How To QUADRUPLE Your Business Revenue With Licensing

I'm Brittany Ratelle, an attorney for online business owners, and I'm so excited to have you here. I help business owners just like you get legally legit so they can show up and own their business in every sense of the word. And today we're going to be talking about the world of licensing and what you need to know as a modern business owner to make sure that you are protecting and investing and harvesting all the amazing money and revenue opportunities that are part of the brand and the content that you've already created. If you've been paying attention, this is part of a foundational series that we've been doing about getting your business legally legit and getting your foundation, people, brand, and product set up. And what we're talking about today in licensing actually stretches across a few of these because we're talking about how do you deal with other people and in a way share all of the good things that you've built about your brand name or your product or your artwork or your audience or community, and also putting good boundaries around that relationship so that you can continue to show up and serve and expand your revenue generating opportunities beyond what you can immediately do on your own. This is about harnessing the power of people and community and co-branded and joint ventures and all of that really exciting stuff in a really smart and savvy way. Like all my other online content I offer, I have to have a little disclaimer. While I'm an intellectual property and business attorney licensed in Idaho and Utah, I'm not your attorney and this is not an attorney-client relationship. So if you have any questions about what you hear today or in any of my resources and content, make sure you reach out with an attorney in your jurisdiction. Let's get into it. So today we're going to talk about licensing Licensing is a very broad term in intellectual property law that really talks about the business of divvying up the rights that someone gets when they create something, and now they want to give or usually sell some of those rights to other people under a lot of very specific circumstances. So I've used this analogy before, but when you are the creator of a new work, okay, say you are a photographer, an artist, a musician, a content creator, a public speaker, a hand letterer. When you create a work and it comes out of your head into something, meaning it's a product or it's written down or you record yourself. Any of those count as a work. You are the creator, and really you have baked a creative cake. And the great thing about a cake is that when you create it, you own all the slices automatically because you created it. And there are some benefits to registering the rights to your cake, and that's called a copyright registration. And I talk a little bit about more in my other video about intellectual property tools. So make sure if you haven't watched that one, make sure you watch it so So we'll assume that you went ahead and watched that and you're ready to come back. Now you're ready to learn how can I make money with my cake, Britt? And that involves licensing. It means that you are going to look at your cake and you have all these slices and you're going to say, you know what, I created this cool work and I am going to sell to you this slice, meaning you get the rights to use this work and to put it on t-shirts and to sell those t-shirts. And that is called licensing. And so you can quickly see how this can increase and really elevate the opportunities that you have because while you might not be an expert in t-shirts. Someone else might be the expert in that. In fact, they might have figured all of that out and have a really great system for it. And so licensing allows you to partner with that person for you to work together and for you to license your work with this other person so that you guys can both make money, be happy, solve people's problems. If we're going to talk about licensing, the most important agreement, as you might expect, is the licensing contract or the licensing agreement. And this is usually a pretty thick contract that is going to outline and really put strong language language around the relationship that you're going to have with your licensing partner. So let's dig into what exactly are the terms that you need to be paying attention to if you are handed a licensing agreement, if you are drafting a licensing agreement, or say we're not into contract territory yet. If you are just starting the discussion about putting together a licensing relationship with somebody, what are some of the things that you should be thinking about and you be prepared to either offer or be asking questions about so you can come to really good terms and really understand what is this going to give and take? What are going to be the asks and the promises and the deliverables of a good licensing relationship. Licensing agreements come in all shapes and sizes, and there are some specific ones that you're probably familiar with if they're in your industry. For example, if you are an author, you probably know about publishing agreements, or if you are an influencer, you've probably seen influencer collaboration or sponsored content agreements. Those are forms of licensing agreement. Same thing if you're an influencer or if you are in the merchandise and physical product side, it's likely that you probably see things called collaboration agreements or joint marketing agreements or co-branded products. What could be tricky about this is there's no standard nomenclature of what to call them. Sometimes attorneys like to flex their creative powers in really weird ways, just like people in Utah when they name their children. I could say that because I had all my children in Utah. It means people are using their creativity in sometimes weird ways, and we're not really sure what to expect or if these agreements are all talking about the same thing. And they are. If you see a licensing agreement or you see some of these terms and we're talking about taking intellectual property and parceling out rights, That's licensing. The first thing you want