Bo's bLAWg - Indemnification Provisions

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

Lisa asks:  Why would a manufacturer to whom I have licensed designs for toys expect me to indemnify it?  Shouldn’t the manufacturer indemnify me?

Thanks for your question, Lisa.  Indemnification is an important legal consideration in every Agreement, and particularly in conjunction with licensing illustrations for use with manufactured goods.  In short, indemnification means that if an “innocent” party to the License is sued by a third party because the other did something wrong, the party who did something wrong should be responsible for any potential liability of the innocent party.  It would be appropriate for each party to a manufactured goods illustration License to indemnify the other in conjunction with their particular contributions to the goods being manufactured.

When you look more closely at your License you will note that the manufacturer has likely asked you to warrant certain things.  Typically, the Illustrator Licensor will be asked to warrant:

1.  That the illustrations you are licensing are yours alone – meaning that there is no one else who will claim a joint copyright interest and claim that the manufacturer must pay them, too;

2.  That the illustrations are original to you – meaning that you have not infringed any copyrights held by someone else;

3.  That you have not violated any other person’s right with respect to your licensing these images – meaning that you have not included any trademark or recognizable face (without a signed Release)  See my February 2016 bLAWg on the Right of Publicity: click here , and,

4.  If the License is exclusive, that you have not otherwise licensed the same illustrations to other manufacturers of competing goods.

If the manufacturer is sued by a third party for a violation of any of these rights, then the manufacturer has a reasonable expectation that the Artist indemnify (be responsible for) the damages for which the manufacturer might be liable for copyright infringement or other warranted use right.

While a comprehensive License will include an Express Indemnification provision, you should know that there is also a legal doctrine called “Equitable Indemnification.”  In short, in the absence of Express Indemnification, most courts will “in fairness” allow an innocent party to invoke indemnification rights anyway.  However, in some states, only Express Indemnification, not Equitable Indemnification, will cover the innocent party’s attorneys’ fees and costs.  Since attorneys’ fees (including mine even though they are so reasonable!) can total even more than actual damages on claims like these, Express Indemnification provisions are favored by manufacturers.

However, I do have pro-active advice to limit the scope of the Artist’s indemnification obligation.  Many of these provisions are drafted so as to make the Artist Licensor responsible for damages and attorneys’ fees and costs arising out of a claim of infringement.  Heck, anyone can claim their illustration has been infringed by you!  However, there are two requirements to prove infringement, both “substantial similarity” and “access” to the copyright holder’s artwork so as to have provided the opportunity for copying.  See Bo’s bLAWg from last June: click here

If your illustration is only substantially similar by coincidence, and there was no access, hence no copying, why should you still have to indemnify the manufacturer?  I don’t think you should have to. As a large corporate entity, the manufacturer is in a much better position to afford to defend a meritless claim than the Artist.

To that end, I recommend looking to edit the standard Express Indemnification provision to make sure that the manufacturer (with its own ample insurance) should be required to defend itself, if not also the Artist, unless there is a “substantiated” breach of warranty on the part of the Artist.  Most manufacturer business reps and/or counsel will recognize the reasonableness of such an edit request.  In addition, I look to limit the attorney’s fees and costs obligation to “reasonable” attorneys’ fees and costs.  It is not only possible that an outside counsel will overcharge for defense services, but that they will assign too many attorneys to a small case.  A judge (or arbitrator) can assess whether or not the fees due are in fact “reasonable” or not.

One issue related to the manufacturer’s handling of unsubstantiated claims is that the manufacturer may try to make the Artist responsible for its insurance deductible, to be paid out of current and future Artist royalties.  That might be a risk that the Artist is willing to take if the manufacturer is not obligated to make any payments on its insurance deductible unless there is a settlement or a Judgment that implicates the Artist.  If your manufacturer offers a compromise on the “claim” indemnification language making you responsible for any part of its deductible, make sure that you have a right to pre-approve unconditionally any settlement into which it might want to enter, and that your share of responsibility for the deductible is reasonably limited.  Some of these policies have deductibles of $50,000 or more!

The flip side to the Indemnification issue is that an Artist can reasonably expect the manufacturer to indemnify them in the event an action (or claim!) is made against the Artist occurring through no fault on the Artist’s part.  Express Indemnification can and often should be reciprocal.  The Artist can be exposed to a legal action on their illustration contribution when the manufacturer requires the Artist to include content it provides in her illustration, like its logo in the packaging that the Artist is illustrating.  If it turns out that the manufacturer’s new logo infringes upon someone else’s trademark the Artist might be sued for trademark infringement along with the manufacturer.  Or, if the toys your illustrations decorate are defectively made and a child ends up getting hurt playing with them, a Plaintiff attorney could name as Defendants both the Artist and the manufacturer!  

While it is not common, it is not unheard of for the Artist to be sued along with the manufacturer.  In which case, you absolutely want to be sure that the manufacturer not only is providing indemnification on any damage claim, but that there is legal defense coverage available to you as the innocent Artist.  Most manufacturers have Product Liability insurance, and will agree to include the Artist as “an Additional Insured” on their policy for these purposes.  Then you should have no worries.  You will have the same coverage the manufacturer has, including legal defense and associated legal defense costs.  However, once again, make sure that the manufacturer is responsible for any deductible that the coverage might otherwise impose on the Artist as an insured under the Policy.

Probably a lot more than you wanted to hear, Lisa, but you asked a good question!

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

© 2015 mjbogatin

Have a legal question? email it to info@AnnGraphics.com. I will forward it to Bo. It might be a blog post! You can search "Bo's bLAWg" to read more posts. I am looking forward to your comments and thanks for sharing this great information on social media.

Bo's bLAWg - Use of Quotes and Song Lyrics

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

Could I be sued for using somebody else's quotes?  What about song lyrics?

I knew I was going to get this question sooner or later.  It is a tough one.

There are at least three legal rights that bear on the question of whether or not an illustrator can make commercial use of an existing quote or song lyric.  These are Copyright, Trademark and the Right if Publicity which I wrote about last month.
http://annietroe.blogspot.com/2016/02/bos-blawg-right-of-publicity.html

With respect to Copyright, let’s first clarify that words, phrases and titles are not by themselves copyrightable.  See: http://www.copyright.gov/circs/circ34.pdf

However, when the words or phrases you want to use are contained in a larger, copyrighted work, then they are indeed protected by copyright.  The same rule applies if the phrase you want to use is a quote, whether from a copyrighted speech or a catchy aphorism used by a writer or one of her characters in the course of dialogue.  Use of the same content in your commercial product without the permission of the copyright holder, whether in a greeting card, or other paper product, is an infringement.  The Copyright Office addresses the same question in one of its own FAQs:   http://www.copyright.gov/help/faq/faq-fairuse.html

“If you use a copyrighted work without authorization, the owner may be entitled to bring an infringement action against you. There are circumstances under the fair use doctrine where a quote or a sample may be used without permission. However, in cases of doubt, the Copyright Office recommends that permission be obtained.”

