Know Your Rights: Scope of licensing your copyrights

Written by Sarah Zivoin with contributions from Tony Duarte and Marian Hebb.

Know your rights: Scope of licensing your copyrights

If you have created and own an original literary, dramatic including choreographic and cinematographic, musical or artistic work, you have copyright in that work – governed by Canada’s Copyright Act in Canada and applicable legislation elsewhere in the world. You may have originated the work entirely yourself or you may have adapted a work created by someone else into a different form or type of work, thereby creating a new original work based on or derived from that work created by someone else, subject to their authorization (e.g., a stage play by you based on a novel by that other author). 

Copyright is a bundle of rights comprising the sole right to produce and reproduce the work or any substantial part of it in any material form, to perform it or any substantial part of it, to publish it if unpublished, and including the rights to translate it, broadcast, webcast and otherwise telecommunicate it and use other important rights which differ somewhat depending on the type of work. Those rights of copyright have value, and you as creator and owner of a work have the right to license and charge a fee for the use of your licensed rights. 

The scope of a licence can be as narrow or as broad as you negotiate. Below is an example of a possible grant in a licence agreement:

       The Owner grants to the Licensee an irrevocable, non-exclusive, one-year, worldwide in the English language, royalty-free, non-transferable               licence to display the work in the background of an internal training video for ABC Company.  

In this example you, as owner of the copyright, are called the “Owner” and the purchaser of your licence, ABC Company, is called the “Licensee”.

Before elaborating upon the scope of the rights that may be granted under a licence, it is important to understand the terminology.  A licence is the permission given to a person (the “licensee”) to do something using a right or rights in a work – granted by a person who has the right to provide such permission or authorization (the “owner” or, in some agreements, the “licensor”). Note that a licence of rights is not an “assignment” of those specified rights that would result in a transfer of your ownership to another person or business entity. 

When contemplating whether you wish to enter into a licence agreement for your work, you need to make some decisions about the objectives of the licence. For example, do you want to let only one person or business entity use a particular right in your work, where and for how long? A licence may seem complicated as there are a number of ways in which grants of rights are customizable and can be delineated in a licence agreement that you create or negotiate into an agreement. 

To help clear up some uncertainty about some of the language used to describe grants of rights that may be included in licences and to assist with negotiations, this article discusses below the scope of grants commonly found in a licence:   

  1. Revocable vs. Irrevocable

Licensees will often request an irrevocable licence. This is because once the licence is granted the licensor cannot take it back unilaterally for the duration of the licence agreement. In other words, if you grant an irrevocable licence to your work and you no longer wish the licensee to use the licensed rights, the licensee may prevent you from ending their licence earlier than the end of the licence or the existing term of the licence, which may be automatically renewable. If you want to give yourself the right to stop the licensee’s use of your work before the licence ends, you should negotiate a revocable licence specifying conditions that would allow you to terminate it (e.g., non-payment, non-use for a specified period or 6 months’ notice at any time). 

  1. Exclusive vs. Non-exclusive

As the creator and owner of a copyright, you are able, by way of a licence, to grant to others either exclusive or non-exclusive rights to use some or all of the rights comprising the copyright of your work. If you were to license the exclusive right to use a specific right or specific rights included in copyright, you would be giving those rights to the licensee alone. No one else, including yourself, could then use the rights in your work that you’ve granted exclusively to that licensee. On the other hand, granting a non-exclusive licence to a right of copyright in your work means that you can grant the same right to multiple licensees and still use it yourself.

An exclusive licence of all or specified rights in a work is considered to be a grant of a kind of  “interest” in the copyright which, if granted together with a right of the licensee to take legal action for infringement of copyright, legally permits the exclusive licensee to itself take that legal action regarding the licensed rights, although you remain the copyright owner. This right of action, as it is called, is not something a non-exclusive licensee can have.   

An exclusive licence must be in writing and signed by you or someone authorized by you. Make it clear in the licence that your grant of rights is a licence – and not an “assignment” of your licensed rights – since it is your intention only to transfer and relinquish all economic interest in those licensed rights to the licensee for the duration of the licence and it is not your intention to lose the economic interest in them permanently. You must also ensure, if you’ve already granted certain exclusive rights in your work in a licence to someone, that the rights that you have previously licensed (and sometimes certain non-exclusive rights) are carved out or omitted from subsequent grants of exclusive or non-exclusive rights that you might want to license subsequently to other licensees.

You might be tempted to think that licensing non-exclusive rights to your work is uncomplicated because you can continue to license the same rights to others without problems but, for example, if you license a non-exclusive right to your work in one country, you cannot then license the same right exclusively to another licensee either in that country or throughout the world. The order in which you license rights and whether a right is licensed exclusively or non-exclusively are among the most important economic choices you make in licensing, not only for what you gain, but also for what you may be foregoing. 

  1. Time Limited vs. Duration “throughout the term of copyright”

The right to use your work granted in a licence can be for as short a duration as you would like or as long as can be granted for the “term” or length of copyright protection specified in Canada’s Copyright Act and applicable legislation elsewhere.  For example, you can grant the right to use specified rights in your work for a month, a year, 5 years or up to the end of copyright protection – which for most authors in Canada, the United States, the European Union and many other countries is 70 years following the end of the calendar year of death of the author.  

Note that references to “perpetual” licences or to a grant of rights “in perpetuity” or “forever” should be avoided or the intended and agreed meaning clarified because different understandings, particularly with respect to potentially overriding reversionary rights in Canada and elsewhere, could lead to uncertainty and confusion.  

