The 10 Key Points That Must Be In Every Licensing Agreement


Art licensing contracts come all sizes, shapes, formats and wording. Some have lots of fancy legal terms, while others may be poorly written or just too short to cover everything that should be covered in order to protect you and your rights.

Here’s a checklist of 10 essential points that must be covered in each and every licensing agreement. There’s more, of course, but these 10 points are the basics, so be sure to look for them in every contract you’re asked to sign:

1) The names of the specific works of art you’re licensing.

This is important because it limits the contract to specific images, thereby making certain that there’s no implicit claim by the licensee that the contract covers all your art, or more than it says it does in black and white.

2) The specific types of products that the art will be reproduced on.

This is another way to limit the reproduction rights of the license.

If the licensee wants to expand its use of your art onto other products, they’ll need to come back to you for written permission to do so.

3) The producer’s or publisher’s written agreement to put your copyright notice on every product sold and on every advertisement or brochure for any such product which bears your art.

While it may not be possible to put a long copyright notice in tiny places, the more places your name appears as the artist who created the artwork used on the product, the more notice you’re giving to potential violators of your copyrights not to copy your work.

A clear copyright notice also helps build your name as a brand, and that’s very important.

4) The countries in which the products will be sold.

Some companies will ask for worldwide rights when they only distribute their products in the United States.

Why not be specific?

After all, another company might come along that wants to license the same art on similar products in Europe or Asia.

This is generally a minor point if you’re just starting out, but once you develop your brand it will gain in importance.

5) A period of time (nine months or a year) during which time the company must bring to market (produce and sell) products with your art, or else give up their right to use your art.

Occasionally a company will sit on artwork for a long time without ever using it on product.

You certainly don’t gain anything by having that happen, and it means any income from the license will be put off to some unknown future date.

Plus the company is tying up your artwork and stopping you from licensing it in the same field somewhere else.

A reasonable period of time for them to use your art makes a whole lot of sense.

6) A termination date for the agreement, generally two or three years after signature.

Open-ended agreements, agreements with long terms like five or more years, or agreements that renew automatically can tie up your art for unreasonably long periods of time.

Three years is a pretty big window for a company to produce and sell products with your art. If they’re successful with the products, they can always come back to you for an extension.

7) An “indemnification clause” which says that the company will protect you from any lawsuits that might arise from any of their business activities which in any way relate to products carrying your art (so that you’re protected if, say, a child swallows a product with your art on it and the parents sue).

Many companies include one-way indemnification clauses which just protect the company in case a claim arises that your art isn’t completely original or otherwise infringes on the copyrights of another art source.

It’s only fair to have the indemnification go both ways, and most companies won’t object to that if you bring it up.

Indemnification is there to protect you, and it should be in every contract you sign.

8) How much you’ll be paid.

Every contract should include a specific statement of any non-refundable advance payment to be made to you against future royalties, the specific royalty percentage to be paid to you on a quarterly basis, and the requirement that each royalty check be accompanied by a clear statement of how they came up with the royalty amount.

It’s important to lay out exactly what, how and when you’ll be paid from the license.

Don’t leave it to a verbal handshake, be sure to have it in writing.

9) Your right to have their books audited at your own expense to make certain they have paid you what is due to you.

While you may never exercise this right, having it in an agreement puts the licensee on notice that they’d best be honest when they report royalties and not fudge the numbers.

10) A statement saying you can cancel the agreement if they don’t abide by its terms or if they go bankrupt.

This is your emergency exit from a bad contractual relationship. Don’t forget to include it!

Follow these 10 points and you’ll be able to move forward with certainty that key basics are covered.

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(c) Lance J. Klass.  All Rights Reserved.  This article may not be reproduced with the expressed written permission of the author. 

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