Then the question is whether or not the Illustrator’s particular use is defensible as a “Fair Use.” See my Fair Use bLAWg from last May:
http://annietroe.blogspot.com/2015/05/bos-blawg-fair-use-of-logos.html

Considering the four part Fair Use test: 
1)  The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2)  The nature of the copyrighted work;
3)  The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4)  The effect of the use upon the potential market for or value of the copyrighted work.

I believe it is reasonably clear that while the substantiality of the amount used may be minimal, (factor 3), the Illustrator’s commercial use and the fact that her use effectively eliminates the copyright holder’s market to license the same quote for similar use would be sufficient to defeat the Fair Use defense. 

When considering whether or not pithy sayings might be protectable on their own, I ran across a case by Ashleigh Brilliant ( http://www.ashleighbrilliant.com/ ) who has successfully defended his copyright of his collection of original sayings.  I can also vouch for the fact that certain quotable essayists and humorists have sent out ‘cease and desist’ letters to some of my clients for their use of quotes, including the Estate of Erma Bombeck.  However, given how broadly her quotes are now disseminated online, I must wonder if they gave up trying to stop commercial use.

As for trademark, if the quote or lyric you want to use is being utilized as a trade or service mark then your use could cause someone to believe that the trademark holder is the source of goods on which you use it.  That is the gravamen of trademark Law – to avoid just such confusion as to origin -- as noted in my May 2015 bLAWg:  http://annietroe.blogspot.com/2015/05/bos-blawg-fair-use-of-logos.html  So, you want to make sure that you are not using a pre-existing catchy saying associated with another company to attract prospective purchasers of your goods.  Many such phrases, such as “Show Me the Money,” “ET Phone Home,” “Got Milk” and “Just Do It,” are trademarked, and cannot be used by you without likely objections, if not claims, by their owners.
Finally, if you are using a quote, and in conjunction with the quote you use the author’s name, that is a use that can easily been seen as a violation of that person’s Right of Publicity, even if it is just being used to identify the source of her quote!  What if you were to use the quote without the author’s name?  Would that diminish sales of your product?  If so, then clearly there is a commercial advantage to using the name.  At the same time, if you go to the author or her agent or publisher for permission to use the quote, it is very likely that the permission will come with the condition that the quote be attributed.  And that is a large part of the reason a royalty payable on your sales will likely be required in exchange. 

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Bo's bLAWg- The Right of Publicity

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

After I’d turned in my bLAWg to Annie in December, I received another client holiday gift that raised legal issues that she had not considered that is topical.  The set of cards I received contains illustrations of a number of celebrities.  Clearly, she had not obtained their permission to feature their likenesses on gift cards.  As long as the cards were being circulated to friends and families as examples of the Artist’s fine skills, there is no legal risk.  However, if the Artist were to sell a single set of these cards, she would be subject to some very expensive legal claims.

The legal interest that underlies this claim is the Right of Publicity.  While it is celebrity images that are most commonly used by illustrators or photographers on cards or on products from digital picture frames to place mats and t-shirts, everyone has an individual Right of Publicity.  In short, it is a personal right to either allow their name and image to be used for commercial purposes – or not.  With respect to celebrities, this right is directly associated with endorsements.  One cannot turn on the television or flip through a magazine without seeing the image of some celebrity touting the benefits of some product.  They get paid big money for these kinds of endorsements.  Whether their image appears on a towel or product packaging, the celebrity has a reasonable right to object unless they have expressly granted this personal right – and so would you or I; although, our damage claim would no doubt be significantly less than that of a celebrity!

(However, writing that reminded me of the Taster’s Choice claim.  In 1986, a one-time model, Russell Christoff, posed for a Nestle photo shoot pursuant to an agreement that paid him for a couple hundred dollars for shoot but promised him $2,000 if his image was actually used to market Nestle’s Canadian division products.  By 2002, Christoff had become a school teacher.  That year, while shopping in a Rite-Aid store in the US, Christoff saw his image on the label of jars of Taster’s Choice Coffee jars.  Christoff had never been paid the $2,000.  Instead of suing for his contract damages, he made a Right of Publicity claim under California law.  With the help of some good lawyering, a jury returned a verdict in favor of Christoff for $15.3 million dollars(!) based on 5% of Nestle’s profits for the six years that Nestle had been using Christoff’s image on the Taster’s Choice label.)

While the Right of Publicity is a matter governed by State law --  which varies from State to State -- because cards and products are typically sold all across the country,  a person whose right of Publicity has been violated can ‘forum shop’ and potentially bring an action against anyone who has profited by the use of their image without their permission.  This means the shop that sells the offending card and the distributor who provided it to the retailer are also liable, albeit they would have a right of indemnification against the Artist who provided them the cards with an express or implied warranty that they had the right to use the image on the card or product.

Christoff used the California Right of Publicity because it is one of the strongest.  This is due to the fact that a lot of celebrities live in California and the State wants to protect their interests.  California’s Right of Publicity is found in Civil Code Section 3344:               http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=03001-04000&file=3344-3346

Under this statute, a person (or company) who knowingly uses the image of a person without their permission is liable to the injured party for his actual damages (like provable endorsement fees otherwise due a celebrity), “and any profits from the unauthorized use that are attributable to the use…” or a minimum of $750.  In addition, the defendant may be subject to a punitive damages, (often based on their total value or assets(!).  And one of the best parts of the statute is that the prevailing party in such an action is entitled to recover their attorney's fees and costs – like in a post registration Copyright infringement action as noted in my June 2015 bLAWg – which means I take these cases on a Contingent Fee basis. Given the risks of a losing case, the defendant will almost always settle rather than risk fees and costs on top of the claimant Plaintiff’s damages.

And don’t think that just because a celebrity is dead that you are safe to use their image.  To the contrary, many States protect the Right of Publicity of the dead!  California Civil Code Section 3344.1 (same link as 3344 above), provides the same rights and remedies to deceased “personalities” as 3344 provides to the living.  All the Estate or heirs of the personality has to do is register the name of the deceased at the California Secretary of State Office.  If you want to find out if a given personality is registered you can find out at this linked website:
http://www.sos.ca.gov/business/sf/sf_siisearch.htm

However, just because you do not find listed at the California Secretary of State the name of the dead celebrity whose image you want to use on a card, does not mean that you can.  Since the right is State to State, there are other States that protect this right for a term of years without any Registry, and others who may well have case law instead of statutes that provide similar rights.  So, what’s my advice?  Don’t use any illustrations or photos of people on any product for sale unless you have obtained a license that warranty that the underlying rights to the image have been obtained for the intended purpose.

