A Guide to Art Licensing Agreements

What is Art Licensing?

Art licensing is a common business arrangement that essentially acts as a bridge between the creative world of art and the practical realm of commerce. At its core, an art licensing agreement allows an artist to grant specific rights to a business (typically referred to as a "licensee") in exchange for compensation that can take various forms. These forms of compensation often include a one-time upfront payment or ongoing royalties based on product sales or usage of the artwork.
The licensee typically receives the right to reproduce, distribute, and sell products bearing the artist’s work, such as clothing, home decor items, or printed materials. This mutually beneficial relationship enables artists to monetize their work without having to directly manage the vast array of administrative duties and legal hurdles that come with mass production and distribution of their art on products. For businesses , licensing an artist’s work can present a low-risk opportunity to offer unique products to consumers, generate new revenue streams, and differentiate themselves in increasingly competitive markets.
Art licensing agreements can be complex documents that require careful attention to detail to avoid potential disputes or infringement issues. An effectively drafted license can clearly delineate the scope of the agreement, including permitted uses of the artwork, duration, compensation arrangements, and any restrictions or conditions – all of which can have significant financial and legal implications for both parties. For artists, a solid licensing agreement is essential for protecting their creative output; for businesses, it can provide security by clarifying their rights and responsibilities.
With the growing focus on intellectual property in the modern economy, understanding the nuances of art licensing is becoming increasingly important for artists and businesses alike.

Components of a Licensing Agreement for Artworks

As with all types of licensing, it is essential to the relationship that the Licensor and Licenee understand each other’s expectations and duties in an Art Licensing agreement. The following should be addressed:
Scope of the license:
What does the Licenee have, or does not have, the right to use? What are the limits?
Duration:
Licenses can be for the life of the artist, for a period of years, or for a single piece of art. In most instances, duration is the same as the scope of the license, since the number of pieces are, in most instances, limited.
Fees:
Licensing fees for art can take many forms. It can be for a piece, a series of pieces, or be a flat fee in return for unlimited use. Royalties are the most common form, either based on a percentage of the profit or a flat fee per use.
Rights Granted:
A clear definition of those rights is critical. Are they exclusive (the most protection) or non-exclusive. To what territories do they apply? For what particular goods? And, to what to those rights extend?

Licensed Artwork Agreement Sample Clause

Here is a closer look at a common art licensing agreement, with an explanation of how each clause may be specifically worded and the purpose behind the various provisions. An actual agreement will differ depending on the situation, state of the law, type of art work, duration, territory, and various other factors. Remember that an explanation of complex legal verbiage does not constitute legal advice. It just means that I’m helping you understand your own agreement, or at least a sample of one:
THIS LICENSING AGREEMENT ("Agreement") is entered into as of this ____ day of ________, 20__, by and between [Company] of [Address] ("Company") and [Artist] of [Address] ("Artist").
Artist is an artist who creates original artworks (the "Works") consisting of [brief description] and Company is a licensed manufacturer of [products] ("Licensed Products"). The value of the Works derives in part from the goodwill associated with the mark "__________" used in connection with the Licensed Products by Company and the desire of consumers to purchase the Licensed Products with the Works incorporated therein or upon thereon.
Company and Artist desire to enter into this Agreement upon the terms set forth herein. NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, the parties agree as follows:

1. LICENSE

Subject to the terms and conditions set forth herein, Artist hereby grants to Company for the term of this Agreement the royalty-bearing worldwide license to manufacture, sell, distribute, reproduce, and use the Works in connection with the Licensed Products.

2. ROYALTY AND RETAIL TERMS

(a) License Fee: The license fee shall be a royalty of [Percentage] per each sale of Licensed Products incorporating the Works.
(b) Minimum Royalty: For the term of this Agreement, the minimum royalty shall be [Sum].
(c) Retail Price: A merchandise distributor shall sell each Licensed Product to the public at no less than the Manufacturer’s Suggested Retail Price ("MSRP") of $[Sum].

