Celebrity licensing agreement

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Celebrity licensing agreement

We created a celebrity licensing agreement for our client, a sporting legend. “GameX” a game development company, had approached our client, requesting permission to use his name in their new game. We addressed exposure risks.

How we managed the licensing process

We:

  • Protected our client’s reputation in the form of a licence agreement.
  • Enhanced our client’s financial position.
  • Resolved a dispute that permitted the parties to continue with the relationship that was beneficial to both.

Celebrity’s licence agreement

Our licence agreement limited GameX’s use of our Celebrity’s brand. The agreement excluded game functions that might defame or harm his reputation. Our client granted GameX a non-exclusive use of various trade marks and image rights. Importantly, he would only be projected in a realistic 3D animation character through the use of augmented reality.

Restrictions

Our client wanted to control who used his brand. He also wanted to control where his brand was placed in the video game. We included a specific restriction in the licence agreement that specified the use of the brand. We also prevented GameX sub-licensing the trade mark. Any sub-licensing would likely damage our client’s reputation. We retained control.

Ring fenced revenues

We knew that any use of the trade mark outside the scope of the licence agreement could be a problem, because:

  1. The trade mark could become generalised and revoked; and
  2. Our client would lose revenue.

Hence our licence agreement only allowed GameX to use our client’s trade mark within the game they had developed. If GameX developed a second version of the game, they required a further licence. That gave our client the opportunity to negotiate new royalty terms.

Trade mark use in the context of a licence agreement

GameX were not allowed to use or associate the trade mark with any other product or service. The final version of the 3D animated character required our client’s permission before its integration within the video game.

No-one knew, when signing the celebrity licence agreement, how much revenue the game would generate. If sales took off, a flat royalty fee would be a poor deal. So our licence agreement included a 10% slice of sales revenue without any cap.

Licence agreement term

Our Celebrity client had not previously worked with GameX. He did not know what their business relationship would be like. If the relationship did not work out, our Celebrity did not want to be tied down. Our solution was to grant a licence for an initial fixed term of 1 year, with an option for extension at our client’s discretion.

Breach of Celebrity Licence Agreement

During the first year, GameX complied with the terms of the licence agreement. The game became a top seller. At the end of the year they asked to extend the licence agreement for a further year. Our client agreed.

However our client grew concerned during the second year. GameX developed a second version of the game. They did not inform our client about this, nor did they seek consent from our client to use his trade mark in the new version.

We issued a letter before action. This put GameX on notice that by using our client’s trade mark on the second version, they were:

  1. In breach of the licence agreement; and
  2. Infringing our client’s trade mark.

Resolving the intellectual property dispute

The licence agreement mutually benefited both parties. GameX generated significant revenue and substantial profits because of our client’s brand. Our client received attractive royalty payments.

Both parties wanted to salvage the business relationship. Neither wanted court action. We offered the following solution, that GameX would:

  1. Pay our client the royalties he would have normally received had a licence agreement been in place for the second version launches by GameX; or
  2. Be granted a licence for their new version in return for a lump sum payment plus sales-based royalties.

GameX accepted our settlement offer. We drafted the commercial settlement agreement. That saved both parties legal costs.

John Deane is a partner in the commercial team at Gannons. John acts for corporate clients in the creative sectors, and individuals licencing their rights to corporates. Please do get in touch with John if we can assist.