Art Licensing: Key Legal Terms from the Artist’s Perspective

With Surtex coming in a week and Licensing Show 2011 approaching in June, I thought it would be appropriate to review some of the key terms of an art license. The heart of the license is the grant of rights and the compensation provisions. This week’s blog post offers advice to the Artist Licensor. Next week, I will provide examine an art license from the Licensee/Manufacturer’s perspective.

Best Practices for the Artist Licensor:

• Be specific. Enunciate which designs are under license and negotiate narrowly defined categories of the license (e.g. glass figurines rather than figurines). Delineate the precise territory of the grant.
• Negotiate compensation. Clarify payment schedules. Ask for guarantees or non-refundable advances, particularly if the licensee wants exclusivity. Connect sell-off rights to consistent payment of royalties.
• Consider payment details. Seek calculation and payment at least quarterly, with interest on late payments. Request royalty statements quarterly. Include audit rights in the contract, requesting the licensee to keep its records for at least three years after termination.
• Review warranties/indemnities. These clauses usually guarantee the ownership and validity of the intellectual properties under license. With regard to their validity or their non-infringement on third parties’ properties, the artist may try to cap his liability based on royalties owed under the contract.
• Think ahead. Typically, an art license requires at least two selling seasons so both parties can evaluate the success of the license. The term of the agreement must be explicit. During that time period, what other activities will the artist want to pursue? Be sure the exclusivity is not so broadly drafted that there is no freedom to pursue other commercial enterprises. In addition, negotiate for approval rights on location of sell-offs after termination, so your brand image remains untarnished.
• Protect yourself. If the licensee is open to it, consider a nondisclosure agreement during the pre-contract negotiation process. Regardless, copyright your art and protect with a watermark when presenting. Negotiate credit on products and packaging. Look carefully at quality control provisions and your right to examine samples. Be sure the contract includes a deadline for the manufacturer to commence manufacturing and/or distribution of the Licensed Products. Connect these clauses to termination rights. Be sure the llicensee holds a product liability insurance policy with a reputable carrier for certain specified amounts. In addition, the policy should list specifically the artist as an additional insured.
• Seek legal advice. An attorney who specializes in art licensing can provide nuanced advice based on what is customary in the business world. She should be able to protect your rights and help you assess whether the deal is a fair one. Retaining an attorney to review an art license does not need to be an expensive proposition. The attorney might offer a flat fee for an initial review of an agreement. You can then take her advice as the starting place for your negotiations or even allow her to handle the negotiations on your behalf.