As an artist, you likely own the exclusive copyright in your work. This means that only you have the right to display, copy, sell, or distribute the work. Buyers of your artwork might want to purchase that copyright either permanently or for a set amount of time. Either option is permissible. Therefore, in a contract for the production and sale of your artwork, you can do one of two things: (i) license your artwork or (ii) assign it.
An assignment is like selling your home, typically giving up all ownership rights. A license is akin to renting your home, temporarily giving up your rights but retaining ultimate ownership.
Not surprisingly, buyers of your artwork (often digital or print media companies) will want to acquire all of your rights through an assignment. Indeed, some companies will confusingly title contractual documents as "exclusive licenses" when the fine print actually indicates a total assignment. The challenge for artists is to sort out what the agreement is trying to do, and then decide whether you are willing to agree to these terms.
If the agreement with your artwork buyer will, at some time in the future, give you rights to your artwork, then you are most likely dealing with a license. This return of ownership is usually referred to as a "reversion" or "reversionary rights" and is found in most license agreements.
In this situation, the buyer is essentially "renting" the right to use your copyrighted work. For example, the buyer might be paying you a sum of money to use your designs on its corporate advertisement for a three-month period.
Reversion terms. Look for provisions entitled "Termination," "Term," "Reversion," "Grant of Rights," "Exploitation," or "Commercialization" to find reversionary rules.
Assignment terms. Be careful if a license agreement says it is "perpetual" or lasts "for the life of the copyright" or has similar language. This type of agreement would probably amount to an assignment of your copyright.
In a license agreement with a reversion, you need to determine the circumstances under which your rights would revert to you. In other words, what has to happen in order for you to get the rights back? Ideally, you want the rights to revert in the event that:
Before you sign the agreement, make sure you have a clear sense of when you will once again have control over your work. It will be in the buyer's interest to maintain control for as long (and indefinite) a period as possible!
Although assignments are presumed to be permanent transfers of ownership, some companies may include reversionary rights provisions in agreements with artists. Imagine that the buyer of a house agrees to transfer ownership back at a fixed time (or when the buyer is done using the house).
This is a different kind of reversion than a license, because you have to reacquire ownership and there may be fees involved. For example, you may have to pay for plates, molds, or other methods of reproducing the work, or the fees for reassigning the copyright, trademark, or patent rights. Often, this is a bad deal for the artist and a good deal for the buyer.
Why some companies like an assignment with reversion. Many companies prefer an assignment with a reversion of rights to a license agreement because an assignment gives the company unfettered control over the art. It has the freedom to create variations or derivatives of the artwork and can enjoy the other legal benefits of ownership (like suing an infringer, dealing with a bankruptcy, or benefiting from sublicensing rights).
Negotiate reversionary rights in an assignment. If you'd like to get the rights back some day, but you're offered an assignment and the company refuses to license, ask the company for a reversion of rights after the agreement terminates or if the company fails to exploit the work.
If a company refuses to grant reversionary rights, you must decide whether to sign the contract or not.
Reasons to forgo reversionary rights. For a number of reasons, an artist may decide not to insist on reversionary rights. For examine:
Licensing income is ordinary business income. Another factor in deciding whether getting the rights back is important to you may be tax treatment. Income from licensing is normally taxed as ordinary business income. You may claim deductions or credits where applicable, but you must pay taxes on the income you receive in each year.
Income from selling all substantial rights is capital gains. Capital gains treatment, which offers some tax benefits, including lower tax rates, is available only when you sell "all substantial rights" to your work. So, if there are no reversionary rights, you could qualify for capital gains treatment. If you are concerned about how your income will be treated, consult a tax professional before entering into the agreement.
For information about licensing fine and graphic arts, see Getting Permission: Using and Licensing Protected Materials Online and Off or the eGuide, License and Merchandise Creative Art, both written by Richard Stim and published by Nolo .