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Bo's bLAWg - The California Resale Royalty Act

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

Since it is in the news and an issue dear to my heart, I wanted to comment this month on the U.S. Supreme Court’s decision this week to decline to hear the appeal of last year’s Ninth Circuit decision striking down part of the California Resale Royalty Act (RRA). (See CA Civil Code Section 986:  http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=00001-01000&file=980-989 )

This unique California statute provides for artists to be paid a modest royalty (5%) on the re-sale of their artwork at an increased price over the re-seller’s purchase price. The statute was one of several that benefit artists that my organization, California Lawyers for the Arts (CLA), helped get passed in the late 1970’s.
   
California is unique in having passed this statute, although it is common in Europe. At its core, it is intended to compensate visual artists for the appreciation in value of their previously-sold works, which appreciation is the result of the artist’s wider acclaim, usually earned through hard work over the years. If the value of the artwork has not increased in value, no royalty is due; if it has, only 5% is to be paid over to the Artist by the Re-Seller. Until recently, the statute applied only on re-sales of fine art in California or by a California Seller.

The RRA came under legal attack in 2012 in response to a lawsuit filed against the major auction houses (Christie’s, Sotheby’s, and eBay) by Chuck Close, the Estates of Sam Francis and Robert Graham, other established artists based on the fact that they were not being paid their resale royalty on out-of-state sales of artworks owned by California Sellers. There was a concerted effort by the auction houses to have the RRA deemed unconstitutional as violating the Commerce Clause of the U.S. Constitution. This clause reserves to Congress the power to regulate interstate commerce. A Federal Judge agreed with the auction houses and an appeal was taken.

On appeal to the Ninth Circuit Court of Appeals, in a split ruling, it was decided on esoteric grounds that part of the RRA that applies to out-of-state sales violates ‘the negative grant of power to Congress under the Commerce Clause’ (The “Dormant Commerce Clause), to restrain the authority of individual states to impose regulation of commerce in other states. In short, even if one party is a Californian, imposing the royalty obligation on the auction house in a New York sale would violate the Dormant Commerce Clause. The ruling left intact the right of California to impose the resale royalty on California sales, but the damage was done. It was this Appeals Court ruling that the artists and CLA sought be reviewed by the US Supreme Court, that the Supremes declined to reconsider.

While disappointing, this is not the end of the matter. There have been attempt to pass a Federal Resale royalty Act that would apply to all the states and provide such royalties to all artists.  Although the statute has been proposed three times to Congress, it has yet to get a hearing. Perhaps with the publicity around this decision will cause artists to become more vocal about their right to such royalties. After all, if composers can continue to earn royalties on the public performance of their works, why shouldn’t visual artists?!?

Or, artists can do what I recommend: Put a resale royalty provision in your art sales contracts. It need not be limited to 5%, either! My sales contracts require re-sellers to pay 15% on the profit of their re-sale, and to pass on this obligation to the purchaser of the work of art so the same obligation applies on future re-sales. You want to see the provision?  I’d be glad to share it with you. Just let me know!

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Bo's bLAWg - Certificates of Authenticity

  

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

 

It’s that time of year – the time of year when I am privileged to receive Seasons Greetings from  many of my wonderful artist clients.  And one I received yesterday reminded me of an issue that should be of interest to all of You artists:  Certificates of Authenticity. 

Often, I receive a gift that is clearly a print, but there is no specific information accompanying it other than the artist’s copyright notice and a note.  As an attorney, seeing that the artist has included a copyright notice on the artwork is good, but as a collector, I am interested to know more about the subject matter of the work and the medium:  lithograph, serigraph, pochoir, monoprint, monotype, etching, woodcut, screenprint, digital print or counterproof?  (Yeah, I Googled “kinds of prints.”  Even so, I DO want to know!)

And, if applicable, for valuation and insurance purposes, I need to know the specifics of the Fine Print Edition.  This is where Certificates of Authenticity come in to play.

There are more kinds of prints than ever before.  Unless the recipient of a gift reproduction is provided information about it, there is no way for them to know how truly special it might be. From time to time we also hear that someone has issued a fraudulent edition of some famous artist’s image, and the market has been flooded with prints that may or may not be authentic, damaging collectors and destroying the market for that artist or her Estate.

In California, this problem was so prevalent that the Legislature decided to do something about it.  They passed a Fine Print Disclosure Law that not only protects “consumers” (buyers), but the value of the entire edition for collectors and artists alike.  In short, Civil Code Section 1740 et seq provides that retailers of Fine Prints and limited edition sculptures and photographs priced at more than $25, unframed, must provide purchasers with basic information about the edition.  This law provides for disclosure in writing of not only the identity of the artist, but the medium, whether the multiple is a limited and if so the number of multiples in the limited edition, the time when the multiple was produced, and if a “plate” is used, what becomes of it.  (i.e. Is the plate destroyed so that a new edition cannot be made from it?)  See:

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1740-1741
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1742-1744.9

The consumer remedies in the event a seller does not comply with this law is return of the artwork and a full refund regardless of any claim that “All sales are final.”  If an art dealer in California willfully fails to provide this information, they can be liable for three times the value of the work, and a civil penalty of up to $1,000.  And if the buyer has to sue to enforce these statutory remedies, they will be entitled to recover their attorneys’ fees and costs!

While there may not be exactly comparable statutes in your state, I still strongly recommend the use of Certificates as a way to both inform people about your prints and impress them with your business acumen.  The client who brought me his multiple customized his Certificate and made it a collectible in its own right.  (See above.)  However, the form of the Certificate can be quite simple and straightforward, including the following information, which you can copy and paste:

CERTIFICATE OF AUTHENTICITY
Compliant with California Civil Code §1744

Title:    _____________________
Artist/Photographer:    _____________________
Signature:    Each print is hand signed.
Release:    [December] 201_
Copyright:    © 201_ ___________________
Description of Edition:    Limited Edition of ____ [11x14] prints plus Artist Proofs.
Print Date:    [December] 201_
Print Size:    [11x14]

A few words about this image:

This is to certify that all information and the statements contained herein are true and correct. I created this fine art multiple from [photographic matter]. [This image is printed on archival paper, and with proper care your artwork should last over 100 years.]
___________________________        ___________________
Artist                        Date

So, make your holiday Limited Edition print gifts even that more desirable by providing a Certificate of Authenticity.  Especially to your attorney! 

