Art Licensing Hoops & Pitfalls

An Interview with Attorney Jay Landrum

by Christine Schrum

In an iiStock_000012638534XLargedeal world, you’d spend all day in the studio and earn enough from your originals to pay the bills and have plenty left over for that Tuscan villa. But for many—OK, let’s be honest, most—artists, it just doesn’t pan out that way. These days, you have to be as good a marketer as you are an artist. That’s where art licensing comes in.

If you’re a purist, you might object to the notion of seeing your work reproduced in a print-on-demand basis, or on calendars, postcards, magnets and other items, but art licensing can open up a world of opportunities and revenue streams that help pay the bills—and bring you a great deal of exposure.

That said, artists should be cautious about some licensing hoops and pitfalls. Jay Landrum, an attorney with extensive experience representing artists, art publishers, licensors and licensees, discusses those traps with us.

Art Business News: Let’s talk about intellectual-property rights and copyrights. How much control do artists have over their own work?

Jay Landrum: By virtue of creating an original work, you automatically have a copyright. But it’s still a good idea to register the copyright with the U.S. Copyright Office, as that further establishes your rights. It’s a fairly simple thing, and, if you learn to do it yourself, your filings are not expensive at all.

ABN: How do trademarks differ from copyrights?

JL: With a trademark, you’re applying for the right to use a word or a set of words exclusively with a certain set of goods. For example, I couldn’t start a company tomorrow called Apple Computers, but I might be able start one called Apple Art Gallery.

I used to represent Thomas Kinkade, and he was widely known as “the Painter of Light.” This phrase is an example of a trademark’s use to brand an artist.

ABN: When we first talked, you mentioned that artists might also need to protect other kinds of rights, such as trade secrets or patents. Can you elaborate?

JL: In some cases, artists may have certain secrets or confidential things they want to protect. For example, let’s say you’re a sculptor, and you work with some sort of plastic- or rubber-type material, you’ve figured out a way of using it to create a unique product, and nobody else has figured it out. You might keep it a trade secret by limiting who knows about it, in which case, it’s yours as long as you keep it a secret and no one else independently figures it out. Or, you might decide to file a patent, where you reveal it to the world in exchange for a 20-year exclusive period of use.

Customer lists you have developed over time also have value and need to be protected. You can protect your secrets by having signed nondisclosure agreements before you reveal [those secrets].

ABN: Another topic you mentioned earlier is exclusivity. When and how should you give it to someone who wants to license your work?

JL: Whenever you go to license something with someone, they almost always want exclusive rights because they want to keep everybody else out there from competing. But, depending on who you’re licensing to, you may not want—or need— to give them exclusivity.

For example, say you’re going to license your artwork to a calendar company. You don’t want to give them exclusive rights to those images and not be able to license them on other products! But the calendar company might not want those images to appear anywhere else. So it’s always a balancing act. There are different ways you can handle this.

You might say, “I’m going to license you the right to put my artwork on calendars, and I’ll give you these 12 images. I promise not to give them to anyone else I do calendars with.” That’s image exclusivity. Or you can say, “I’m going to license you calendars, and I won’t license anyone else calendars, but that doesn’t mean I’m not going to license coffee mugs and magnets.” This is product exclusivity. The third way would be a distributionchannel deal. You’d say, “I’m going to license you to sell products in the Christian market but nowhere else.” Last, there is geographic exclusivity. You might say, “I’m going to license you the rights in the U.S., but I’m going to license this other guy in Mexico.” Many times, it’s a combination of several of these concepts. Basically, you’re trying to give licensees enough rights so it’s worth it to them to invest in the products without giving them more than they need and limiting your own opportunities. Keep in mind: An exclusive right to them means that you cannot give that right elsewhere, so be sure it’s worth it.

ABN: You really have to put your bargaining hat on!

JL: You really do. And part of how you ensure success is by setting up milestones. This [step] is critical, and it’s where a lot of artists fail. They fail to put provisions in their agreements that really hold the licensee’s feet to the fire.

For example, one thing you can do is say, “Look, if you think you’re going to make me $10,000 a year in royalties, let’s start with a $2,500 advance.” That way, the licensee has some pressure to perform at least well enough to make back their advance. The other thing to do is set some expectations, such as “If you don’t sell X amount or if I don’t get royalty payments of X per year, then I have the option to terminate the contract.” The other might be “If you don’t succeed, I have the option to move all of your exclusive categories into a nonexclusive arrangement.”

When you set milestones for the licensee, they know they have to commit and succeed, or they’re going to lose some or all of their rights.

ABN: I guess this segues into what you’ve described as “looking-over-their- shoulder rights,” right?

JL: Yes. Within licensing agreements, it’s important to be able to make sure licensees are holding up their end of the bargain. One of the ways you do that is by having a set of audit rights. For example, say you’ve gone into a deal with a licensee and you get a royalty check for a thousand dollars, but from what you can tell, they’re selling a lot more of the product out there! You want to be able to send an accountant into their company and audit their sales of your product to see how much is selling and ensure they’re sending you the proper amount of royalties.

Jay Landrum headshot 2013ABN: So it’s about keeping people honest.

JL: Right. Lots of times, artists are not paid what they are due. Sometimes, it’s intentional; sometimes, it’s not. Often, just having that right to go in is all you need to keep the licensee honest.

Product-approval rights are another part of this. You want to have rights to approve the sample products your licensee is creating. You don’t want them to create products that don’t represent your artwork well. You want to see samples and make sure those meet your expectations. If you don’t reserve these rights, you have given away the control over how it looks, and you might not like the final product.

ABN: The last thing we were going to talk about was “sunset rights,” or post-termination rights. When a deal ends, what rights terminate immediately, and which continue?

JL: Whether it’s because a contract just ends, or because you terminate when it just isn’t going how you wanted, you need to focus on these rights before you sign the contract. You want to address these issues up front, like “How much notice do I have to give? Can they keep producing product afterwards? If the contract says I have to give thirty days notice, and within that last thirty days they go and print off another hundred thousand calendars, is that something I’m going to allow? When they sell it off, what are they allowed to do with it? Sell only within their existing channels, or through discount channels?”

When I negotiate licenses for artists, I don’t allow licensees to produce any more work once notice of termination is given. Then we give a limited number of days that they can sell things off. The other thing we always try to secure is the right to buy the inventory from them at a certain price, so we can keep it from being dumped onto the market at a discount.

ABN: Given all the hoops and pitfalls you’ve laid out, do you still recommend art licensing?

JL: Oh, absolutely! Some artists have a fundamental objection to it, and that’s fine, but I’ve seen artists have tremendous success through art licensing. You just need to be informed so you can protect your rights and proceed wisely.

Keep in mind that licensing can be a gateway that collectors take into higher-priced pieces. I can’t tell you how many times collectors have told me, “I started with a calendar, then I went to an open edition print, then a limited edition print, and so on.” If you don’t license, you don’t get that particular opportunity. It’s well worth pursuing.

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