Greg “Airbag” Storey is running a design contest to produce a logo for his friend’s new company, with the designer of the chosen logo set to receive an iPod shuffle, an Airbag Industries t-shirt, and a stack of Jewelboxes. But even more notable than the contest is the heated comment thread over at the ‘Bag (156 comments as of this posting), and the discussion has continued on Pixel Chatter and Whitespace. What Greg expected to be a fun and spiffy little creative exercise quickly spun into a moderately tempestuous debate over the very nature of design competitions; whether designers should enter them, whether companies should stage them, and what the greater effect of these contests is on the design industry as a whole.

There have been some solid points made on both sides of the fence. Some say contests are bad because it diminishes the perceived value of professional design when you can get a quality logo for a hundred bucks. Others say it’s a great chance for newbie designers to gain experience and expand their portfolios and high-dollar pros need not participate if they don’t wish to. I myself lean towards the latter group: if you think it would be a waste of your skills to produce a logo for a paltry hundred bucks, don’t do it. Entering a contest is a gamble, and if the contestants are willing to sacrifice their time for a chance at the prize, more power to ’em.

However, I do hold strongly to the philosophy that you should never do commercial work without compensation. Pro-bono work for friends/family or non-profits is different — you know you’re giving away something of value, and the client can take or leave whatever you give them. In the case of a contest, the winner is compensated with a nifty prize package and some bragging rights, so it still counts as a payday.

But here’s a thought: what do the losers get? If 100 people submit logos and only one can win, 99 designers just invested their time and energy without getting anything back. That’s the gamble they take when they decide to enter. However, the company running the contest should not have the right to use any of the rejected entries in any way. Entrants should retain full rights to their work unless they win, and the rights can then transferred to “the client” in exchange for the prize. If the designer isn’t compensated, the designer still owns it.

Contest rules should constitute a binding contract, with both parties obligated to adhere to them. As such, any well-administered design competition needs to include provisions for what will be done with the rejected entries. If the contest rules don’t clearly state that you keep the rights to your losing logo — or even worse, if they emphatically state that all entries become the property of the company — consider it a bad risk. They get tons of logos for the price of one and you get the shaft. I don’t think Greg and Mike would do that, but not everyone is as scrupulous. Contestant beware.