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

 

Bo's bLAWg - Return of License Rights after 35 Years

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts.  www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

Last month I wrote about the way I look to protect an Artist client’s rights in her image preemptively by making the license subject to mutually agreeable minimum annual earnings.  That is a way to get back rights to images being used unproductively in the relatively short-term.  (Last month's bLAWg)

However, the Copyright Act, Sections 203 and 304(c)(3), also addresses the return of copyright interests to Artist in the long-term. In short, for works originally published before January 1,1978, an Artist or their heirs can reclaim her copyright interest after 56 years.  For works published since January 1, 1978, the right to claim a reversion of copyright is available after 35 years.

(See http://copyright.gov/title17/92chap2.pdf and http://copyright.gov/title17/92chap3.pdf

While most of my transactional work over the last 30 years involves works created and licensed after 1977, I have had occasion to advise certain composers and rock and roll poster artists on the way to recover the rights to their works that were exclusively in the hands of record labels and publishers for as long as 56 years beginning in the 1950s and 1960s.
  
For works published from 1978 on, the 35 year reversion right became operative as of 2013.  This year, works licensed in 1980 became subject to reversion.  Next year will open the door for recovery of works licensed in 1981, and on and on.  Each calendar year, thousands of copyrights will be available to be reclaimed by their Artist authors or their heirs should they choose to avail themselves of this right.

It should be clear, however, this right only applies to copyrighted works that were licensed (exclusively or non-exclusively) or “assigned” (sold) in the first instance, not those that were created by an employee for her employer or as bona fide works-made-for-hire.  (For more particulars on what is a work-made-for-hire, see my bLAWg from March 20, 2015 click here ).  Nor does the statutory reversion right apply to copyright interests that were transferred by will.

However, it also applied to derivative works that were made from the original.  So, if an illustration was issued for all kinds of paper products but mostly greeting cards, but was subsequently sub-licensed for a jigsaw puzzle that became a best-selling puzzle, termination of the original license terminates any sub-license as well.

So, why would you want to terminate the license of the sub-licensee who is still selling lots of puzzles?  Because if the Artist is only getting a nominal royalty out of a successful illustration, she can look to renegotiate that royalty rate as an alternative to the termination, or look to obtain a much more lucrative license with another puzzle publisher upon termination!

There is a formal Notice process that applies to both statutory reversion rights.  Rights under Section 203 may be effected at any time during a period of five years beginning at the end of 35 years from the date of original license.  For instance, if an Artist granted an assignment of copyrights in a one or more of her illustrations on January 1, 1978, the earliest date upon which termination of such grant could be effected would be January 1, 2013; the latest date would be January 1, 2018.  So, for those licenses commencing as of 1978, we are right in the window of time to recover those rights. If Notice has not been given in timely manner for this work, the reversion right will be lost for the duration of the copyright term, the life of the Author Artist plus 70 years.

Additionally, the written Notice must be served upon the grantee or the grantee's successor-in-interest not less than two years or more than 10 years before the effective termination date. And, of significant importance, the effective date of termination must be a date that falls within the applicable five-year termination window. So, in our example above, if the rights holders wait until January 2, 2016 to give the minimal two year notice, their window will have closed!  For those who recognize that they are presently in the 10-year window, they can look to exercise their right now, to be effective as soon as the 5-year eligibility period commences.  Make sense?

With copyright interests reverted, the Author Artist and her heirs will have the right to look for other publishing and/or licensing opportunities, presumably on much more attractive rates then were originally offered.  And these recovered copyright interests will last for the remaining part of the copyright  term, 70 years after the death of the Author Artist.

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Bo's bLAWg - Get Back Your Rights: Royalty Minimums

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts.  www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

An artist asked how they can get back her rights to a group of illustrations that are licensed exclusively but are not making her any money.

The main way that an Artist can look to insure she can get back her rights to an illustration under an exclusive license that is not earning sufficient royalties is to include a provision in the License Agreement that requires minimum royalty benchmarks to be satisfied on a year-to-year basis. At least that is what I look to do for my clients.  Establishing such benchmarks need not be put in terms of royalties, but can be based upon the Licensee’s earnings of sales, whether the Licensor Artist’s royalties are based on gross or net receipts.

This is part of the conversation that the Artist or I would have with the prospective Licensee in the course of negotiations. What is the projected sales income? If the Licensee’s projections compute into royalties that satisfy the Artist’s minimal royalty expectations, then look to include those sales thresholds as ‘minimums’ for the Licensee to maintain exclusive rights. At the very least, even if the Licensee insists their rights continue for the full term, it is possible that the License can be converted to a non-exclusive one – either automatically or upon written notice.

One additional term that might be included is that if the Licensee pays the Artist additional royalties to make up the difference between those actually earned and the minimum expectation, the Licensee may maintain exclusive rights. In that way the Artist can be assured that her minimums are always achieved, or some or all rights revert to her for further use of the licensed image(s).

I can provide specific language on all these terms as needed. Just ask. I can be contacted through my website linked below.

 
Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Bo's bLAWg: What might that ‘infringing' legal language look like?

 

Question: What might that ‘infringing' legal language look like? - Leslie.

This question has a few different answers depending on what aspect of “infringing legal language” it pertains. There are actually two different issues that immediately come to mind.

The first is the Artist’s warranty to the licensee manufacturer or publisher that the licensed illustrations are original and do not infringe upon the rights of any other person or entity. This is a legitimate concern of the Licensee, and they can reasonably expect that the Artist indemnify them and their sub-licensees from any damages that they might incur due to such an infringement. That will usually include responsibility for their attorneys’ fees and costs in defense of any such claim.*

Keep in mind that just because your work might be “substantially similar” to that of another artist, it is not legally infringing unless “access” to the original copyrighted work occurred. Those are the two elements needed to prove any copyright infringement claim. If the plaintiff claiming an infringement of their copyrighted work cannot prove access and substantial similarity, then no infringement can have occurred.

The other “infringer” issue pertains to who has the right to bring an action if the Licensor Artist’s copyright has been infringed by a third party. Usually, this will be in the context of a competitor of the Licensee, but the provision can be drafted so broadly that if the licensing Artist is not careful, her copyright infringement claim can be exercised by the manufacturer or printer whether or not the infringement involves competing goods to theirs.

