But for the people that created the character, Omnicom Group Inc.'s TBWA Chiat/Day, Sock Puppet's sale is rather sad: The agency won't receive a dime from the sale. Since last year, the cheeky canine has developed quite a following. Demand for Sock Puppet items, such as "Me By Me," a book written by the puppet himself, has skyrocketed, Pets.com says.

It's one of the hard facts of advertising that even though it is the writers and designers at ad agencies who usually create the characters and mascots that can transform a campaign from background noise into pop entertainment, they can't usually claim ownership of their creations. Over the decades, agencies have dreamed up some of American culture's most enduring icons. Leo Burnett, a unit of Bcom3 Group Inc., created Diageo PLC's Pillsbury Doughboy and Kellogg Co.'s Tony the Tiger. More recently, another Bcom3 shop, the Kaplan Thaler Group, turned out the quacking duck for the insurance company Aflac Inc. In addition to Sock Puppet, TBWA Chiat/Day also has created the talking Chihuahua for Taco Bell, a unit of Tricon Global Restaurants.

Historically, agencies haven't claimed ownership rights to the intellectual properties. The reasons date back to advertising's early days, when agencies were paid a 15 per cent commission on every dollar their client spent for TV time or space in magazines and newspapers. In exchange for the commission, agencies usually gave up all rights to the creative work they produced for the client.

Now agencies are moving to claim a piece of the action from licensing of advertising characters and slogans. Under TBWA Chiat/Day's contract with Pets.com, for example, the agency will receive some revenue related to licensing of Sock Puppet for key chains, coffee mugs, books, greeting cards, toys and other items. Mr Chris Deyo, president of Pets.com, says TBWA fought hard for a piece of Sock Puppet's potential future earnings. "They weren't obnoxious about it, but they made a good case for getting some of the proceeds," he says.

In the view of some marketing experts, agencies should have insisted on changes long ago. "It's insane not to be able to capture the value you are creating," said Mr Allen Adamson, managing director of WPP Group's Landor Associates, a brand-consulting firm. "Agencies need to find a way to get compensated for the huge value these icons bring - a value far beyond the advertising."

Some agencies see an opportunity with Internet clients to negotiate agreements giving them additional revenue related to merchandising. Ms Marjorie Hoey, vice-president and general counsel at agency holding company Interpublic Group of Cos. says non-traditional compensation agreements may be possible with start-ups or dotcom companies. Many clients now link what they pay their ad agencies to how well the ads deliver recognition, sales or other criteria. Agencies, in turn, say it is time that they, too, made changes.

Mr Jeff Goodby, co-chair of Ominicom's Goodby, Silverstein & Partners, says his shop's experience with the famed "Got Milk?" campaign convinced him that the compensation rules have to change. In 1995, the California Milk Processor Board, based in Berkeley, hired his agency to create a campaign promoting milk. The results - the "Got Milk?" tagline and the milk-mustaches on celebrities - turned out to be so popular that the state group was able to leverage them in a major way, leasing both the ads and the tagline to another milk processing board and another advertising agency. The trade group says over the past five years, licensing the slogan - for bibs, kitchenware, dishes, baby bottles and other products - has generated more than $10 million in royalty revenue.

Goodby doesn't earn royalties from those agreements. Mr Goodby says he complained to the California board but couldn't do much more. "Advertising people are stupid about this, and I include myself in that bunch," he says.

"In the heat of winning the piece of business or being able to do the new campaign, we sign contracts that aren't necessarily equitable."

Mr Jeff Manning, executive director of the trade group, Berkeley, California, confirmed Mr Goodby's account, but suggests the agency head doesn't have much to complain about. "The fact is that Goodby Silverstein & Partners has gained an enormous amount from 'Got Milk?' in terms of acknowledgment, awards, awareness and new business," says Mr Manning. "They are well compensated but not from a royalty standpoint."

The Wall Street Journal