q & a: licensing

The following information is simply my opinion as an artist! Use it or disregard it in good health!

Q. I have been asked to show my work to a company that wants to license it for use on cards and possibly other items. How do I protect myself?

A. First, get a lawyer experienced in art and licensing. Before you say you can’t afford it – you can’t afford not to. Besides, until you get started, there won’t be much for the lawyer to do.

Next, before you show any work, get a nondisclosure agreement in place. (Your attorney can give you one or you can get them from a variety of sources.) A nondisclosure covers situation where the people you are sharing information with are in a position to use that information for their own gain.

Some companies refuse to sign nondisclosure agreements, and in reverse ask the designer to sign a waiver of their right to sue the company if there is use of a substantially similar design. Personally, I don’t deal with these companies – but you will need to make a decision on a case-by-case basis. If you choose to do this, take some basic precautions like documenting the idea by sending a copy of it to an attorney, or even to yourself (then don’t open it) so that the post mark and closed envelope can prove the date of your design.

Q. Any other precautions I should take?

A. Well, get a lawyer to look at ANYTHING before you sign it.

Make sure that everything you show has your name, the year, and a copyright symbol on it. I recommend you also include “all rights reserved”.

If you can afford it, copyrighting or trademarking your ideas or products in advance of showing them to a third party is a good idea. In the US you do this through the US Trademark and Patent office. This is one of the most user-friendly agencies in the government and they really try to help you through the process.

When you are at the meeting, take very good notes. Ask for the business card of everyone in the room and put a date on the back of the card to prove they were at the meeting. After the meeting, send a letter to the person in charge of the meeting with an overview of what was discussed, what you showed them, etc. If you left anything with them, be sure to include a reference to that in the letter. You might also ask for a receipt for anything you leave.

Q. What is the going rate for licensing agreements?

A. Generally you can expect to make 2 – 10% of the wholesale sales rate on most items. I would say the median is about 4 – 5%. Remember that the other party is taking the risk of the cost of manufacture, that it might not sell, etc. That is why they get the bulk of the money.

Q. How do I insure the quality of the item produced?

A. Something that is REALLY important to understand is that when you are handed a contract, it is a document that they paid their attorney to create to protect THEM. You have the right, then, to hire an attorney to go through it and ask for changes to protect YOU. Usually when someone is burned in a contract it is because they signed it blindly. As someone who has practiced law, I can assure you that their attorney is NOT looking out for you. That is not their job.

If you are working with a company that will not negotiate on a contract, I personally would be wary. As a lawyer, when I saw a business dispute it generally arose because a contract was unfair and one party didn’t realize it until it was too late. Smart businesses know that a contract is a relationship that creates a team. No team succeeds unless everyone’s needs are met. You must provide value in return for the value they are given you. If a contract is weighted more to one party than another, chances are there will be a breakdown. Just like relationships between friends, if one side is carrying all the weight, eventually they get tired and fed up and want out.

You have a right to demand that the contract is fair to you. If you are a new artist, you might think “If I don’t agree to everything, they won’t sign me!” That is true if you are lucky! You should hope that God would protect you from unscrupulous companies who are looking to take advantage of you.

An artist I know who has recently gone through hell over a contract told me before she signed it that she felt that it was in bad taste to hire an attorney. She said it sounded like she didn’t trust them. I pointed out that they had hired an attorney to write the contract and she didn’t seem to think THAT was in bad taste!

The bottom line is that if you are going to make it in business, you have to act like a businessperson. Don’t sign documents you don’t understand. Hire someone who can explain it to you and make sure that you are being treated fairly. You know that you aren’t going to be unreasonable in your requests. Make sure that they are not unreasonable in theirs. What a lawyer does is to read provisions and think of the worst-case scenario . . . because that is the one that will happen if you don’t. Non-lawyers don’t’ think in those terms and as a result lawyers get a bad name. However, a good attorney has saved many a business relationship.

Think of a contract as laying down the rules in advance of the relationship. If you know what you are expected to do, and what they will do in return, there is less chance that something will go wrong. Iron out the details in advance, and it is likely that your relationship will last longer and be more profitable on both sides.

Q. Do I need an agent?

A. Dealing with agents can run you in circles. It is hard to get one until you are an established artist, it is hard to become established without one. MOST companies will accept direct submissions from artists. Since that is the case, why pay someone a percentage when you don't have to? Once you are busier and you don't have time to deal with the paperwork end of things, and agent can be a very valuable resource for you.

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