So, first, the third party infringement rights provision should be edited to limit the Licensee’s rights to bring legal actions to those having to do with infringement in conjunction with competing goods.  Second, the Artist wants to make sure that she has the right to participate fully in the action as a party plaintiff.  Often, the manufacturer’s License template will say that the manufacturer alone can bring an action and it alone obtains the benefits of the action.  This can create a windfall recovery for the manufacturer in which the Artist does not share whatsoever!  If the infringement has resulted in a substantial loss of the licensed manufacturer’s sales, then the Artist will have been deprived of her royalties on such sales.  There is no legitimate basis to deny her right to share in such a recovery.

In fact, even if the infringer has made no profits on its use of the Artist’s copyrighted image, an action for willful infringement can be the basis for a judgment of up to $150,000 in statutory damages, plus reimbursement of the plaintiff’s attorneys’ fees and court and discovery costs.**

Keep in mind, even if the defendant has limited assets of their own, they may well have an insurance policy that provides coverage for negligence like an infringing use of a copyrighted work by a company employee.  If that use was “intentional,” as it typically is, the otherwise negligent act still provides a legal basis to claim statutory damage limits as willful use!

The best provision regarding action on infringements against such third parties allows the Artist to be an active participant if she wants to, and to be a passive participant if she prefers, and to share 50/50 in the net recovery after payment of attorneys’ fees and costs out of any settlement or judgment. In the event of a negotiated settlement, she wants the right to approve the terms of settlement as they directly affect her interests.

Alternatively, if the manufacturer or publisher Licensee elects not to pursue the infringement claim, the provision should include timely notice to the Artist so that she can pursue that claim herself should she want to. She has not only the prospects of obtaining a substantial settlement or judgment for herself, but it is possible if not likely that she will find a copyright litigator who is willing to take the case on a contingent fee basis. If she does not prevail or settle, she will have no attorney’s fees to pay. If/when she does settle or collect a judgment, the attorney is paid out of that judgement, usually 40-50 percent.

If the infringement has been widespread and the Artist’s loss of royalties and/or license fees substantial, including use beyond that licensed to the manufacturer, she might even be able to settle or obtain a judgment in excess of the statutory fees maximum of $150,000 per infringement. She cannot know the value of the claim without some investigation of the scope of infringing activity; an investigation which Licensees often do not bother to even consider.

In summary, make sure you look carefully at any infringing activity that involved your illustrations, and don’t give up those rights to the Licensee without a fight to share in the prospects and benefits.

* You may want to make sure that such indemnity provisions do not include “claims” against the manufacturer or publisher as distinguished from an actual breach of the warranty. Anyone can claim their work has been infringed. However, if there has been no access and the similarity is not the result of copying, then the manufacturer is in a much better position to defend a meritless infringement claim than is the artist. At least that’s my argument in negotiating edits to that provision of the License Agreement.

**Remember, to qualify for statutory damages and prevailing party attorneys’ fees and costs, the Artist must have registered her copyright in the infringed illustration before the infringement occurs, or within three months of its original publication. Otherwise, only the infringer’s profits can be awarded under the US Copyright Act, and fees and costs will be out-of-pocket.

If you have further questions about this that you want to direct to me personally, I can be contacted through my website linked below. 

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com.

You can use the search box at the top of the page to read more Bo's bLAWgs.
Send me your questions for Bo! Thanks, anntroe@cox.net

Bo's bLAWg: Fair Use of Logos

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts.  www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO! 

"Thanks for your bLAWgs distinguishing copyright and trademarks for us.  Tell me, can I use trademarked logos in my illustrations?  Examples:  an illustration of an iPhone with the Apple icon, and illustrations of matchbook covers featuring the trademarks of various restaurants and hotels."

A follow-up question.  Great!

I will address this question in parts.  First, I will consider those trademarks that include original artwork subject to copyright protection.  This would likely include some of your matchbox covers.

As previously mentioned, trademarks may include original artistic designs which are subject to copyright protection.  Those copyrightable elements of a logo cannot be used in any derivative fashion without the permission of the copyright holder unless they are in the public domain (published before 1923), or if your application of the illustration constitutes “Fair Use.”  Fair Use is defined under Section 107 of the Copyright Act.  In short, copyright law contemplates that fair use of a copyrighted work without permission is available for ‘free speech related” purposes such as (1) criticism and comment, (2) parody and satire, (3) scholarship and research, (4) news reporting and (5) teaching.

Whether a given use qualifies involves an assessment of four “Fair Use factors” that the courts must apply to each fact situation to determine whether a particular use of a copyrighted work is or is not fair use. These factors are:

1)  The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2)  The nature of the copyrighted work;
3)  The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4)  The effect of the use upon the potential market for or value of the copyrighted work.

The courts must consider all four factors; no single factor is sufficient to establish Fair Use.  

Note that Fair Use is a defense to a legal action, not a bar that would prevent the claimant from bringing such an action.  However, an infringement lawsuit will often be averted by persuasive argument that a Fair Use defense will be available if the claimant were to file an action in court.

If your use of a copyrighted logo is not for the indicated free speech related purposes, including a broad interpretation of parody and satire, and your use is commercial in nature, it is likely going to require a license to avoid the possibility of a copyright infringement claim.

The second issue pertains to logos subject to the Lanham (Trademark) Act.  

You will recall that logos are a form of trademark. Trademarks identify the source of specific goods and services.  Consumers have the right to know that the goods and services they are purchasing come from the company identified with the logo. Trademark law assures the owner of a given trademark that it will have the exclusive right of use to that mark as against any and all others who might like to use the same or a similar mark in the same class of goods or services and cause public confusion as to the source of the goods or services. 

There is a “Fair Use” corollary that applies to the use of trademarks as well as copyrights.  In legal terminology this is known as “Nominative Use.”  The Nominative Use Doctrine provides that a person may use the trademark of another as a reference to describe the other product, or to compare it to their own. Like Copyright Fair Use, it is only an affirmative defense to a trademark infringement claim, not a bar to bringing a claim.

The nominative use test essentially states that one party may use or refer to the trademark of another if:

1)  The product or service cannot be readily identified without using the trademark (e.g. trademark is descriptive of a person, place, or product attribute).
2)  The user only uses as much of the mark as is necessary for the identification (e.g. the words but not the font or symbol).
3)  The user does nothing to suggest sponsorship or endorsement by the trademark holder. This applies even if the nominative use is commercial, and the same test applies for metatags.

Nominative use does not require that ownership of the trademark be acknowledged, for example by use of a sentence such as
"is a registered trademark of Apple Computer, Inc.". Such statements may, however, be required by the terms of a license agreement between the parties, and they may be prudent (and courteous) as a way of preventing misunderstandings or allegations that your illustration is sponsored by or associated with Apple.

