Merchandise License Agreement – What you should know
The Merchandise License Agreemens represent an important independent form of exploitation in the entertainment industry. Not only in the field of music and film has the exploitation of merchandise articles gained enormous importance, but also in the field of video games and anime. Merchandise can refer to all conceivable articles and marketing forms. Merchandising offers an additional independent source of income and therefore goes beyond primary exploitation. As early as December 1994, a study on “Character Merchandising” by the WORLD INTELLECTUAL PROPERTY ORGANIZATION WIPO, stated that “Character Merchandising can be considered as one of the most modern means of increasing the appeal of goods or services to potential customers.” Broadly speaking, the term “character” covers both fictional humans (for example, Tarzan or James Bond) or non-humans (for example, Donald Duck or Bugs Bunny) and real persons (for example, famous personalities in the film or music business, sportsmen).
The Merchandising license agreement is a license agreement that does not require formalities under German law. In view of the complicated regulatory content and the fact that other legal systems have stricter formal requirements, merchandising agreements should always be concluded in writing.
The subject matter of merchandising license agreements can be rights of use to copyrights (rights to exploit photos, comic or anime characters, ancillary copyrights, rights to designs, to trademark and name rights, or rights to one’s own image – in short, anything that can be commercially exploited can be merchandised. Since the legal requirements and the rights involved can be different, a distinction must be made between the protective rights positions. In the case of fictional characters such as Donald Duck or James Bond, other
For the granting of the license rights, the licensor often receives a fixed advance payment that can be offset against subsequent licenses (guarantee). The royalties range from three to fifteen percent of the retailer’s selling price (Nordemann, vor 31ff RdNr. 423).
Merchandising contracts should contain the following provisions, among others
– Contracting party
– Preamble (this serves the interpretation of the contract)
– If contracts are written in English, they should be preceded by a list of definitions. This does not hurt with German language contracts either, but should be used cautiously.
– Merchandise object
– List of merchandise items (which goods are included in the merchandise)
– Contract area
– Scope of the granting of rights – The rights (trademarks, designs, etc.) should be described here.
– Duration of the granting of rights (contract term)/termination
– Sublicenses ?
– Granting of materials/files
– Regulations on property rights
– Obligation to produce
– License fees
– marketing plan
– Quality Assurance
– product liability
– product samples
– Sales efforts
– Naming of the licensor/proprietary rights notice
– Consequences of infringement by third parties
– Indemnification clauses
– Secrecy obligation
The attorneys of our law firm are regularly active in the field of license agreements and will be happy to assist you in drafting or reviewing your merchandising agreements.
Attorney at Law Kai Jüdemann
Specialist attorney for copyright and media law
Graphic template: Template: Boris Mikhailovich Kustodiev (1878-1927 – Merchant 1920)