PLAYDIGM Entertainment Licensing & Branding

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

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:

4. STATEMENT AND PAYMENTS

4.1 The Licensee shall provide the Licensor, within thirty (30) days after the end of each calendar quarter (the ‘Royalty Period) due March, June, September, December, a complete and accurate statement of it’s Net Sales of Licensed Products for the Royalty Period and Term. Said statement is to be certified as accurate by the Licensee and to include information as to the number, description and gross selling price of the Licensed Products, shipped, distributed and/or sold by the Licensee during the preceding Royalty Period, information as to discounts given and returns actually credited. Such statements shall be furnished to the Licensor whether or not any Licensed Products have been shipped, distributed and/or sold, and whether or not Actual Royalties have been earned during the proceding Royalty Period. Payment of Royalty shall accompany the statement.

4.2 The receipt and/or acceptance by the Licensor of any of the statements furnished or Royalties paid hereunder to the Licensor (or the cashing of any Royalty Checks paid hereunder), shall not preclude the Licensor from questioning the correctness thereof at any time and, in the event that any inconsistencies or mistakes are discovered in such statements or payment, they shall be rectified within thirty (30) days by the Licensee and the appropriate payment shall be made by the Licensee immediately.

4.3 All payments made hereunder shall be in United States currency drawn on a Canadian Bank US account, unless otherwise specifically agreed by both parties in writing.

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Paragraph 4.1 indicates that the Licensee agrees to submit to the Licensor accurate Statements and Payments regarding the products they have made (using the Property) which have been sold, shipped to clients and/or distributed. The statements and payment must be made withing thirty days after each calendar quarter (every three months plus one month for Licensor to receive statement) and if there are any errors, these will have to be corrected within a further thirty days of this being pointed out by either party.

These statements are also to be certified as accurate, which translates to the Licensee guaranteeing they are true and that they are liable for any inaccuracy. Make sure there is at the least a thirty day correction period if mistakes are made to ensure you have time to fix them within this period or you could be paying interest and fines or possible legal costs and penalties in a future court case.

There is always a clause describing the information to be included with the statements, in this case it is to be the number of units sold, description (if the Licensee has multiple product types using the Property) and gross selling price of the Licensed Products (gross price is the complete full price each product costs a buyer), then the net price (the price of each product after agreed upon deductions), the date all Licensed Products are shipped, distributed and/or sold by the Licensee during the preceding Royalty Period. In this statement the Licensor also wants to know what kind of discounts were given to the Licensee’s clients and how many returned Licensed Products have been credited to the account.

Of course statements need to be sent to the Licensor, whether or not any Licensed Products have been shipped, distributed and/or sold and whether or not any Actual Royalties have been accrued during the preceding Royalty Period (every ninety days). Most importantly is that each Payment of Royalty must accompany the Statement the royalties were earned within.

4.2 Clearly states that when the Licensor receives and/or accepts the Licensee Statements or Royalties paid or has cashed any Royalty Checks, the Licensor can still question the correctness of all statements and payments at any time and, if there are inconsistencies or mistakes that are discovered in such statements or payment, the correct amount shall be fixed within thirty (30) days by the Licensee and the appropriate payment shall be made by the Licensee immediately.

Clause 4.3 is self evident. All payments made to the Licensor by the Licensee must be in American dollars and paid from a Canadian Bank using a US account, unless other methods are approved by both parties in writing. This was due to the fact that the Licensee (my company) is based in Canada and the American Automobile Association is base in the United States of America. Of course, the currency will usually be determined by the Licensor and the country the Licensee are located in.

Next – Licensing Agreement #7 Audit.

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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 advice in all contractual matters. I provide consulting which is detailed on the ‘services’ page of this website.