However, your creative use of the logo is not necessarily nominative.  If it transforms the logo in some way that is uniquely artistic, like Warhol’s use of Campbell Soup cans, there is a transformative element involved that by its nature can be seen to distinguish the artistic rendering from the corporate use on goods or in conjunction with services.  Such transformative use is not definitively Fair Use if the public could be confused as to its source.  Indeed, had Campbell Soup wanted to stop Warhol or his Estate from publishing his exacting images of their logos, they probably could have.  Sometimes, the trademark owner may decide that the artwork although infringing, promotes their brand without damaging it.

If your use of the logo is to make fun of the company, the free speech aspect of Fair Use may apply.  At its core, (pun intended), a parody of the Apple logo that makes fun of Apple or one of its products may well be privileged as there is no likelihood of confusion.  Clearly, your use does not use the Apple logo to identify the origin of your artwork, but to make a kind of joke.  Such  “parody” is at its essence, free speech.

Legitimate parody may however ‘cross the line’ and be seen as slander of the trademark owner’s brand.  Even if a trademark infringement claim may be defended, the illustration could be seen as “trade libel,” and generate a defamation claim.  The elements of trade libel are:

1)  The material in question can be shown to be a false statement of fact;
2)  The defendant’s statement caused the plaintiff either financial or reputational harm;
3)  The defendant didn’t sufficiently research if the claim in question was true before publication or broadcast.

So, if your illustration does not alter the logo or add information that suggests the company has done or supported something negative or offensive that it did not do, or you can prove that your use of the logo in this fashion did not cause harm to the business, there’s a good chance you’ll be able to successfully defend against such a claim.

Bottom line, if your use of a logo in an illustration might cause the corporation that holds a trademark and/or copyright interest to object to your use, there is a risk to you involved.  The corporation is likely to have much greater assets than you do.  They may insist you “cease and desist” from your use or it will bring a legal action even though your use is defensible as a matter of law.  Can you afford to defend on principal if you have to?  You may have to, so be careful.  Consult with counsel as needed!

Disclaimer: The information contained in this website is not intended as legal advice or a solicitation of business. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

You can use the search box at the top of the page to read more Bo's bLAWgs.
Send me your questions for Bo! Thanks, anntroe@cox.net

Bo's bLAWg: Trademark Basics

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts.  www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO! 

 

'I saw that you need to decide on your trademark application whether you are selling goods (a product) or services. I'm hoping to sell goods but then I saw that if you plan on selling on your website that's considered services?? Can I choose both goods & services? Thank you! Kathy'

The short answer to this question is that trademarks can apply to goods and services, in which case you want to look to register your trademark in both classes – which you can do at the same time, but which requires additional application fees.

What this question also invites is an opportunity for me to address the fundamentals of trademark law. Like copyright, trademarks are a matter of Federal law – the Lanham Act, 15 USC Chapter 22, https://www.law.cornell.edu/uscode/text/15/chapter-22.  However, this Act applies only to goods and services in interstate commerce.  Goods and services that are made available ‘locally’ in intrastate commerce, would not necessarily qualify for Federal Registration, but would be eligible for State Registration.  Most states provide for registration of such marks through their respective Secretary of State Office.

In my prior bLAWgs I have focused upon Copyright issues.  There is a keen distinction between Copyrights and Trademarks that is a “natural” aspect of the intellectual property interests of their owners and creators.  First, let’s distinguish between them by definition.

Remember, a Copyright is the original expression of an idea by way of writing, composition or recording.  A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others, while a service mark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of a service rather than goods.  The popular term these days for such commercial identification is “branding.” The word “trademark” is often used to refer to both trademarks and service marks. 

Copyright law allows for multiple Authors to claim an IP right in a substantially similar original expression of an idea. Hence, there are legitimate claims of right to very similar illustrations, photographs and paintings.  Any and all of such Authors can claim ownership of their own original expression as long as they have not copied from the other.  An example:  Every tourist who takes a photograph of the Golden Gate Bridge at the same moment of dusk from the same pinnacle at Lands End can have their own copyright claim in that unique photograph, and all the exclusive rights that attach to their photograph.  However, it is not an infringement of their Copyright for another photographer to publish and exploit a nearly identical photograph!

On the other hand, because trademarks are for the purpose of identification of the source of specific goods and services, it is important that the owner of a given trademark have the exclusive right of use to that mark as against any and all others who might like to use the same or a similar mark in the same class of goods or services.  The purpose of this exclusive interest is to insure the public consumers that they are purchasing the brand they are intending to purchase, not a ‘pretender.’ You may not have realized it, but underlying the purpose of trademark law is consumer protection! 

The Trademark Office has identified 34 classes of different goods and 11 of services from which the prospective Trademark registration applicant must select the most appropriate for their product or service.  Hence, it is possible that there are similar Trademarks in other classes, but obviously not related to one another, and will neither compete with one another or lead to public confusion.  Hence you could have both Apple Computers and Apple Records operating at the same time without a problem.  However, once Apple Computers got into the music business (with iTunes etc), litigation commenced.

Unlike Copyright, where ownership in a similar representation (of an object) can be claimed again and again, the maxim for Trademark is, “First in time is first in right.”  The first person (or company) to use a given word or logo as their trademark has a “senior” user right (superior right of use) against any latecomer (“junior” user) who might want to use the same or a confusingly similar mark.  The basic legal test for Trademark infringement is whether or not use of a given mark may cause public confusion as to the source of such goods or service.  There need not be actual public confusion for a mark to be refused registration.  It is enough that a junior mark may confuse the public as to the source of the seller’s good or services.

Must all marks be registered? No, but Federal registration has several advantages, including a notice to the public of the registrant's claim of ownership of the mark, a legal presumption of ownership nationwide, and the exclusive right to use the mark on or in connection with the goods or services set forth in the registration.

If you claim rights to use an unregistered mark, you may use the "TM" (trademark) or "SM" (service mark) designation to alert the public to your claim of ownership of the mark, regardless of whether you have filed an application with the United States Patent and Trademark Office (USPTO). However, you may only use the federal registration symbol "®" after the USPTO actually registers a mark, and not while an application is pending.

The Trademark Office fees for an online registration range from $225 to $325 per mark per class.  The Lanham Act allows for registration of a mark the applicant has an Intent To Use (“ITU”) to reserve rights in the mark pending manufacture and distribution.  (15 U.S.C. § 1051b) 

So, Kathy, if you intend to use the same Trademark for both goods and services, be sure to first do a thorough search of marks being used in the classes of each.  One senior rights-holder with  the same or a confusingly similar mark in one class or the other will likely spoil your plan to use the same mark for both.

