By Alan E. Katz, Esq.

Licensing your art is an excellent way to develop a supplemental income stream. According to the Graphic Artists Guild, licensing is a $70 billion industry, and art licensing accounts for 10 percent of the licensing market. You can license your artwork to be reproduced on a wide range of products such as T-shirts, posters, jewelry, prints, household items, and fabrics. The following tips will not help you market you art but will help you determine how your license can protect your rights once you find the right deal.

The United States Copyright Act of 1976 recognized the principle of divisibility, which allows artists to use narrowly defined licenses to divide the rights to their copyrighted artworks. For example, artists can grant one company the right to reproduce a work of art on a T-shirt, grant another company the right to reproduce the artwork on a coffee mug, grant a third company the right to distribute it, and grant a museum the right to display the artwork. Each of these licensees would become the owner of a limited copyright in the artwork, and the artist would retain all other rights that he or she had not otherwise parceled out.

An exclusive license stipulates that the artist agrees not to convey to another party a right it has granted to one party; these exclusive licenses may have time-period limits. To be effective under the Copyright Act of 1976, an exclusive license must be in writing, and the writing must clearly define the key terms of the grant of license, including duration, royalty payments, and the name on the copyright notice.

The license agreement goes from the artist who holds the copyright (the licensor) to the user (licensee). The license grants the licensee the right to use the artwork on a product or for a specific purpose and for a set time period in exchange for some form of compensation and subject to such other terms and conditions upon which the parties agree. The compensation can be a flat fee, a percentage of the sales of the product (a royalty), a combination of a flat fee and a royalty, or a guaranteed minimum amount against the royalty.

The license agreement should include the exact names and addresses of the licensor and the licensee; describe the licensed artwork; include an attached image of the artwork, when available; and clearly describe the use that the licensee can make of the artwork. For example, the license should clearly state whether the licensee plans to reproduce the artwork on a T-shirt, a coffee mug, or another product.

The license may entitle the licensor to a specified number of free samples of the product using the artwork and specify that the samples are subject to the licensor’s approval before production begins. The licensee must agree to seek permission from the artist to make any additional use of the artwork that the license agreement does not cover, and the licensor and licensee must agree upon payments for such use at that time.

The license should stipulate the time period that the license will remain in effect, the date upon which the artist must deliver the artwork, and the manner of delivery. The licensor should stipulate whether it is granting an exclusive or a nonexclusive right to reproduce the artwork on the product. The license should state where the licensee can use or distribute the product containing the licensed artwork. The artist should reserve all rights that the license does not expressly grant to the licensee.

If the licensee is paying royalties, the license should specify whether there is a guaranteed minimum payment and how the percentage is calculated—on gross sales or net sales, for example. It should also state whether the licensor has a right to audit the books of the licensee and what procedures will take place if the licensor finds a discrepancy in the books and how often the licensee must render statements of account to the artist and how detailed those statements must be.

The license should stipulate whether the licensee has the right to change the artwork or combine it with other artworks and, if so, whether the licensee can do so without the approval of the licensor; specify whether the name of the artist will appear on the artwork when it is reproduced; and state whether a copyright notice in the name of the artist will accompany the artwork when it is reproduced.

If the artist is licensing electronic rights to the artwork, the license should specify the form of final use, such as a website or a compact disc, and indicate whether the consumer or end user can print a copy of the artwork or is limited to only viewing a display of the artwork.

The license should provide for indemnification of the licensor by the licensee against any and all claims, costs, and expenses, including attorneys’ fees, that arise in connection with any use of the artwork that differs from those that the license allows and from any claims relating to the product upon which the artwork has been reproduced, even if in full compliance with the terms of the license agreement. The licensee should agree to assume liability for loss, theft, or damage to the artwork.

Finally, the license should specify the manner in which disputes will be resolved—for example, whether the parties will submit to binding arbitration or are free to litigate. If the parties do not agree to binding arbitration, then the license should specify that the law of a particular state shall govern and the court that will have exclusive jurisdiction over the dispute.

While putting together a comprehensive license agreement with all these terms can be daunting, don’t let it deter you from licensing your art. Doing so offers you the opportunity to earn income multiple times from the same work of art, which is not the case if you sell the artwork outright.

Alan E. Katz is a partner in the New York City law firm Greenfield Stein & Senior, LLP, where he specializes in art law, real estate law, and software licensing. 

The post Licensing Your Art appeared first on Art Business News.

by Christine Schrum

In an ideal 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.

ABN: 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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