PLAYDIGM Entertainment Licensing & Branding

When there is a breach of a Licensing Agreement this causes a conflict between the Licensor and Licensee.  Problems of this nature are usually due to the Licensee not living up to the full agreement in some way. Rarely is it the fault of the Licensor (who really just wants to earn income on their Property the Licensee wants to utilize.

If the Licensee is not able to correct the problem within an agreed upon time frame (usually stated in the Agreement), then a material breach has been  made and the Licensor may take legal action to either have the Licensee correct the breach or have the licensing contract terminated.

What needs to be done is ensure that in the licensing contract there are clauses that plainly state what consequences will happen if – a, b or c breach is not corrected within a clearly defined time period. This way it is evident to all parties involved what will happen and it helps judges overseeing court cases make good, quick decisions and fair compensation settlements during the legal process.

The other way to solve this matter is to have the Licensee agree that all the possible breaches, even minor ones, are considered total material breaches of the contract and to have the penalties and/or compensation defined for each breach clause. It is hard for either party to argue in court that they were not in a total breach if the phrase is stated plainly that it is (in every breach clause) and what exactly will happen if this breach is not corrected within the proper time limit.

Penalties for breach of a Licensing Agreement can range from immediate termination of the contract to financial penalties and other concessions that both parties need to agree to during the creation of the Licensing Agreement.

Of course, the best case scenario is to have both parties live up to the Licensing Agreement in full.  Some of the above could also be taken into consideration for almost any contract.

Sandford Tuey

Entertainment Licensing and Branding Specialist

info@Playdigm.com

With every Licensing Agreement there should be attached a one page summary of the agreement that highlights the Property being licensed and what the most significant conditions and terms are.  Here is the Schedule ‘A’ used in the Licensing Agreement between my corporation and the American Automobile Association, which allowed the usage of the AAA logo on my educational board game titled – THE FRIENDLY FREEWAY.

SCHEDULE A

PROPERTY:  AMERICAN AUTOMOBILE ASSOCIATION Name, Motif and Logo as described in diagram section of this Schedule.

Here was the diagram of the three A’s within an oval circle with the words American Automobile Association underneath it.

LICENSEE PRODUCT DESCRIPTION:  Educational Board game titled:

“THE FRIENDLY FREEWAY”  including and/or all components, designs, characters, and reference materials including with this game design, Copyrights and Trademarks.

TERRITORIES:  WORLD WIDE.

INITIAL TERM:  Three (3) Years From _____ to _____.

TERM OPTION:  As per this Contractual Agreement.

ROYALTY PERCENTAGE:   7.5 % from Net Wholesale Price or 75 cents  whichever is greater.

SPECIAL PROVISIONS:  Refer to this Contractual Agreement.

LICENSOR and LICENSEE can also sign the bottom of Schedule ‘A’.  That way any one can see that the parameters of the entire understanding between the two parties is outlined on one page and agreed to because both signatories have signed the Schedule A as well as the actual Licensing Agreement.

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Schedule ‘A’ is an important attachment to the actual Licensing Agreement since it visualizes and describes the Property that is going to be licensed.  Most Trademarks are diagrams and need to be shown to get a good representation of what they look like and to ensure there is no misunderstanding between the two parties on what is really being licensed.

The Licensee Product description is important to clarify what exactly will be allowed to use the Property on.  Put every version of the product(s) that will be utilizing the Property, including all any and all advertising and marketing materials.

Some contracts allow for World Wide usage of the Property, where others will allow only one country or a group of nations.  Make this as clear as possible by naming every nation if you do not have World Wide usage.  This will ensure there are no misunderstandings on where the Property can be used.

The Term can be for any time period agreed by both parties.  I recommend that you put a clear date from and to, with possible extensions if any are allowed.  Ask for no less than three years.

Royalty amounts can vary from contract to contract and here is where the skill of a good Licensing Specialist can help secure a deal but also a great royalty price.  This negotiation stage is the most important and my expertise is in this area.  Several times I have been able to secure a better royalty rate and/or contract conditions than the lawyers representing both parties, all because of my previous licensing negotiation experience and skilled win-win-win techniques that legal counsels do not specialize in.

In this Licensing Agreement I believed it was in our interest to have a percentage based royalty (7.5 %) because the Canadian currency was rising, yet the American Automobile Association desired a fixed royalty rate of seventy-five ($.75) cents to ensure a minimum fee per product sold.  That is why there is both a percentage royalty rate and a minimum fee royalty rate.