Disclaimer: The information contained in this website is not intended as legal advice or a solicitation of business. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

You can use the search box at the top of the page to read more Bo's bLAWgs.
Send me your questions for Bo! Thanks,

Bo's bLAWg: What does “work made for hire” mean? Is it a problem for me as an artist?

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts.  www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO! 

 

“Work Made for Hire” is a term of art – in law.  It is hugely important to artists providing any kind of artistic services for a client.  In some instances it is fully appropriate.  In most that I have seen submitted to artists as “vendors” providing services, it is not.

The nature of "work for hire" is that pursuant to the Copyright Act, 17 USC 201b, the   independent contractor Artist who is providing services is not the copyright holder in her deliverable artwork. With use of those magic words in the contract, the commissioning party is deemed to own the copyright in whatever the artistic deliverable might be.  The Artist’s work product, even though she is engaged as “an independent contractor,” is essentially being treated as if her work product has been created by one of the company’s own employees.  It is reasonably expected that the copyright to anything an employee creates on the job for her employer is going to belong to that employer.  17 USC 201b supports that expectation as a matter of law.  Work for hire applies the same proprietary interest of the employers to the work of non-employees. The Copyright Act is linked here for convenience:  http://copyright.gov/title17/circ92.pdf

Employees and independent contractors are very different jobs.  As an independent contractor, whether or not the Artist is working for her own business, the Artist is not receiving a salary.  She must negotiate for a fee and is competing with every other independent contractor for the assignment.  However, she is not entitled to the benefits that an employee receives as a matter of law in exchange for her labor.  Must a non-employee Artist’s work product belong entirely to the client, including the underlying copyright and all the use rights and derivative use rights that are contained in that copyright interest?  No, it need not.

As artists well know, there are 1001 uses for any one of their images.  A single image can be used as print, limited edition or otherwise; as a giclee; as a card or on any paper product.  It can be used in any kind of decorated merchandise, from plastic ware to bumper stickers.  If the client has a single uses in mind, or a dozen, it does not necessarily mean that the Artist need give up her copyright.  To the contrary, more often than not, once the issue is discussed, it may well turn out that the kind of artistic deliverable requested may not qualify as a work made for hire, and/or that an exclusive license for the client’s uses is all that they really require.

In fact, the Copyright Act provides that there are only limited kinds of works that are eligible for work for hire treatment.  (See 17 USC 101 Work Made for Hire.)  These include only a work specially ordered or commissioned for use in the following ways:
1 as a contribution to a collective work,
2 as a part of a motion picture or other audiovisual work,
3 as a translation,
4 as a supplementary work,
5 as a compilation,
6 as an instructional text,
7 as a test,
8 as answer material for a test, or
9 as an atlas.
The law defines a “supplementary work” as a work prepared for a publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as may appear in forewords or afterwords, or as pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes.

So, in essence, the Copyright Act looks to protect artists from being duped into giving away her copyright interest.  However, if it is agreed that the artistic work involved is legitimately work made for hire, the Copyright Act further requires that the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.  In the absence of such a written, signed Agreement using the magic phrase, there is a presumption that the deliverable is not work for hire and the Artist retains her copyright interest!

Assuming for the moment that the Artist’s deliverable is for one of these legitimate work for hire purposes, the Artist still need not offer it on that basis. The services need not be provided on a work for hire basis if a license of part of the Artist’s retained copyright interests will as fully meet the client’s actual needs.  One way to convince a client to prefer the license is to offer a significant cost savings for the license as opposed to conveying the underlying copyright by way of a work for hire provision.  I recommend a 10 to 1 ratio!  The copyright “coat of many colors” can be had for a price, but is worth as much as 10 times the fee the Artist might otherwise charge for the licensed use right.  That often results in a quick agreement to license the artwork in lieu of a work made for hire transaction.

If the client still insists on work for hire, here in California individual artists have another argument that typically will clinch the deal as a licensed work product instead of work for hire.  The legislature in California has reasoned that if a company is going to treat a deliverable as work for hire as they would were it made by one of its own employees, the company should rightly provide to the independent contractor some of the same benefits to which its employees are entitled as a matter of law, namely Workers Compensation and Unemployment Insurance!  That’s right!  In California statutes provide that if work for hire is involved as part of the deliverable by a non-employee independent contractor, the company is responsible to pay into Work Comp and Unemployment Insurance policies for the service provider!  (See CA Labor Code Section 3351.5c and Unemployment Insurance Section 686 linked here:  http://www.leginfo.ca.gov/cgi-bin/displaycode?section=lab&group=03001-04000&file=3350-3371 and http://www.leginfo.ca.gov/cgi-bin/displaycode?section=uic&group=00001-01000&file=675-687.2 )

All this said, there are caveats.  (Lawyers always have “caveats”.)  It may well be that a client wants an Artist to design a new logo or provide artwork the right to which they need to totally control.  A logo for instance is a form of Trademark, which the client logically does not want used in any other way that might be confused with their brand with which the logo is associated.  In a circumstance like this, the Artist should recognize the legitimate need, but the client should be prepared to pay accordingly for the larger rights required.  If the logo does not fit naturally into one of the work made for hire categories, the copyright can still be “assigned” (sold) by the Artist in writing.

This brings me to my final comments on the subject.  Companies have become so sophisticated that many will often include a provision in their Service Agreement that anticipates that if the work to be performed is not necessarily eligible for work for hire treatment under 17 USC 101, but they still want “all rights,” they will add an alternative assignment provision to the work for hire provision.  It will read something like this:

All work products developed in whole or in part by Contractor for Client (the “Work Product”) including but not limited to any text and/or artwork or graphics, and any copyrights contained therein, shall belong exclusively to Client and shall, to the extent possible, be considered a work made for hire for Client within the meaning of Title 17 of the United States Code. However, to the extent that any of the materials created by Contractor in support of the project may not, by operation of law, be a work made for hire in accordance with this agreement, Contractor hereby assigns to Client all right, title and interest in and to any copyright.

In which case, the Artist is right back to looking for the much higher fee since in the application of either of these legal precepts, copyright is conveyed, and the Artist will have no further use rights whatsoever, without the Client’s permission!

If you have further questions about this that you want to direct to me personally, I can be contacted through my website linked below.

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

You Might also like:  "Bo's bLAWg - What should be in an art licensing contract with a manufacturer"

Bo's bLAWg - What should be in an art licensing contract with a manufacturer

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts.  www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

I have a list of some 30 issues that should be covered one way or the other in a visual art License Agreement with a manufacturer.  Some of them are what you would consider “legal boilerplate,” but there are good reasons for such provisions to be included.  Others are more particular to most any agreement that pertains to a copyrighted image.  Then there are some that are unique to a visual artist’s agreement with the manufacturer of goods.  I will identify the most important to me from the last two groups.