3. TERM AND TERMINATION

(a) This Agreement shall become effective on the date first written above and continue until the close of business on the _______ (12th) day of ________, 20__, unless and until terminated in accordance with other provisions of this Agreement.
(b) During the term of this Agreement, either party may terminate this Agreement for any reason whatsoever by giving to the other party not less than [30-90 days] written notice, and thereupon this Agreement shall terminate at the expiration of such notice. In the event no such notice shall be given by either party, this Agreement shall automatically be renewed for four (4) renewal terms of one year each and shall continue in effect until terminated by either party by giving to the other party not less than [30-90 days] written notice.
(c) In the event of any default by a party, then without regard to any other remedy available to the other party, such defaulting party shall have a period of [30-60 days] to cure such defaults after receipt of the written notice of default, including, without limitation, the re-listing of such marks, to the extent feasible under the circumstances.
(d) Upon termination of this Agreement for any reason, all rights granted to Company hereunder shall forthwith revert to Artist and Artist shall not thereafter use in any way the names or trademarks used prior to termination except as otherwise provided herein.

4. WARRANTIES AND REPRESENTATIONS

Artist represents and warrants that (a) no authorized or unauthorized use of the Works by Company or its licensees or sublicensees shall constitute an infringement of any copyright, and (b) Artist shall at all times during the term of this Agreement keep and maintain in full force its copyright registrations covering the Works used in Licensed Products.

5. ENTIRE UNDERSTANDING; NO WAIVER

This Agreement constitutes the entire understanding between the parties hereto and supersedes all prior agreements and understandings between the parties hereto. No waiver of any breach or default shall constitute a waiver of any subsequent breach or default. Any amendment to this Agreement must be in writing and signed by both parties.

6. GOVERNING LAW

This Agreement shall be construed under the laws of New York State.

Different Types of Art Licensing Agreements

The types of licensing contracts vary and a number of terms should be considered in negotiating those contracts. The most basic distinction is between an exclusive and a non-exclusive license. An exclusive license grants the licensee the right to use the work image for the specified purpose to the exclusion of any other potential licensees. A non-exclusive licenses a variety of potential licensees to use the specified work image for a specific purpose. An exclusive license can be granted under a number of circumstances, such as for a particular territory. For example, an art licensor may be interested in granting an exclusive license to an African party for the purpose of publishing a magazine in English and French languages for sale in French speaking Africa to the exclusion of all other licensees. On the other hand, a non-exclusive license would grant the licensee the right to produce, sell and distribute a licensed product on a global basis. A blanket, non-exclusive license could be given to any person, company or entity under specified terms and obligations set forth in the licensing contract.

Art Licensing Agreement Negotiation

Negotiating an art licensing agreement requires careful consideration of the terms and how they will affect the value and control of the licensed art. Prior to entering into negotiations, the licensor should develop goals regarding the licensing terms of the work being offered. Generally the licensor wants favorable monetary terms and flexibility to exercise future control over the licensed work.
Additional considerations include exclusivity of the license, the markets in which works will be distributed or sold, royalties, length of the license, restrictions on alterations and derivatively , and compensation for guest artists or other collaborators. The licensor should be mindful of the amount of control it is willing to give to the licensee and whether changing the terms seems favorable at a particular moment in time.
Licensors may not want to sell a license to a single party for a large number of works given that this could allow the licensee to gain a monopoly over the licensed art and over time potentially lower the value of the licensing terms. Licensors should also be aware of the length of the license and how this governs the vesting of rights over time.

