What is licensing?
Licensing is a contractual agreement formed to allow business or other licensees to use copyright material. Without some type of contract between the content creator and additional parties permitting the external use/sale of material, these actions would otherwise be restricted by copyright law.
As it pertains to UK law – you are automatically granted copyright upon creation of original material, be it photography, art, literature or motion (find out more about copyright here). This ownership can be partly shared or loaned to another party by way of license.
The core purpose of licensing remains the same; however, there are different types of agreements with varying rules and regulations. Some of these are listed and explained below:
This is an agreement whereby you lease material to a company for a specified period of time. This gives them the freedom to use and monetise the print on the products outlined in the contract. Once the time frame has lapsed, they will have to either renew the license or cease to use the piece.
Limited sales are often paired with no exclusivity, meaning you are free to license the same print to other companies for use in different industries. Considering this, you need to be careful about licensing to multiples businesses involved in the same industry; there is a possibility of things getting a little messy if there is an overlap. For example: if you give ownership to a company that produces baby clothes, and then license the same print to another company who also manufacture and sell baby clothes in the same country or locality; this may present a conflict of interest and impede on your integrity as a brand.
Avoid overlaps like the plague.
This is you signing off material to the licensee, with the premise that said work will not (and has not already been) licensed to another party. Contracts such as these are usually exchanged for much higher fees than a non exclusive agreement, as it shaves away other potential sources of revenue for that specific design. The material is essentially given a new home, and can not move in anywhere else.
Pros: If you tie in exclusivity with a hugely successful brand, you will receive not only the initial premium fee for sole use (if your contract requests this), but also the royalties that come with it. If your print turns out to be a hit for the company, they may contact you for more work.
Cons: Simply put – If the print is locked in, then it’s locked in. One stream of (potential) income. The print is to be tied in to that company alone, and if it turns out to be a mismatch for the company, this action cannot be undone for as long as the contract applies.
This is when you license material to different companies concurrently. Once any products have been non exclusively licensed, they can never be presented as exclusive – as these designs have many homes and can be used in various ways, depending on settlement. The fees for such contracts are usually considerably lower than an exclusive arrangement, as the licensee will be aware that the material may pop up somewhere else on a different product.
Pros: You are able to license your work out to multiple companies simultaneously, increasing monetisation prospects for your pieces.
Cons: As buyers will be aware that these may be used elsewhere, you may have to consider reducing fees in comparison to exclusive options. As a result, it may take a substantial amount of buyers before seeing much of a return.
These types of contracts can vary. Some opt for a one off deposit at the start, taking a percentage of any sales made using their designs periodically, while others may choose the option of only receiving money once the licensee starts making sales. In order to make sure the licensor is being paid accurately, proof of earnings needs to be sought. It is highly recommended that you join an artists union, regardless of contractual agreement, so you have people on standby to help you get things correctly set in place.
Pros: If the business(es) you grant license to happen to do very well with their sales, you may find you have a nice consistent flow of income as a result. This may also strengthen the relationship between you and the licensee once they realise how great your material is for their brand, opening the door for future partnerships & collaboration.
Cons: On the flip side, if they do not do as well, you may have to wait an extremely long time (if ever) before seeing any royalty payments whatsoever. If they find it isn’t working, they may opt to shelve it altogether. (This is all dependent on the rules outlined in your contracts, certain areas may vary).
Royalty percentages vary massively dependent on product type, quantity and shelf life. It can start from anywhere around the 5% mark – however, there may be scope for negotiation.
The licensee(s) often come with their own percentages for royalties, so it isn’t always left for the licensor to figure out. If you are not happy with what is being offered – try to negotiate. If there is no satisfactory outcome – slowly disappear into the bush.
Flat Flee (one off payment)
A flat fee agreement is where you charge a one off price for a licensor to use your print as agreed in the contract, signing away any chance of receiving royalties from any sales after the initial payment has been made. For this reason, flat fees are usually set at a higher rate.
Pros: With a flat fee, you will be covered regardless of any sales being made or not.
Fairly simple process, quick and easy.
Cons: However… quick and easy may not necessarily the best route for your project. If your prints do extremely well, you’ve essentially frozen yourself out from the start. You will not be entitled to any royalties no matter how many volumes and volumes of your work they sell.
This is why it is recommended that flat fees are higher rates than ‘advance on royalties’ for example.
Ok so, now you have an understanding of licensing and how it all works – but what about contracts?
Below are features and terms you need to clarify in a licensing agreement.
⁃ Payment Records
If the contract covers some sort of royalty agreement, whereby you receive a percentage of every item sold – you will need to be provided with details as to how you will access the relevant sales reports to ensure transparency and accurate pay.
How long is the company allowed to use your prints? Provide a clear start and end date.
Stipulations / conditions
What about sales rate? What happens if the sales aren’t up to scratch by a specified date? What happens if any conditions are not met? Clearly outline what the consequences are.
(Also consider that with royalty based payments, in some cases it can take a while before you start seeing anything back as there are so many variables: start ups, production times, set backs, change of direction etc..)
What isn’t permitted?
Are there any particular items or products you do not want your work to be affiliated with? Specifications about material not being used in anything that propagates homophobia, racism, sexism, so on and so forth would be addressed here – but are there also particular items you may have tied up in other licensing deals?
Clearly list the items the designs can be reproduced onto. This list can be chopped, screwed and remixed depending on what has been agreed between both parties.
Outline permissions granted, e.g / sub-licensing – essentially the same as renting a room from a landlord to live in, deciding to sub-let and charge the tenant rent for a space that isn’t yours to begin with. That sort of thing.
Clearly state if this is an action you permit or not.
What happens if there is any infringement?
What’s your plan, g? If they fail to follow the terms of the contract, you need to clarify what the ramifications are.
I would recommend joining a union and checking out websites like ACID to get to iron out grievances pertaining to design theft/copyright issues (should they occur) – might be handy to note there is a fee for joining such services, although considerably cheaper (one would imagine) than having to hire a solicitor to help you tidy any mess.
Who’s gonna be touching my stuff?
Specifically – who will be using your prints? If it’s a massive company – which department? Who will be your main point of contact? These need to be clarified from the start so you can ensure you are kept fully informed throughout the entire process – from production right through to market,
If you need some help drafting up a licensing contract/agreement – this site is a good shout.