Celebrity licence agreement

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We created a celebrity licence agreement for our client, a sporting legend, to lend his likeness to a video game.

A video game development company had approached our client, requesting permission to use his name in their new game. We drew up a licensing agreement to enable both parties to profit, and addressed the exposure risks for our client.

How we managed the licensing process

We protected our client’s brand and reputation in the form of a licence agreement. This served to enhance our client’s financial position. Our client also later called upon us to resolve a dispute that arose. We successfully resolved the dispute in a manner which permitted the parties to continue with the relationship that was beneficial to both.

Celebrity licence agreement

Our licence agreement limited the game developer’s use of our client’s brand. The agreement banned game functions that might defame or harm his reputation. Our client granted the game developer a non-exclusive use of various trade marks and image rights. Importantly, he would only be projected as 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 the game developer from sub-licensing the trade mark. Any sub-licensing would likely damage our client’s reputation.

Ring fenced revenues

We knew that any use of the trade mark outside the scope of the licence agreement could be a problem as this could lead to the trade mark becoming generalised and then revoked. Our client would lose revenue if this happened.

Hence, our licence agreement only allowed the game developer to use our client’s trade mark within the one game they had developed. If they developed a second version of the game, they would require a further licence. This would also give our client the chance to negotiate new royalty terms.

Trade mark use in the context of a licence agreement

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

When signing the celebrity licence agreement no party knew 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 the games company. Therefore 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, the developer 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. The games company developed a second version of the game, but 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 the company on notice that by using our client’s trade mark on the second version, they were in breach of the licence agreement and infringing our client’s trade mark.

Resolving the intellectual property dispute

The licence agreement mutually benefited both parties.The game had generated significant revenue and substantial profits for the company because of our client’s brand, and our client received attractive royalty payments as a result.

Both parties wanted to salvage the business relationship. Neither wanted court action.

Solution

The game developer would firstly pay our client the royalties he would have received had a licence agreement been in place for the second version of the game. The game developers could also be granted a licence for their new version in return for a lump sum payment plus sales-based royalties.

The company 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.

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