to pay attention to is term. Term means what is the length of the agreement? What's set up? We're going to get into a business marriage, right? How long is this marriage going to last? And I know it seems weird at the outset, but this is how business is done in licensing. You want to know how long because you are committing and locked into this partner. Most licensing agreements, a term is pretty normal, anywhere between 1 to 3 to 4 years. Have I seen longer than that? Yes. I don't love those agreements because again, you could not be controlling for inflation, huge change of circumstances, meaning one party could get way more popular and should have a higher rate, and yet they're locked in at this rate. Less than a year is usually pretty rare unless this is something that has a really quick turnaround time like a digital product. For any kind of physical product, it's usually going to take longer than that to source and get all of that worked out. It's normal for people to ask for a little bit more of a lock-in because they want to make sure they're not outlaying all of that investment in capital and then you're going to run away and not deliver on your end of the deal. So know what the term of your licensing agreement is and sure that how your licensing agreement renews. A lot of licensing agreements are set up to auto-renew, or they say if the parties don't come together and negotiate with 30-day notice or 60-day notice, we're going to assume that this agreement continues forward. And so if you are the party that's creating the work and you have a licensee partner, a distribution partner, and the deal's going okay, but you want to make sure that you come to the table and can maybe renegotiate because you're in a different position of power— this would be a great time to call an attorney, by the way— make sure you have this in your calendar. Check your contract, and whatever that date is, add in a couple of weeks before to make sure that you're reaching out and saying, hey, I noticed that our contract is set to renew at this date, would love to set up a meeting so we can talk about it. Don't assume that someone will remind you because if the contract's working for them, the deal's working for them, they might just keep on rolling. It's going to be a Proud Mary situation rolling down the river and you might get swept up with it. Let's talk next about royalties. Money. Everyone cares about the money in the contract. Of course you do. So royalties is normally how people pay out on licensing contracts, and royalty means you get a percentage of how much is sold. And it's a really fair way of distributing risk, right? Because I don't know how much money we're gonna make, you don't know how much money we're gonna make, so we're gonna split and give you a percentage based on how much money we make. Sounds pretty great. Licensing rates can vary. I know people want to know an exact number, and it really depends on the cost of the product, how much your creative work is the one that's selling the product. Disney can command physical product licensing rates of 10% maybe even 15%. A lot of people aren't Disney and they don't have the name power of Disney and all their brands and IP portfolio behind it. So don't be offended if your licensing agreement is 5% or 7%. And again, that's probably going to be on gross revenue. Something you want to make sure you understand in your royalties is how often are they paid. Quarterly is pretty normal, but it could be monthly. It also could be twice a year or yearly. I wouldn't recommend that. How are they calculated? Is the royalty rate going to be based on gross revenue, meaning the actual price, like all money for a product, or is it calculated on the profit? Note that if it's on the net profit, your person who's selling it is going to have better control. I'm not saying that someone could rip you off or is padding the expenses, but you might not have as much information or control over what are the shipping costs, what are the fulfillment costs, what are all those other costs that might be going into that could be affecting your profit share that you might not have access to. And so those can quickly eat up some of your profits in a way that impacts you more than it does your other partner. Royalties can also come in tiers. This is more common in like book publishing agreements, for example, is it's this rate based on this much volume and then if you sell more, we're in a different pricing tier, and so on and so forth. We also see this in other entertainment contracts. You see this a lot in larger-scale film production agreements. Also check for audit rights. Is there a right for you to look at the books and to audit your other partner? Because you're relying on them to be honest, and you might not have access to the dashboard and behind the scenes of how many sales are coming in, and you're just expecting that they're doing a good job with their math and their bookkeeping, and they're writing you and sending you their check like they're supposed to. If you have any doubt whether you're being ripped off or you're not being paid everything that you should be be paid, check for an audit right in your contract and exercise that if you need to. Most of those audit rights will say like on a reasonable basis or maybe once a year, or that you have to pay for it unless they find something. If auditors find that there's something not right and not going okay, then the other side has to pony up, which makes sense, right? Because they need to fix their mistake. Check for exchange rates and inflation, especially if you're dealing with international partners. You want to be really clear whether this is American dollars or Australian dollars or Canadian dollars and how you're being paid and the manner. Are they physically going to be sending you a check? And if so, to which address? Make sure that's an address box that you have control over. Or are they going to be giving you a wire transfer or electronic payment? And then check for quality assurance. I know that's kind of part of like royalty and control, but make sure— do you have a right to look at the samples beforehand? Do you have