about the value of, for example, your client relationships to your agencies or your business and you look at them as opportunities to expand revenue or expand margin, what are some of the levers there? One of the key levers there is having a well negotiated agreement and that takes some forethought and some legal strategy to achieve. And so that's one of those instances in which yes, legal can always be good risk management and it's good defense, right, for everybody to play, but it can really impact the line that you achieve in an agreement that you enter into for a piece of client work that it could be a year long engagement, it could be for a specific deliverable that is really going to move the needle for your client's brand or its business.

(05:33):
So that's one key area where legal should really be construed as a profit generator for the agency. And then one main other missed opportunity is the assembly of and sort of packaging of an agency's intellectual property. It's brands, it's content in a way that is replicable and can be deployed for multiple different clients to help them achieve their goals and how you use it to create separate revenue streams for your business potentially. So that's another example of how the proper legal foundation can be a profit builder versus just an expense on the bottom line of your balance sheet.

Karen Swim, APR (06:19):
It's interesting because really the shift is thinking about legal as something that you do when things go wrong to investing and when things go right because it actually expands what you can do with your business.

Sharon Toerek (06:35):
It's creating the opportunity for things to go well also. And it's also creating the opportunity to expand that margin at the top to actually monetize what you do every day, which is ... And you mentioned AI earlier and we cannot have a conversation about the industry right now without talking about it. I'm kind of here for it from the perspective of I've been on this soapbox for years, years, about trying to get agencies excited about and interested in the necessity of protecting the intellectual property that they create on a regular basis and harvesting it as a profit and revenue generator. And AI is forcing the changes to our business models in this industry that make that even more of a necessity for us all.

Michelle Kane (07:27):
Yeah. And I think that's something that a lot of us, including myself, we've never really actually done the math on, right? We know intuitively that a client contract protects us, but the idea that legal work could directly translate into a revenue capacity or a business value, that's a different framing entirely, which is exciting.
Sharon Toerek (07:51):
It is. And there are pieces and parts of the agency client relationship above and beyond the intellectual property discussion that can also move the needle on the profitability of that relationship. Things like, are you going to offer exclusivity? Are you going to be required to agree to exclusivity as a condition of doing business with that client? Okay, if you are, then you should be charging a premium for that and that needs to be reflected in your agreement. The terms of compensation that you negotiate, those have to be backed up with legal foundation and relevant language.

I think that's one area agencies are pretty savvy about understanding how payment term creativity can be important to them, but the bigger a client you work with and even if some of the listeners are small businesses, they may be working with very large brands and trust and believe that your clients are using the payment terms in this contract to give themselves as much leverage, time and space as possible when it comes to the movement of money.


(09:03):
And so you ought to be thinking the same way. So that's another way to move the needle using legal process as a revenue generator.
Michelle Kane (09:11):
Wow, that's so true. And it makes me think of something you said in the intro, Karen, that I think there's a version of this conversation where people hear intellectual property and already they remove themselves from it because they think, "Oh, that's for companies with patents. That's got nothing to do with me.
Karen Swim, APR (09:26):
Yeah. And that's really sad. And that's why I was really excited to have this conversation because I think after talking with you during our prep call, I realized what an underutilized resource legal is for solos.

A lot of solo microagencies, small agency owners, we have workflows and methodologies and frameworks and we've developed these things over years of doing the work and we do it for every client engagement and we just don't think about it.

So what does it actually look like to protect and monetize that internal IP and where does somebody even start?
Sharon Toerek (10:17):
Right. Well, it's a great question and it's a good opportunity for me to say upfront that not every piece of IP that every agency develops has the same level of economic value to your business. I think that's where we get bogged down in this conversation sometime as well, every agency has a proprietary process.

We all say that on our websites, we all make that promise and some of it can be leveraged for economic benefit and some of it is just table stakes for running a marketing or communication services firm. So I'll be upfront about that. But I'll also say that agencies tend to under-index on packaging and thinking systemically about the generation of their intellectual property.

And at our firm, we use really kind of a triangle rubric to go through how to assess if you have intellectual property and these are the steps you take on the journey to determining what its monetary value might or could be. And you have to play with this in the early years because you don't always know what the pricing differential would or could or should be, right?

But so the triangle has three points and one point is brand and that is the set of names or other indicators that you use as an agency, not only to identify the brand of your agency, but all those proprietary systems, methods, and products that you might offer in the conduct of providing your services day to day.


(11:55):
So over time as you develop this what I'll call family of brands, they can gain economic value in and of themselves. If you've got a proprietary system for media relations as a communications agency, or if you have a proprietary methodology for determining how to create thought leadership or develop thought leadership in the CEO or C-suite executives of your client's team and you brand those things, that's brand, right? And the way the legal underpinning for protecting a brand is usually trademark protection. So the game is protecting those as you develop them and use them.

