How many of us don’t read the small print and end up in a bit of a pickle? Do you tick the box “I have read and understood the terms and conditions of agreement” without looking and live to regret it? Many of us do.
So, the devil is in the detail! If you are unlucky enough to be in any dispute and this includes intellectual property. Whether it concerns the ownership of graphics, who owns photographic images or the terms of a licence/royalty or confidentiality agreement, it’s good to know where you stand. It’s the small print which counts in your commercial relationships and allows you to address these hiccups more easily. Spending a few moments to see if your agreements are healthy and fit for purpose will also help you identify where your intellectual property is at risk. After all, you want your business to grow and allow you to develop business relationships to provide a return on investment for the time spent, so why not cross the t’s and dot the i’s. NOT reading the small print makes lawyers rich!
Most companies will have marketing material and use a photographer, so clarity of ownership is needed. Who owns the rights? Many believe that if you pay a photographer to take photographs of, say, a new range of products, the commissioner (or the person who pays for the photographs) will own the rights. In law, the answer is usually NO!
The photographer will be the first owner of the intellectual property rights, the copyright, in the photograph(s) of your designs. However, it is possible to obtain the copyright by having the photographer “assign” the copyright to you and it is important to realise that copyright may only be assigned by a signed agreement in writing. Having an Intellectual Property Assignment Agreement drafted is the best way of achieving this. Once you have a template agreement, this can be used to fit different circumstances.
Paying for the services of a professional photographer makes no strict difference to the legal position as stated above. However, payment may well provide an “implied term” of any agreement that you have with the photographer, that you intended to own the copyright rather than the photographer. Such an implied term will most likely result in your being permitted to decide where your photographs are published and for what purpose.
The photographer will also have moral rights associated with the photograph(s) he/she has taken. This means that you will have to consider not using the photographs in a manner that could be interpreted as derogatory by the photographer. You will also have to credit the photographer as having taken the photograph(s) wherever published. In order for you to have full rights over how the photograph(s) are published, and to avoid having to name the photographer each time, you will need the photographer to “waive” these moral rights. A waiver of moral rights may be incorporated into an Intellectual Property Assignment Agreement.
License/Royalty Agreements – what to look out for and ensure you consider
How many businesses thrive as a result of a positive relationship between designer and manufacturer and how few have a robust license/royalty agreement to benefit both parties, should things go wrong? In the creation of an industry standard agreement, ACID spent a considerable time consulting with both designers and manufacturers to create an agreement which demonstrates a fair balance between both parties and which is easy to understand, avoids legal jargon and most importantly is legally enforceable. Having such an agreement protects the interests of both parties, without compromising either party and maximises commercial opportunities.
Ten top tips when thinking about a license/royalty relationship:
1 They’re my designs….!
Assigning the rights in your designs effectively hands all the control over in those designs and the manner in which they can be exploited by the recipient, unless you agree specific terms under which you keep the right to maintain control over certain matters.
2 What licence?
If you do wish to retain more control over your designs, then you should license them rather than assign them. This means that you retain ownership of the rights and grant others the right to use the designs subject to certain restrictions which you can impose. An exclusive licence means that you cannot use the designs for the duration of the licence – that becomes the exclusive right of the person granted the licence. A sole licence means that both you and the person granted the licence can use the designs. A person who is granted a non-exclusive licence merely has the right to use the designs but cannot take action to prevent anyone else also using the designs. Someone granted an exclusive licence can take action to stop anyone else using the designs.
3 Make a list
All the designs which are to be covered by the licence should be listed in a schedule attached to the agreement. This avoids any doubt as to which designs are covered. If the licence covers future designs then further schedules should be added when those designs are created.
4 Copying – who pays the bills?
The licence should state whose responsibility it will be to take action against someone found copying the designs. Sometimes the cost of this can be shared, as can the proceeds recovered from the copier, but the licence should state how they will be shared.
5 Hidden extras
The licence should set out exactly how royalties will be calculated. There will be a big difference between a royalties calculated as a percentage of the retail selling price of the article as opposed to its wholesale price. Check for further deductions for things such as discounts on bulk orders.
6 Which country?
It is possible to license different companies to sell the same design in different countries or other geographical areas. The licence should clearly state which country or countries it covers, and should prevent active sales of the designs outside of that territory. It is also important that the licence states which country’s law will apply to the licence.
7 How much?
It is possible to agree either a one-off lump sum, or payment of regular royalties on sales, or a combination of the two, often in the form of an upfront payment followed by royalties. If you do agree an upfront payment and royalties, check to see whether the lump sum payment is deducted from future royalties. Also consider using a minimum guarantee for royalties, so that you are paid a guaranteed minimum amount each year even if the royalties actually earned are less than that amount.
8 How long?
This can often be an important but difficult issue, as the shelf life of the design is often not known at the outset. It may be difficult to get a company to agree to continue paying royalties after the period of copyright or design right protection has expired.
9 The last word…
If you want to ensure that the products are being made to your correct design, or to your standards, then include a right to inspect samples before they are put into production. Similarly, you can include clauses which state the manner in which the products will be promoted. You may want to ask for your name to be included on all publicity materials.
10 Remember..!
You should always read the whole of the licence and seek advice if you are unsure of the effect of any of the terms.
ACID Case Study
We asked an ACID member, a user of ACID’s industry standard License Royalty Agreement, to underpin all her licensing relationships, to list her top tips when negotiating a license royalty deal:
ACID recently spoke to a member who had purchased a confidentiality agreement. She commented, “We’d been working with someone who had been fantastic when we started up the business but we got our fingers burnt when we felt he may have taken some of our “know how” and our ideas and there was nothing we could do about it. We have now just employed our first member of staff and have ensured that, as part of our standard terms and conditions of employment, there is a signed confidentiality agreement. This gives us assurance that should things go wrong we can rely on the small print. There are so many “hats” that a small business owner has to wear and sometimes it’s easy to forget something that really matters.”
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