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How to handle non-paying clients?

Many photographers know the problem: a customer does not pay the bill – in some cases even if the photo is already being used. If a customer doesn’t pay the invoice for work done, it can threaten a photographer’s very existence. But what exactly is to be done if this happens? How does a photographer get his money if the user refuses to pay the license fee?

Any author who discovers that his or her work has been used without permission should act promptly. However, this does not mean blind activism. On the contrary: think carefully about how you want to proceed. Sending invoice reminders does not necessarily lead to success: reminders, legal action and enforcement are unpleasant and costly for both sides.

The first steps

If a customer doesn’t pay, there can be many reasons. Forgetfulness, disagreements about the service provided, or even a lack of money are common causes for a default in payment. Perhaps the contractual partner simply did not receive the invoice or the bank details were incorrect. A personal conversation can quickly clear up any ambiguities and oversights.

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What to do if the customer cannot pay?

If it turns out that the customer has liquidity problems , an alternative solution can be found. One possible approach is the payment in instalments. For customers with seasonal payment fluctuations, a payment deferral can also be a way out. Another possibility could be a so-called compensation transaction, in which the customer offers a product or service in return.  

If the customer does not accept the invoice

If a customer is unhappy with the invoice, a personal conversation helps to find out the reasons for the dissatisfaction and to come up with a joint solution. Explaining the items listed on an invoice, including  the photographer’s own expenses often results in better understanding and helps to resolve the disagreement. Diplomacy and goodwill are essential in maintaining good business relations.

The customer still won't pay?

If the above methods have not achieved the desired success, legal action will follow. As a photographer, you have the choice between a lawyer, an online provider for image rights or a collection agency.

The Dunning Procedure

The law defines an invoice reminder as a clear request by the creditor to the debtor to pay for the service owed. If the payment reminder contains a deadline, it is given more force and emphasis. It is recommended to send any reminder by registered mail so the recipient can’t claim not to have received it. 

From the first day the debtor is in default, interest on arrears may be charged at a rate of 5 percentage points above the current basic rate of interest of the ECB.

In Germany, a default of payment according to §286 of the Civil Code (Bürgerliches Gesetz, “BGB”) exists if: 

  • a payment reminder has already been sent

  • 30 days have passed since the invoice was delivered

  • a date for the payment of the invoice had been agreed

  • the service was preceded by an event and a time was determined when payment was to be made

  • the customer absolutely refuses to make payment

Should a reminder solicit no response, it may become necessary to make reference to the possibility of a legal dunning procedure. The choice of words should always remain objective and neutral. Referring to the additional costs incurred increases the effectiveness of the letter.

The advantages of a dunning procedure compared to immediate legal action are obvious: It is more cost-effective, as no lawyer is required and the court costs are subsequently lower. Since it is a formalized procedure, the process is uncomplicated and convenient. The course of a dunning procedure is speedy, as both the filing of a writ and personal negotiation are dispensed with.

The claims procedure

This action will be initiated if the dunning procedure is unsuccessful or an objection has been lodged. Civil proceedings are initiated at the request of the creditor. Since a writ of execution is an enforceable title, they can, upon application, enforce up to 30 years of the debtor’s assets.

However, please note:

  • If the debtor has no seizable assets, you should waive the claim.

  • If the debtor is unable to pay the costs of the bailiff and the lawsuit, you, as the creditor, are liable.

The collection procedure

As an alternative to the judicial dunning procedure, a debt collection agency can be commissioned. In this case you remain the “master of the procedure” and are able to coordinate your interests regarding the claims with the collection agency.

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Compensation for unauthorized use of images

Nowadays, pictures and photos are constantly being used without permission. However, there is little or no awareness of injustice. If a photograph is used without permission, there is a right of injunction against the person using it. The unauthorized use also interferes with the photographer’s ability to exploit the image. Consequently, in the case of intentional or negligent unauthorized use of a third-party image, the user owes the copyright holder damages in accordance with §97 (2) sentence 1 of the German Act on Copyright and Related Rights (Urheberrechtsgesetz, “UrhG”) 

The rights holder is entitled to opt for the quantification of the damage according to one of the following methods of calculation:

  • compensation for the actual damage, including the loss of profit of the rights holder according to §252 of the BGB

  • return of the infringer's profit in accordance with §97 (2) sentence 2 of the UrhG

  • payment of an appropriate license fee in accordance with the principles of license analogy pursuant to §97 (2) sentence 3 of the UrhG

If no concrete damage or profit of the infringer can be proven, the calculation of damages according to the principles of license analogy still remains. If no contractual or licensing practice exists, it is recommended to use industry standard compensation rates and tariffs. The guidelines of the “Mittelstandsgemeinschaft Fotomarketing” (MFM) often serve as a basis for estimating damages. Depending on the circumstances, these may have to be modified individually.

Conclusion

If a customer does not pay, a legal dunning procedure is sometimes unavoidable. Before doing so, however, you should consider whether an alternative solution might be more profitable than going to court. The business relationships that may arise from this should not be underestimated. For assignments that require financial outlay or a lot of the photographer’s time, it might be sensible to agree part payment in advance.

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