Before I begin, I want to mention that this article is based solely on my own experience, and should not be taken as actual legal advice. I am not a lawyer, and do not claim to have complete knowledge of copyright or trademark law. If you have questions or are thinking of releasing a product that could possibly be infringing on a copyright, then I urge you to seek legal counsel from a lawyer.
So you want to make some t-shirts featuring a popular character or phrase eh? Everyone else is doing it, so why not cash in, right? Well, chances are, that idea you have might be considered copyright infringement unless you get proper permission to use it. That is where licensing comes in.
In order to use any recognizable character, slogan, image, etc on a t-shirt you are going to sell, you need a license from the owner giving you the right to sell those goods. It is a contract that includes all the terms by which they allow you to use their property. Some licenses are pages and pages long with lots of legalese, others could be a one page document. Regardless of length, it is a legally binding agreement that includes, but is not limited to: all the terms in which you can use the property, license period (how long you have the right to sell your goods), how much you are wiling to pay as an advance, and the percentage of royalties (based on gross sales) you will be paying the licensor.
HOW MUCH DOES A LICENSE COST?
Licensing costs vary widely based on the property and what you are doing with it. Some licenses may only cost a few hundred dollars, others may be several thousand. That is something you must negotiate with the licensor. As for royalty rates, expect to pay anywhere from 10-12% royalties on items like t-shirts. Again, this is something that varies from property to property, so it could be more depending on what you want to license.
WHAT THE HECK ARE ADVANCES AND ROYALTIES?
Royalties are the percentage of sales you will be paying the licensor. So if you make $10,000 in gross sales, and you agreed to a 10% royalty, you will owe the licensor $1,000. However, most licenses require an upfront advance against royalties. That means you will be paying a portion of your royalties upfront, before you even start selling your shirts. For instance, if the licensor agrees to a $1,000 advance on 10% royalties, then you have to pay $1,000 to the licensor upon signing the agreement.
Since your royalty percentage is 10%, the $1000 advance covers your royalties up to $10,000 in gross sales. Once you hit $10,000, you will then pay 10% of gross sales after that. So, if you end the license period and have grossed $20,000 in sales, you will have owed an additional $1,000 in royalties (10% of $20,000 = $2000 – $1,000 advance = $1,000). If you do not hit $10,000 in sales then you don’t owe any additional money.
HOW DO I FIND OUT WHO OWNS THE PROPERTY?
Finding the rightsholder to a specific property can sometimes be like finding a needle in a haystack. Since we primarily license movie properties, some of the older films are very hard to track down rightsholders for because many of the film companies have been bought or broken up over the years so their catalogs are all over the place. There is no exact science on how to find the owner, other than doing lots of research. Some places to check out are:
- Copyright.gov (http://www.copyright.gov/records/)
- Trademark search (http://www.uspto.gov/trademarks/)
- Licensing.org Database (http://www.licensing.org/)
Depending on what you want to license (movie, character, slogan, etc), the rightslolder may either license it directly, or go through an agency to broker the deal. Again; research, research, research.
HOW DO I KNOW I NEED A LICENSE?
If it looks like a duck, quacks like a duck, walks like a duck…it’s probably copyright infringement. If you are using elements from characters, movies, books, etc. that are part of our pop culture or recognized by the general population, then your spidey-sense should warn you that you could be infringing on an existing copyright.
WAIT, WHAT ABOUT PARODY?
Ahhh, parody. Parody is often mis-construed as a blanket “OK” to get around having to license a property. People will say things like, “If you change it by 40%, you’re ok”. That is bulls**t. I may not be a lawyer, but I can tell you I have never seen anything in the copyright law that states altering a property by a specific percent will be deemed ok. Keep in mind that, even if it did say that somewhere in the law, it would still have to be proven that your design is OK. That means it will have to go to court, which is extremely costly and time-consuming….and chances are, whoever is suing you has way deeper pockets than you. Do not automatically assume that parodies are ok. The fact is, if you are selling something for profit without permission, you are at risk. Period. Again, it’s important to talk to a lawyer for advice on whether or not to proceed. What you pay them for an hour of advice could save you thousands later on.
T-shirts are a great business to get into as it can be a great hobby that can turn into a career. However, if you plan on basing your designs off well-known properties, do your homework and take the necessary precautions that will keep you out of the courtroom and focused on selling great t-shirts.