Getting the Rights Without Getting Shafted

September 2010Articles

In “Pitfalls and Protection in License Agreements" we saw that the licensee who receives a draft agreement from the licensor must always ask himself or herself three questions:

  • “Am I getting the rights that I need?”
  • “Will the rights cost what I expect?”
  • “How else might I be taken advantage of?”

In order to make a determination regarding the first question, it is essential that the licensee have a clear understanding, of what rights are needed.

The Business Plan

Close coordination between the licensee’s product design team and the individual or team responsible for negotiating the license agreement is obviously important. If the Property is a motion picture and the License Product is a video game, for example, knowing whether movie clips are to be included in the game play, whether actors’ likenesses and/or voices will be used, whether additional voice-over recordings by one or more of the actors will be needed, and other such considerations must be anticipated before the agreement is negotiated.

For example, if branded vehicles will appear in action sequences or other branded products are to appear as props, those must be taken into account.

Whether theme or background music from the movie will be audible during play is another essential pre-negotiation determination.

In short, all visible and audible elements from the motion picture that will be included in the game must be accounted for, and an entirely different issue is raised if and to the extent that the movie action is to be modified when included in the game.

Advertising for the game can present the same questions in a different context, or a different set of questions to the extent that the advertising differs from game content.

Thank you; May I have Another?

Finalizing such a deal without carefully establishing the necessary elements of the Property to be licensed and how they might be used in the game and related materials would be equivalent to begging the licensor for a thrashing. On the one hand, if essential elements are left out of the definition in the executed agreement, the cost of adding those elements at a later point very likely will be much more expensive than including them in the first instance. On the other hand, defining the Property more broadly than necessary for the content of the game and peripheral material can make the original deal more expensive than necessary.

Making it Count

Assuming that the necessary rights have been determined and coordinated among the licensee’s people and negotiated with the licensor, the manner in which the rights are expressed in the agreement can be an additional hurdle in the path to success. For example, in Part 56 we noted that a grant of actor or other rights “owned or controlled by Licensor” begs the question whether the licensor actually has the necessary rights. If not, risk remains that the licensee must acquire those rights after the fact.

It is entirely possible, for example, that the product placement deal for use of a branded vehicle that appears in a motion picture might omit merchandising rights. The lawyers on the production side of the pertinent movie studio who negotiated with the auto manufacturer may be well aware of this. However, the lawyers with whom the licensee negotiates its license agreement might not have been made privy to this critical fact. Such occurrences are not unprecedented.

The careful planning by licensee will not have improved its position unless the contractual language conveys the necessary rights without such qualifications. If the licensee is able to eliminate the qualification and the auto company complains when its vehicle appears in the video game, the circumspect licensee can defer to the licensor the obligation to resolve the situation through its own resources.

What Does That Mean?

In reviewing a draft agreement proposed by the licensor, an understanding of terminology is also a critical requirement. For example, a grant of rights to use an actor’s “likeness” may not convey use of his or her “performance” in the above example. The grant of likeness could simply allow the licensee to use a still photograph of the actor on packaging or within in the video game but not in action sequences taken from the picture.