Chapter 5 - Sample Licensing Clauses

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Jake Blues: My name is Jacob Stein. I'm from the American Federation of Music. I've been sent to see if you gentlemen are carrying your [copyright] permits.

Jake Blues is John Belushi's character in the movie The Blues' Brothers (1980), written by Dan Aykroyd and John Landis

A comprehensive licensing agreement policy may include sample clauses and the position and policy of the museum in relation to each clause. As both licensors and licensees, the policy may set out the position of the museum vis-à-vis each clause, from both the licensor and licensee perspective. Further, suggested wording for each clause might be included in your policy.

If you are creating your museum's first licensing agreement policy, you may find it difficult to include the museum's policy on each clause and may in fact find this task overwhelming. Since it is likely that you have already entered into some digital licensing arrangements, review these licences and see what your museum has learned from them, and what may be useful in your policy. At first, your policy may only deal with a few clauses, but as your policy is a live document, keep updating it and including information that reflects your museum's ongoing licensing experiences.

Each Licence is Unique

Different licence agreements are written in different manners. Some are as brief as one page while others are 20 pages. Some are written in non-technical language while others are filled with legal terminology. This chapter discusses key digital licensing clauses common to many licences. Although each licence is unique, the clauses in this chapter may serve as a valuable checklist when examining licences you are negotiating or interpreting. You may use this checklist, for example, as an agenda of issues to explore when developing your licensing policy. Appendix A sets out the clauses in this chapter in the form of a checklist to be used in each consultation when reviewing and negotiating your licences.

Be cautious when reviewing the clauses in this chapter. In some circumstances, you may find it difficult to compare these clauses to sample licence agreements and to agreements to which you have signed, or to which you are contemplating signing. Licences vary to a large degree in how they set out the terms and conditions of the licensed content. For example, one licence may have a clause dealing solely with rights, while another licence might include the rights granted under a more comprehensive clause such as one covering the licensee's obligations or restrictions on use. Before interpreting any one clause in an agreement, you must read the entire licence and see how the various terms and conditions are organized and set out. Do not be concerned if you see different terminology and headings in other licences than those in this chapter. When reviewing licences, look for clauses you may have to be add, omit and amend to meet your particular circumstances. In many situations, your licence may be brief and the details about the clauses may appear in an appendix attached to the licence. This is common for definitions, terms and duration and payment. Also, the order of clauses in a licence may vary from agreement to agreement.

Government Agencies

When a museum is part of a government agency, it may be required to include or exclude specific provisions in its licences. Check this possibility with your corporate counsel. Also, you should understand that other licensors and licensees may also be required to include or exclude specific provisions in its licences, and they may not be able to negotiate these specific items.

Sample Digital Licensing Clauses

The clauses discussed in this chapter are set out in an order that is intended to be logical in terms of reviewing an agreement from its beginning to end. You may find a different order in your licences.

Preamble

The preamble is the introduction to your licence. The preamble sets out the purpose of the agreement, i.e. , for one party to license the content of the other party. Typically, a preamble sets out identifying information about the two parties who will sign the agreement, the names of the parties, their addresses, the name or a brief description of the content being licensed, who owns the content, and who wants to license the content. It often sets out the date the agreement becomes effective; alternatively, this may be set out at the end of the agreement above the signature lines.

A preamble is not considered part of the agreement. However, it may be referred to should the licence later result in any ambiguity and require interpretation.

A preamble may also be called "Background", "Recitals" or "Parties", or have no title at all. Many licences, especially shorter ones, do not have a preamble, nor is one mandatory. Many preambles begin with various "whereas" statements such as "Whereas the Publisher is the owner of the rights granted under this Licence And Whereas the Museum wishes to license these rights, It is agreed as follows. . . " As discussed elsewhere in this book, it is not necessary to use such legal terminology as long as the clauses in the licence are clearly written and understandable.

If there is a preamble in your licence, it should be as concise as possible.

Parties to the Agreement

A licence must clearly set out the names of the two parties entering into the licence. Where this is not done in the Preamble, it is important that the licence, preferably at the beginning of the agreement, set out identifying information of the parties. It may also be placed in the Notices clause discussed in Chapter 6.

