Brand Licensing Agreementsmedia.straffordpub.com/products/brand-licensing... · 2012-09-04 ·...

Brand Licensing Agreements Negotiating Key Deal Terms, Avoiding Common Pitfalls, and Maximizing Brand Value

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THURSDAY, SEPTEMBER 6, 2012

Presenting a live 90-minute webinar with interactive Q&A

Thomas Dover, Partner, Nossaman LLP, Los Angeles

Kelly Payfer, Vice President - Licensing, Perry Ellis International, New York

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Brand Licensing Agreements:

Negotiating Key Deal Terms, Avoiding Common Pitfalls, and

Maximizing Brand Value

THOMAS DOVER KELLY PAYFER

Brand Licensing Agreements: Negotiating Key Deal Terms, Avoiding Common Pitfalls, and Maximizing Brand Value. THOMAS DOVER KELLY PAYFER Stafford Publications Legal Publishing Group

Thomas Dover

Partner; Chair, IP/Media Group

NOSSAMAN LLP

[email protected]

T 213.612.7879 F 213.612.7801

777 South Figueroa Street, 34th Floor Los Angeles, CA 90017

Thomas Dover provides cutting-edge legal strategies focused in the areas of intellectual property, corporate transactions, advertising, and entertainment law. He provides licensing representation and intellectual property protection, both in the U.S. and internationally, and has assisted with over 100 "new media" licenses, 250 entertainment brand licenses, and 1,500 advertising agreements. Mr. Dover is dedicated to the intersection of digital content and distribution in our daily business and personal lives. He earned his LL.M. in a pioneering program for Media and Entertainment Law, and is the Chair of Nossaman's Intellectual Property and Media Practice Group.

Mr. Dover's entertainment talent representation work includes continuing management as well as negotiating high-value endorsement and licensing transactions for a variety of entertainment, video gaming, and retail businesses.

He has extensive experience with new technologies and was among the first attorneys pioneering the direct licensing and distribution of music and entertainment content via the internet and mobile platforms. He represents entertainment production and distribution companies, internet/digital platform distributors, and video gaming/content developers on transactional and litigation matters.

Mr. Dover lectures widely on industry topics and serves as Adjunct Professor of Law at the Thomas Jefferson School of Law.

I. Defining Brand

II. Intellectual Property Rights

III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

6

mailto:[email protected]

mailto:[email protected]


I. Defining Brand Product Defined.

Corporate Identity.

Entertainment Property.

Advertising Initiatives.

Celebrity, personality, and similar.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

7


I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices


Corporate Identity.




8



Corporate Identity.




I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

9



Corporate Identity.




I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

10



Corporate Identity.




I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

11



Corporate Identity.




I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

12


II. Intellectual Property Rights Trademark.

Copyright.

Patent.

Trade Secret.

Right of Publicity.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

The term “trademark” includes any word, name, symbol, or device, or any

combination thereof--

(1) used by a person, or

(2) which a person has a bona fide intention to use in commerce and

applies to register on the principal register established by this chapter,

to identify and distinguish his or her goods, including a unique product,

from those manufactured or sold by others and to indicate the source of the

goods, even if that source is unknown.

15 USCA Sec. 1127 [Emphasis added]

13



Copyright.

Patent.

Trade Secret.

Right of Publicity.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices










Distinctiveness requirement:

(1) arbitrary or suggestive marks, or

(2) descriptive marks with secondary meaning.

14



Copyright.

Patent.

Trade Secret.

Right of Publicity.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices










Distinctiveness requirement:

(1) arbitrary or suggestive marks, or

(2) descriptive marks with secondary meaning.

BRANDING ISSUES:

(1) TITLES OF ARTISTIC WORKS (not in a series).

(2) INDIVIDUAL CHARACTERS/ACTOR’S PORTRAYAL.

(3) CELEBRITY NAMES/LIKENESS.

15



Copyright.

Patent.

Trade Secret.

Right of Publicity.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

COPYRIGHT:

1. Compare to TM:

A. Term of Protection: Indiv – life + 70; Work/Hire – 95/120

B. Protects against copying regardless of ad “comparison.”

C. Consider: Mickey Mouse as artistic work.

2. Use in Entertainment/character licenses.

3. Separate Cause of Action for grey market infringement.

16



Copyright.

Patent.

Trade Secret.

Right of Publicity.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

PATENT:

1. Compare to TM:

A. Term of Protection: 20 years/filing date or earliest priority date.

B. Protects against any marketing, manufacture & distribution.

C. Consider: Design patent.

2. Use in apparel, consumer electronics, etc.


17



Copyright.

Patent.

Trade Secret.