Any Special Provisions or Additional important facts can also be included.

Having both Parties sign the bottom of the Schedule ‘A’ allows for only this one page summary to be shown to third parties, instead of the entire Licensing Agreement (to prove there is an agreement for the usage of the Property).  It also helps make it look more official.

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For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accounting and tax advice in all contractual matters.

I provide consulting services and more details are on the ‘services’ page of this website.

I hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name’ & the word ‘Licensing’ in the subject line of your email.

Thank you.

Sandford Tuey

Well this clause concludes the Licensing Agreement that was signed between my company and the American Automobile Association that allowed the usage of the AAA logo on a game that I invented.  THE FRIENDLY FREEWAY helps teach children how to read a map, legend, left & right, North-South-East-West, and basic sign comprehension.

The next post will be explaining ‘Schedule A’ of the Licensing Agreement which is a one page overview attached to the contract.  For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

This is the next clause in a Licensing contract:

19.  NOTICE and EXECUTION

19. Any Notice or other communication provided for herein or given hereunder to a party shall be in writing and shall be delivered by registered mail or in person to the parties at the addresses set out below:

(a)  to the Licensor at :

“The Licensor’s address.”

ATTENTION: Contact name.

(b) to the Licensee at :

“The Licensee’s address.”

ATTENTION: Sandford Tuey

or such other address with respect to a party as such party shall notify the other in writing as above provided. All notices shall be deemed made upon actual notification or mailing as provided for above, whichever shall occur earlier; provided, however, that notice by mailing shall not be deemed to have been made until delivered.

IN WITNESS WHEREOF the parties hereto have executed this agreement as of the day, month and year first above written.

The Corporate Seal of the Licensor.

______________________________

Authorized Signatory

The Corporate Seal of the Licensee

______________________________

Authorized Signatory

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The Notice portion of a Licensing Agreement just ensures that both parties have the correct contact information for each.  It also details the legal methods of contact, in this case – registered mail or by handing a document to the other party.  Note that it is the date the document is actually received that is the correct and legal date of receipt.

It is common now to allow email or fax as a legal method of contact but any method needs to be described in this section to be approved.

Only the proper signatory can sign or endorse a contract on behalf of each party.  Usually this person is identified by name and I recommend to always ensure that the person’s name is printed underneath the signature plus a detail explaining what position this person has with the company (if a corporation is involved).  This makes it easy for all involved to know who are signing the contract.  The days of company seals being needed to endorse a contract are pretty much over so don’t concern yourself with that.

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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accounting and tax advice in all contractual matters.

I provide consulting which is detailed on the ‘services’ page of this website.

I hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name & Licensing’ in the subject line of your email.

Thank you.

Sandford Tuey

For the next few posts I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

This is the next clause in a Licensing contract:

16.   CAPTIONS

16.  The Captions used in connection with the paragraphs and subparagraph sections are inserted only for purpose of reference.  Such Captions shall not be deemed to govern, limit, modify or in any other manner affect the scope, meaning or intent of the provisions of this Agreement or any part thereof nor shall such Captions otherwise be given any legal affect.

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This clause ensures that both parties understand that the headers or Captions of each contract clause, in no way has anything to do with the actual text of the Agreement.  The Captions are only to make it easier to locate certain parts of the contract.

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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accounting and tax advice in all contractual matters.

I provide consulting which is detailed on the ‘services’ page of this website.

Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name & Licensing’ in the subject line of your email.

Thank you.

Sandford Tuey

For the next few posts I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

This is the next clause in a Licensing contract:

11. PURCHASE PRICE

11.1 The Licensor agrees to purchase the Licensed Product from the Licensee for the amount of ten dollars ($10.00) U.S. for the sale to their (Licensor name) members. Their sales price to their members shall be for what ever price they desire. The Licensor’s minimum purchase shall be limited to one case/carton. One case or carton of games shall not be more than twelve (12) units.

11.2 Payment times and policy by Licensor from Licensee shall be detailed in a separate agreement letter and agreed upon in writing by both parties.

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Clause 11.1 explains that the Licensor can buy the Licensed Product the Licensee is manufacturing for ten dollars American and that they can sell the product for what ever price they decide. It also details that the Licensor can not purchase less than one case of games( in this contract the Licensed Products) at a time and that there shall not be more than twelve Licensed Products in a case. Total price for twelve would be $120 U.S.).