The second point of the triangle is I think where a lot of us get bogged down, because again, here is where some of the stuff might be more valuable economically than others and that's your content. It could be your proprietary media list, it could be your content library. It might be a piece of software. It doesn't have to be a piece of software that you develop. It's a system or a piece of content or something that because you do what you do in the vertical that you do it in, you are best in class or better in class than your competitors and it gives you an advantage. That's usually protected by either trade secret law or copyright law, depending on if it's public facing information or not.


(13:25):
And then we have the third leg or the third point, I should say, the triangle. I always get the legs of the stool and the points of; the triangles have points, stools have legs. So the third point of the triangle is your transactions. And that's not only your transactions out of the agency, which is usually a license or something similar to that, but it's transactions into the agency and that's usually important because most of your listeners have engaged with freelance or 1099 contract help. And so you don't own the IP to the work that those folks necessarily do for you, even if you paid for it, unless you have the proper transaction with the proper written agreement set up.

So that's how we analyze where the IP is. And then you have to do that in conjunction with the realities of your client market and determine what it means for your pricing, what it means for packaging your services. I'm not a professional marketer, so I'm not going to pretend to tell folks how to market that stuff, but I can tell you I see examples of it every week with the work that we do.
Michelle Kane (14:30):
I bet. I bet. And so it's really all about recognizing not just what you've built, but the value of each aspect of everything that goes into each of those points. Now I don't want to get too far into a geometry lesson because that'll just give me a headache.
Sharon Toerek (14:45):
You can talk about the legs of a stool if you like, Michelle.
Michelle Kane (14:49):
No, it's all good. All good.
Sharon Toerek (14:51):
Well, I think a lot of this is about pattern recognition, right? And that is what a lot of intellectual property development is about is if you become best in class at serving the types of clients that you serve, let's say a communications pro listening to this today is best in class at serving accounting architecture and engineer firms, right? They know how to get the word out about what those people are doing. They know how to build press relations and a thought leadership campaign, et cetera, et cetera. And they've developed systems for doing that and making it easier to do and making it land more effectively. That's intellectual property and maybe you can create a course for folks who want to do it themselves and create a separate stream of revenue. That's an example of intellectual property put into real life for profit in a way that doesn't relate to you doing a fee for a service type of a relationship.


(15:52):
So as you can tell, I get a little animated about this topic because I'm an IP nerd first and foremost. But look, as AI is coming for our businesses and the legal industry is no different in this regard, but as it's changing our business models from being able to charge based on the amount of effort or time or the making of the stuff and converting us into thinking about making money from our thinking, not our doing, thinking about your intellectual property is becoming more important to your financial health as a business.
Karen Swim, APR (16:29):
We have a lot of agency owners that are looking at sort of the end of their career and they're now making decisions about what they want work to look like, what do they want to do with their agency? Do they want to just continue to run it, take a step down and in a different role?

You had some really interesting insight that really excited me because it gives us another option where IP plays a role in the exit strategy. So tell us how should those agency owners that are mid, late career, how should they be thinking about their IP right now if on their horizon they plan on transitioning or selling their business?
Sharon Toerek (17:15):
I think there's a couple opportunities that depending on your horizon are really important to think about. One is that I have seen direct examples of agencies who have created a definable body of protected IP, have their business' valuation impacted positively by a significant number of percentage points because not only now do they have their book of business to sell, their book of client relationships and contracts, but they have all these assets that they've developed that now the buyer of that agency can deploy over the entire organization.

That's one way. Another way is that I've talked with lots of business owners over the years in the agency space who might be ready to move on from running an agency, but they're not done contributing professionally. They're moving on to another horizon perhaps, but they've created a tremendous body of work while they are running their agencies and they don't necessarily want to leave that part of it.


(18:22):
So they may want to form a consultancy or they may have separate buyers for the client business and the intellectual property. So it's an option creator, it is a revenue enhancer and it's a valuation increaser potentially. And I've seen examples of all three of those situations by taking the time to invest in thinking about it.
Michelle Kane (18:49):
That's the great thing about it. It's not just protecting you from risk, it's giving you these options, which is just incredible.
Karen Swim, APR (18:56):
Yeah. Yeah. I love that. But I'm also wanting to call out to people that hearing this conversation means that you need to take action on it because you have to protect it before you want to sell it. Right? And so that means you can't decide at the exit that, hey, I care about my IP, you have to care about it a few years before that. Right?
Sharon Toerek (19:24):
That is true. And I always like to say the longer a horizon between now and when you're ready to be thinking about an exit, the more options you have for creating value. And of course there's lots of ways to do that. And most agency owners think of that in terms of, well, let's get the fee for service revenue as high as we can be. So our multiple looks better, our book of business looks better.

