Licensing a design - general discussion

[IfYouBuildIt]

I have a small manufacturing business. I have been cultivating an edgy look and feel or the business, and part of that is a sort of in-your-face logo that has generated a great deal of enthusiasm from many quarters. I made some tee shirts with the logo, and when I am wearing them, people stop me in the street to ask where I got the shirts.

I am based at ground zero for the surfer/thrasher/xtreme sports movement, with lots of local sportswear, design and other related companies. I have been thinking about partnering with one of these companies to develop my logo and capitalize on it. See, the thing is, I would dearly love to develop a line of clothing or sportswear featuring my design, but also realize I need to concentrate on my core business. Instead, I would like to offload the logo development and sportwear business to a third party on a royalty basis while I continued marketing my other products.

Today I had some very preliminary discussions with a likely partner. Before I get much further, I want to have a better idea of the arrangements I might want to propose.

Off hand, what I am thinking of doing is selling this third party the right to use the logo in original designs for sportswear, stickers, etc. He or she would be able to sell the branded products directly, but must also sell to me (so I can sell them through my website). I would want to charge a royalty based on units or - most likely - dollar sales volumes. I don't know how I would go about auditing such a royalty agreement. I would be willing to grant an exclusive license with a fixed term.

Can anyone give me some ideas of the sorts of issues I should be thinking about, to protect myself? How are these deals usually structured?

Thanks for all pointers.

[leonk]

Originally Posted by redneck

what I am thinking of doing is selling this third party the right to use the logo in original designs for sportswear, stickers, etc. He or she would be able to sell the branded products directly, but must also sell to me (so I can sell them through my website). I would want to charge a royalty based on units or - most likely - dollar sales volumes. I don't know how I would go about auditing such a royalty agreement. I would be willing to grant an exclusive license with a fixed term.

Your logo image and concept is marketable, I believe. Have you considered www.CafePress.com? You can pay someone to create the logos, and then you can upload them and have custom logo-ized products created with any markup you want... all at no cost. Years ago I had a few items created, and coincidentally spoke with their reps at the Toy Fair in New York last month. (I'm not affiliate with them).

If you want to 100% remove yourself and "sell" your rights, then you are talking about licensing your trademark. Your logo image also has copyrights, which are different. I'm not an attorney... this is just information I've gathered (and starting to put up at http://trademarktoolbar.com/ - site plug, yes- you can use it to check if there are similar trademarks registered in the USPTO).

Trademark licensing is a good idea, as it frees up the creator to do other things and leaves the development of products to people who may do it better. But you'd want to make sure you have a good contract. If you have it strictly limited in time/duration I think you'd be okay since you can renegotiate later. It gets sticky if the people you license to happen to create an offshoot logo or idea that they want to claim for themselves (and they may have rights to it).

There are some good books on the subject, including one I think is called The Licensing Handbook that you can buy online. I've heard that companies like Disney have as big of a legal department as they do a creative department, because copyrighting, licensing, and protecting creative investments is a core part of their business. As such, there are companies that sell "forensic accounting" software to help determine if a licensor is being paid appropriately for a licensee.

Registering your trademark(s) for $400 or so each may be worth it at some point early on, and you can do your own filing without an attorney if you pay $200 or $400 to a company that can prepare the information that you can submit online yourself (directly to the US Patent and Trademark office).

So, if your logo turns into a funny comic and that leads to a cartoon series that leads into action figures selling at hundreds of stores, you'd want to protect your rights to manage and profit from that... without preventing your partners from their share (but just their share, and not all of it...).

That said, you can and should reserve the right to audit the books of your partners every 6 months; have a clause that all products, services, and designs containing the letters "mesa" or "tactical" belong 100% to you (the licensor) regardless of who created it, and perhaps have a clause stating that any other spinoff products, services, or designs (trademarks/logos) belong 100% to you with a right for the partner to license them (or buy outright) within XX years for XX amount. Work with them to establish what benefits and encourages both sides to build the revenue.