Identifying information includes the following:

The parties to the agreement are the licensor and licensee. The owner of the digital content is the licensor. The licensee is the party obtaining access to the digital content (often for internal purposes as well as for "walk-in" researchers, or the public at large.) Although many licences use the terms Licensor and Licensee throughout the agreement, it is not necessary to use these words once the parties have been identified. You may then simply use "the Museum" and "the Publisher" or "the Content Owner", etc., or the names or abbreviations of the names of the two parties. However, reference to the legal names of the contracting parties should be included somewhere in the licence. Some museums are legal entities within themselves and may sign legal agreements whereas other museums are part of larger legal entities. If you are unsure of your legal name, consult your counsel. This is important information to research prior to entering into a licence agreement.

Both parties must have the authority to enter into the agreement. Before entering into the agreement, be sure to ask the following questions: Does the owner of the digital content have authority to license it, or do they need to clear rights with another party? If your museum owns this content, make sure you have all the necessary rights in it. (This is further discussed in the warranty and indemnity sections of this chapter.) Do you have signing authority on behalf of your museum? If not, who should be signing the agreement? Make sure that the name on the licence is the one that has legal authority to enter into legal arrangements. Also, see below under Warranty and Indemnity as well as Chapter 6 under Signature.

Definitions

Since there are no specific standards or universal models for a licensing agreement, a good licence agreement is one that is clear to the parties who sign it, and to others who will be interpreting it and applying its terms and conditions to particular circumstances. The agreement should therefore define terms whose meaning may be unclear or which may have more than one meaning.

Terms that you should consider defining include authorized uses, authorized users, commercial use, content, licensed content, premises and territory. Note that authorized uses and users are often not defined in the definition section if they are defined in a separate clause. The basic rule of thumb is that if a word is being used other than in its ordinary dictionary meaning, then include that "special" meaning in the agreement. That meaning should be one to which both sides to the agreement agree, and may be part of your licence negotiations. Other terms to consider defining in licence agreements are: “archiving”, “perpetual access”, “site”, “unauthorized use”, “personal use”, “third party uses”, “re-use”, “adapt”, “modify”, and “technical support”.

If you have more than one licence with the same party for different content, you may use different definitions in each licence as the definitions may vary vis-à-vis different content.

The definitions may be set out in a separate section, usually at the beginning of the licence, or defined throughout the licence. They may also be included in an appendix. Placing all of the definitions in a single place in the licence can make it easier as you may consult the one section when coming across various terms in the agreement.

Social networking and the re-use of content are considerations for museums as licensors and licensees. When you license your content, what are your expectations of your licensee when using that content, when the content is posted and re-published as-is or in a modified format? Similarly, how does your museum use content now, and does it need permissions that extend to various third parties and social networking venues? Definitions can both expand and limit uses of content. Define words in a manner that meet your preferred and intended uses of content.

Museum as licensor: If your museum is drafting the licence, take the time to consider each term in the licence and which ones require a special definition for purposes of the licence.

Museum as licensee: When reviewing a licence offered to you, take the time to carefully review the way terms have been defined, even if at your initial glance they seem straight-forward. The way words are defined should meet your needs and expectations. The definition may affect other parts of the agreement and you always want to ensure that you are licensing content in the manner that works for you.

Content Covered by the Agreement

The clause dealing with content covered by the agreement is often called "Subject", "Subject Matter" or "Product Definition."

It is vital that your agreement is clear as to what content is being licensed. Is the content a single photograph or a set of photographs by a specific photographer on a certain topic? Or is your museum licensing the electronic version of a print publication to which you subscribe, or an electronic-only periodical? Is the content an online subscription to a journal, database, or encyclopedia? You may need to define whether such content includes full text articles, abstracts, table of contents, indices, and new or special online products, sections or services that are available online.

Keep in mind that with digital content there may be more than one type of content which must be covered by the licence. Less obvious works and underlying works that may be subject to the licence are: text, images, databases, musical and other audio works, video and film clips, computer software and the like.

If the description of the content is lengthy, some licences include the description in an appendix attached to the licence. For instance, you could include a five page list of articles which are subject to the licence. Also, if the content is brief, for example, a single article or a single image, you may attach a copy of the image or article to the licence so it is easily identifiable.

