What We Talk About When We Talk About Licensing

Ok, you’ve created something, great.  You put in the time, the effort, and your know-how to make a film or a piece of art or a song and it’s just what you wanted it to be.  Other people have started to take notice of your work and they want to use it.  Excellent!  So now you need something that will let someone else use your creation while protecting your rights to your work.  Enter: the licensing agreement.

To understand what a licensing agreement is, you should know a little bit about property law because intellectual property law shares its most basic concepts with property law.  Property law is commonly referred to as a bundle of rights.  The specific rights in your bundle change depending on your interest in the property; landlords have different rights than tenants and both have different rights compared to an outright owner.  One of the most important property rights is the right to exclude others; it’s what defines my yard from my neighbor’s yard.  If my neighbor doesn’t want me on his yard, he can have me ejected for trespass.  Or he may let me stay in his yard while we chat about 90s hip hop.  His allowance to let me remain for the discussion is a license.  It does not grant me any kind of ownership of my neighbor’s yard, right to let others enter his yard, or right to change the flowers in his bedding area.  This particular license lets me stay in his yard so long as he wants to hear me talk about the East Coast-West Coast rivalry.  In copyright law, a license essentially allows others to come onto your metaphorical yard for specific reasons.  You still own your copyright, but others may use your work and you may charge them a fee called a royalty.

Licenses are one of several kinds of limitations on the exclusivity of copyright and there are two kinds of licenses: compulsory and non-compulsory.  Compulsory licenses are those that a creator must give to others (i.e., cannot withhold the license) and are limited to nondramatic musical works (songs, essentially).  To obtain a compulsory license, a person must follow the requirements of 17 USC § 115.

For example, to obtain a compulsory license to record and distribute, for private use, your own version of Ice Ice Baby, you must file a Notice of Intention to Obtain Compulsory License with the copyright owners and pay the statutory royalty.  Vanilla Ice, DJ Earthquake, Queen, and David Bowie all have a writing credit for Ice Ice Baby, but who owns the copyright?  If you aren’t sure, you have to check the Copyright Office records and if the Copyright Office records do not indicate who the owner is then you can file the notice with the Copyright Office.  You have to file this notice no later than 30 days after you make your recording and before you distribute it.  The amount of royalty you pay is set by the Copyright Royalty Board and as of this writing is 9.1 cents per song or 1.75 cents per minute for songs over 5 minutes.  Thus, if you sell (you don’t pay if you don’t sell) 1000 records with your version of Ice Ice Baby, you have to pay the copyright owners their share of $9.10.

Non-compulsory licenses let someone else use your work, regardless of what type of work it is, but only with your permission.  There are two kinds of non-compulsory licenses: exclusive and non-exclusive.  An exclusive license is essentially a transfer of whatever rights are contained in the license (so unless all rights are included, it’s not technically a sale of the copyright).  Even the original owner of the copyright can no longer exercise the licensed rights without infringing on the licensee’s rights.  Exclusive licenses must be done in writing and signed by the copyright owner due to the dynamic change in rights associated with the copyrighted work.  The holder of an exclusive license may exercise the rights granted by the license, sue for infringement, and transfer or license their rights to others.

Non-exclusive licenses let the licensee exercise the granted rights while retaining the licensor’s ability to exercise and license the same rights to others.  A non-exclusive license does not have to be in writing.  You may use an oral agreement.  However, when people start disagreeing about oral contracts, problems abound.  You should always get contracts in writing when you can to save yourself legal heartache later.  The holder of a non-exclusive license may not transfer their license or rights to others and may not sue for infringement.  The vast majority of copyright licenses are non-exclusive licenses.  These are contracts and as such require careful negotiation over the terms to protect the rights each party desires to get from the other.  You can find all kinds of free, boilerplate licensing agreements all over the Internet.  Maybe these will work for you, maybe they will cause legal heartache.  The more complex your agreement is (read, the more ambitious the project is), the more likely you will need professional help in crafting the agreement.  An ounce of prevention…

Lastly, the law limits licenses in two important ways.  These limits are limited themselves, though: neither of the following limits applies to works made for hire.  The first limit comes from 17 USC § 304 (c), which grants authors of works created before 1 January 1978, 19 “extra” years of copyright.  In 1976 Congress extended the term of copyrights by 19 years.  If an author sold his copyright during its term of protection, instead of expiring when it would have under the law before the 1976 Copyright Act, ownership reverts to the author for the last 19 years. 

The second limit comes from 17 USC § 203.  This section allows authors of works created after 1977 to terminate licenses and transfers after a period of 35 years.  If you sell a copyright to make rent and the copyrighted work later goes on to be worth millions, you can get the copyright back 35 years later.  This is not an automatic process, though, the author must act to get the copyright back from the current owner. 

Ok, that’s a lot of licensing!  Hopefully you now know a little more about what you’re talking about when you are considering licensing your work to another or another’s work for yourself.