Bad behavior is why clear contract terms are critical to the success of a brand and celebrity licensing partnership. As Benjamin Franklin once said, “It takes many good deeds to build a good reputation, and only one bad one to lose it.”
It’s human nature to test rules and boundaries, sometimes break them, accept them and respect them. Our entire lives we are exposed to rules and agreements. We learn early on that agreements facilitate trust, and we learn the full extent of their value when disputes arise.
A Brief History Of Contracts And Celebrity Right Of Publicity
Written in 1750 BC, The Code of Hammurabi was one of the earliest and most complete written legal codes. The Hammurabi code of laws, is a collection of 282 rules, established standards for commercial interactions and set fines and punishments to meet the requirements of justice. People have been dealing with contracts and the interpretation of contract terms for well over 3,700 years. A breach of the Hammurabi Code may have resulted in losing your head; in today’s world, it can make you feel like you are losing your head.
Rights Of Publicity And Protections Under The Law
The right of publicity (ROP), which came into play between 1953 and 1954, is the inherent right of every human being to control the commercial use of his or her identity. ROP does not have a federal law under which it operates; there is no unified federal standard for protection. ROP is recognized under state law and interpretation varies State by State. Name and likeness are mostly covered by state statutes and common law.
Additional aspects can vary substantially State by State. Some States and not all recognize voice, mannerisms and other forms of imagery. So, manufacturers need to be mindful of these nuances (especially when considering the risk of “parallel developing” something that will confuse the general population). When negotiating a contract, to be prudent, make an effort to clarify all potential intangible assets for which one will be licensed, and make note of the State to which the law of the contract is governed.
Celebrity Licensing And Endorsement Contracts
I recently caught up with Ken Schulman, Partner at Pryor Cashman. Ken’s practice includes celebrity and corporate brand development, copyright and trademark protection, litigation, arbitration, and general corporate and commercial counseling.
“Depending on the deliverables, you can have a 10, 22 or 100-page contract,” said Ken, “and with reasonable provisions and a schedule of requested activity, typically both parties act in good faith.” We discussed how both parties take risks; the licensee financial and the celebrity reputation. “Most celebrity licensing deals are more transactional in nature.” One defines what the artist shall do, how that may be done, and agree upon payment terms. For example, if the celebrity is to use their social media to promote a licensed product, one may negotiate if it will be the licensee who prepares the content for the artist’s approval or someone on the artist’s team to submit for the licensee’s approval.
Everything is a negotiation – financial, approval rights, activation, and termination. While the terms are the driving force, both parties are engaging based on reputation and relationship.
“Celebrities not making themselves available doesn’t help anyone,” said Jennifer Keene, Vice President, Athlete and Property Marketing at Octagon. She continued, “ The last thing I want when I do a partnership with a brand and my client is for the assets (e.g., time for production work or appearances, etc.) to go unutilized or underutilized. I want partners to leverage the assets and see the impact of working with a celebrity spokesperson can have for a brand. In most cases, there are protections in our agreements that protect the brand from a celebrity taking a deal but then never following through. There are provisions about the talent using ‘best efforts’ to make themselves available for contractual obligations with sufficient advance notice and ‘subject to his/her professional availability.’ There’s a grey area, of course,” Jennifer continued. “From the talent side, though, we usually include a provision that stipulates that a brand’s failure to request the services from the talent doesn’t give the brand reason to terminate the deal.”
What To Do Before And After Something Goes Wrong
Throughout my career, I have trained direct reports to be on great terms with the legal, finance and accounting departments, and always be nice to your corporate communications and PR teams. My suggestions include, and are not limited to:
- Always go to your attorney prepared with something to discuss and state what counsel you seek. Imagine your attorney looking at a list of 10 people whose calls need to be returned; how do you brand yourself to be bumped to the top of the list. Be the one who is prepared to discuss. If you have no idea what course of action to take, at least be prepared to discuss the dollars at risk, and/or the potential PR disaster at hand.
- Don’t wait to alert your legal, finance and accounting, and PR departments when something is at risk.
- Be respectful of your attorney’s time. I used to have “a deal” with the in-house attorney who did my contracts while at the NBA: One minute per thousand dollars of the minimum guarantee of the contract at hand.
Below are some additional thoughts and considerations to think through when entering into a celebrity licensing partnership.
Terms Regarding Payments Schedules, Marketing Requirements, And Product Approvals
- If there is a sales goal in addition to a minimum guarantee, is there a commensurate schedule of approval timelines that must be met? If a celebrity doesn’t approve product within the manufacturer’s sales and production timelines, how does that bear consequence? What if the licensee doesn’t submit their samples on time? Is there a cure?
- If a manufacturer ships an approved product, with quality standards that are of a material change from that which is approved, resulting in a sales and PR problem, then what? What defines a material change?
- If there is a minimum marketing spend requirement by the licensee, what is that for? Say, for example, there is an annual minimum ad spend requirement, is it for “new or old” product? Is the product evergreen, or is it trend?
