Character Merchandising Rights License Agreement

[Character Merchandising Rights License Agreement]

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★This is a contract when other companies use the "character" to commercialize (plan, manufacture, and sell products).
This type of contract is used when the planning, manufacturing, and sales of official merchandise are outsourced to another company.

"Merchandising rights" is not a legal term, but it is a recognized term, so we use the term "merchandising rights." (The meaning is stated in the purpose clause.)

★You can also change the "character" to a "logo" or "brand" and use it.

★The following fees are set as consideration for commercialization permission.
If necessary, customize/delete any unnecessary royalties.
・Initial royalties
・Minimum guaranteed royalties for each contract year (minimum royalties)
・Commission (running royalties)
・The remaining amount after deducting the minimum royalty from the running royalty (over royalty)

[Reference (our office website)]
IP business design and merchandising license/license agreement creation
https://keiyaku.info/licence01.html
Transaction design and contract creation for property advertising use agreements
https://keiyaku.info/licence02.html
Creation of contracts regarding the use of original works
https://keiyaku.info/licence04.html
Copyright Transfer Agreement
https://keiyaku.info/copy01.html
Licensing Agent Agreement
https://keiyaku.info/licence03.html
Creation of OEM/ODM contracts
https://keiyaku.info/OEM01.html
Contract law for content business and related industries
https://keiyaku.info/contents02.html

★ Clauses included in the "Character Merchandising Rights License Agreement"
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Article 1 (Purpose)

Article 2 (Definition)

Please change the definition of each term according to the content of the contract.

No. 1: If the "trademark" or "design" that has been applied for or registered with the Japan Patent Office is not included, please delete the following: "It also includes the trademark (hereinafter referred to as "the trademark") and design right (hereinafter referred to as "the design") that have been applied for or registered with the Japan Patent Office as shown in the attached document."

Items 3 and 4: Please change "the whole world, including Japan" to "Japan and the Republic of Korea" if necessary.

Article 3 (Representations and Warranties)

Section 1: This provision represents and warrants that the Licensee (Party A) has the authority to enter into this Agreement with Party B.
Clause 2: Party A represents and warrants to Party B that the Character does not infringe the copyright of any third party.
Clause 3: Party A represents and warrants to Party B that the Character does not infringe on the trademark rights or design rights of any third party. (Please delete if unnecessary.)

Article 4 (Licenses and Restrictions on Rights, etc.)

Section 1 (Regarding the content of the license): This section clearly states that Party A grants Party B the rights.
Section 2 (Exclusive/Non-Exclusive): Clearly states whether the rights are exclusive or non-exclusive.
Section 3 (Regarding exceptions): Leaves room for exceptions to monopoly.

Article 5 (Manufacturing/Quality Control)

Paragraphs 1 to 3: If the shape of the character or the quality of the product is poor, it will damage the credibility and value of the character, which will be a problem for Party A and will also affect Party B's credibility. Therefore, we have established supervision and approval procedures.

Section 4 (Regarding Copyright Ownership): Even if Party B modifies a character or creates a new work during the commercialization process, Party A must clarify the ownership of the copyright to the character (including in cases where it becomes a secondary work), and therefore this provision has been included.

Section 5: These are the rules regarding the transfer of the original drawings, manuscripts, etc. of this character to Party B. (Please delete if unnecessary.)

Article 6 (Sales Promotion, etc.)

Section 2 (Regarding Approval): For the same reasons as in the case of products, Party A usually supervises and approves the appearance of characters used in advertising, publicity, and sales promotion materials.

Section 3 (Advertising Rights, Sponsorship Rights): Party A may collect compensation for the use of the character design in advertising, publicity, sales promotion materials, and premium goods, depending on the content. This provision confirms this. (If unnecessary, delete this and make the current Section 4 Section 3.)

Article 7 (Copyright Notice)

If a character is a copyrighted work, it is common to include the appropriate copyright notice.

Article 8 (Compensation)

These are regulations regarding compensation (royalties).
The agreement includes a down payment (initial royalty), a minimum royalty of a specified amount, and a running royalty calculated by multiplying sales by a percentage.

