How to draft a content license agreement

We live in the era of content. This content has no such definition in any law in India. From
Television to social media, we consume content unknowingly and knowingly. The person
who creates the content is called the content owner/provider/creator and the one who
consumes it is called the content user. Due to the advancement of technology, the speed and
the feasibility at which we are able to get the content just by clicking “ I accept” has
increased tremendously. Although a lot of people, accept the terms and conditions, neglecting
the provisions can lead to serious infringement claims and liabilities. A content license
agreement is mostly in the written form and is always best to have it in written form to avoid
any disputes and nuances.

Before starting to draft the content license agreement it is important to note that, the content
is “licensed” and not assigned to the user which means that the ownership will remain with
the content creator while in an assignment the owner will lose ownership of the content. This
is the basic concept of a content license agreement. So now let us look at the important
clauses needed to draft a content license agreement.

1) Grant of License

This is the most important clause of this content license agreement. This clause will actually
define how the rights will be transferred and how the remaining agreement will be
comprehended. The grant of license basically means that it will cover the scope of the content
that is being granted by the Licensor( Content creator) to the content user.

Generally, there are many types of licenses granted but the mainly and frequently used are the
exclusive and non-exclusive grant of license. An exclusive grant of the license will allow
only the particular party who is entering into the agreement to enjoy and consume the content
and not to any other third party. Conversely, a non-exclusive grant of the license will not
impose any restrictions to license the content to any number of licensees(content consumers).

Example of an exclusive grant of license clause:

“Subject to the terms and condition of this Agreement, Content Provider hereby grants to the
Company an exclusive right and license to use, reproduce, encode, encrypt, market, promote,
transmit, distribute and publicly display the Content on the Platform worldwide within the
territorial limit of India for the Term of this Agreement”.

Example of a non-exclusive grant of license clause: “In consideration of the license fee paid
to the licensor, the Licensor grants a non-exclusive right in the territory of the whole world.
The Licensed right shall mean and include the right to distribute the songs through the
platform. Any right not expressly granted to the Licensee under this Agreement shall be
retained by the licensor.”
There are other types of licensees also like perpetual license, territorial license, irrevocable
license, etc., but the exclusive and non-exclusive grant of license is the most used one.

2) Publicity
This is a clause peculiar to such agreements. This provision ensures that no party uses the
name or the business logo of another party in any publicity act or reveals their association to
the public without the prior written consent of the other party. The condition of such a clause
is that it facilitates a party to learn and track the usage of such party’s name and the business
logo by another party in the publicity act. It puts a condition on the consenting party that such
a party shall not withhold consent for any unreasonable cause.

3) Term

The term clause defines the duration of the agreement. This is usually like the term clause in
all the standard contracts. In the content license agreement, the term will define the duration
for which the license for the content will exist and will come to an end. The Licensor can
have either an auto-renewal clause in which after the completion of the term of the
agreement, the agreement will be renewed and will again come into force automatically. If
there is an option to renew, the parties will have to mutually discuss and if they want to they
can renew the agreement.

Example of the term clause: This Agreement, the exclusive license granted to the Company
and the provisions hereof, except as other provided, shall be in force and full effect
commencing on the date of execution of this agreement and shall last for a term of 2(Two)
years (“ TERM”). The agreement shall not be automatically renewed and can be renewed
upon giving notice to the party upon mutual agreement and further negotiations between the
parties.

4) Confidentiality

The content which is being licensed might sometimes be a very valuable asset of the
Licensor. Therefore, the Licensor may want to keep the content itself confidential and it is the
duty of the Licensee to keep the content confidential. The parties also can enter into a
separate NDA( Non-disclosure agreement) to keep the content confidential. It is always better
to define in detail in the definitions clause what includes confidential information and what is
excluded. The Licensor also needs to imagine the situation what if the agreement gets
terminated then what will happen to the confidentiality will it survive and thus the clause
needs to be drafted accordingly.

Example of Confidentiality clause: The Licensor will not disclose Confidential Information
during the Term or at any time during the 3-year period following the end of the Term. The
Licensor will take all reasonable measures to avoid disclosure, dissemination, or
unauthorized use of Confidential Information, including, at a minimum, those measures you
take to protect your own confidential information of a similar nature. The Licensor will not
issue any press release or make any other public communication with respect to this
Agreement”.

5) Obligations and rights of the parties

A very recurrent clause in all the agreements but it plays a very vital and is a paramount
clause in this agreement. The duties of the Licensor need to be very precise and
comprehensive. As most of the subject matter of the agreement would be on the internet and
once something is uploaded on the internet as it is not supposed to be it can be havoc.
Therefore, the Licensor needs to make sure that while licensing the content it isn’t infringing
any third-party claims or violating any intellectual property rights and if rights are violated
who will be held liable and what will be the remedy available all needs to be set out in the
clause. Also, whether the Licensee can alter or modify the content can it further sub-license,
all these issues need to be referred to in this clause.

6) Consideration

The consideration will be paid by the Licensee to the Licensor for the License granted to the
Licensee( called “License fees”). The clause should define whether the payment will be a flat
fee in one go, whether an advance should be paid. This makes one part of the consideration.
In some cases for example, if the Content provider is an OTT platform, it can demand a
royalty/variable fee based on subscription payments made after or before signing the
agreement with the Licensee.

Example of Consideration:
In consideration of the License granted to the Company, the Company shall pay the Content
Provider a flat amount of Rs.____- (Rupees _______only) as License Fee (“License Fee”).
An amount of Rs. ________/-(Rupees ____ only) will be paid at the time of signing this
Agreement. The remaining amount shall of Rs. _______/-(Rupees _only) shall be paid within
30days from the date the Content is released on the Platform. In addition to the License Fee,
the Company shall also be required to pay the Content Provider a variable fee of 5% of
subscription payments for the Platform made 30 days before and after the date of the Content
being released on the Platform.

7) Termination

The termination clause will lay out the event in which the agreement may be terminated and
other points like who has the right to terminate the agreement. Some of the common issues
for termination are:

1) Termination in even of Material Breach

2) Termination for insolvency
3) Termination for convenience
After listing out the conditions for termination and the rights, the effects of termination
should be drafted. The Licensor would like to keep the confidential information confidential
even after the termination of the agreement or would want to destroy it. Such provisions need
to be drafted and should not be missed out.

These are the major clauses of a content license agreement. The remaining boilerplate clauses
such as assignment, waiver, severability will complete the content license agreement.

Everything taken into account the legal nuances and concepts of the agreement, some things
should be kept in mind before signing the agreement.

Precautions while signing the content licensing agreement:

1) Minimum Performace guarantee

If the Licensor is granting an exclusive license to the Licensee, the revenue of the Licensor
would solely depend on the performance of the Licensee. Therefore, it is beneficial for the
Licensor to include a minimum guarantee performance clause that will force the Licensee to
perform to a certain benchmark, or if not then the Licensor will have the right to terminate the
agreement.

2) Term Sheet

Certain purely contractual aspects like performance guarantee initially itself because it might
have to be discussed furthermore with the particular team or management of the Licensor.

3) Negotiation of business terms

The negotiation of business terms and specifics of the agreement relating to intellectuall
property should be left to particular professionals involved in that area.