Right of Publicity.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

TRADE SECRET:

1. Compare to TM:

A. Generally protects manufacture-specific know-how, client lists,

and marketing plans/processes.

B. Limited value for licensee against infringement. Licensor

typically encounters issues re proof of infringement and

damages.

2. Use in manufacturer environment not otherwise protected by patent.


18



Copyright.

Patent.

Trade Secret.

Right of Publicity.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

RIGHT OF PUBLICITY:

1. Compare to TM:

A. Generally protects name, likeness, voice, etc. of a person

(typically a personality or celebrity).

B. Term of Protection: See chart.

C. State-created right..


NY

Civ Rts

§50

NY

Civ Rts

§51

CA

CC §3344 CA

CC

§3344.1

INDIANA

§32-36-1-1

to -20

Protection:

Living X X X X

Dead X X

Transfer of

Right X X

Term Life + 70 Life + 100

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I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

BRANDING ISSUES:




TITLES OF ARTISTIC WORKS (not in a series).

Not protectable as TRADEMARKS.

As a practical matter, titles of mass distributed works are often

accompanied by merchandising where the title may be protectable.

20



I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

BRANDING ISSUES:




INDIVIDUAL CHARACTERS/ACTOR’S PORTRAYAL.

Character = copyright

Actor = right of publicity

License of Actor portraying Character = ? It depends. Best practice:

ensure that licensee has rights of both the character, actor, and any

trademark attached to either due to other/prior merchandising.

21



I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

BRANDING ISSUES:




CELEBRITY NAMES/LIKENESS:

Issue: Protection is state-created, not consistent among the states.

International is also a patchwork of inconsistent protection.

Licensor best-practice: secure trademark and service mark (endorsement

services) for the celebrity.

Licensee best-practice: do your homework regarding distribution territory

protection and ensure that the license includes reps/warranties for

those territories. Do not rely on licensor alone.

22


III. Key Deal Terms

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

23

25

Licensing

Fashion

Entertainment

Brand

Direct-to-Retail (DTR)

26

THE LICENSING PROCESS

Finding the right clients

•research brand recognition level

•identify brand’s core characteristics

• identify logical product mix

Finding Licensees

•match brands to partners

•making a good match/finding Licensees that “get” the brand and are capable of selling in the brand’s market

Negotiating the Term

Sheet

27

Licensing Term Sheet o Product Category: this should be in as much detail as possible so as to clearly define the

boundaries of the category (i.e. “ladies’ footwear” rather than “footwear”), as well as to

reserve rights to license out to other companies or add on to the Licensee’s agreement later

o Territory: Again, should be clearly defined and limited to the territory the Licensee

intends/has capabilities to sell. New territories can always be added later.

o Channel of Distribution: generally limited to retailers the Licensor sells to. Other retailers

(specialty stores, boutiques etc.) need to be approved by the Licensor in writing

o E-Commerce, Flash Sites: also need to be approved by Licensor

o Type of Contract: License

o Rights to sub-license: in fashion, generally not allowed

28

o Contract Dates/Length: standard is three years, sometimes 5 years for footwear or

fragrance

o Renewals: renewal terms are not generally negotiated in advance, but thresholds for renewal

can be set out at the time of the initial agreement.

o Royalty Formula: Royalties are generally paid on Net Sales. The definition of Net Sales

can vary but is generally defined as gross sales minus allowable deductions (which can

include taxes, trade discounts, allowances and returns up to an agreed-upon percentage)

o Amt Due Upon Execution: Usually 25%- 50% of the Year 1 Guaranteed Minimum Royalty

o Payment Periods: Usually quarterly, based on calendar year, with statements and payments

due 30 days after end of quarter.

29

o Dedicated Design Personnel: “dedicated” vs. “exclusive”

o Dedicated Sales Management: “dedicated” vs. “exclusive”

o Dedicated Licensor Showroom: need an area reflecting the brand

aesthetic

o Design Approval: Very important for Licensor to implement and control

approval process

o Design Rights: Licensor sometimes reserves the rights to use the

approved Designs outside of the Territory

30

o Promotional Product: Licensee to supply Licensor at no cost with a

certain amount at wholesale each year for promotional purposes

o Q.C. how managed: QC/Social Compliance practices

o Advertising and Marketing Approval: Necessary in order to control

brand image

o Request for financial statements/Auditing: Need a structure in place for

audits

31

Licensing Minimums

INITIAL TERM

GMS

ROYALTY

RATE

GMR

ADV CONT.