Also, see the discussion below under Delivery and Continuing Access to the Licensed Content about a reimbursement of the license fee should content specified in the licence no longer be accessible during the duration of the licence.

Some licences state that copyright in the content remains with the content owner. This may also be dealt with in a separate Copyright clause as discussed below.

Museum as licensor: The more specific and narrow the description of the content, the more you are protecting your copyrights. For instance, if you license all of your slide collections from 1998, then the licence will cover the use and payment in relation to all of your 1998 slides. However, if you license only the 1998 slides relating to artists A, B and C, then you still have other 1998 slides to license to the same licensee in the future.

Museum as licensee: The more general the description of the content, the greater the content to which you will have access.

Rights Granted/Licence

The grant clause or licence sets out the rights being granted to the licensee by the owner of the digital content. It states how the licensee may use the content being licensed and what uses of the content are prohibited. This clause is sometimes titled "Permission", "Permitted Uses", "Grant of Licence" or "Authorized Uses".

The rights may be non-exclusive or exclusive. Non-exclusive means that the owner may grant another individual or organization the right to use the same content. For example, Publisher X may grant the right to use its content to Museum A, Museum B and Museum C. Exclusive means that the content owner may only grant permission to use the content to one party at any given time.

Many grants of rights state that the licence is "non-transferable." This means that the licensee may not transfer its licence to another licensee. This is further discussed in Chapter 6 under the Transferability or Assignment clause.

The grant clause sets out the scope of rights. Rights may be set out narrowly or broadly, depending on what the parties agree upon. An example of a broad licence would be a licence to use the content in any manner whatsoever for the entire duration of copyright of the content. A narrow licence might be the inclusion of a specific chapter of a book on your museum's Web site for a sixty-day period.

There are no special rules or words for setting out these rights-what you want is a clear statement of what the parties have agreed to. Although some licences use terms like reproduce, adapt, exhibit, transmit, broadcast, communicate by telecommunication, perform in public, and other terms found in the Canadian Copyright Act or in various copyright statutes around the world, other licences use wording relating to the relevant activities such as searching, retrieving and printing.

The grant of rights sets out the permitted uses. Both the licensor and licensee must ask themselves what sorts of permitted uses make sense in relation to the content in question. For example, a licensee would ask the following: What uses does it require in relation to the online content being licensed? Do you need to be able to view, reproduce, store or save copies of the electronic content, ( i.e. , on a hard drive or other digital information storage media)? What about the ability to search, browse, retrieve, display, download, print, forward electronically to others, email to oneself, fax to oneself or to a colleague, include in a Web site, social networking site, intranet, extranet, LAN , WAN or other closed network (or in a Web site that is password protected)? These are all things that may be addressed in your agreement.

Below is a list of rights you may see or want to consider for inclusion in your licences. You may have a different perspective with respect to each right, depending on whether your museum is then in the capacity of a licensor, or a licensee.

Some of the terms set out below may need to be defined in the licence agreement.

In reviewing various licence agreements, rights granted or "permitted uses" often include the rights to:

This may be temporary storage in which case your agreement should state the length of permissible storage. In addition, this may include caching as discussed in the immediate section below.

Although rarer, this may include permanent storage. Also, see Archiving and Perpetual Access clause below.

If the licensed content is a database or other compilation or collection of information, your licence may specifically state that the rights include extraction and manipulation of information from that database.

In addition to the rights granted set out above, there are other permitted uses that are sometimes included in the grant of rights, such as:

Rights for “Re-Use”

There are a number of rights for specific uses and media that museums have recently started to consider when licensing the content of others. For many of these uses, it is possible that the licensor will only allow a limited excerpt in the general licence and that use of larger portions or whole works will require an additional separate licence likely for an additional fee. These include:

The above rights may be subject to specific terms and conditions set out in clauses relating to Sub-Licences, Authorized Users, Authorized Site, Usage and Usage Restrictions (see below.)

Museum as licensor: Only license the rights that the licensee requires. Review the lengthy lists above, and determine what makes sense in the circumstances of each licence.

