Copyright licence

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What it is

A copyright licence is a legally binding contract in which a copyright owner (the licensor) grants a third party (the licensee) the right to use their copyrighted work for specific purposes.

Put another way: a licence tells a licensee when they can use someone else’s work, for how long and for what price.

When it applies

Copyright licences arise when a copyright owner grants a third party the right to use their copyrighted work.

A licence is not needed where a copyright exception applies, as in this case the use of the work in the prescribed way is already permitted and will not constitute an infringement.

Who/what it applies to

A copyright licence binds the copyright owner (the licensor) and the third party using the copyright (the licensee).

Depending on the terms of the licence, it will also impact third parties as the licence may prohibit the licensor from allowing anybody else to use (licence) the work.

The copyright licence applies to the licensor’s copyrighted work. The extent to which the licensee can use that work should be set out in the licence agreement.

Core principles

1. Copyright is a property right of the owner and, like other property, can be licensed to a third party.
2. Both present and future copyright in a work can be licensed.
3. The licensor retains ownership of the copyright (in contrast to an assignment) - they are simply granting the licensee the right to use the copyrighted work.
4. A copyright licence reflects an express agreement between the parties (compare with an implied licence).
5. Other than an exclusive licence (see key legal considerations below), the licence does not have to be in writing although this is highly recommended to avoid disputes.

Why it matters (risks/opportunities)

Risks

Some formalities do apply - if the parties wish to grant an exclusive licence this must be in writing and signed by the copyright owner.

Identifying any breach of a licensing agreement can be difficult – the licensor needs to be able to monitor use of the copyrighted material.

Copyright owners need to consider potential reputational risks when allowing the use of their work by third parties – this should be managed through restrictions in the licensing agreement.

Opportunities

The copyright owner can monetise their work in a tailored way e.g. only granting specific rights (a partial licence) for a set period of time.

Licensing provides a pipeline of income to the licensor, without losing ownership of the copyrighted work.

A non-exclusive licence allows the licensor to continue to use the work and licence it to other third parties, increasing their audience.

Key legal considerations/elements

A licensing agreement an be either:

• Exclusive – under an exclusive licence only the licensee can use the work for the duration of the licence. Neither the licensor, nor any other third party, can use the work. An exclusive licence must be in writing and signed by the copyright owner.
• Non-exclusive – if a non-exclusive licence is granted, the copyright owner retains the right to use the work and can licence the work to other third parties.

Key provisions of a licensing agreement include:

• Copyright (or licensing) fee – often a one-off payment made by the licensee to the licensor for the grant of the copyright.
• Royalties – a periodic payment made by the licensee to the licensor that is calculated on the base of the licensee’s use (e.g. relevant sales) of the copyrighted material. For more information, see our glossary entry on royalties.
• Term – how long is the licensee entitled to use the copyrights work for? When will this period start to run – from the date of the agreement or on a date set out in the agreement?

Key commercial considerations/elements

When agreeing the terms of a licence it's important to be clear exactly what rights are being granted, in what jurisdiction and for what period of time. Everything else should be excluded to allow the copyright owner to continue to monetise the work as they see fit.

Consider:

• Where can the licensee use that work e.g. is there a geographical limit?
• How will the copyright owner be compensated? Will it be a copyright fee, royalty fee or both? If royalties are being paid, how will they be calculated, when will they be paid, what deductions can be made?
• What reporting requirements will be needed to allow the royalty payments to be verified e.g. sales reports?

Copyright owners should keep a clear records of the rights that have been granted, to whom and for how long, especially if non-exclusive licences are given. This will help you manage the rights granted and know when additional licences can be agreed.

FAQs

Can I licence moral rights?

No. Only economic rights (e.g. the right to perform the work) can be licenced. The copyright owner therefore retains the right to be acknowledged as the author of the work. However, moral rights can be waived.

What is a sole licence?

Although not a term recognised by the relevant legislation (the Copyright, Design and Patents Act 1988), a sole licence is generally understood to be a licence where the licensor can continue to use the copyrighted work but they are not able to grant any additional licences to third parties (contrast exclusive and non-exclusive licences in key legal considerations above).

If there are two copyright owners, do we both need to agree to granting a licence?

Yes, where copyright is owned jointly reference to a ‘copyright owner’ is to all owners. Therefore, both joint copyright owners would need to agree to the licence.

If as copyright owner I assign (sell) my copyright, does this terminate any copyright licences that I have granted?

No. Copyright licences bind any subsequent copyright owner provided they had notice of a copyright licence that has been granted.

This includes constructive notice, which arises when the licensee is deemed to know about the licence (whether or not they have actual knowledge) as they should have been aware of it e.g. through reasonable due diligence or where a matter is in the public record.

Can I exclude the copyright exceptions in a licensing agreement?

No, any attempt in a licensing agreement to exclude or disapply the copyright exceptions will be unenforceable.