Foreign licensing is an important part of growing an arts-based business. Whether you make visual art or music, licensing your work across the globe can be lucrative. Unfortunately, it can also be a legal minefield. If the licensee is a cheat, you could end up wasting time and money suing the licensee in a foreign court and trying to collect a judgment overseas. How can you protect yourself as best as possible in foreign licensing deals?
The most important way to protect yourself when dealing with foreign licencees is to find out the company's reliability. Imagine, for example, that you license your photograph to a foreign company that wants to print it onto shirts in Japan. But then, before you know it, countless imitators are printing your photo across Asia, because the licensee failed to properly monitor the image. If you have a poorly managed licensee, no foreign license may be better than a bad foreign license.
When researching a foreign licensee, start by asking two questions:
Your contract can be a standard form licensing agreement or one that you draft. You can modify the sample license agreement included in Nolo books. For art licensing, use Getting Permission: How to License and Clear Copyrighted Materials Online and Off. Or, use the eFormKit, License & Merchandise Creative Art.
Below is a summary of some important foreign licensing issues to keep in mind.
Approval of licensed goods. When major American manufacturers license products to companies abroad, they often arrange periodic inspections of the manufacturing facilities to ensure the quality of the goods (and also to monitor whether the licensee is siphoning off products or engaging in illegal labor practices).
It is unlikely you'll be able to afford such on-site inspections, but you can demand that copies of your licensed work be sent to you on a regular basis for approval. This offers you some assurance of consistency and quality for your work. For example, if you are licensing your photographs, you want to ensure that they are printing them in the correct colors.
Royalties and accounting. Payment of royalties from a foreign licensee can get tricky, especially when you consider issues like:
Also, it is wise to include an audit provision, which allows you to inspect the foreign licensee's books. For more on royalties and audit provisions in license agreements, see Licensing Artwork: Negotiating and Monitoring Royalty Payments.
Jurisdiction. Sometimes referred to as personal jurisdiction, jurisdiction is the power of a court to bind the parties by its decision. Unless the company does substantial business in the states, the only way to get a foreign licensee into a U.S. court is to include a provision in the license agreement that requires the licensee to consent to U.S. jurisdiction.
Choice of law. Every country (and every state) has laws as to how contracts are interpreted. The licensee will want the disputes to be resolved under the laws of its country. Try to include in your agreement that disputes will be resolved under U.S. law for copyright purposes and the laws of your state when it comes to contract issues. Otherwise, you might be forced to hire an attorney to litigate on your behalf in a foreign country, which can be difficult and expensive.
Arbitration. In arbitration, instead of filing a lawsuit, the parties hire a neutral arbitrator to evaluate the dispute and make a determination. You'll almost always benefit by agreeing to have disputes arbitrated and inserting this in your agreement. If possible, your agreement should award attorneys' fees to the victor in the arbitration.
Hopefully, the licensee will agree to arbitrate the matter in the United States. If not, there are three popular (though expensive) spots for international arbitration:
Foreign registrations. If your works are protected by U.S. intellectual property laws like copyright or design patent law, you should determine whether it's worth your while to obtain foreign copyright or patent registration in the countries where your work is being manufactured or distributed. You may be able to require that the licensee handle these administrative tasks as part of the license.
Become familiar with international trade terminology and rules so you can speak knowledgeably about things like "F.O.B." and "letters of credit." You can get a crash course by reviewing the resources below.
Get more information on negotiating and drafting a solid license agreement, and obtain sample agreements, by referencing the following Nolo books and form kits: Getting Permission: How to License and Clear Copyrighted Materials Online and Off (for art licensing) and the eFormKit, License & Merchandise Creative Art .