Some licences set out the grant of rights followed by a phrase such as "and all similar uses" or "and related uses", etc. This is advantageous to a licensee as the licence may include some uses that are not specifically mentioned in the licence. As a licensor, it is in your best interest to explicitly state what uses are included in the licence agreement, and to explicitly state what uses are not included (or to state something to the effect, "all uses not specifically mentioned herein are retained by the museum.") Licences more commonly take this latter approach. Although this is less flexible for licensees, it also helps to avoid ambiguity in the licence.

Museum as licensee: Without the proper grant of rights, your museum may not be able to do what it needs to do with the licensed content, and therefore the content is less valuable to you. Make sure the licence meets your needs and allows you to do all that your museum requires. Otherwise, you may have to make additional payments and obtain additional permissions after signing the licence.

Examine your agreement and see what uses are specifically permitted. Are some uses missing? Do you need to include some of these omitted uses/rights? What is your "normal" use of the content? How about future uses of this content, does the licence provide for this or will you have to return to the content owner for further permission? Do you have plans to post content on flickr, YouTube, or on other social networking sites, and will you require additional rights to do so? With the rights granted to you, are you able to carry on with your regular role of providing content to your staff and to researchers, and possibly the general public?

Sub-Licences

Generally, a licence involves two types of arrangements. The first is a licence, let's say, for the use of a photograph or a database. The second is called a sub-licence, to allow the licensee to provide the photograph or database to its staff, researchers, and possibly the generally public. In other words, a sub-licence is a licence a licensee gives to a third party or end-user – a person who has not signed the licence agreement.

Some licensees, such as libraries, are licensing content from museums, publishers and other content owners for the purpose of sub-licensing it, to its patrons and researchers. For example, a CD-ROM of Museum Z's collection may be licensed to Library X, then Library X "sub-licences" the content on the CD-ROM to a library patron or researcher by allowing that patron or researcher to view the contents of the CD-ROM and to print copies of specific works from it.

Some sub-licensees are dealt with in a licence provision referred to as Authorized Users, and your licence may not include clauses for both of these terms. Some sub-licensees are media specific – for example, the sub-licence may allow you to post the licensed content on your MyFace page. The bottom line is to ensure that whatever terminology is used, all necessary sub licensees are provided for in the licence. Look for “sub-licensees” in the following clauses: Rights Granted; Authorized Users; Authorized Uses; Authorized Site; Usage; Usage Restrictions.

Museum as licensor: Consider who will be using the content under the licence. Does it make sense to license the content to the licensee and to include a sub-licence to that licensee? Or is it more practical and/or profitable to directly license the same content separately to the licensee and any of its possible sub-licensees?

Museum as licensee: Determine all uses of the licensed content that may be made and by whom, then include these people as sub-licensees. Consider “secondary” and any possible unintended or new sub-licensees whenever you are considering a new licence.

Inter-Library Loan

An inter-library loan (ILL) is the lending of library materials from one library to another library. ILL is generally for print materials such as a book, periodical article (though not usually for an entire issue of a magazine), pamphlet, government document, etc. Generally, audiovisual materials, such as videos, and digital materials, such as DVD s, online content, computer software, music CDs and databases, are not part of an ILL .

An ILL is important in the library community because it allows patrons at one physical location of a library to borrow materials from a library at a different physical location without the need for travel. If your museum has a library or resource centre, whether virtual or not, an ILL clause may be important to you.

The inclusion of an electronic ILL in licensing agreements between publishers (and other content owners) and libraries is somewhat controversial, and agreements vary on whether to include it or not. One reason it is controversial is because traditional ILL meant that the print documents were shared with another library, then returned to the original library. This therefore may not be applicable to electronic documents, though a publisher allowing ILL may ask that the electronic document be destroyed after a certain period of time from the "borrowing" library. Also, developing digital rights management mechanisms may help protect digital content from unauthorized uses. If you agree to an electronic ILL , it may be necessary to define ILL for purposes of your licence, i.e. , in an electronic context.

The inclusion of an electronic ILL provision may exist in a variety of forms. For example, a licence may allow printing an article from an electronic database which may then be faxed to another library for ILL purposes. A licence may allow electronic ILL subject to specific and sometimes extensive record keeping which goes beyond what is normally required for print ILL . You may need to negotiate an ILL provision that best works for your museum and the library licensee who requests the ILL provision.