A licence agreement may also state that a time-limited term (e.g., a one-year period) is renewed for another period automatically or can be renewed only if certain conditions are met by the licensee. These conditions could include, for example, that the licensee be required to give you notice in writing that they want to renew, or that they must have generated a certain amount in sales in their use of the licence during the initial or previous term of the licence before they can use any right to renew the licence term. 

  1. Limited Language and Geographic Territory vs. Worldwide

Another way to restrict or narrow the rights granted in the licence of copyright in your work is by specifying the language or languages in which the work may used and specifying where the licensed rights can be used. A licence may be only for use of the rights in the language in which the work was written by the author or it may authorize use only in a particular city or province, or in a larger territory (e.g., in the English language in Canada and other specified countries) – or it may cover worldwide use in any specific language or languages. A translation of a work in a specified language is commonly licensed for publication throughout the world or a territory that includes specified countries where the language is in common use, whereas publication of the original language version of the work is more often restricted by country.  

  1. Royalty vs. Royalty-free

Royalty payments are a way to receive money for the use of copyright in your work instead of, or in addition to, any fixed fee or fees paid for the licence.  How royalties are calculated when included in a licence can depend on a number of different factors. The most common approach would be to calculate a royalty to the creator based on a percentage of the licensee’s gross or net sales revenue from their use of the rights specified in the licence granted. When a royalty applies, it is also common to require a minimum payment (e.g., an unreturnable “advance” of future royalties calculated on a book’s list or retail price, payable to the author in stages such as on signing a publishing agreement, on delivery of the manuscript and on the publisher’s publication of the work). For you as copyright owner, a royalty based on the licensee’s total or “gross” sales revenues is generally preferable because no deductions would have been taken from sales before the royalty percentage is applied.  If the royalty is instead based on “net” sales revenues, then these should be defined as the gross sales revenues less certain specified deductions, which should be as limited as possible.  These deductions generally do include the licensee’s out-of-pocket costs to collect revenues from any of their sub-licences (e.g., foreign currency exchange costs, currency transmission costs, and unrecovered foreign withholding taxes).

A “royalty-free” licence means that you won’t receive any payment or additional payment from your licensee over the course of the licence agreement based upon the financial success of their use of your work. However, you would still be entitled to any fees that you may have negotiated and specify in exchange for the licence to use your work.  

It is not unusual, and sometimes intentional, for a licence agreement prepared by a licensee to describe a royalty in a way that is no longer really a “royalty” as commonly understood. Sometimes, for example, a royalty based on net sales revenues is defined to allow such a broad range of deductions to arrive at the “net” that they can deduct most of their costs of doing business and is closer to being a share of their “net profits”, which is far more uncertain than a royalty.  

Any licence that includes a percentage royalty or a share of revenues or profits for the copyright owner, whether or not based on retail sales or “net” or “gross” amounts received, should also include obligations for the licensee to keep proper accounting records, deliver detailed statements to you and make periodic payments and permit your examination of their accounting books and records to verify the accounting statements and payments. 

  1. Transferable vs. Non-transferable 

A licensee may ask that their licence to use your work or specified rights in your work be transferable.  A transferable licence agreement would give your licensee more flexibility to change how they do business without necessarily asking for your permission. This would allow the licensee to transfer their licence by assignment to another individual or business entity (related or unrelated to them) without any communication to you or consent from you. There are sometimes reasons why a licence may not, or should not, be transferable. Consequently, it may be important for a licence agreement to prohibit any transfer without the written consent of the licensor who owns copyright. If you choose not to allow a licence to be transferable, the licence agreement can simply state that it shall not be assigned without your prior written consent. Simply prohibiting transfers of a licence does not prevent a licensee from sub-licensing specified rights if the licence authorizes this (e.g., a licensed producer or publisher might still be allowed to sub-licence its own licensed rights in a production or publication to another producer or publisher for their use, but remain accountable to you for the sub-licensed uses).  

Remember that an assignment of a licence including specified rights, unlike an assignment of those rights in your work (e.g., on a sale of rights), does not transfer your copyright ownership of those rights.

  1. Restricted Use vs. Unlimited Use

The right granted to a licensee to use your work can be for narrow or broad purposes – or not specified at all. The licensee would often prefer unlimited use, so they would have no restrictions on the purpose of their use of the rights in your work or whatever rights they are licensed to use. That could include, for example, rights to produce or reproduce your work including publication and sale in physical and digital forms and to exhibit or perform it in public including by webcast or broadcast.  As you likely don’t want the grant to be so broad, you can restrict how a licensee can use your work. For example:

  • publish the work (e.g., a poem) within a pamphlet for local distribution in a named city;
  • read or recite the work (e.g., an entire short story) at an event in a named community centre; 
  • adapt the work (e.g., a novel) into a theatrical play in the French language for production and live performance in Canada and France;
  • telecommunicate the work (e.g., a television documentary) for exhibition at a specific event (described); or 
  • display the work (e.g., a sculpture) for a 2-month long exhibition in a named hospital. 

Don’t forget that, as well as being able to narrow or place restrictions on use of your economic rights, you have moral rights in your work unless you waive them. The licensing agreement should have provisions, for example, on how you wish your name to be used, or perhaps not used, in connection with uses of your economic rights and what approvals or rights to comment you will have as development and production of a work or a work based on or derived from your work progresses. 

As mentioned, licences can be complicated but knowing what rights you have in the copyright of your work and their potential scope will help you decide how you would like to authorize use of your work. 

This article is informational and not intended as a substitute for legal advice