But if you've got the runway, then think about the steps you need to take. They're the same steps you might take to keep your business more healthy today, whether or not you ever want to sell it, but they make you the beneficiary of a better tomorrow if you are looking at, okay, yeah, let's assess our intellectual property. And we've kind of talked about the triangle and walk yourself through the triangle and just start making lists.

(20:17):
This is something that can be done at any scale. If you're a business of one, you can sit down and think about your original secret sauce or the things that distinguish you and your own special way of doing things. Walk through the triangle and do some inventory, do some assessing.

And then the second thing is look at your contracts that govern your client relationships and make sure that they don't have language in them either about your IP or about things like assignability of the client contract or a payment term or just a duration clause, anything in there that will limit the ability to transition that client relationship as an asset of the business.

So those are two things that any owner can do today when they're done listening to this without even necessarily having to call an advisor right away. I mean, I definitely recommend that you need a good financial/accounting advisor, you need a good legal advisor as you advance in these steps.But initially this is stuff that anybody can do and it gives you opportunities to spot value creation today in addition to when you're ready to sell or exit.
Michelle Kane (21:40):
That's such great information and that we have a lot to do when we get off this.
Sharon Toerek (21:48):
But don't get overwhelmed by it. Pick one thing. Look, if you're giving yourself an honest assessment and thinking to yourself, look, I don't think our intellectual property is vast, but I know we have client relationships that are strong and profitable, but oh my gosh, it's been five years and we haven't signed a new contract with those folks, or, we've been doing business on a handshake or we just issue purchase orders and bill a client and they've always paid us.

Clean that up first, right? Start there. If on the other hand, you know you have some systems, some brands and things that are leverageable, then start there inventory or IP and work on that aspect of it. But there's something for everybody here, right? It's not either or.
Michelle Kane (22:43):
There we go. Starting to feel better.
Sharon Toerek (22:45):
Yeah. It's a starting point for all of us.
Michelle Kane (22:48):
Okay. I want to shift us into AI because that's where a lot of our listeners are right now. They're using AI tools, their contractors are using the AI tools and I think a lot of people probably haven't stopped to think about what that means legally. Do you agree, Karen?
Karen Swim, APR (23:07):
I do. I mean, let's get specific. What are the two or three things that Communication Pros should absolutely have in their client contracts and when it comes to AI and what's the actual concern if those things are not there?
Sharon Toerek (23:24):
Yeah. So we're talking to agencies every single day about AI at our firm in one way, shape or form. And I think the two risk points that all of us face fall into one of these camps. First is intellectual property from the perspective of who owns the work if you've used AI to create it and intellectual property from the perspective of who's responsible if somebody else's some third party's work gets infringed because we use AI and something generated out of AI that infringes somebody else's.

That's area one. Area two is data privacy, data confidentiality, and how easy it is to breach our promises to our clients in terms of confidentiality and how easy it is to be not in compliance with data privacy laws because we're using AI to perform some of the tasks that we perform in our client engagements. So those are the two areas of risk.

(24:30):
And then to specifically answer your question, Karen, about what should be in the contract, you need language in your client engagement agreements, your independent contractor engagement agreements around intellectual property ownership, around intellectual property infringement responsibility and these go in different sections of the contract. Then you also need to make sure that the confidentiality promises you're making to your client in your agreement address what happens when you're using AI to process some of that information. So that's a starting point
Michelle Kane (25:09):
And that's a great point, especially the freelance or vendor aspect. If we're working with a fellow 1099er, if my 1099 contractor that I have working on my client's project puts anything that's confidential, client confidential information into any of the AI channels, any of the LLMs, what does that mean legally for me, for them?
Sharon Toerek (25:38):
Well, I mean, we're speaking theoretically here, right? Because I'm not giving legal advice.
Michelle Kane (25:44):
Yes. I’m asking for a friend.
Sharon Toerek (25:48):
Theoretically, your friend should understand that it's a waterfall. Whatever you're passing up to your client that's been passed to you by your freelancer is going to be your responsibility.
(26:03):
So not only do you need alignment in the contract language, everybody needs, but there needs to be careful communications around protocols between ... I mean, you need to be asking on the one hand, your clients, what are your AI policies? What platforms do you want us absolutely not to use? What information that you're giving us do you absolutely not want us feeding into any AI platform?

