LICENSING AGREEMENTS – ‘BITTERSWEET’ SIDE OF TERMS & CONDITIONS

On March 06, 2008 in General

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Ideas and innovations are almost always converted into some form of appropriate intellectual property, for which the necessary protection is acquired and then asserted. Subsequently, it is quite common to sell, assign or license this property to someone else for a fee, thus the owner can get fat and rich. So how does the buyer or the licensee gain from this? Simple, by making and selling products that utilizes the intellectual property in question for more money, of which only a portion goes to the original intellectual property owner. But how many of us are aware that even the act of buying or licensing may have some strings attached to it in the form of terms and conditions? And how many of us take the time out to read and understand the agreement that describes the T&C, which is more popularly referred to as the “Fine Print”? We all paraphrase the famous comedian Jerry Seinfeld’s quote: “Have you seen the size of the document?” and forget about it. But it is very important to know the limits of agreements, else disastrous consequences ensue. Just ask Richard Ashcroft and the British band Verve.

The Verve sampled an Andrew Loog Oldham’s orchestration of the riff of Rolling Stones’ 1965 hit single “The Last Time”, which was originally composed by Mick Jagger and Keith Richards, on their song 1998 “Bittersweet Symphony” in their “Urban Hymns” album. Allen Klein, who had managed the Stones during the 1960s ended up owning the copyrights of all the Stones’ compositions of that period, as part of the legal settlement between him and the famous band. Before the release of the album, The Verve negotiated a licensing agreement to use the sample — at least the composition rights to the sample. In 1997, the album peaked at number 23 on the Billboard Charts. Subsequently, The Verve was argued out of any credits by stating that they had violated the previous licensing agreement by “using too much of the sample in their song”. The ensuing legal battle did not result favourably for The Verve, with them turning over 100% of the royalties to the Rolling Stones.

Allen Klein capitalized off the success of the song, by licensing the composition to Nike and Vauxhall automobiles. To add even more insult to injury, when “Bittersweet Symphony” was nominated for a Grammy, Mick Jagger and Keith Richards were named the nominees and not The Verve. What could be more “Bittersweet” than your song reaching the top of the charts and not being able to enjoy a cent of its success? Thus, despite having original lyrics and original musical creation in it, because of an oversight of the legal T&C, the song writing credits went to two others who ended up being nominated for one of the most prestigious awards in music, and someone else made all the money off it.

It is the author’s philosophy (moral issues aside) that the size of the pie will determine the share demanded. Thus two people fighting over a $10 pie may easily settle for 50-50 split or even a 80-20 split. But a million dollar pie will usually result in bitter fights with each party demanding at least 100% of the pie (charging legal fees and other things will eventually render the payment easily). This is exactly what happened here. As soon as it was noticed that the size of the pie called “Bittersweet Symphony” was huge, someone clamoured for a greater share from it. The Verve argued that Allen Klein got greedy when the song became successful, and managed to get the whole pie because of the “Fine Print”.

A simple lesson for all of us is that it is always worthwhile to check if there are any terms and conditions for having bought or licensed something, but never assuming it. It is definitely worthwhile reading the document, and if it is too cumbersome and tedious to do so, it is a good idea to have someone explain it to us in plain simple English. Because after all, it is reading in that language.

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