For discussion, say the product of an agreement is seasonal apparel with two floor-sets (spring and fall), over a five-year term, and the manufacturer has agreed to spend $500K annually on marketing. Clarify to what each year’s marketing spend requirement correlates. For example, if a celebrity doesn’t approve the new season collection, is the licensee removed of the marketing-spend obligation for the season in the year said disapproved product would have been on retail floors? Can the $2.5M marketing budget be spent over the term, as opposed to annually? Is cross-collateralization acceptable? What are the notifications provisions in place to protect both parties? Are those provisions being met?
Obligations Of Both Parties
As it pertains to celebrity participation, the licensee will want to clarify how expenses are managed. Have a conversation about what reasonable and necessary expenses mean, and how travel for appearances will work.
What are the endorsement activities? Stipulate and define:
Promotional Appearance. Televised, non-televised? How many days, hours per day, and what is the notification requirement for the appearance?
Shopping Channel. Is the licensee allowed to use B Roll Footage?
Print Advertisements. Typically a celebrity will appear for a one (1) day photoshoot and will want the right to select their hair & makeup stylist, and have the approval of the photographer.
Television Commerce. When may and may not will the licensee be permitted to utilize T-Commerce?
Web Site Link. What kind of link or links will be permitted, and what is the approval process?
Social Media. As this is a newer and evolving type of celebrity activation tool, based on when the contract is being negotiated, you will need to address the who, what, why, where, when and how vis-à-vis the current environment.
Negotiate that endorsement fees or portions of financial obligations be defined on an ‘Activation Schedule’ defining what events trigger payments. For example, if a licensee agrees to pay a celebrity $25K for five tweets, negotiate something like $10k as an advance, and the remaining $15K is due upon completion of the fifth tweet, or something like that.
-Where possible, set up a shared calendar between someone on the celebrity’s team and your project management team, and maintain it.
-What measures will the licensee have in place to ensure quality standards are maintained?
-What happens to approved product and marketing collateral upon termination or expiration?
-Do you have the right resources? If you are turning a negotiated contract over to a younger or ‘green’ employee/team to manage, ask yourself if you have the time and resources to mentor and monitor an initiative.
Sometimes, it is worth hiring a “project employee” or to retain a seasoned independent “project mentor” to have them help set up, and/or monitor and be on-call to help ensure best practices are being followed to ensure success.
Warranties & Obligations
My friend Greg Battersby has practiced law for more than 40 years, and is one of the most respected names in the field of intellectual property law and licensing. He is also a prolific author and has co-authored more than 36 books on various licensing and intellectual property topics. We both served on the Board of Directors at LIMA (now Licensing International, the licensing trade association) and have had many a discussion over the years about celebrity licensing.
We agree that some warranties & obligations are black and white. For example, the celebrity of an agreement will represent and warrant that they are in good health and don’t plan to retire during the term of the agreement.
Then we have the moral turpitude clauses. Contracts with “morals” clauses are nothing new and are common and important. One needs to be critically clear on what constitutes a violation, and even then there can be room for interpretation.
When a licensee has already paid a celebrity for something, don’t count on getting anything paid back. When the dollars involved are large, and the two parties can’t see eye-to-eye on damages compensation, “Then you will have a lawsuit,” according to Greg.
Morals clauses will vary. In his Bloomberg Law article entitled, ‘INSIGHT: A Moral Compass—A Guide to Celebrity-Focused Morals Clauses‘, Steven S. Sidman – Carlton Fields- states that a typical morals clause goes a little something like this:
“Company shall have the right to terminate this Agreement if Artist knowingly and publicly disparages the products or services of Company or is charged with a crime involving moral turpitude, notwithstanding any subsequent dropping of such charges, and such charges become known to the public, or if Artist is otherwise involved in activities that subject Artist to widespread public contempt and/or which materially tarnishes Company’s image. In the event of such termination, no further compensation shall be due you or Artist, other than that theretofore earned and due and then unpaid. Furthermore, Company shall be entitled to a refund of any Fee unearned as of the date of termination.”
If a celebrity has been paid an advance, what defines a “fee unearned?” Don’t let that one be gray.
Lastly, there is perception and reality. When in a dispute, the licensee, and/or the celebrity, will have to work very hard to justify what’s been lost and how damages for financial compensation are valued and calculated; especially when appearing in a court of law. One may have a cut and dry case (very rare), and your attorney or legal team will help you navigate what will hold up in a court of law. Sometimes adding color to the facts will help, but be careful not to be emotionally colorful.
Celebrity licensed products can range from t-shirts & mugs to branded experiences. When evaluating a product in general, everything starts with the consumer. How will the consumer see the product in their lives? Then you have to ask yourself will the celebrity enhance that value, and will consumers see it a credible connection? Mind you there are many celebrity-branded and endorsed product success stories, and many failures; sometimes there is no accountability for the taste of the American public.
There is something to be said for a licensee and celebrity to agree on terms and take responsibility for, and be accountable to that for which they sign up.
The Blake Project can help you discover and solidify the right celebrity license or endorsement for your brand. Further, we serve as expert witnesses in celebrity licensing and endorsement disputes.
Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Licensing and Brand Education