Museum as licensor: When you are involved with a library licensee, you may need to consider whether electronic ILL is permitted for the content licensed under your agreement. As the licensor, it is not necessary for you to automatically offer this in a licence with a library. However, if the library requests an ILL provision, your museum should have a policy on this issue.

Museum as licensee: If your resource centre is involved with ILL 's, you may want to negotiate an ILL clause in your licence.

Fair Dealing

In Canada, licence agreements may limit rights that otherwise would apply under the application of the Canadian copyright law and principle of fair dealing. If an agreement does not discuss fair dealing or expressly acknowledge it, then it will apply. However, the agreement may restrict fair dealing. Note that even if fair dealing is restricted, it will only be restricted in terms of the licensee, and not vis-à-vis any third party as the agreement is only valid between the parties who sign it. This is a controversial issue. Some licences that specifically refer to Fair Dealing allow it under the licence in a manner that is consistent with the Fair Dealing provision in the Canadian Copyright Act. Footnote 5

Fair dealing exists in other countries like the United Kingdom; a comparable (though differing) concept of fair use also exists in the United States.

Museum as licensor: Explicitly stating that fair dealing applies to the licensed content may make a licensor appear in a more positive light to licensees.

Museum as licensee: If you are licensing content from another country, your licence may be subject to the laws of that country. As such, it is important to understand the parameters of that country's fair dealing or fair use provision, if they have one.

E-Rights

E-rights or electronic rights is a term that has become very popular in licensing parlance. E-rights are not, however, specifically defined in the copyright laws of most countries. E-rights would be included as part of the more general or flexible rights such as the right of reproduction which is set out in Canadian copyright law and in copyright laws around the world.

E-rights may include a large variety of rights for such things as using content in electronic books, journals, e-reserve, e-learning systems, databases, DVD s and other storage media, online, Internet, intranet, extranets, Web sites, social networking sites, and archives. As technology changes, so may the meaning of e-rights, and even the notion of such popular platforms as CDs and DVD s. If you use the term e-rights in your licence, it should be defined. For instance, will it include all electronic rights, or just Web rights, or blog rights, or virtual exhibition rights, for example, or other specific rights? Unless your licence does cover all electronic uses, which is unusual, then your licence should refer to the specific electronic uses that you require and which are set out above under Rights Granted/Licence.

Museum as licensor: Understand what is encompassed by the broad term, e-rights, and ensure that the specific necessary e-rights are defined and set out in your licence. Only license the necessary rights and retain all other e-rights to yourself (and possibly for further licensing.)

Museum as licensee: A savvy licensor will only license specific rights to you. Make sure that you have all the necessary rights as it can be costly and time-consuming to return to the licensor to obtain additional rights not initially contemplated. It is best to err on the side of caution and to obtain more rights than necessary, however this should be at a reasonable fee to your museum.

Usage or Authorized Uses

Licence agreements generally specify the purpose of the use of the content for licensing and sub-licensing. This is sometimes referred to as "Authorized Uses", "Conditions of Use" or "Purpose". Usage may include the following:

Some of the above concepts may need to be defined for purposes of your licence. For example, terms like non-commercial use or commercial gain may need to be defined. Does that mean that a licensee cannot charge a researcher to access the licensed content? What if the researcher is a student, as opposed to one earning $25/hour for his research?

Museum as licensor: Determine (and possibly negotiate) in what manner the content will be used and ensure that this is carefully and narrowly addressed and defined in your licence.

Museum as licensee: If you are licensing certain content for use on your Web site, such as an image for your home page, you should ensure that the licence allows this particular use. In fact, this may be a useful negotiating point. For instance, if the content owner asks for $1,000 for the use of his image on your home page and you only have a budget of $200, you may be able to pay $200 for use of the image on a page other than your home page.

Usage Restrictions

There may be certain things which the licence specifically states are not permissible under the licence, that is, things an authorized user or the licensee may not do with the licensed content. Foremost, the licensee may not share the licensed content with any unauthorized users. Other usage restrictions may include the following:

Museum as licensor: Consider any restrictions on the licence that might ensure only authorized uses of the content are made, as well as ones that may help your ability to license the same content to others.

