One of the most contentious areas in licensing negotiations is in the area of ownership of derivative IP. The most effective articulation of the issue that I have seen was by Jill Riola, a highly capable licensing attorney working at Carlton Fields in Orlando. During negotiations with a team of attorneys from a Fortune 500 firm that was licensing our IP, she brought it back to first principles:
· We own our IP (blue Play-Doh)
· You own your IP (red Play-Doh)
· We are granting you the right to create purple Play-Doh, using our blue in combination with your red
· But you do not own purple Play-Doh, because by definition, purple must contain some blue.
Furthermore, when viewed this way, all of the terms contained within the licensing agreement, including restrictions on Field of Use, royalty rates, etc., apply for all shades of purple Play-Doh.
We could get down in the weeds and occasionally lose sight of the issue, so it was amusing to watch how Jill would bring it back to first principles. “If it’s blue Play-Doh it’s ours…You own all of the red you can develop, but if it’s purple, you don’t own it, and you owe us if you sell any.”
Agree on who owns what Play-Doh upfront, and the specifics of the agreement will be much easier to draft later.
That’s my .02!
martin.suter (at) iplicensing.net
Play-Doh is a registered trademark of Hasbro, Inc. Its use herein is strictly to illustrate a legal concept. No endorsement by Hasbro is expressed or implied.