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Navigating the Potential Traps in Licensing Content for Online Uses

By Christian L. Castle
October 29, 2007

Copyright owners who are considering licensing their content for online exploitations must understand that they are venturing into still largely uncharted waters with few reliable partners. It's better than it was in 2000 ' or even 2003 ' but it's still not an entirely stable environment with dangerous shoals along the route. Don't assume that words you have seen in contracts for decades have the same meaning to your online licensee as they would to a court.

Licensing content to many online distributors or retailers is much the same decision as licensing to unscrupulous distributors in small third-world countries. Experienced licensors will likely try to get the biggest advance they can, on the assumption that they will be robbed blind on actual sales by licensees. Many such licensees go into their deals with the intent to deceive ' like so many other aspects of the Internet culture the business question is often not what's right, but what you can get away with. There are some bright spots in the market, such as iTunes Music Store, MusicNet and others, but they are few and far between.

A good example of this is a deal I did a few years ago with a large online company. I pointed out in the negotiation that there was no audit provision in the contract that would have applied to the online company. I was told that the reason there would be no audit clause is that the company had decided that being audited was not an efficient use of its resources.

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