any rights to check the marketing or the use of your name, image, and likeness before it's released? Depending on what the asks are in the relationship, make sure that you are getting the rights that you need so that people are having a really consistent and a good relationship. So that if you're partnering with someone, they can't give really cheap merch that's going to have a bad customer experience with your audience and community, and it's going to reflect back poorly on you even though you didn't okay that. Next piece, let's talk about the work. This is the thing that you're licensing, right? So this could be the surface pattern design, this could be the audio that you created, this could be the online course, this could be the book or the ebook. This is the thing you created, and now that is probably titled the work. And we need to make sure, first of all, that you have protected all the rights to it. There's likely in that licensing agreement going to be what's called reps and warranties, which means These are promises you're making to the other side that say, hey, I created all this stuff, it's all original, I know where it came from, either I created it or my people did and I have written agreements to show that, or I got it properly licensed. And you are making a promise and standing behind that's the way it was. What can be problematic here is that if that's not the way it went down, then you could be in breach of contract. And that way, if there's allegations or if there's fallout down the line about who created, you likely will have to indemnify and come to the aid. Basically, in a litigation sense, you will have to pony up the time and money to defend your other licensing partner because you promised that the stuff was original and it turns out it wasn't. Before you get into licensing, it's a really good idea to work with an intellectual property attorney like me or a smart colleague and make sure that you've taken a look at your work and your brand and your content and you've done your own homework. You've set out good boundaries around it. You've either registered the copyright to it or you've registered the trademark or you have contracts in place that protect the work to make sure that you've built this on solid ground, on real estate that you own. And that's why then you can then turn and wheel and deal that creator cake like we talked about to other people. We don't want to be selling cake slices when we don't have a cake, or we made a cake with bad ingredients. The ingredients, we said it was real cinnamon, turns out it wasn't real cinnamon. And that's a bummer because we lied and we're likely in breach of contract. The worst thing, like I tell my little kids, I'm a mama of 4, we make mistakes. What's not great is making another mistake by lying about our first mistake. So let's make sure that we're not making liars of ourselves. Let's make sure we're owning what we create so that we're ready for all these awesome opportunities of licensing and royalties and expansion projects. Sometimes royalties don't work out, or they're not practically feasible. I will say that if you're a smaller business or brand and you're working with another smaller business, brand, or partner, royalty structures can be a lot to figure out. Like I said, you need to have really good bookkeeping. You need to make sure people are keeping track of the SKUs and how many we sold and what were the costs and can we attribute all that and that we have good balance sheets and forecasting and all of that. If all of that is giving you hives right now and you're like, we're not doing any of that, then you might not be ready for royalties yet, and that's okay. The other way that you can structure a licensing agreement is with a buyout or a limited buyout or a license of use. And this means that you are gonna allow someone to use your work for a limited amount of time and you're just gonna charge them a fee for it. And you're gonna say, look, lovely brand, you can use my artwork and put them on your socks socks, and you can put them on 5,000 socks, or you can put them on your fall collection, or you can use them for the next year or 6 months. You can really wheel and deal and make this really custom to your needs, but you should be charging enough for like your design fee and then also a good forecast of what do you think you're going to make from it. And then you can also structure payments. Maybe they pay you a little bit now for your time and for setting up the agreement, and then they pay you every month a set fee, or after launch they're supposed to pay you within 30 days. So just know there are different ways that you can set up a licensing agreement if royalties just don't make a lot of practical sense for one or both sides. We talked about the work and how copyright or trademark always needs to come first. And in other ways is to make sure that we have all the intellectual property rights. I talked a little bit about contracts, but something else you should have is your CEO hat on. We talk a lot about that a lot here on my channel. Make sure you are the owner of your business. Law doesn't care whether you're a little business or a big business. You're the CEO. The buck stops with you. So we want to put on that CEO hat and think about, did anyone else touch this work? Create this work, pour into this work, and I don't have anything in writing about it. Because the way copyright law works here in the United States is that the person who created the work owns the rights unless you have something in writing otherwise. Where I see this come into play a lot is when we're dealing with photography or videography works, because it's possible that you did not do the photography or videography or recording of your work. And if you didn't do it yourself, that's fine. I love hiring experts. Do what you do best and hire out the rest. But if you did that, make sure the people you hired that you either had a written agreement like a copyright assignment or a work-for-hire agreement or an independent contractor agreement that spelled out all that cool stuff they were making got properly assigned and transferred to you and put