Art Licensing - Should You Assign or License Your Work?

Assignments and Licensing Overview

"Should I assign my work or license it?"

As a small business owner looking to make money from your creative works, you may wonder about the best route. One of the best ways to make money as a startup artist is to execute licensing agreements or assign your work. Although many people use these terms interchangeably, there is a tremendous difference between licensing and assigning your art.

Assignments

An assignment is when you hand your art over – for good. Assigning your art to someone else gives them full ownership of it. They can do with it as they please. The assignment holder can seek legal recourse and remedies against others for misuse of the art. There are plenty of good reasons to do this. But if you're going to give your art away for good, you should pay close attention to what you're giving away.

Licenses

A license is like renting your art. It gives someone the right to use your art for a limited time and limited purposes. However, you, the artist, retain ultimate ownership of your art. The rent payment is usually a lump sum or royalty fee based on sales or revenue. The license holder cannot seek legal recourse or remedies against another company for using the art. Once the license expires, the licensee can no longer use your art. Licenses are great for partnerships because they allow you to expand your reach and exposure.

Unfortunately, many companies use terms like "exclusive licenses" for agreements that are assignments. Read the fine print carefully. Know exactly what you are and aren't giving away.

Reversions

A reversion is when something happens that causes the rights to your artwork to spring back, or return, to you. Most reversions occur in licensing agreements. You can grant a company a license to use your artwork for a set period of time. Then, when some predetermined event(s) happen, those rights terminate for that company. Your rights then flow back to you.

Here's an overview of how to spot and deal with reversions in an agreement:

Finding the Reversion

When trying to spot a reversion in an agreement, look for clauses entitled "Term," "Termination," "Reversion," "Grant of Rights," "Commercialization," or "Exploitation."

Beware of Perpetual Licenses

A license, by nature, must end. You're only allowing the person or company borrow your art. Yet some people and companies use tricky language like "perpetual license." Perpetual means never-ending. When this term is used in a licensing agreement, the other party creates an assignment of rights in your art that will never revert back to you.

Figure Out When It Reverts

Once you've spotted the reversion, understand exactly what triggers it. Common reversion triggers include:

• The agreement reaches its end date
• The company materially breaches the contract
• The company doesn't make use of your art for a period of time
• The company fails to use your art by a specific date

Sometimes, you will see a reversion based on a company going bankrupt. Courts rarely allow this clause to stand, so be very careful. If a company goes bankrupt, it may keep the license no matter what you signed. Before committing to any deal, speak with a contract attorney.

Assignments and Reversions

Although assignments are traditionally complete and permanent ownership transfers, some companies have begun including reversions in assignments. This may lead you to wonder what the difference is between an assignment with a reversion and a license with a reversion.

An assignment is a complete transfer of ownership, whereas a license is the right to use the art. The difference may seem subtle, but it's significant. If someone is assigned the art, they can make derivatives and sue people who infringe on it. Essentially, they own the art and behave accordingly as its owner. A licensee, however, cannot make a derivative of your art or enjoy the legal benefits of full ownership.

Therefore, many companies prefer an assignment with a reservation over a license. They want to be able to pursue any infringers, create derivative pieces of artwork based on your artwork, and then sublicense that artwork. If you grant a company an assignment with a reversion, make sure you are receiving compensation. It is worth much more than a simple license with a reversion.

Deciding Whether To Forgo Reversion

Some companies won't grant reversions, and you're left with the decision to sell your art or not. There are many reasons you may be happy without getting a reversion, so keep them in mind:

• The money is just too good to pass up.
• You like the company using your work, and it serves as an essential piece of work for you to advertise to other customers.
• You believe the design is short-lived anyway and wouldn't want it back.
• Assignments are generally taxed at a lower rate (capital gains) than licenses (business income), and the tax benefits are worth it to you.

Intellectual Property Rights

There are several intellectual property rights factors to consider when deciding to assign or license your artwork. Let's dive into a brief overview of intellectual property law and how it might affect your decision.

There are four types of intellectual property: trademarks, patents, trade secrets, and copyrights. The United States Patent and Trademark Office handles trademarks and patent registration. The U.S. Copyright Office handles copyright registration. Trade secrets do not require registration. However, protect your trade secret by having others you share confidential business information with sign a non-disclosure agreement.

Copyrights Add Value to Your Art Agreements

Copyrights protect creative works such as artistic works, literary works, and sound recordings. Copyright law automatically grants protection to your original works of art as soon as they are created in a tangible form. Although copyright protection is automatic upon creation, registering your fine art with the U.S. Copyright Office provides legal benefits. These benefits include seeking statutory damages and attorney fees in case of copyright infringement. It can also increase the value of your art to assignees or licensees.

As a copyright owner, you have the exclusive right to display, reproduce, distribute, and create derivative works based on your artwork. A derivative work is created based on someone else's copyrighted artwork. Derivative works require permission from the original copyright owner to create the subsequent works. Public domain means that copyrighted works no longer have copyright protection and can be used freely by everyone. Fair use allows the use of copyrighted works without permission from the owner for:

• Criticism
• News reporting
• Education
• Commentary
• Research

Need Art Licensing Legal Advice?

An intellectual property law attorney can explain the differences between assignments and licenses and help you with copyright legal actions.