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Re: copyright
Concern for your copyright shows that you're on the right path. Lots of lessons to be learned in terms of what should and shouldn't fly. You'll learn a lot from the situations you'll find yourself in.
Judging by what you've said so far, I think the best option for you would be to go and talk directly to the agency and see what they have in mind for the images. If they're just up for display to promote the model, then you should probably request simply to be credited with a tag line as the photographer. In a real lucky case, you may find that the agency offers some sort of finder's fee. Regardless, if all the agency is doing is displaying the photos as a result of your neighbor submitting them, the best you can really hope for is a photo credit.
If they indicate that they plan on using it for commercial purposes, then you should already have a clear understanding w/ your neighbor as to who owns copyright. So you have to ask yourself what exactly it is you want your neighbor to be able to do with the pictures. Lesson learned: best to clarify this BEFORE the shoot, but hey.. we learn by doing. I'm guessing you were ok with the neighbor using the images to promote herself, allowing her to print as many copies as she wants for modeling purposes, posting it online, and generally anything that allows her to display the image. I'm going to go out on a limb and say you probably didn't count on her making a buck from the shot. Maybe you did, but either way.. it's something you should clear up with the client.
I'm not exactly clear about who gave the Agency the images. If it was your client, then the Agency probably puts the burden on the client for providing proof of ownership of the image. If you gave them the image, you lost a lot of bargaining power. Hard to negotiate after the images have exchanged hands. I'll assume your neighbor put up the pictures. If that's the case, you should clarify with them what rights you're allowing them.
Typically, most TFP arrangements offer some exchange of rights. The photographer gets a model release to use the images in a portfolio, or maybe for stock photography, or for an ad campaign, or whatever. He/she gets some benefit from taking the photos. The model(s), in return for whatever rights they give the photographer, gain something in return. Depending on the arrangement, a photographer could give nothing more than the right to display a single copy of the image (and require the model obtain permission for any additional prints), or could give virtually all rights, which lets the model do just about whatever they could had they taken the photo themselves.
Back to the core issue at hand (to sum up all of the above), you should have a sit down with the neighbor and hammer out the details of your arrangement. Key points should be usage rights. What do you want to be able to do with the images (if anything)? What do you want the neighbor to be able to do? Once that is settled you should verify that the Agency is not planning on using the images for anything more than what your arrangement with the neighbor would allow.
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