Hope this 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

For the next few weeks I am breaking down a general Licensing Agreement clause-by-clause: For the beginning of this series of posts, read the first one starting Sept 14, 2009 (scroll down). This is the next clause in a Licensing contract:

3. ROYALTY PROVISION

3.1 Licensee agrees to pay the Licensor a non-refundable Royalty of 10% (ten percent) as stated in the attached Schedule A, based on the Licensee’s Net sales of the Licensed Products using the Property (the ‘Actual Royalty’). The Actual Royalty shall accrue when the Licensed Products are sold, shipped, distributed, billed and/or paid for. Net Sales is described as gross sales less returns.

3.2 Actual Royalty payments shall be made by Licensee to the Licensor on all licensed Products sold, shipped and/or distributed by the Licensee or sub-licensed manufacturers, even if not billed (such as in the case of introductory offers, samples, promotions, and the like, including all sales other than those to the Licensor or Licensor’s associated distribution networks. Those products using the Licensor’s Property sold to the Licensor shall be exempt from any royalty payment(s) from the Licensee.

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Paragraph 3.1 details that the Actual Royalty the Licensee will pay the Licensor is 10 % (ten percent) of the Net Sales price. Every Royalty amount is different – it can be a specific per unit cost or a percentage of sales like this one. Negotiate the best deal you can. This royalty will be paid on all products the Licensee makes using the Licensor’s Property and will need to be paid on any products sold, shipped from the plant,distributed, billed and/or paid for.

In this case, Net Sales are described as the gross sales price minus any returns from customers. This is important, especially if you are in the book industry, where many months after delivering books to retail stores, any unsold books can be returned to the Licensee for a refund. The Licensee will then request a credit for these unsold/returned Licensed Products and try to resell them (without having to pay the royalty twice) or if they are damaged and not able to be resold, the same amount of returned Licensed Products will be credited against new Licensed Products being manufactured. Example: If 1,000 books are returned too damaged to resell they are destroyed and the next 1,000 Licensed Products would not have to have the Actual Royalty paid to the Licensor. All this is taken care of in the Royalty Statement and by accountants.

Paragraph 3.2 is clear that a Royalty must be paid on all Licensed Products the Licensee has sold, shipped and/or distributed directly by the Licensee or by any sub-licensed manufacturers, even if not billed. The better way to write this clause is to have the Actual Royalty paid upon manufacture. This allows you to get the royalty payment when production happens and will be paid faster than waiting for the billing or selling process to start. It also is easier for auditing purposes. However, this will allow the Licensee to justify the Actual Royalty to be a lower amount than if it was based on the higher sales price. It would be a good idea to clarify what is exactly meant by introductory offers, samples, promotions, and the like, including all sales other than those to the Licensor or Licensor’s associated distribution networks. Those products using the Licensor’s Property sold to the Licensor exempt any royalty payment by the Licensee. This benefits the Licensor if they have access to mass distribution but ensure there is an agreeable purchase price the Licensor will pay for products using the Property produced by the Licensee.

The next installment is Licensing Agreement #6 Statement and Payments.

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

Hope this 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.

For the next few weeks I will be breaking down a general Licensing Agreement clause-by-clause: For the beginning of these series of posts read the first one starting Sept 14, 2009. This is the next clause in a Licensing contract:

2. TERM

2.1 This Agreement is for the term of three (3) years commencing on (date) and shall terminate (date), unless an extension to this agreement is agreed upon in writing and signed by both parties. At the end of the term of this agreement, the Licensee and Licensor shall, in good faith, renegotiate any further continuance of the licensing for use of the Property and trademarks by the Licensee.

2.2 Renegotiation of this agreement shall begin between both parties at least ninety (90) days prior to the termination date of this agreement as set in and cited in article 2.1. During this ninety day period of renegotiating the continuance of licensing the Property, the Licensee is restricted from manufacturing additional products using the Property, unless written permission is granted by the Licensor.

2.3 If the Licensor does not respond within thirty (30) days after receipt of such written request for extension from the Licensee, then it will be considered that the Licensor has granted permission to continue production until the end of the term of this agreement.