Museum as licensee: Ensure that any restrictions are fair and reasonable and do not interfere with your intended use of the licensed content. Ensure that the license states that any governing laws are mentioned in the licence.

License Fee/Payment

How will the licensor be compensated for use of the content? In legal terms, this is called "consideration". Consideration is an exchange of benefits to each party. The licensee receives the benefiting of using the content while the licensor receives monetary or other compensation. Although monetary compensation is the norm, other compensation may include publicity for the content owner when the content is used, or other "creative" benefits.

There are a number of issues to address in terms of compensation, especially monetary compensation. Will the licensor be paid per use of content (e.g. per article or per photograph), per media (e.g. per Internet, intranet or a blog), for the time the content is accessed, or according to a set fee for a specified period of time with unlimited use during that time? There are no standards for method of payment -- it depends on what works for the parties involved.

In determining the appropriate fee, both content owners and licensees must be able to evaluate the value of the electronic content being licensed. As licensing electronic content is still new to most of us, this may involve some guesswork or experimentation. If you are unable to accurately determine or negotiate the value of the content being licensed, you may be able to arrange an interim deal to help you determine this value.

An issue both parties must consider is whether the agreed upon fee is inclusive, and includes all services relating to accessing the electronic content under the licence, as well as all applicable taxes. It is best to ensure that neither party is surprised about any hidden or missing costs from the license fee at a later stage.

Other factors to take into account when determining the appropriate license fee are such factors as: expected use of the content; any maintenance or training costs associated with accessing that content; preferences for formats in which the content may be accessible; whether any additional software or hardware will be necessary by the licensee in order to access the content; costs for such things as updates to the content; and future license fees for this content or archived content. Both parties need to carefully consider these factors in order to determine the appropriate license fee. Consider whether the license fee is the only fee in relation to the licensed content, or whether there are other financial considerations such as time to negotiate the licence, lawyers’ fees in relation to the licence itself, and software or hardware you may need to purchase in order to access the licensed content.

Your licence needs to address when the fee is due and payable, whether it is payable in stages, and the amount of each payment. You may also want to address the currency of the payment as well as any applicable taxes (this is also discussed in Chapter 6.) This may all affect the value and price of the content.

The licence should also address when the license fee is due. Is it due upon signing of the agreement or is it due at a later date? Or if the fee is payable in stages, and if so, what is the frequency and amount of each payment? It is common to attach these details in an appendix to the agreement.

Museum as licensor: Some factors that the content owner may take into account when putting a price tag on its content are the following: the cost of creating and/or digitizing the content; the cost of maintaining the electronic content or database, including updating the content; design costs and packaging; costs of developing and maintaining software to access the content; the expected usage of the content; the intrinsic value of the content itself (e.g. financial, cultural, aesthetic); the medium in which the content is supplied (e.g. DVD , digital tape, on-line access to remote server); expectations as to future need for and value of the content; the increased ability to search and maintain content; documentation and services to help licensees use the content.

Museum as licensee: Licensees have to consider their budget for any product and how flexible this budget may be. For instance, if your museum is able to license an image database for $5,000 for use by your staff and museum members, can your museum afford an additional $1,000 to ensure that all members of the public may equally access the content? In many situations, licences allow for flexibility in terms and conditions and such terms and conditions are balanced against payment for using that content.

Pricing Models

Payment methods vary from licence to licence. You must look at all of your particular circumstances to determine which payment method or which combination of them makes the most sense for any particular licence. If you are licensing a single photograph, you will likely have a short and uncomplicated licence and pricing structure. A fixed fee or lump sum payment is often the best choice for individual pieces of content such as an image, or a series of images. However, if the content in question is an online database, for instance, you may have to consider more complicated pricing models. There are numerous pricing models from which content owners and licensees may choose. In some situations, the content owner may offer more than one model to choose from. In other situations, the content owner only has one pricing model to offer the licensee. In some circumstances, the content owner may be open to the licensee's suggestions in terms of a new and creative pricing model.

Databases and Journals

Discussions in setting fees for licensing content such as electronic databases and online journals often focus on: a) subscription fees for limited or unlimited use; and b) pay-per-use. Even within these two models, there are many, many variations, some of which are included below: