ART LICENSING – SPECIAL CONSIDERATIONS
Under an artwork license, the owner of the copyright in the illustration, painting, photograph or other work of art being licensed grants the licensee the right to reproduce the work on specified articles of merchandise and to distribute and sell the licensed articles in certain channels of distribution in a defined territory. In exchange, the licensee agrees to pay compensation to the licensor, usually in the form of a royalty calculated as a percentage of the net amount (i.e., wholesale sales) invoiced or received from sales of the licensed articles. In some cases, the licensee may pay an advance, a minimum guarantee, or both, and these amounts will be offset against the accrued royalties.
In many respects, an art license is the same as a license for any other type of property. However, there are some considerations which are unique to art licensing, and the licensor and licensee should review these considerations before entering into a license transaction:
- Does the licensor own the copyright in the artwork being licensed? If the licensor is the artist who created all of the artwork himself or herself, acting individually, then the artist will be the copyright owner, and will be the proper party to act as the licensor. However, if the artist worked in collaboration with another person to create the artwork, the artwork may be a joint work, in which case the two collaborators will be co-owners of the copyright in the artwork, and both will need to enter into the license agreement, as licensors. If the artist created the artwork as an employee of another party, the artwork may be work made for hire, and the artist’s employer, rather than the artist, will be the copyright owner and will be the proper party to act as licensor. Finally, if the artist created the artwork individually but then assigned the copyright in the artwork to a corporation or LLC, that corporation or LLC will be the licensor under the license agreement.
- Is the artwork eligible for copyright protection? In most cases this will not be an issue, but artwork which consists only of basic elements, such as mere variations of typographic ornamentation, lettering or coloring, may not qualify for copyright protection. This may be important to the licensee, since if the artwork cannot be protected by copyright, it can be freely copied and used by anyone else.
- Will the copyrights in the artwork be registered? Registration is not a condition for obtaining copyright, but it is required in order to sue for infringement. Also, unless a registration is in place prior to the time an act of infringement occurs, the licensor and the licensee will not be entitled to seek statutory damages or attorneys’ fees for the infringement, and will instead be limited to actual damages. In many cases, the threat of a statutory damages award will be enough to make an infringer stop infringing and agree to a settlement, which may include payment of a royalty. However, if the copyright has not been registered, or was only registered after the infringement began, the infringer may ignore demands to stop infringing, as the risk of legal action or a significant damages award may be low. Registration is typically the responsibility of the licensor, but the licensor may be able to negotiate a payment from the licensee to apply toward part of the cost of registering.
- Will the artwork or the artist be exclusive to the licensee? In most licenses, the licensor will grant an exclusive license for the use of the artwork on the types of products covered in the license. However, what if the license is only for specific works of the artist? Will the artist be able to license other works to other licensees for use on the same types of products? Even if the license applies to all present or future works of the artist for the products covered by the license, will the licensee want to prohibit the artist from licensing any artwork for other types of products? As a general rule, a licensor will want to retain as much freedom as possible with regard to licensing the artwork for other uses, while a licensee will at least want to ensure that the licensor’s work is not licensed for other products which may compete with or detract from the licensed products.
- Does the licensed artwork contain any elements which may result in claims by others? In many cases, the answer to this may depend on how the artwork is to be used. For example, a photo that includes a trademark may give rise to a claim for trademark infringement if the photo is used on products in any way that causes consumers to think that the products are produced, licensed, endorsed or sponsored by the trademark owner. Similarly, an illustration of a celebrity may be grounds for a right of publicity claim if that illustration is used on products in a way that makes it appear that the celebrity has licensed or endorsed those products.
Licensors and licensees should address the above considerations before entering into an art licensing agreement. In some cases the licensor and licensee may need to change the parties to the license agreement, add or remove artwork or revise the terms of the agreement.