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Paragraph 2.1 indicates that the Licensing Agreement starts at a specific date and will last three years (it is a good idea to spell and indicate the number of days for clarification. especially if foreign languages are involved). You can request any amount of time limit but keep it as short as possible for two reasons- a) another party or company may become interested in your Property rights and offer more money to license the use of your Property, and b) if the present Licensee desires to continue the license, you can negotiate a larger advance/royalty payment at the end of the present term. Of course the opposite is true for the Licensee, in that, the longer the term of the agreement, the better for the Licensee.

Paragraph 2.2 refers to the requirement that any continuance of the Licensing Agreement must be made in written form and signed by the Licensor (You) and the Licensee. It also forces the Licensee not to manufacture any products they are putting the Licensor’s Property onto during the ninety day renegotiation period unless allowed to in writing from the Licensor. As a Licensee, I would try and make sure the last sentence of clause 2.2 is removed or not in the original contract, since this will stop you from producing your products using the Property ninety days prior to the end of the actual term of the Licensing Agreement.

The extension request information is to ensure both parties are aware that there is a time frame to start negotiating any change to the term period. The Licensee should ensure they register mail the written extension request letter for any continuance of production of products utilizing the Property, because the Licensor would have the ability to state that because they did not receive any notice that Licensee production of products using the Licensor’s Property must stop ninety days prior to the end of the agreement and also that no effort was made to commence renegotiation of the original Licensing Agreement, so the Licensor can refuse to relicense or start negotiations again.

Clause 2.3 Gives the Licensee automatic approval to continue manufacturing their products using the Property if the Licensor does not respond to the Licensee’s attempt to get permission to continue production until the end of the term. Note that this does not give an extension to the Licensing Agreement but just the ability for the Licensee to keep production going until the final term date. If the Licensee desires, they should initiate negotiations for a continuance with the Licensor many months prior to the ninety day notice because the lawyers involved on both sides could take longer than expected to complete and finalize the extension or new agreement if one has been requested by either side (very often this is the case).

Next Licensing Agreement #5 Royalty Provision.

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

Hope this 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.

More on the clause by clause breakdown of a general Licensing Agreement:

Usually at the end of the contract Preamble is the following line:

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereto contained, it is hereby agreed as follows:

1. GRANT

1.1 The Licensor grants to the Licensee the right to use the (describe Property) and certain trade marks in association with the (mention your products or services you intend to use the Property on or with), shipment, marketing and distribution of the products within the Licensed territory. The rights to use the Property and trademarks are granted to the Licensee and are restricted to the (list products the Property will be on or used in conjuction with) and may not be assigned, sub-licensed or granted to any additional parties.

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The Grant of Rights clause determines what the Licensee is getting and what they can use the Property on and for. The above is a brief version of this clause and I would recommend that a more detailed explanation be given on what the Licensee products are and how the Property will be used.

Usually the Licensor will not allow the Licensee to re-license their use or rights of the Licensor’s Property to another Party and this is why the last sentence is there.

The next installment is Licensing Agreement #4 Term.

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

Hope this 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.

For the next few weeks I am going to break down a general Licensing Agreement clause-by-clause. This is not a definitive engraved in stone version of such a document but contains the most important information that needs to be included in a contract of this nature.

Here we go:

The first line at the top of page one usually goes something like this:

THIS AGREEMENT IS MADE this ____ day of (Month), (year) and is between

Insert Party A (the Licensor)

AND

Insert Party B (the Licensee)

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Party A is you, the Licensor. The person or company that owns the asset that the Licensee is interested in paying to use.

Party B is the Licensee. The person or company willing to pay the Licensor for the use of their asset.

Make sure that the addresses for both parties are complete and accurate.

The asset can be anything like a novel, screenplay, film, character, name and likeness of a famous person or pretty much anything.

The next installment is Licensing Agreement #2 Preamble

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

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