license agreement primer: approvals
Ready to hand over your artwork to a licensee? Wonderful! But wait. How will you make sure you’ve got some control over what the final product looks like and where it gets sold?
Product Quality and Artist’s Right to Approve
Before even considering a licensing deal, you’ve presumably checked out the things the prospective licensee makes and decided they’re consistent with the look and feel of your work, the message you’d like to send to the world, the audience you’d like to connect with, and the place in the market you’d like to be—what we’d say is the brand you have or the one you’d like to have. To help ensure that what you've seen is what you'll get, an artist-friendly license agreement will spell out the licensee’s affirmative duty to create products with the licensed artworks that are at least equivalent to the products it’s been offering in the marketplace. A typical provision requires the finished licensed product to be “equal to the best quality of similarly priced goods offered by the licensee.” Some agreements explicitly state that the manufacturer’s failure to meet the quality standard is grounds for the artist to terminate the agreement, either in whole or part.
Most license agreements will also contain an art approval clause. This gives you a further opportunity to ensure you're pleased with the way your art is represented on/in the product. This provision requires that the licensee submit an example of the licensed product to you, prior to full-blown manufacture, to confirm and agree that the way the artwork’s been used and the product’s quality meet with your approval. Occasionally the approval submission is a physical object shipped to you for review. More commonly it’s a digital file showing the layout or 2-D mockup of the product that will be manufactured. You’ll typically have a fixed, fairly short, period of time (e.g. 3-5 business days) to approve or disapprove. If you disapprove, the licensee is generally allowed to modify the product and resubmit for your approval. In all of this, there is a requirement of reasonableness—if you disapprove, you should have a sound basis for doing so.
Acknowledging Copyright on the Product
As you may recall from this post in our copyright primer, it’s in the interest of both parties to have an accurate copyright notice on the licensed product. The license agreement will ordinarily specify the wording of the notice text and require that it be placed on all licensed products as well as on packaging, sales and marketing materials. A typical notice will be: © [year artwork 1st published] [artist’s name].
Stores in which the Licensed Products may be sold
Whether it’s a bricks-and-mortar or online venue, you’ll probably know the stores in which your licensee’s products are sold. And you know that where you sell your works sends a message, creating a kind of feedback loop about your artwork. In a licensing arrangement there might sometimes be a bit of tension between your goals and your licensee’s goals, which comes up in terms of who’s doing the selling. For example, your licensed product may have sold well for a long stretch but now it’s reached the end of its productive cycle. Or perhaps you’ve licensed five products and one of them just does not do well. If the manufacturer has more stock on hand than it feels it can sell in its ordinary, full-price retailers, it may want to move those products into a deep discount arena. While this may offset the manufacturer’s costs on a product, it has the potential to pull down the perception and overall value of your work in the market. To avoid this, you could ask for a schedule of outlets in which it is not acceptable to sell the licensed products. Be aware, though, that licensees are reluctant to limit their sales options in advance, and some regularly rely on deep discount at some point.
Scope of The Territory
A license agreement authorizes the licensee to sell licensed goods within a particular geographical territory. Usually the territory a licensee asks for is “worldwide” and the agreement defines it that way. Often, however, the licensee doesn’t actually sell all over the world. It's worth asking if they truly sell worldwide and, if not, whether you can define the territory more specifically—giving your licensee the leeway they need to sell where they actually sell, while keeping your art open for non-competing licensing opportunities outside the licensee's territory.
That's the scoop on approvals, folks! On Thursday, we'll be looking at a specific set of promises that pretty much every license agreement is going to have— promises each party makes to the other. We hope you'll pop by to catch up with us then—or better yet, subscribe to have our posts delivered straight to your inbox, each Tuesday and Thursday.
Please remember: The information provided on this blog and throughout our website is intended for general educational purposes only. While some information on this site relates to the law as a topic, it's not intended as a substitute for legal advice. Only a lawyer, selected by you and fully informed of the facts relating to your particular situation, can render legal advice.