Mistakes to Avoid in Art Licensing Agreement

Among the most common mistakes artists and licensors make in art licensing are:
Failing to ensure that the licensee registers its rights.
While it is not the responsibility of the artist/licensor to do this, it is essential that you make sure your licensee does so. At one time, it was a good idea just to register your copyright and not your license. That has changed. It is now recommended that the FTCs mandatory registration requirement be taken into account. Prior to October 5, 2009, registration could be obtained as permissive, voluntary or optional. Now, the registration of a copyright or a license (contractual copyright) is mandatory and should be done before the licensee commences with production of any funded photos or other works. Where owners of copyrighted works wish to bring suit to enforce the rights they have under the copyright, registration is an essential prerequisite to filing a lawsuit.
Not including all the necessary boilerplate.
These include such things as non-waiver clauses, severability clauses, choice of law; entire agreement; notices; successors and assigns; deadlines and time is of the essence clauses; amendments and modification clauses; and arbitration and submission to jurisdiction clauses. All of these may not apply in every case, but they should be reviewed by the parties and agreed, in advance of entering into the licensing agreement.
Not including a "residuals" clause.
As licensing of artworks continues to grow in popularity, this has become more and more essential. For example, in the September 2003 issue of "Results: The Journal of the American Academy of Orthopaedic Surgeons," in an article entitled "Robert Harris – A Masters Project," the magazine featured work by photographer Robert Harris. Attached to the magazine’s cover was a CD Rom containing a video of Harris’ work featuring images, clinical video clips and audio commentary on arthroplastic heart valves. This CD Rom included artwork and subject matter other than what was printed in the magazine. Licensing agreements should be clear as to whether the artist/licensor if entitled to residuals each time the artwork is used in a new way. If not, it should be clear that residuals are only payable where the artwork is used as contemplated at the outset.
Not allowing the artist/licensor to use the artwork during the licensing term.
This is all too common. It can be both frustrating and potentially damaging to the career of an artist if they forego using their own work during the term of a licensing agreement. In the event of the bankruptcy or insolvency of the licensing company, or a dispute over the amount of royalties earned by the artwork, the ability of the artist to continue to license the master art work in order to generate income will be very important. Further, the inability to use their work can slow its promotion to those more likely to license it. At the very least, if the licensee is not providing details of how the work is being used and promoted, the artist/licensor must have the right to promote the work independently or through their agent.
It is critical to avoid these common errors when negotiating licensing agreements.

Art Licensing Law

A. Copyright
If the artwork is covered by copyright, it must be clear that the customer owns all rights in the artwork and for all uses of the artwork, even in derivative works.
B. Name, and Likeness
If the artwork is meant to capture a particular person, then the customer should have all rights in the name and likeness of the person, if that name and/or likeness is recognizable. This is important to avoid liability from a "right of publicity" claim.
C. Trademark
Even if there is no trademark use, consider adding a disclaimer, such as:
"no claim is made to any non-trademark rights in the name[s] of [insert name of individual(s) depicted in the work(s)]."
D. Enforcement
The downside of being a licensee is that the licensee may have little or no control over the enforcement of the restrictions on use. Depending on the sensitivity of the images, the licensee may want to have more control over the use in the marketplace, over and above the scope of the original agreement. This may include the right to use the images in the future, and/or the right to audit the use of the images.

Future Trends in Art Licensing

While traditional art licensing continues to be an important aspect of the industry, digital art is expected to have a significant impact on the market in the coming years. With the rise of NFTs (Non-Fungible Tokens), artists and licensors are exploring new ways to monetize their creations and protect their intellectual property.
NFTs are unique digital assets that are built on blockchain technology, and they allow artists to sell their digital works to collectors and ensure their ownership through the digital ledger. This technology has opened up a new revenue stream for artists, while also creating challenges for licensors looking to protect their portfolios.
In the coming years , we can expect to see traditional licensing models evolve to accommodate digital art and NFTs. For instance, licensors may need to adopt new terms and conditions that address the ownership and transfer of digital assets, and ensure that they are properly compensated for any sales or transfers of those assets. They may also need to work closely with NFT platforms to ensure that their licensed works are properly represented and marketed.
Overall, the future of art licensing looks bright, with the potential for new revenue streams and creative collaborations. As technology continues to evolve, licensors and artists will need to adapt and stay ahead of the curve to ensure that they are maximizing their opportunities and protecting their rights.