And then in your shoes as the agency who is engaging a contractor, you need to have conversations and reflect them in your agreements and policies around you will not use the free basic ChatGPT or Cloud account that trains on every input that ... You need to be having those conversations with them and getting their understanding and alignment and having them commit to that and writing to you so that, like I said, there's a waterfall between, but it's alignment and it's conversation and then ultimately all of that reflected in contract language.
Michelle Kane (27:12):
No, that's smart. And honestly, that just feels intrinsically right.
Sharon Toerek (27:18):
It is. And I think the contract development process and the process of creating, again, something that anybody listening to this could take a stab at themselves initially, but creating policies around how you use AI as a business and what you require of your contractors or your vendors. And then also not only a policy but a question or a conversation guide about discussing this with your clients are great steps to take to be proactive about it, not forget to mention it because it serves as sort of a checklist before you get the work started and also remind you what language needs to be included in any agreements that the parties enter into.
Michelle Kane (28:05):
So true. So true.
Karen Swim, APR (28:08):
Wow. I'm stuttering because there's a lot to take in, but it almost feels like, okay, this is like a growth step, another growth step to think about these businesses that we're running with such passion in such a different way. And around the solo PR pro parts, we have always advised that as you start your business, make sure that you have an attorney and accountant on your team, but we apply that to the startup, but we don't really talk about it throughout the life of your business.

And so I am just so thankful that you have opened our eyes to something that I'm sure many agency owners have neglected to some degree, because you're right, like we know about IP, we understand it. We may have clauses in our contract, but we're not really thinking of the myriad of ways that we could be using legal to help us to grow, to scale, to plan for the future, to have an exit strategy that would profit us. So these are all really exciting things and I know our listeners are really going to benefit from this.

Sharon Toerek (29:23):
We're all on a journey of entrepreneurial maturity to some degree or another. I'm certainly not immune from that myself, owning a business as long as I have. And so I say focus on progress over perfection because if you focus only on perfection, you won't get started. You won't take the small steps that you can take initially because it feels too overwhelming. So start with one thing that you can do and actionalize and then do another and then do another. And then get the professional advice that you need when you're ready for it. And meanwhile, just educate yourself about the risks so that you understand how to protect your bottom line, but think a little expansively about how these things might be helpful to you in increasing your top line. Because like I said, it took me a long time to get to talking about it from this angle.

(30:28):
But my experience is that agency owners spend more time in their brain thinking about their top line than worrying about what might happen on the bottom line. And so if that's you, and it's not everybody, but if it's you, then think about some of these things that you could do independently starting right away.
Karen Swim, APR (30:50):
That's such practical advice. That's fantastic, Sharon.
Michelle Kane (30:53):
Yes. I have to say this will probably go down as one of our favorite episodes because it's just really a way to change how we think about our business. I'm hoping to our listeners this instills some excitement if that's been missing for you. But thank you for making this real and actionable instead of overwhelming. And we'll definitely have to have you back because there's so much more we could be talking about, right, Karen?
Karen Swim, APR (31:19):
There is. There is.
Sharon Toerek (31:20):
I would love that. That would be lovely. And yeah, I'm here to make this attainable. I think that there's something about understanding the power of protecting your innovation as a communication services firm that is very, very inspiring. And I think that we are in an era right now that might feel overwhelming because of the changes that AI is creating for the industry. But it's also, I think, the beginning of enormous opportunity. And small agencies are nimble and can move quickly and can be leaders and mentors on some of this stuff. And so it's not your job to be your client's lawyers, but you can certainly be their teachers about a lot of this and you can make money doing that.
Michelle Kane (32:13):
I love that. I love that.
Karen Swim, APR (32:16):
Empowering conversation, right?
Michelle Kane (32:20):
Yes, it has. So how can our listeners connect with you should they want to do so?
Sharon Toerek (32:25):
First of all, thanks so much for having me for the conversation. Really enjoyed it. There's a couple of ways. Our firm is on the web as legalandcreative.com. I'm very active on LinkedIn, Sharon Toerek, T-O-E-R-E-K. And take a listen to our podcast, The Innovative Agency, which is not actually a legal podcast, it's about innovation in the agency world, and we have folks on about business development, technology, creativity, all sorts of agency focused topics. And we just hit, I think, episode 355. So we've been at it a while and we'd love to have you join us.
Michelle Kane (33:05):
That's awesome. We're getting in those numbers too. Amazing.
Sharon Toerek (33:08):
Congratulations.
Michelle Kane (33:09):
Yeah. It's really exciting.
Karen Swim, APR (33:12):
Yeah. You are officially the first IP nerd that I have ever met and I have to say I'm a fan.
Sharon Toerek (33:21):
Back at you. Thank you so much.
Michelle Kane (33:23):
Well, thank you so much. Oh, thank you, Sharon. Well, thanks everyone for listening yet again and we know you've got something out of this one. You can't say you didn't. And so if you did, please do share it around and check us out at thatsololife.com where you can check out all our episodes. And also if you want to join the savviest group of solos around, check out soloprpro.com. And until next time, thanks for listening to That Solo Life.