Navigate the legal jungle:

You are the owner of a digital agency. Your days are filled with creativity, strategy, client meetings and pushing the boundaries of digital marketing. You've landed a big new client. The enthusiasm on your team is palpable. The project is ambitious, the rewards enticing. Everything seems perfect. Until words like "handover protocol", "licensing arrangements", "liability for defects" or heaven forbid "GDPR audit" first appear.

That's when the pulse of creativity and business often stops. Instead of focusing on what you do best - creating cutting-edge campaigns, design and code - you start to wade through uncertainty. Is our contract bulletproof enough? Who actually holds the copyright to the logo? And what if the freelancer we hired used a stolen photo?

Welcome to the reality of any successful digital agency. A reality where legal risks are not just a theoretical threat, but a ticking bomb that can bury not only a profitable project, but your entire business.

This article is not a scarecrow. It's your guide and life jacket. I'll take you through the five key areas where digital agencies most often make mistakes, and show you how to avoid them. Because proactive legal care is not an expense. It's the best investment you can make in the peace of mind and sustainable growth of your business. At ARROWS, we see these issues every day and help agencies like yours turn legal risks into a competitive advantage.

Author of the article: ​ARROWS (JUDr. Jakub Dohnal, Ph.D., LL.M., office@arws.cz, +420 245 007 740)

Contracts - Your shield and sword in the digital arena

Imagine a situation: you have completed a complex web application for a client. Three months of work, dozens of hours of your team. The client is thrilled. A month later, he calls you to say that "after all, part of the project was to manage and add new features on demand". You don't know anything about it, it wasn't in the contract. Or was it? Was the contract specific enough?

The contract is not just a formality. It is the cornerstone of your relationship with your client. It's a manual that tells you what happens when things go wrong.

The most common mistakes in digital agency contracts:

Vaguely Defined Scope of Work: "Website development" is a recipe for disaster. What exactly does that mean? How many subpages? What features? How many rounds of proofreading? Without a detailed specification, you run the risk of "scope creep", where the client keeps adding more and more requirements beyond the original budget.

○ Risk: Free work, a frustrated team, a losing project and arguments with the client.

Missing copyright and licensing arrangements: you've created an awesome logo. Who does it belong to? You or the client? If it's not clearly stated in the contract, you could get into a dispute where the client can't legally use the logo, or conversely, you can't showcase the work in your portfolio.

○ Risk: Litigation over authorship, inability to use own work for self-promotion, damage to name.

Unclear payment terms and penalties: 'Invoice on completion' may sound simple, but for a three-month project it means you are financing the client out of your own pocket the whole time. What happens if the client doesn't pay on time? What are the penalties for late payment?

○ Risk: Serious cash flow problems, debt recovery costs.

Underestimated liability for defects: your code has a bug that causes the client to have an e-shop outage during peak season. Who is liable for lost profits? If your contract doesn't address this, you could be exposed to claims for damages in the hundreds of thousands or millions of crowns.

○ Risk: Liquidated financial penalties, loss of client and reputation.

How to solve it?

Your contract must be detailed, specific and anticipate potential problems. It must include a precise specification of the work, clear rules for change management (how extra work will be handled and paid for), detailed licensing arrangements, a robust payment schedule (e.g., down payment, milestone payments), and reasonably set liability limits.

At ARROWS, we specialize in contracts for creative and technology companies. We understand your business and know where the biggest risks lurk. Our attorneys won't just present you with a generic template, but will create a customized contract that protects your interests while being understandable to the client. We deal with these issues routinely and know that a well-written contract is the best prevention of future disputes.

Intellectual Property - Your Agency's Gold

In the digital world, your main assets are creativity and know-how. Code, graphics, text, strategy - it's all intellectual property. And if you don't protect it, it's like leaving the vault door wide open.

Imagine that your graphic designer uses a font he downloaded from the Internet to create a website for a client. It looks great. The project gets turned in. Six months later, you and your client receive a pre-suit demand from a large font bank to pay 250,000 CZK for unauthorized use of a commercial font. Who's going to pay?

Where IP agencies most often flounder:

Using third-party resources: photos from photo banks, icons, fonts, music for videos, WordPress plugins. Do you have the right license for everything? Does the license entitle you to use it for a commercial client project? Many "free" licenses are for non-commercial use only.