There are various methods for determining (calculating) royalties, as follows:
①Pay a fixed amount in one lump sum (paid-up royalties)
② A method that combines a fixed lump sum payment (initial royalty) at the time of signing the contract with a running royalty payment calculated by multiplying the sales amount of the product by a fixed rate.
3. Paying only running royalties
4) A minimum annual compensation amount (minimum royalty) is set, and if the running royalty amount exceeds that amount, the total running royalty amount is paid, and if the total running royalty amount does not exceed the minimum royalty amount, the minimum royalty amount is paid.

Article 9 (Submission of Royalty Report)

In order for Party B (the licensee) to gain Party A (the licensor)'s trust, Party B must submit a report that serves as the basis for calculating running royalties and make the underlying books available for audit at any time.

Article 10 (Non-refund of vested interests)

Article 11 (Reporting obligation)

Article 12 (Trademark and design registration)

Party A believes that it would be unacceptable for even a portion of the intellectual property rights relating to the character to belong to Party B, and will therefore establish measures to have the intellectual property rights belong to Party A or at least be under Party A's control.

→Another example of the regulations from Party B is also provided.

Article 13 (Infringement of rights by third parties)

Article 14 (Disclaimer)

Regarding exemption from liability, Party A's position is that it is balanced with the guarantee, but we would like to confirm that Party A will be exempt from liability for any problems arising from Party B's actions other than those relating to the rights themselves granted to Party B.

Article 15 (Prohibition of Transfer of Rights)

Article 16 (Obligation to maintain confidentiality)

Article 17 (Termination of Contract)

This clause stipulates the contractual right to terminate the contract and also provides for the claim for damages. Under the Civil Code, the right to terminate arises if the other party fails to fulfill its contractual obligations (statutory right to terminate, Civil Code Articles 541 and 543). In addition to the statutory right to terminate, this clause adds grounds for termination by contract (items 1 to 13) and provides for termination without notice.

Article 18 (Compensation for damages, exemption from force majeure)

Section 1: Stipulates liability for damages. (This is a typical example of a provision.)

★Alternative example 1 of paragraph 1: An example is also provided limiting the scope of damages to be awarded to both parties.

★Alternative example 2 of paragraph 1: We also provide an example of a provision in which only Party B is obligated to pay a heavier amount of damages.

→ "Profit from performance" refers to the profit that would have been earned if the contract had been performed as per the contract.
→ "Profit from fulfillment" includes both "lost profits" and "expenses that would not have been incurred if the contract had been fulfilled."
→ "Lost profits"
For example, if Party B does not plan, manufacture, or sell the Products as stipulated in this Agreement, this will be a breach of Party B's obligations. In this case, the profits Party A would have earned if Party B had planned, manufactured, and sold the Products as stipulated in this Agreement are called lost profits.
→ "Expenses that would not have occurred if the performance had been carried out"
If Party A is forced to make expenditures because Party B has not fulfilled the contract as per the agreement, then Party A has incurred "expenses that would not have been incurred if the contract had been fulfilled."

[Scope of damages: Civil Code provisions]
If the scope of damages stipulated in the following article (Article 416 of the Civil Code) is excessive, the scope of liability for damages will be limited by contract.
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Civil Code Article 416 (Scope of damages)
1. The purpose of a claim for damages for breach of obligation is to obtain compensation for the damages that would normally arise from such breach.
2. Even if damage has arisen due to special circumstances, the creditor may claim compensation if the parties foresaw or could have foreseen those circumstances.
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Section 2: Provides for exemption from liability for force majeure.

Article 19 (Validity Period)

Article 20 (Handling of the Products after the Contract Ends)

Article 21 (Exclusion of anti-social forces such as organized crime groups)

Article 22 (Governing Law, Consultations, and Jurisdiction)

Attached catalog: Characters, trademarks, designs, designated items
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* Includes annotations and comments. WORD file format, so you can customize it however you like.
★We also accept customization on our side (separate quote required).

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