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Retailers and licensing agreements: how does it work?

If there is one thing that we have tried to make clear on this blog in past posts it's that the entertainment industry is a relatively complex machine that depends on its many pieces to make the entire system work properly. One small aspect of this process that we will look at today is how licensing agreements work within the industry.

From sports jerseys to movie character toys, all of these things can turn a profit for a business within the entertainment industry. This is first done by obtaining a copyright for the item. This copyright, as you may already know, protects the item from being duplicated or sold without the copyright owner's consent.

To sell the item, a retailer would need to enter into what is called a licensing agreement with the copyright owner. Both the licensee and the licensor typically enter into negotiations that stipulate everything from the length of the licensing agreement to the specific monetary compensation the licensor will receive.

What some of our California readers might not realize though is that once a licensing agreement expires, the retailer is no longer allowed to continue selling the licensed merchandise without first signing a new licensing agreement. If a retailer continues to sell licensed merchandise after an agreement has expired then they could be accused of trademark infringement and held liable for damages in civil litigation.

As important as it is for licensees to maintain their licensing agreements, it is just as important for a licensor to do the same. That's because it is the duty of the licensor to monitor and enforce their trademark rights. Failing to do so could cause the licensor to lose their intellectual property rights. This could complicate litigation and require even more help of a skilled lawyer than before.

Source: smallbusiness.chron.com, "The Rights of Retailers to Sell Merchandise When a License Has Expired," Jill Stimson, Accessed Nov. 12. 2014

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