○ Risk: Heavy fines, obligation to rework the entire work, lawsuits from rights holders.

Transfer of rights to the client: as mentioned in the chapter on contracts, it is crucial to define exactly what rights the client acquires to the work created. Does he or she get an exclusive license (no one else, not even you, can use it) or a non-exclusive license? For what territory? For how long?

○ Risk: Disputes with the client over the scope of use of the work, inability to further develop similar solutions for other clients.

Own content from employees and freelancers: if a freelancer (ID number) creates content for you, the copyright does not automatically transfer to your agency! You must have a contract with them that grants you a sub-license sufficient to allow you to sub-license the rights to the end client. For employees, the situation is simpler, but here too you need to have well set up employment contracts.

○ Risk: You don't have the rights to the work you paid for. You can't legally sell it to a client. The freelancer can sell the same work to your competitor.

How to solve it?

Establish an internal policy for the use of third-party resources. Create a database of verified sources with clear licensing terms. Have bulletproof contracts with freelancers that address transfer of rights. And above all, educate your team. Every designer, coder and copywriter needs to understand the basics of copyright law.

Getting the licensing policy and copyright contracts right is a complex discipline. ARROWS attorneys routinely address this issue. We can help you audit your practices, prepare sample freelancer agreements, and set up licensing arrangements with clients to protect you and them. This will prevent situations where a creative project becomes a legal nightmare.

Contact our experts:

GDPR and personal data - A scarecrow that can be tamed

GDPR. Four letters that, as of 2018, are causing wrinkles on the forehead of everyone who works with data. And as a digital agency, you work with them all the time. Contact forms, emailing databases, analytics tools, cookies, data from your clients' CRM systems. It's all personal data.

Imagine that you manage an e-shop for a client. You deploy a new analytics tool, but forget to update your privacy policy and cookie bar. The client gets an inspection from the Data Protection Authority and subsequently fined hundreds of thousands of crowns. And they point the finger at you as the processor who erred.

The biggest GDPR transgressions of digital agencies:

Incorrectly set cookie bar: "By using this website you agree to cookies." Such a sentence is no longer enough. The user must be able to give active, granular consent for each type of cookie (analytical, marketing) and just as easily be able to refuse it.

○ Risk: Fines from the Office of the Public Prosecutor, distrust of users. Fines can range from tens to hundreds of thousands of crowns, even for smaller websites.

Missing or bad processing contract: If you are managing any data for a client (e.g., running an email campaign for them or accessing their customer database), you are in the role of "processor." The client is the "controller". The law obliges you to have a "processing agreement" between you, which defines exactly what your duties and responsibilities are.

○ Risk: Breaking the law on both sides. In the event of a data leak, you won't have clearly defined liability.

Insecure forms and databases: you are responsible for the technical security of the data you collect. Do you use encryption (HTTPS) to transfer data from forms? Are the databases protected against attacks?

○ Risk: Data leakage, huge damage to the reputation of the client and your agency, hefty fines and possible claims for damages from those affected.

How to solve it?

GDPR is not a one-off task, it's a process. You need to be clear about what data you are processing, for what purpose and on what legal basis. Your websites must have technically and textually correct cookie bars and privacy policies implemented. And you must have a signed processing agreement with all clients for whom you process data.

GDPR issues are complex and constantly evolving. At ARROWS, we have data protection specialists who understand the technical background of digital projects. We routinely handle website and e-commerce audits, prepare complete bespoke GDPR documentation, including processing agreements, and help agencies set up internal processes to comply with the legislation. So you can focus on marketing, not paperwork.

Law in Marketing - The boundary between creative and misleading advertising

You've created a viral campaign. Funny, bold, edgy. Oh, great! But isn't it already beyond the pale? Advertising and consumer protection rules are stricter than many marketers think.

Imagine running a social media contest for a client to win valuable prizes. You've written the terms and conditions "just off the top of your head". The contest is a huge success, but after the contest is over, several entrants call you saying that the rules were unclear and discriminatory. The complaint goes all the way to the Czech Trade Inspection Authority (CTI).

Where you may run into this as an agency in marketing law:

Misleading and comparative advertising: Do you use claims like "best on the market", "lowest price guarantee" in your advertising? Can you back this up 100%? Do you compare yourself to competitors? You need to compare objective, verifiable and relevant parameters.

