Every time I start negotiations for royalties where I trade in my design and engineering professional fees forfeited instead for future royalty monies, my counter part always insists royalties are paid on net profits. After negotiations failed (x-buyers from Home Depot) on my first attempt at negotiations for royalties I put it to rest. (My negotiations did not fail completely as we obtained a monthly retainer instead.) This frustrating declaration of payment on profits made me want to define profits and better understand royalties. Now I am faced with yet another potential licensing arrangement and again that pesty phrase. The next person I am going into negotiations is telling me again that they want to pay on ‘Net Profits’. Now if two are saying the same thing five years apart then there most be something written someplace that states something of ‘Net Profits’.

I did a search on the internet and found this definition for Net Profits, “Often referred to as the bottom line, net profit is calculated by subtracting a company’s total expenses from total revenue, thus showing what the company has earned (or lost) in a given period of time (usually one year). also called net income or net earnings.”

Not to scare any potential inventors or board members of doing business with me, but If it is up to me I would not show a profit for many reasons. Furthermore, I would not allow in a reversed situation a designer to sign on “Net Profits” alone. I would try to spend profits on marketing, advertising or other related efforts to generate more income, press or notoriety. It is not in my immediate need to show a “net profit” for IRS reasons as well. Basically, I am left to some manufacturer’s board member vote if there will be a profit or not. There has to be a better way. I started with several talk boards but that went no place fast. For this reason I went in search of a book or another resource like a law firm that could help me negotiate a royalty on a percentage of sales and then I located this book.

This revised edition I located is a bit old but is still a must read for designers looking to move into a royalty arrangements. Be it furniture, toys, graphics or product this book is short and an easy must read. This revision is slightly out of date in that there is no reference to China manufacturing and nothing offering protection internationally.

Licensing Art & Design started out by discussing in chapter 1 the basic need for written agreements explaining that it is easy to mistake preliminary discussions and casual conversations that there should be more for a stable relationship. The author went on to discuss in Chapter 2 the use of trademarks, copyrights and patents then discussed some recent laws that make the register not so necessary. Although the notice requirement is no longer mandated, better practice dictates that the notice be used to signal the creator’s rights in a work and to cut off potential claims of innocent infringements of the work. From a practical standpoint, from March 1, 1989, on anyone seeking to use published, copyrightable material should assume that the work is protected by copyright even though no notice appears.

Chapter 3 went on about the safeguard of ideas and how to protect that idea. Several disclosure agreements are available there for employers hiring both employees and freelancers etc and the author writes in plane English of each that are available in the book. Those forms are nice to have if not so resourceful using the internet.

What I found most informative was in Chapter 4 where explanation in plane English under each bulleted legal ease explained the case for each bullet. The book comes complete with two licensing forms; one long and one short complete with English explanations. The “Grant of License” listed in the book will need significant revision for each specific case however it is my personal advice to do your best to re-write your own agreement from the one supplied in this book before taking that to an attorney.

At the end of Chapter 5 you will find a “Checklist for Negotiating Licensing Arrangements”. Without infringing upon the authors bullet list (I would like to include her list here) Read this book for the checklist alone. That checklist came from another Author Tad Crawford who wrote the book ‘Business and Legal Forms’ for Fine Artists also on Allworth Press.

Chapter 6 discusses the fact that many artists and designers will turn to licensing agents and representatives for help when they lack leads for locating potential licensees or when they need other assistance. Often overlooked this chapter sparked many insightful alternate ways to generate income for a designer.

The book concluded in Chapter 7 with a discussion on electronic licensing for both CDROM and Internet authoring. They even used the word ‘cyberspace’ if that is any indication of the age of my revision. There are sample forms there for use too.

In conclusion this is a must read for both parties looking to go into a royalty arrangement. The idea is for both parties to make a revenue stream and this book explains how to ensure in writing that a revenue stream flows properly. In the end many of my questions recently asked to an attorney were again answered in this book reinforcing my knowledge.

Caryn R. Leland is a practicing attorney experienced in representing graphic artists, designers, and design firms.

ISBN-10: 1880559277
ISBN-13: 978-1880559277

Review by Bart Brejcha