11.2 states that details regarding payment for such Licensed Products shall be expressed in a separate agreement that requires both parties to sign.

In Agreements that I have negotiated since this one was created and signed, I have now added a clause 11.3 that ensures that the Licensor must pay for the shipping and handling costs for processing all orders to them. The production price was estimated to be $6.40 Cdn, with a handling fee of $2.50 Cdn, so there was to be a good profit margin on this secondary market as the Licensor was not to be the main industry the Licensed Products were going to be sold into. Shipping is now defined as needing to be arranged by the Licensor and all costs shall be their responsibility.

At the time, the Licensor was the American Automobile Association who not only had around 50 million members, they also could sell Licensed Products utilizing their triple A logo but would also sell the Licensed Product to their members by direct mail and through their hundreds of stores. it was a win-win situation, because the Licensee’s main sales were into the Toy and Game industry which promoted both companies to the children who are the future drivers of the world.

I also now add another clause 11.4 that defines that the Licensee can sell the Licensed Product for any price they want.

Next – Licensing Agreement #14 TERMINATION

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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accounting and tax advice in all contractual matters.

I provide consulting which is detailed on the ‘services’ page of this website.

Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name & Licensing’ in the subject line of your email.

Thank you.

Sandford Tuey

For the next few posts I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

This is the next clause in a Licensing contract:

9. INDEMNIFICATION

9.1 The Licensor hereby agrees to defend, indemnify and hold the Licensee harmless against any claims, demands, cause of action and judgments challenging the authority of the Licensee to use the Property in ‘Schedule A’ by the Licensee as authorized by this agreement.

9.2 The Licensee hereby agrees to defend, indemnify and hold the Licensor and/or any of its related entitles harmless against any and all claims, demands, cause of action and judgments arising out of Licensee’s designs, manufacture, distribution, shipment, advertising, promotion, offering for sale and/or sale of the Licensed Products and/or Promotional materials with respect to the foregoing indemnity, the Licensee agrees to defend and hold the Licensor harmless at no cost or expense to the Licensor whatsoever including, but not limited to attorneys’ fees and court costs. The Licensor shall have the right to defend any such action or proceeding with attorneys of its own selection.

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The first clause of this section allows the Licensor to defend, indemnify and hold the Licensee harmless against any claims, demands, cause of action and judgments challenging the authority of the Licensee to use the Licensor’s Property expressed in ‘Schedule A’ by the Licensee as authorized by this agreement. Therefore allowing the Licensee to use the Licensor’s Property even if the Property is challenged in court or has other claims against it. Of course, a court could decide otherwise but in the event that the Licensor’s Property is being contested in some way, the Licensee can continue to use it unless a court decision deems otherwise.

9.2 The Licensee agrees that if a lawsuit or claim against them arises they will defend, indemnify and hold the Licensor and/or any of its related entitles (associates/entities) harmless. Since there are risks to the Licensee regarding intellectual designs, manufacturing procedures and process, distribution errors or problems, shipment mistakes, advertising and promotional liability, questionable techniques of offering for sale and/or sale of the Licensed Products and/or Promotional materials, Licensor wants to remain protected from Licensee in every way. Also the Licensee agrees to defend and hold the Licensor harmless at no cost or expense to the Licensor. Yet the Licensor shall have the right to defend any such action or proceeding with attorneys of its own selection (insert ‘at their own cost’).

My recommendation is to give the Licensee the same indemnification rights as the Licensor receives in both clauses above. Fair is fair.

Next – Licensing Agreement #12 PREMIUMS, PROMOTIONS & SECONDS

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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accounting and tax advice in all contractual matters. I provide consulting which is detailed on the ‘services’ page of this website.

Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name & Licensing’ in the subject line of your email.

Thank you.

Sandford Tuey

For the next few posts I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

This is the next clause in a Licensing contract:

8. GOOD WILL AND BENEFITS

8.1 The Licensee recognizes the value of the good will associated with the Licensor’s Property stated in Schedule A and acknowledges that the Property and all rights therein are the good will pertaining thereto, belong exclusively to the Licensor. The Licensee further recognizes and acknowledges that this Property has secondary meaning in the mind of the public. The Licensee agrees that during any Term of the Agreement, or thereafter, it will not attack the title or any rights of the Licensor in and to the Property.

8.2 The Licensee agrees that its use of the Property shall inure to the benefit of the Licensor and that the Licensee shall not, at any time, acquire any rights in the Property stated in Schedule A by virtue of any use it may make of the Property.

8.3 The Licensor agrees that its use of the Product shall inure to the benefit of the Licensee and that the Licensor shall not, at any time, acquire any rights in the Product or related characters/components stated in Schedule A by virtue of any use it may make of the Product.

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Clause 8.1 defines the benefit in and to all the Property are owned solely and exclusively by the Licensor and the Licensee shall not attack in any way verbally, in writing or in court, the value or rights of the Property during the contract or any time after.

8.2 details that the use of the Property by the Licensee does not grant any rights or benefit to the Licensee in any way.

8.3 expresses that the Licensor recognizes and agrees that they will not acquire any rights in the Product bearing their Property and all benefits from the product remain with the Licensee who created it.

Next – Licensing Agreement #11 INDEMNIFICATION

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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accountant and tax advice in all contractual matters.

I provide consulting which is detailed on the ‘services’ page of this website.

Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name & Licensing’ in the subject line of your email.

Thank you.

Sandford Tuey

For the next few posts I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

This is the next clause in a Licensing contract:

7. OWNERSHIP OF RIGHTS

7.1 It is understood and agreed that the Licensor is the sole and exclusive owner of all right, title and interest in and to the Property detailed in Schedule A.

7.2 It is understood and agreed that the Licensee is the sole and exclusive owner of all right, title and interest in (insert products to use Licensor’s Property) and related components and characters on the cover of the box.

7.3 Nothing contained in this Agreement shall be construed as an assignment to the Licensee of any right, title and/or interest in and to the Property as stated in Schedule A (other than for usage). Nothing contained in this Agreement shall be construed as an assignment to the Licensor of any right, title and/or interest in and to the product and or related characters/components.

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7.1 This first clause is a straight forward explanation to clear up that only the Licensor owns the Property and Trademarks expressed in Schedule A that are to be licensed by the Licensee. I will break down what is in Schedule A at the end of this Licensing Agreement since it is attached to the back of the document.

7.2 This clause clarifies that the Licensee owns all right, title and interest to the products they manufacture of which they desire to use the Licensor’s Property upon. The Licensee also retains ownership and all rights to all related components and characters on the cover of the box. The characters are the Licensee’s copyright and brand.

7.3 Nothing in the Agreement allows for any transfer or assignment from the Licensor of any right, title and/or interest in and to the Licensor’s Property as detailed in Schedule A (other than for the use of that Property as described in this Agreement). Nothing contained in this Agreement allows for the Licensor to have any right, title and/or interest in and to the Licensee’s products and or related characters/components.

In Licensing Agreements I have been involved with since this one was created and signed, I make sure that the Licensor’s Property and Licensee’s Products are stated in more detail in this section of the contract. The most important part is that none of the above allows for the granting or transfer of ownership rights from, or to either party and it clarifies who owns what.

Next – Licensing Agreement #10  GOOD WILL BENEFITS

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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accountant and tax advice in all contractual matters. I provide consulting which is detailed on the ‘services’ page of this website.

Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name & Licensing’ in the subject line of your email.

Thank you.

Sandford Tuey

For the next few posts I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

This is the next clause in a Licensing contract:

6. SAMPLES AND QUALITY

6.1 The quality of the Products bearing the Licensor’s Property shall be at the least as high as the quality of other products produced by the Licensee. This shall include advertising, all promotional materials and other items that includes the Property and/or Trademarks and shall be in full conformance with the applicable laws and regulations.

6.2 A reasonable number (1-5) production samples will periodically be sent to Licensor to ensure quality control, and should Licensor require additional samples for any reason, Licensor may purchase such at Licensee’s cost (for sample purpose only).

6.3 The Licensee agrees that all Licensed Products and all Promotional material/Advertising shall contain appropriate legends, markings and/or notices as required from time to time by the Licensor, to give appropriate notice to the consuming public of the Licensor’s right, title and interest thereto. The Licensee agrees that unless otherwise expressly approved in writing by the Licensor each usage of their Trademark and Property shall be followed by either the TM or the Circle R Trade Mark Notice symbol, as appropriate, and initially the following legends shall appear at least once on each Licensed Product and on each piece of Promotional/Advertising material.

“Artwork and Product Copyright: (date) (Licensee name)(Product Title) Trade Mark and Logo are owned by (name of Licensee). The (Licensor name) and Logo are Trade Marks of (the name of Licensor).”