RATE

GMAR

YEAR 1 $ 1,000,000 8% $ 80,000 2% $ 20,000

YEAR 2 $ 1,500,000 8% $ 120,000 2% $ 30,000

YEAR 3 $ 2,000,000 8% $ 160,000 2% $ 40,000

GMS= Guaranteed Minimum Sales

GMR= Guaranteed Minimum Royalty

GMAR= Guaranteed Minimum Advertising Royalty (paid to Licensor)


IV. Common Pitfalls Ownership – Copyright reversion right.

Selling in unauthorized channels and territories

Misuse of Logos and Marks

Bankruptcy/Non-payment of Royalties

Licensor BK, 11 USCA Sec. 365(n)

Licensee BK, Security Interest in TM

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

Ownership – Copyright reversion right.

Generally, a Copyright owner may terminate a license or grant of rights at

any time during a period of 5 years commencing at the expiration of

35 years from the date of the grant. 17 USC 203.

Note: Compare pre-76 act (Jan. 1978) – calculate termination date.

Note: The owner must strictly comply with a statutory notice

requirement.

Best Practice: Always…conduct your own chain of title review.

“Next best” Practice: Specifically call out copyright reversion

representations in the license agreement requiring the licensor to

warrant that they have (1) disclosed all ownership and rights and (2)

own the rights granted for the entirety of the term.

32


I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices


• Generally, Licensees are allowed to sell to the same

retailers/channels as Licensor. Any requests to sell outside these

channels must be made and approved in writing

• Licensees selling in unauthorized channels can damage the

reputation and image of the brand

• Selling in unauthorized territories can interfere with the core brand's

expansion plans

• Licensor must also check on TM registrations before authorizing sales

to a new territory; if a Licensee sells without authorization it can

possibly be without that class being registered in that territory

• Penalties can range from warning to termination of License

Agreement with the Licensee responsible for payment of guaranteed

minimums over the balance of the Agreement

33





Licensor BK, 11 USC Sec. 365(n)



I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

34


• Licensees are generally issued guidelines on logo/mark usage when

starting development

• Misuse of logos and marks can hurt the overall brand image-

consistency is important!

• Very important that all products developed by Licensee are reviewed

and approved by Licensor to ensure brand consistency

• Misuse can also interfere with the registered logos/marks of other

brands, causing confusion and inviting legal action














I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

Bankruptcy – Licensee:

TM, Copyright, and Patent Licenses are “Assets” of a bankrupt estate

and are assumable or may be rejected under the Bankruptcy Code.

1. Licensor can file a Motion to Compel rejection or assumption.

2. Licensor can file a Motion to Determine Rights (generally termination)

under a license.

3. Assignability of the license is an unsettled area and is largely

determined by the nature of the license, the ability of the assignee to

provide “adequate assurances” that it can perform under the license.

Generally, licensor must acknowledge and agree to the assignment.

4. Consider: sale of a trademark must accompany sufficient assets to

ensure the transfer of the goodwill of the business to avoid an

assignment in gross.15 USC 1060.

35


V. Best Practices Designer Agreements.

Gray Market.

Internet Distribution.

I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

Designer Agreements – Individual/Named Labels licensed to Manufacturer.

Rights – TM, Right of Publicity, and rights to designs/materials.

Royalty – range 8% to 11%+

Defined by “Net” – negotiate to exclude chargebacks due to failure to

follow vendor agreement, packaging/shipping requirements, and

defectives.

Advance – 25% to 50% upon acceptance of each PO.

Authorized Retailers.

Approvals –

POs/pricing.

samples: pre-production, top of production, and retailer sample.

Termination – sell-off, often allow manufacture/distribution of new PO’s if in

negotiation at time of termination.

Insurance.

36



Gray Market.


I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

Gray Market = genuine goods, manufactured by owner or authorized

licensee, but not intended to be imported into the US.

Section 526 of the Tariff Act of 1930 – Prevents the Importation of Infringing

& Counterfeit Goods. 19 USC 1526

K-Mart v. Cartier (1988) – parallel imports are prohibited where the US

company (1) acquires or licenses a mark from a foreign manufacturer

for distribution in the US or (2) owns the US mark and licenses a

foreign manufacturer for distribution outside the US.

But…foreign subsidiary manufacturers or distributors of US mark owners

may produce and import product. Imports originating from foreign

“affiliate” not prohibited. Still very much unsettled.

37



Gray Market.


I. Defining Brand


III. Key Deal Terms

IV. Common Pitfalls

V. Best Practices

Internet Distribution:

1. Territorial Restrictions.

2. Sales v. Marketing v. Informational purposes.

3. “Sub” license to e-commerce provider with marketing rights?

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Brand Licensing Agreementsmedia.straffordpub.com/products/brand-licensing... · 2012-09-04 ·...

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