"In contrast to previous economic eras,
intellectual property will be the primary source
of new wealth in the 21st century."
- Gregory A Piccionelli, 1989
 
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7 Content Licensing Tips For Licensees

AUGUST 2011

These days, it seems like barely a week goes by that I do not negotiate or draft an adult content licensing agreement. The reason is simple: more and more adult entertainment companies have determined that licensing their content as often as possible, and for exploitation in as many media as possible, is simply required for sustained profitability in today’s economic environment. More and more, I note that even companies not traditionally known for licensing their content to third parties are entering the content licensing game.

 

Several months ago I wrote an article for this column entitled “7 Content Licensing Tips” addressing some of the fundamental issues involved in exploiting content though effective licensing. The article was primarily directed to adult content licensors and companies considering the possibility of becoming content licensors. Since the article’s publication, however, I have received a number of requests to write an article with licensing tips directed to companies seeking to license adult content from adult content producers. So, in response to those requests, here are 7 adult content licensing tips for licensees.

 

Tip #1: Determine what rights will be required to use the content as contemplated.

 

The licensing of content is fundamentally a licensing of rights, such as copyrights. Therefore, it is important that you determine what rights you will need to license from the content owner to accomplish your objectives regarding the content. If you don’t do this, you run the risk that you will either not obtain all the rights you need to exploit the content as you wish, or you will “over-license” and pay for more rights that you don’t need.

 

The following are common considerations used by adult content licensees to evaluate what rights should be included in an adult content licensing agreement:

 

  • Should the license of rights be exclusive or non-exclusive?

 

  • What media uses should be covered? (E.g., Internet, Internet-mobile, on-deck mobile, mobile apps, cable and satellite broadcast, in-room hotel entertainment systems, DVDs, virtual worlds, computer games, etc.)

 

  • What territories should be covered by the license? (U.S., Europe, world-wide, etc.)

 

  • Should the license allow for the creation of derivative works such as compilations, etc.?

 

  • How long should the license last? (E.g., for a fixed or renewable term, in perpetuity, etc.)

 

Tip #2: Make sure the content is identified with particularity.

 

The content to which the license of rights pertains should be clearly identified in an adult content licensing agreement. If it is not, and the licensee is subsequently accused of unauthorized use of the content, the licensee may not be able to prove that the use was licensed. There are many ways to effectively identify the content that is subject to a licensing agreement. One way is to list the subject works by title or other identifiers in an attached exhibit referred to in the license agreement. Sometimes it is impractical or unnecessary to list the subject content by title or identifier. For example, if the subject content is going to be produced in the future and made available to the licensee over a period of time. In such cases, specific language in the agreement should clearly describe the content that will be subject to the license.

 

Tip #3: Make sure that the agreement contains appropriate representations and warranties.

 

A properly drafted adult content licensing agreement must contain effective and enforceable representations and warranties made to the licensee by the licensor. These should include at least all of the following:

 

  • A warranty that the licensor has all the required rights to grant the license to the licensee;

 

  • A warranty that the content is lawful and complies with all applicable laws, including without limitation 18 U.S.C. §2257, 18 U.S.C. §2257 and 28 CFR 75 (“2257 Regulations”);

 

  • A separate warranty that no minors are depicted in any part of any of the adult content;

 

  • A separate warranty that a copy of all the records that are required by the 2257 Regulations to be maintained regarding the content will be provided to the licensee with the content; and

 

  • A warranty that the licensor has the full power and authority to enter into the licensing agreement.

 

If music is included in any of the content, a number of special music-specific representations and warranties should also be included. For example, if video content including music is licensed for performance via the Internet, the licensor should specifically warrant that the licensor is authorized to grant to the licensee all the required synchronization and public performance rights in and to the music that are necessary to provide the subject content license. This special warranty is generally advisable because many adult content producers that have used “royalty-free” music in their content production have failed to note that the license terms associated with such music royalty-free music often prohibits use with explicit sexual content and/or public performance of the music.

 

Tip #4: Make sure there is an indemnification provision in the content licensing agreement.

 

A properly drafted content license agreement will also include an indemnification provision that requires the content licensor to pay for the consequences of any breaches of the licensor’s warranties and/or any failure to perform any of the licensor’s other obligations under the agreement. An indemnification provision is one of the most important provisions in a content licensing agreement as it “holds the licensor’s feet to the fire” to make good on extremely important warranties and other obligations, which if breached, could potentially result in criminal liability for the licensee.

 

Here’s an important consideration regarding indemnification provisions that should be soberly considered by every adult content licensee trusting in the promises and warranties of their adult content licensor. From a practical perspective, an indemnification provision is only as good as the indemnifier’s ability to provide the indemnification. Put another way, if the licensor/indemnifier does not have the financial wherewithal to pay for the consequences of its failure to perform, the licensee might well have to face the resulting consequences alone. This could be catastrophically costly if for example, the licensed content was in fact owned by another party, if the records required by the 2257 Regulations are incomplete, or if a minor is depicted in any of the content.

 

Tip #5: Make sure the licensor will provide a copy of the records required by the 2257 Regulations.

 

Just about any licensee of explicit adult content shot after June 3, 1995, who uses the licensed content in U.S. domestic or foreign commerce will be a “Secondary Producer” under the 2257 Regulations. As such, the licensee will be required to maintain all the records required by the 2257 Regulations. Because of this each adult content licensing agreement that pertains to content that is subject to the 2257 Regulations must have a provision that requires the licensor to provide copies of all the required records to the licensee.

 

Tip #6 : Be Prepared For Disputes Down The Road.

 

Prospective content licensors and licensees seldom want to dwell on the topic of dispute resolution while they are in the middle of negotiating. But this is exactly the time when the parties should consider how to effectively resolve any disputes that may arise under their agreement. Care should be taken to be sure that if there is a dispute, it will be resolved at a location that is convenient for you, and that the adjudication of the dispute will use the laws that will work most effectively in your favor. For example, for American licensors and licensees in content licensing deals involving a foreign party, it is usually not in the American party’s interest to litigate disputes in a foreign territory under foreign laws.

 

Tip # 7: Engage An Attorney Experienced In Adult Content Licensing Matters To Draft/Review Your Content Licensing Agreement.

 

The topic of adult content licensing is complex and ever-changing in the face of the dynamic economic realities of the adult entertainment business and the constant emergence of new technologies and new ways to exploit adult content. As such, the negotiation and drafting of effective adult content license agreements is as much art and future forecasting as it is a business and legal endeavor. As such, if you are considering the licensing of adult content, regardless of whether you will be a content licensor or a content licensee, I strongly recommend that you consult an adult entertainment attorney with experience in the negotiation and drafting of adult content agreements as early in the process as possible.

 

This article is not intended to be, nor should be considered to be, legal advice. I strongly urge you to seek the counsel of a qualified and experienced adult entertainment attorney familiar with the legal matters discussed in this article.

 

1Gregory A. Piccionelli is an intellectual property and adult entertainment attorney. He can be reached at Piccionelli & Sarno at (818) 201-3955 or greg@piccionellisarno.com.

 

 

 

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