6.4 Upon commencement of manufacture, shipment and distribution of the Licensed Products and/or Promotional materials relating to said Licensed Products the Licensee shall submit, at its own cost, an addition five (5) samples of the Licensed Products and/or Promotional materials to the Licensor.

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Clause 6.1 ensures that the quality of the Products using the Licensor’s Property and Trademark shall be the same quality as other products designed and produced by the Licensee previously. This also includes advertising, all promotional materials (brochures, one sheets, etc…) and other items that includes the Property and/or Trademark and shall be in full conformance with the applicable laws and regulations. The Licensee should try not to have all their Licensed Products, Advertising and promotional materials requiring the written approval by the Licensor as this will cause delays in production of such products/materials. You can have a response time limit. where any materials sent to the Licensor by the Licensee for approval is automatically approved by the Licensor if no response if given within thirty days. This clause also puts the onus on the Licensee to conform to the laws of each company they market the Licensed Products into.

6.2 Allows the Licensor to receive a reasonable number, up to five production samples, that will be sent periodically to the Licensor to ensure quality, and if the Licensor requires additional samples for any reason, Licensor may buy such at Licensee’s production cost (for sample purpose only). This makes sure the Licensor can only purchase a limited number not for resale to any mass market, as this would limit the Licensee’s ability to make a profit from these type of sales into similar markets. It is best to come to an agreement on the price of these sample Licensed Products and the Licensee should try to build in a marginal profit.

6.3 states the Licensee agrees to make sure all Licensed Products and all Promotional material/Advertising they make will contain appropriate legends, markings and/or notices as required from time to time by the Licensor. This allows the consuming public to know that the Licensor owns, has right, title and interest in the Property and Trademark. The Licensee also agrees that if approved in writing by the Licensor each usage of their Trademark and Property shall be followed by either the TM notice or the Circle R Trade Mark Notice symbol, and they will appear at least once on each Licensed Product and on each piece of Promotional/Advertising material. The below is exactly the lay out that was required to be on each item.

“Artwork and Product Copyright (date) (Licensee name)(Product Title) Trade Mark and Logo are owned by the Licensee. The (Licensor name) and Logo are Trade Marks of the Licensor.”

6.4 Upon commencement of manufacture, shipment and distribution of the Licensed Products and/or Promotional materials relating to said Licensed Products the Licensee shall submit, at its own cost, an addition five (5) samples of the Licensed Products and/or Promotional materials to the Licensor. I recommend to send these items every time you do a new production run.

Next – Licensing Agreement #9 OWNERSHIP OF RIGHTS

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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accounting and tax advice in all contractual matters. I provide consulting which is detailed on the ‘services’ page of this website.

Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name & Licensing’ in the subject line of your email.

Thank you.

Sandford Tuey

For the next few weeks I will be breaking down a general Licensing Agreement clause-by-clause and giving brief explanations on what it all means. For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).

This is the next clause in a Licensing contract:

5. AUDIT

5.1 The Licensee shall keep, maintain, and preserve (in the Licensee’s principal place of business) for at least two (2) years following the termination or expiration of the Term of this Agreement or any renewal(s) hereof, complete and accurate records of accounts including, without limitation, invoices, banking, financial and other records pertaining to the various items required to be submitted by Licensee. Such records and accounts shall be available for inspection and audit at any time during Licensee’s business hours and upon fourteen (14) days notice by Licensor or its nominees. The expense of audits initiated by the Licensor shall be at their expense.

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Clause 5 is self explanatory. Keeping proper records is a good idea, even if you don’t license an entertainment property. This Agreement forces the Licensee to keep accurate records of all accounts, including invoices of sales to stores/clients, banking statements, financial records and other records pertaining to the various items required to be submitted by the Licensee in the Royalty Statements (see previous post).

These records and accounts shall be available for inspection and audit at any time during Licensee’s business hours and must be kept at the Licensee’s principal office until two years after the expiry or termination of the Agreement. The Licensor can only commence an audit after fourteen (14) days notice from the Licensor or its nominees. Add written notice for clarification in future contracts.

The expense of audits started by the Licensor shall be at their expense. This line is very important and ensures that the Licensor will not only pay for audits they commence but will not do audits without justification as they can be quite costly.

Next – Licensing Agreement #8 Samples & Quality

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As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel and accounting and tax advice in all contractual matters. I provide consulting which is detailed on the ‘services’ page of this website.

Hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Licensing’ in the subject line of your email.

Sandford Tuey