Every time an artist, author, musician, etc. creates something, they automatically own the creative rights to it as the original creator of the work. Sometimes these artists will offer a “full rights buyout” option to the client. A Full Rights Buyout means the creator sells the client their creator’s rights, meaning they don’t own what they created anymore, and have no rights to it. The client purchases the rights to use the artwork whenever, wherever, and also create derivative works from it. Full Rights buyouts may be time-bound, or in perpetuity. 

Real life examples:

• A man with an online business commissions an illustrator to create a series of icons for him. He wants to use these images in a few specific places, but his business is growing and he wants to be able to use them in new ways in the future without purchasing new usage licenses. He opts for the full rights buyout package so he has the freedom to use these illustrations as he pleases as his business grows.
• A business hires a graphic designer to create brand assets for them (logo, pattern, icons, etc.). The business needs to own and have all creative control over their assets, so the full rights buyout is necessary for them.

A derivative work is a new, original work that includes aspects of a preexisting, already copyrighted work. Only copyright owners have the exclusive right to produce derivative works based on their original, copyrighted works.

Copyright on original works is automatic and immediate when the work is completed. A copyright owner can grant permission to someone else (a client) to make a derivative work based on the original. If permission is granted (in the form of a license or agreement), then creation of the derivative work is not infringement. If the original isn’t yours and you don’t get permission to use the original from its creator, then you’re infringing that creator’s copyright.

Example:

• Let’s say I created an animated cartoon series for Netflix called Timba, and it was the story about a young lion coming of age, defeating his evil aunt, and getting elected as president of the Jungle. It would be obvious that by looking at my character Timba and the story that I was creating a derivative work from Disney’s The Lion King, and they would sue me for infringing on their copyrighted character and story and making a derivative work, and also for making a profit on it!
• A man hired a designer to create a microphone icon for his website. Sometime later, the man decides to start a podcast, and he uses the microphone icon in the podcast logo which he makes himself. The designer would have the right to claim copyright infringement because the man did not ask permission to make a derivative work, he didn’t pay for the new use-case license, and he didn’t buy the full rights to the icon in the first place.

Copyright on original works is automatic and immediate when the work is completed. Every time an artist, author, musician, etc. creates something, they automatically own the creative rights to it as the original creator of the work. Ideas are not copyrighted, but their expressions are. The person who is putting that expression into tangible form, the creator, owns that copyright.

Copyright law favors the creator. Laws governing trademark are covered not only on a federal level, but on a state level as well. So be sure to check in with the governing agency within your state. You can learn more at https://www.copyright.gov/

In order to make money and serve clients, these artists sell the rights to use the images to to their clients via a license, or the artist can sell the full rights via a buyout. The buyout or license terms may be bound by a length of time or in perpetuity.

Clients do not get source files (aka “working files” or “native files”) unless it’s specifically scoped into the project, or unless it’s a logo/brading project. (A client obviously needs source files of their own logo!) Source files are an additional fee, ranging from 33-100% of the artwork fee. Remember, just because a client purchases the source files does NOT mean they now own the artwork! A client would need to either a) purchase additional use licenses, or b) purchase a full-rights buyout in order to use the artwork in other ways and/or make derivative works.