in your business pot. Because if it's not in your business pot, then you can't turn around and go license that to someone else, okay? We're lying because we're saying I can license this and you can pay me money for it, but we don't actually own it in the first place, which can get in trouble down the road. So make sure we own our rights to that and we've done a good audit and worked with a good IP attorney to make our house is in order so that we're ready to build on and add that addition. Next, we want to talk about exclusivity. And exclusivity means just like it says, I want to be exclusive. Think of this as like our DTR, okay? The define the relationship talk that you're having. If we're going back to our business marriage metaphor, it's probably a good idea if you're going to get business married to someone that you have a talk at some point of, hey, it's my expectation that we would be exclusive. And what do you mean by exclusive? Exclusive could mean certain product categories. And so if you're again the creator and you have your cool artwork, artwork and you're working with your sock person, awesome. You probably want to have in your agreement that I am licensing this artwork exclusively for socks. If you say clothing, then it means they could put it on any clothing, which maybe you want, maybe you don't. Because what if the next day someone comes and they're like the hat guru and you're like, dang it, this person really knows hats, but I just told this person they could be exclusive for all clothing and they might not even do hats, but I gave them exclusivity. And so now I'd have to go back and renegotiate. Not ideal because we're not in a great bargaining position. So make sure that you're thinking about what, what makes sense for exclusivity, especially for that term. Okay, if you're giving someone a big term, make sure that they can't just sit on it. I was at a conference once and we were crafting during lunchtime because it was that kind of fun conference, and there was someone next to me who was telling a horror story that she had signed. She was this cool artist and she had signed the licensing agreement a few years ago before she had met me, unfortunately, and the person had gotten that locked out exclusivity on a few of her best-selling designs, her most popular stuff, and they sat on it. They did not release any products. They didn't put any marketing budget behind it. They didn't advertise it. But they had exclusivity, and there was nothing she could do because there wasn't language in that contract to protect her and say, by the way, if you don't launch something and sell this without a certain amount of time, deal's off. I get the rights to my stuff back. We call that a reversion of rights, and it's really important in a contract if you think there's any chance chance that this person might not sell that or might put you on the back burner and just stuff comes up and it's a year and it's 2 years because you again have given them that exclusivity. You sold that to them and she got like a tiny little payout in the beginning where she should have been charging and making a lot more money. I tell you that not because I love to scare you guys. I don't like to use that fear, uncertainty, doubt. I know marketers tell me to use that all the time, but I want you to know the realities of licensing. That's what I'm here is to make sure that I'm giving you good information so you can make smart decisions. And the last thing we want is for someone to be a freaking toadstool on your creative work because you haven't protected your rights. So make sure that you are limiting the product categories. Don't let them have exclusivity for everything unless they're really going to do a good job and it's worth it and you're getting the right price for all of that. Exclusivity can also be limited to territory. Say you are giving someone exclusive use for a state, or normally it's more like they want all North America, or they want English language. If you're getting to the publishing realm, they usually specify by like the language or the European zone, or like zones of economic commerce. So make sure you understand what territory and make sure it's— we're being really clear on what distribution they have and that you're giving up the rights and money that you're giving up this agreement, that there's a good balance on the other side. So subsidiary licensing especially comes up in a lot of entertainment contracts like publishing and movie agreements, and it's basically that you created your cake, you're giving them the slice, they can take that slice and cut it into really tiny slices that you serve to like kindergarteners so they're not sugared up for their poor teachers, and they're gonna go and dole out those You may want them to have that power, you may not. And if you don't, you need to make sure that there is no subsidiary licensing rights that are going to be granted to your partner on the other side. Next, we want to talk about use, and this is especially important depending on the format and the manner and again, what kind of exclusivity we're giving. So what can they do? What are the IP rights they are actually getting to your thing? What is in the slice that you are selling to this partner? Can they use it on specific products? Is it limited to certain media formats? It's hard for me to get because this can be very customized depending on the type of agreement and the type of property that's being licensed. But these are some questions and good questions that you should have as you're approaching negotiations and discussions with licensing partners. Next, we get to our boilerplate stuff that should really be in just about any contract— NDA language, or non-disclosure agreement. This means we want to make sure that we are both pulling back the curtain a little bit on our businesses, and we want to make sure that we're being professional and respecting our access to different information, to confidential and proprietary information that normally the public does not see, like our pricing or editorial calendar or our products. We want to make sure we talk about assignment. Assignment means that