Licensing Advice from Chris Muggleton

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Assortments and Non-Associations(Posted: 07-07-2009)

By Chris Muggleton

Hello!

As mentioned way back in the dark cold days of January, these monthly columns would be like treasured “part works”. Well, some six months later, we are half way through the series, the point of no return or often known as the point that Tesco’s ^1.stops stocking the product!

This month we will discuss the issue of Assortments & Non Association.

So what are they?  As ever, our discussions are limited to the “mythical” Standard Merchandise License Agreement.  An Assortment is where Licensed Articles are sold in packages to the final customer which is a mixture Licensed Product and non Licensed Product. Non Licensed products could mean any generic or another Licensed Article with different ownership.  Non Association in this instance means when there is a product/article produced that has different Licensed Properties contained within it, for example a T-Shirt that would have both an image of Mickey Mouse and Ben 10.

It is imperative that any Assortments & Non Association clause clearly prohibits such practices and incorporates the following:

·          Ensure that everything produced by the Licensee that contains the Licensed Property has to be approved and this should include all containers, packaging, promotional material, display material etc. and that there is a presumption of non approval, unless approved in writing.

·          That the clause clearly forbids the Licensee from associating the Licensor’s Licensed Property with that of another’s.

·          Ensures that the Licensee does not manufacture/distribute merchandise that is confusingly similar to the Licensor’s Licensed Property.

·          Clearly states that, should the Licensee sell assortments in a package with non Licensed Articles, royalties will be due based on the full sales price of the whole package and not apportioned by the number of articles in the assortment pack.

·          Should the Licensee sell products that were not approved, in additional to any other remedy, all profits from such sales of un-approved articles will be paid to the Licensor.

As ever there are a number of steps that Licensors and Licensees can each do.

For Licensors, we would advise the following:

·          Review a Licensee’s declarations thoroughly, look for inconsistencies between Sales Value, Unit Prices and Royalties owed.

·          Ensure there is a good product approval process in place, and that staff are trained to know what is permitted and what is not.

·          Request that the Licensee submit samples of products, packaging, and promotional material on a regular basis and where possible conduct regular store checks.

For Licensees, we would advise the following:

·          If you want to produce an assortment, seek and obtain written approval prior to production and how royalties are to be calculated on the sales of the assortment.

·          Don’t even think about producing unapproved product,. You will be found out and the finance ramifications will be costly.

As ever we have only scratched the surface in this small space. However do feel free to get in touch should you require any further explanation. I can be reached at chris@licensingadvice.com

Next month I will discuss Territory.

Chris

^1. Other supermarket brands are available.