○ Risk: Fines from regulatory authorities, unfair competition lawsuit from competitors.

Rules for competitions and consumer lotteries: every competition must have clear, transparent and non-discriminatory rules. Note the difference between a consumer competition and a lottery (where chance decides) - lotteries are subject to much stricter regulation.

○ Risk: Competition invalidation, fines, damage to brand reputation.

Influencer marketing: do you work with influencers? Their paid collaboration must be transparently labeled as "advertising" or "paid collaboration". Just an #ad somewhere at the end of the description is not enough.

○ Risk: Not only the influencer, but also you and the sponsor (your client) are at risk.

Emailing and spamming: you can only send marketing emails to those who have given you active consent or to your existing customers under strict conditions.

○ Risk: Fines from the OOOO, mass de-registration from the database, reputational damage.

How to solve it?

Every creative idea must be measured against the optics of the law. Always ask yourself the question: "Can we prove this claim? Are we misleading consumers? Are our rules fair and transparent?"

At ARROWS, we understand that marketing must sell. But we also know that it must be done in accordance with the law. Our lawyers routinely handle marketing campaign reviews, draft rules for consumer contests, and advise on influencer marketing. We help agencies set up campaigns that are not only effective, but also legally bulletproof.

Team relationships - Freelancers, employees and risk on behalf of Švarcsystem

Your agency is growing because of great people. Some are employees, others are freelancers on I.T.O. This flexibility is great for business but carries significant legal risks.

Imagine that your key programmer, who works on an ICO, gets a better offer from your direct competitors. He leaves overnight and you find out that your contract with him does not contain any non-compete clause or non-disclosure agreement. Or even worse: an inspection from the Labour Inspectorate comes and labels the collaboration with your five freelancers who sit in your office, use your hardware and have fixed "working hours" as an illegal Quilting Scheme.

The most common legal issues in internal teams:

Schvarcsystem (disguised employment): if the cooperation with a freelancer has the characteristics of dependent work (superiority and subordination, personal performance of work, working hours and location determined by you), you risk being reclassified as an employment relationship.

○ Risk: Taxes and social and health insurance backdated several years in the order of hundreds of thousands to millions of crowns per freelancer. In addition, a fine of up to CZK 10,000,000.

Weak contracts with freelancers: as we have already mentioned, the contract must address copyright. But what else? Non-disclosure (NDA), competition clause (during and after the collaboration), liability for damages caused by the freelancer.

○ Risk: Leakage of sensitive client data, freelancer leaving for a competitor with your know-how.

Insufficient employment contracts: even for employees, contracts need to be in order. Do they properly address the definition of work, confidentiality, any post-employment non-compete clause (which is, of course, much more complicated and expensive for employees to negotiate)?

How to solve it?

Audit your relationships with outsourcers. Are they truly independent contractors? Set clear rules of cooperation that minimise the signs of dependent work. Invest in good quality freelancer contracts as well as robust employment contracts.

Properly setting up contractual relationships within your team is the basis for stability and protection of your most important asset - your know-how. At ARROWS, we will prepare customized documentation for you that corresponds to the real operation of your agency. We routinely address these issues and help you set up relationships with freelancers and employees to minimize the risk of being penalized for the Schwarcsystem and protect your trade secrets.

Conclusion: from firefighting to prevention and growth

If you've read this far, you probably have at least one of the situations described resonating in your head. Maybe you've realized that your contracts could use a review, that you're only "feeling" GDPR, or that freelancer relationships are on the rocks.

It's okay. The important thing is that you know the risks. Successful agencies are no different from others in that they don't have legal problems. They're different because they address them proactively. They don't wait for the fire to start. They build their business on solid legal foundations that allow them to focus on creativity and growth.

Legal advice is not a brake. It is an accelerator. It allows you to confidently take on bigger and more lucrative contracts because you know you're protected. It allows you to build a strong and loyal team because you have fair relationships. And it protects your reputation, which is everything in the digital world.

Leave the paragraphs to us and concentrate on what you do best.

Are you ready to turn legal uncertainty into a solid foundation for your future growth?

Arrange a no-obligation initial consultation with us. We will discuss your agency's specific needs and suggest concrete steps to legally fortify your business. You can take the first step to protect your business today.

Contact ARROWS and get a partner who understands your world.

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