someone can take their slice and then go and sell it to someone else. Sometimes assignments are allowed if someone sells their whole company to someone else, and so watch for that. I like to add in when I'm redlining these agreements and negotiating for this partner's— you can do that with permission. You want to sell your whole company and you get bought out by someone else and acquired? Awesome, good for you. I'd like a heads up and I'd like to approve that because because I knew you, I trusted you. New phone, who dis? I don't know who this new guy is. We didn't talk, we didn't have a relationship. So you want to make sure that you maybe have an out if you don't like that new partner, or if things have changed enough, circumstances have changed enough that the new deal is no good for you and you want a new deal. Termination means how can we kill the deal? Make sure you have language in there saying that if there's a breach of contract, you can kill it. Possibly if it's a type of agreement where you can do like a trial period, if someone will agree to that, can give you an out in terms of termination. But make sure you understand if we need to kill this deal, can I walk away? We talked about this a little bit. Indemnity is that weird legal doctrine stuff that lawyers worry about, right? But indemnity involves who is going to be coming to bat for someone if we have a third-party problem. If someone else sues us for something and we're looking around, is this your problem? Is this my problem? Indemnity answers that. Sometimes we cross the whole agreement out. Sometimes we make it mutual, meaning, okay, you're in charge of the things that you can control and come to bat for that. I'm going to cover and back up the stuff that I can control. We're not shifting it the opposite way. Make sure that you're not taking on and then indemnifying a company, especially if it's a big company and they're a big target and they could have a class action lawsuit. And it's stuff that you could have no control over because you did your bit, but they did shady stuff in their business, or they took your artwork and put it on a crappy product. So things like product liability, that's a good thing to watch for, especially when you're doing physical product licensing. And then dispute resolution— if there's a problem here, where are we going to go to fight it out? Especially, you don't likely want to be dragged around the world in someone else's court because that's going to cost even more. So if you can, try to negotiate and bring that dispute resolution closer to home. And then I mentioned again, there are some special type of licensing agreements, and depending on what you need in your business, I sell a bunch of these templates in my shop called Creative Contracts. It's an industry-tested, attorney-drafted resource where you can get DIY templates with training so you can actually know what's in your fine print. Because having a contract and you not knowing what's in it, not really doing a whole lot of good. I sell these DIY templates, and they are drafted using the most up-to-date clauses and terms and situations that are happening from me as practicing attorney. I know there's options out on the internet right now where you can buy contract templates, but a lot of those are sold by people who are not practicing in your area, so they're not going to give you the training and support for you to talk about the issues that you need to so you can make a really good deal that's a win-win for everyone. I mentioned book publishing agreements are a type of licensing. Music collaboration agreements, co-branded product collaborations, and these are the special hybrid licensing slash collaboration agreement because it's probably not a strict licensing because these agreements and deals are usually like someone maybe has the cool IP and then maybe someone is a distribution partner, or they both could have IP, they both have audiences. It makes sense, like we're going to go into business marriage together for this product and we're maybe both going to put in time and money, and so we want to have terms on how that works out. I'd be getting a lot of requests for these, and so I have one of these in my shop. So if you are in either end of this, in terms of you want to do collaborations or you have requests for collaborations and you're like, we really need a contract, especially because you're not forming a new business for it. Make sure you grab one of those agreements. And then influencer content agreements, whether you are an influencer, agency, or the brand, anyone in that triangle, you should really be using a good solid contract. And then program and course certifications. And I know this is maybe a little bit outside the box, but really if you have a certification program and you are training people in your framework or coaching methodology, you are in effect licensing the use of your name and your curriculum to that person. So it's a type of type of licensing agreement, and they're becoming really popular as the coaching industry is changing. And so if that's something that you're interested in, make sure and get one of those agreements so that you can set up these certification programs properly, so that your name is safe and protected even as your empire expands beyond your immediate center of control. Thanks so much for joining me here. Again, I'm Brittany Ratelle, attorney for creatives and online business owners. Make sure if you like this video, like and subscribe. I've got other resources here to you get your online business legally legit and protected so that you're ready to grow and scale, especially when we start talking about all the exciting fun things we did today. Licensing is a super cool way, and you can quadruple or exponentially add to the revenue streams of your business. I want you to put on your big, beautiful, audacious licensing hat and just blow your own mind a little bit of what could you do with the amazing, incredible stuff that you've created. I hope I've given you some ideas of what you could do today and also how you could protect and start to structure those relationships. Thanks again for being here.