On the fourth day of Christmas, my client gave to me, 4 territories… (Mel’s Remix)
In honor of the holidays, I’d like to share a few tips with you to make sure you go into the new year with new knowledge. Instead of the 12 Days of Christmas, I present to you — The 12 Days of Contracts! Yes, I’m a legal nerd!
In these 12 days, I will share some contract basics, terminology, and other info so you can be more informed on what a proper contract needs to contain to make it valid and enforceable.
Prior 12 Days Posts:
If you assigning rights in a contract, it’s important to distinguish where the rights are granted and exploited.Melanie Rodriguez
Territory: Worldwide vs. Specific Countries
Not all contracts will contain a territory clause or definition, but most entertainment contracts (music, licensing, IP, film/TV) will. In contracts where there is a specific grant of rights being licensed or transferred, the territory dictates where these rights can be used.
Many contracts have the territory designated as “worldwide” or “the universe” (because eventually we’ll live in space?!”) as the default. Why? Because it allows the ability to maximize profits. However, one can negotiate to limit the territory to only include certain countries or to exclude other countries. If you see this, or someone requests this, it could mean that the rights are already given in that territory to someone else. This is common if an artist is not based in the U.S.
Territory = Where in the world the rights are being granted
Territory is probably the most straightforward as it gets, but, the key is knowing and being able to verify that there are no overlapping territories. For example, if one party is trying to license the rights to a musical composition, which has been previously granted (and still under term) in a separate contract to a music publisher in Mexico, then the current contract cannot have “worldwide” rights. The current contract would have to exclude Mexico. If there is a mistake made, either because the parties were unaware or misinformed, this can open you up to the possibility of being sued.
Here’s a caveat: The territory MAY be parsed out where certain rights are granted in one territory, but not in another or vice versa. A specific territory MAY also be designated differently when it comes to exclusivity. Exclusivity is specific contract terminology that will be discussed on Day 7. The rights can be exclusive in one country only, meaning that the licensor can still exploit in the rest of the world.
Staying vigilant when it comes to territory is essential. Sometimes it is beneficial to carve out territories if foreign royalties are at issue. If there is a reason you want to keep certain territories out of the contract, this must be specifically negotiated.
Questions to ask:
- 1) What territory does the contract designate? Not all contracts need have this, so make sure if it should be included, it is.
- 2) Is the territory worldwide or only limited to certain countries? Sometimes it is beneficial to carve out territories if foreign royalties are at issue.
- 3) Are there any territories specifically excluded? Make sure you note these exceptions in the contract.
- 4) Have any rights been granted in other territories? Verify that rights granted in a territory are not overlapping with another territory or differ in exclusivity.
If you have any questions related to an contract you signed or need guidance for constructing your contracts, please contact me.
*Disclaimer: This post is for informational purposes only and does not constitute legal advice. An attorney client relationship is not formed until there is a signed fee agreement*