Exclusive and Non-Exclusive Rights

The first and most important issue to me is whether or not the license is to be Exclusive or Non-Exclusive, and whether the referenced exclusivity pertains to the goods for which the designs are intended, or the designs which are being licensed, or both.  On occasion the nature of the exclusivity is uncertain.  Consider the following provision:

“Artist grants to Manufacturer the exclusive right to Artist’s illustrations on Schedule A attached hereto to reproduce, manufacture, have manufactured, use, sell, advertise, promote, and distribute in domestic and/or foreign markets in the Licensed Products in accordance with this Agreement.” 

What exactly is the exclusive right that is granted?  A literal reading could be interpreted to mean that the Artist has licensed exclusively only her Scheduled illustrations to this manufacturer, but retains the right to license other of her images, whether or not similar to those licensed in this agreement, to a competing manufacturer of the same kinds of Licensed Products!

If the Grant of Rights is Non-Exclusive, then the Artist maintains her right to license to other manufacturers of the same or similar goods.  If Exclusive as to goods, then the artist will not be able to license to competing manufacturers for the duration of the agreed-upon Term of the license. 

A well-drafted Grant of Rights provision, in concert with a set of Recitals (“WHEREAS” provisions that I recommend at the start of an Agreement that identify the parties and the underlying intentions of the Agreement), should clearly state the nature of the Exclusive Rights that the manufacturer expects to acquire and the limits on their use.

If the Exclusive Grant of Rights bars the artist from licensing the same or other illustrations, make sure that the bar extends only to competing goods rather than any other kind of manufactured goods.  The goods that are encompassed under the license should be listed.  These are often called “the Licensed Products.” 

Furthermore, depending on the length of the Term, make sure that the Exclusive Agreement requires a minimal level of sales for each year of the Term.  You do not want to tie up your best illustrations (much less all of them!) in a deal that does not net you a reasonable minimum income.  Where the manufacturer is unwilling to guarantee minimums, it is possible that they will accept the prospect of the License becoming Non-Exclusive as to your illustrations and their goods if the royalties do not come to an amount that the manufacturer itself believes is the minimum you should be earning for Exclusive Rights on its anticipated sales.  The minimum for each year can change, depending on the kind of goods, expected promotional efforts and the market.  It is not unusual for me to come up with an acceptable ‘bell-shaped curve’ of a minimum in royalties, low the first couple years, spiking at years three and four, then receding again as the product is supplanted. 

A significant Advance on sale royalties is another way to insure a decent income on the license, particularly if the Advance can be recouped only on the first year or two of sales.

 

Sub-licensing 

The next most critical consideration is whether or not the manufacturer will be sublicensing manufacturing rights to another entity.  As you can imagine, such sublicenses can result in significantly diluted royalties to the Artist.  You might expect to negotiate for the right to pre-approve proposed sublicensing terms.  To be more attractive to you, a sublicensing arrangement could involve a big up-front fee in which you would share.  Otherwise, look to establish a minimum royalty per unit sale regardless of manufacturer sub-licensing rights.

 

Discounts

A related issue is the manufacturer’s right to discount its wholesale goods.  Sales to big chains and Amazon can include huge discounts due to the volume of sales involved.  Again, as long as the Artist is entitled to a minimum $um on each unit sold, discounts need not grossly decrease the Artists 4 or 5% royalty rate.

 

Audit Right

It is one thing for a manufacturer to supply an Artist (and her accountant!) with statement of sales and computations of royalties due; another for the Artist to have the right to audit the manufacturer’s records to assure the accurate reports on sales.  While I have nothing to support the opinion, I think that the threat of an Audit, particularly with a financial penalty attached in the event of the discovery of any erroneous accounting, helps to insure that the accountings are in fact accurate; while absence of the provision pretty much assures the licensor Artist that they will never know if the accountings were accurate or not.

 

Copyright Notice / Trademark

Wherever possible the Artist should look to include a legible copyright notice associated with the illustration being used in the product.  Don’t forget to include the notice in product packaging that might well include the artwork.  I urge clients to include their own trade name as long as they are certain that it does not infringe another entity’s trademark.  The Artist can expect to warrant that she has rights to any trade-name and trademark used.  Including a URL as part of the name credit in the copyright notice (or otherwise) can be a significant promotional benefit to the Artist.

 

Quality Control

The quality of the item and the Artist’s illustrations as used is not the issue it was back in the Analogue Age.  Correct use of Digital files pretty much assures that the reproduction of the illustration will be decent.  However, the product itself may not be.  The Artist will want to satisfy herself up front that the manufacturer makes quality goods and that her reputation will not be sullied by association with crappy goods.  The right to pre-approve the product and quality of the reproduction and copyright notice and name credit, along with free samples after approval and manufacture are still legitimate terms to include.

 

Dispute Resolution

If there is a dispute that crops up, whether on name credit or accountings or termination rights, it is likely to be an unreasonably expensive proposition unless there is a prevailing party cost and fees provision included in the Agreement.  Otherwise, to bring a claim, the Artist will be out-of-pocket for attorney’s fees and costs to bring an action in court on a dispute that cannot be resolved between the parties.  A prevailing party costs and fees provision makes it much more likely that a party will not have to pursue a meritorious matter in court, or sue on one that lacks  merit.  

A much better alternative than the threat of court process, however, is the prospect of mediation and/or arbitration as the contracted way to resolve disputes.  Such Alternative Dispute Resolution process has become much more acceptable to manufacturers over the last few years.  95% of the matters that I have had occasion to refer to mediation – a three-way discussion facilitated by a trained mediator -- are resolved in the course of that process. Arbitration, if necessary, is a quick, private and relatively inexpensive alternative to court.  Prevailing party fees and costs can still be awarded in arbitration if provided in the Agreement.  I strongly recommend that provision still be included as a means to leverage settlement of a legitimate claim and avoid specious ones.

As mentioned at the top of this bLAWg, there are many more issues that need to be included in the typical Manufacturer’s Licensing Agreement, but they are for the most part all reasonably included by both parties if requested (or required).  If you have raised these listed issues in negotiations, I suspect you will be respected for your level of sophistication about licensing terms, and may well be able to get better terms than other Artists of whom the manufacturer’s business rep might otherwise take advantage.

If you have further questions about this that you want to direct to me personally, I can be contacted through my website linked below.

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com.