Evaluating Art Licenses: How to Tell if You Have a Good Deal

In a recent discussion on the LinkedIn group “Art of Licensing,” an artist asked group members to evaluate whether an agent had offered her a “good deal” based on the percentages of compensation. Artists and agents, alike, chimed in with their thoughts on the percentages and what makes for good representation in the art licensing field. As I followed the discussion, I thought about the questions that clients frequently ask me about proposed contracts and what questions they ought to be asking. In this post, I will focus on licensing agreements rather than representation agreements, although some of the issues certainly overlap.

Artists frequently ask me questions like:

• whether the percentage they are being offered is fair
• can they get any money upfront
• when will they be paid
• do they have control over their copyrights
• what kind of credit they will receive on licensed goods

Notice that artists’ questions tend to be divided evenly between compensation and copyright questions. Indeed, these are threshold issues, but they are just part of the puzzle in evaluating whether a deal is “good.”

Artists should also be asking me questions like:

• how is the compensation defined in the agreement; does it need more clarity
• how does the compensation seem relative to the length of the deal
• is there exclusivity; how broadly or narrowly is it defined; how is that reflected in the compensation
• how broadly drafted is the definition of “licensed goods”
• what is the territory
• how quickly will they bring licensed goods to market
• how much art are they obligated to produce
• can the licensee alter the art without permission
• how will the licensee help enforce the artist’s copyright
• what are their termination rights
• what are their rights to audit payments
• what rights do they have regarding quality control
• what protections do they have in the event of a quality control problem (e.g. toxicity)
• how does the contract’s style of drafting reflect the business style of their potential partner

As these questions show, the determination of whether a licensee has presented a “good” deal is not solely defined by compensation and copyright protection. In fact, evaluating compensation means not just looking at the raw number but also many of the factors I mention above. A broad grant under exclusive terms is worth more to the licensee, and it should be willing to compensate the artist more for such an arrangement. In addition, while it is essential that a license afford copyright protection to the artist, it is also important to examine what kind of partner the licensee will be in enforcing copyrights, promoting the art, and preparing quality licensed goods. Finally, even if the artist knows the answers to the above questions, has he considered the contract drafting? What are the legal ramifications of words like “best efforts?” Is the contract drafted to avoid ambiguities? These are questions that an attorney who specializes in art licensing should help the artist address.

So how does one evaluate whether an offer is a “good deal?” Artists should look at the deal in its entirety and have a complete understanding of the rights and obligations they will incur. They should consult with legal counsel on drafting issues that could affect their business rights. They should ask lots of questions. If the licensee cannot answer or does not want to answer the questions, no matter how high the compensation seems, it may not be a “good deal.”

Artists know instinctively that to evaluate their art, they need to step back from the easel to gain full perspective. I hope they bring that same instinct to viewing a business deal so they can see the big picture. Only then will they know if they have a “good deal.”

For further discussion on this blog on evaluating art licenses, click here and here.

Copyright 2013 Kyle-Beth Hilfer, P.C.