M Cal Bar 08 21st C Licensing V1 080108

21S T CENTURY LICENSING STRATEGIES

Digital Convergence, International Issues & Hollywood or

How to Straighten Out a License in These Digital Days

CALIFORNIA BAR ASSOCIATION Annual Meeting 2008

James C. Roberts III, Esq.

G L O B A L C A P I T A L L A W G R O U P PC

G L O B A L C P I T A L L A W G R O U P PC A

GLOBALCAPITAL/Page 2

BACKGROUND INFORMATION GLOBAL CAPITAL LAW GROUP. Global Capital advises clients on new initiatives, mergers & acquisitions and new international markets. Clients range from Fortune 100 corporations such as News Corporation and its subsidiaries, MySpace.com and Fox Interactive Media, to start-ups in digital media, Internet, software, medical and biotechnology, nanotechnology and environmental technology industries. The firm has offices in California and Colorado and just opened its first European office in Milan, Italy. The law firm and the affiliated strategic consulting firm, the Global Capital Strategic Group comprise The Global Capital Group.

JAMES C. ROBERTS III. Mr. Roberts is the managing partner of Global Capital Law Group PC and CEO of the Global Capital Strategic Group. Previously, Mr. Roberts was managing partner of Praxis LLP, a transactional law firm, and CEO of its strategic consulting subsidiary. Prior to Praxis, Mr. Roberts was CEO of The Atlantic Advisory Group, a strategic consulting firm advising media and digital clients.

Mr. Roberts started his legal career with Brobeck, Phleger & Harrison and later with White & Case, advising venture capital and other capital sources and technology companies. Prior to his legal career, he was at SRI International (formerly Stanford Research Institute), conducting strategic analysis on and in Southeast Asia, the Middle East and Europe.

Mr. Roberts is a member of the International Bar Association, the California Bar Association, and the “virtual” bar association of SecondLife. He founded the first office in the virtual world, SecondLife, for a California law firm. Mr. Roberts serves on the board of several, including the Mayme A. Clayton Library & Museum. He is also a frequent speaker, most recently on “three-screen convergence” and strategies and legal issues in mobile IP transactions. He can be reached at [email protected].

JD, University of Chicago; MA, Stanford University; BS, University of California, Berkeley

mailto:[email protected]


1. INTRODUCTION.

The hour will be spent reviewing a term sheet (briefly) and then the terms of a license agreement to discuss how the agreements can be drafted. First, some preliminaries.

1.1 Assumptions: (a) Audience: “Advanced” does not mean only experienced lawyers—anyone at any

level of expertise is invited. “Advanced” means that we will not be spending time on the basics.

(b) Law School Distinctions: You remember law school: Differences between copyrights, trademarks & patents.

(c) Not all Licenses: Our framework is technology and digital content licenses—not music, not biotech, etc.

(d) License Only: We assume it is a license and not work-for-hire.

(e) Staying Out of the Weeds: We will not get into the exceptions to the rule or the rare risks.

(f) Limits of Your Presenter: He doesn’t have all the answers—or even all the questions.

1.2 The Context:

(a) True convergence?

• Tivo and Amazon announced a partnership to enable viewers to purchase items they see in television programming.

• Television station WRAL begins a testbed to broadcast digital video long-form programming to mobile devices.

(b) Crumbling Walls of the Walled Gardens?

• Facebook and Amazon (among others) opened up their code (e.g., API) to enable anyone to develop applications for them.

(c) Declining (or Non-existent) Revenues?

• Very few companies are making money from the advertising model on the Internet (never mind mobile) and CPMs (and other payment metrics) are dropping fast.

(d) Limits of our Market & our Mindset?

• While News Corp. bought MySpace for $600+ million several years ago, one year ago this month Nokia purchased Navteq for $8.1 billion dollars. In other words, we are still a PC-centric market while ROW is mobile-centric.


(e) The Clash of Industries:

• Hollywood v. the digital “tradition”: Hollywood wants to own everything—even if it has not been invented. Silicon Valley wants discrete rights.

1.3 The Issues. How do you draft your licenses to address these issues?

(a) How do you deal with convergence? Platforms, Technology, Users, Sublicenses. Dangers of exclusive deals (e.g., technology that cannot handle changing content, platforms or technology). Know what it means—e.g., mobile.

(b) Changing revenue model requires flexibility. Negotiating tactics will come into play. New revenue streams (data and datastreams).

(c) International means more than territory. Territory is still problematic but what about EU privacy laws? Claims of non-American legal jurisdiction (country of access v. country of origin)?

(d) Just how important is Hollywood to your model? If content, perhaps important; if technology, probably not? Non-American media companies as an alternative?

2. THE TERM SHEET

How will the term sheet be used? Guide negotiations and guide drafting.

Effect: Make sure you are clear that it binding or non-binding.

Scope: Comprehensive, unless negotiations strategy compels you otherwise.

Author(s): Business people (client); if binding, then make sure you clear it.


3. THE LICENSE

The list below is not comprehensive but those sections that will be most affected by convergence, international and “Hollywood” issues.

Topic Sample Issues The Licensor: Multiple sources of technology?

The Licensee: Scope of sublicenses (e.g., subsidiaries, viewers/users); assignment limitations.

Definitions: Get them right, especially technology (e.g., Developed Technology, Underlying Technology), Platforms, Data, Datastreams, User Metrics

Scope of license Various platforms, re-purposing (affected by definitions).

Scope: Purpose The “magic” language + Platforms + audiences

Scope: Territory With global access, just what is the territory? New forms.

Scope: Sublicense (See above)

Scope: a la Hollywood Will the “future technologies” provision survive? Challenges possible in foreign jurisdictions (see “choice of law” below).

Revenue model Just what are they? How real are they now?

Clear math (in exhibits); anticipating other sources

Need for audit right

Metrics

Connection to dispute resolution

Hollywood’s revenue hunger?

Reps & warranties: Underlying Technology ownership/control

“Open Source” trip-ups (quasi-public domain)

International laws (privacy; “public morality”)

Choice of Law & Dispute Resolution

Specifications: SLS


4. SAMPLE PROVISIONS. So, what’s wrong with these provisions? This is not a trick question. Assume that these are provisions for technology that enables users to view content on the Web and to download content. All capitalized terms are defined terms but not all defined terms have been included below.

4.1 Recitals A. Licensee owns or operates various websites and provides content for viewing and

downloading by users through other media including broadcast and mobile applications.

B. Licensor provides technology that enables users to view and download content.

C. The Parties desire to have Licensee license to Licensor that technology for the use by Licensee through its websites and other media, including but not limited to e-mail distribution and mobile devices.

D. The Parties desire that Licensor also provide other services, including the development of additional technology and the maintenance of certain of the websites and related technology.

E. The Parties desire to share certain revenues generated by the websites.

4.2 Licensed Technology “Documentation” means any and all materials and information provided by Licensor to Licensee in connection with the use of the Program, including without limitation all documentation and specifications detailed in Attachment XX.

“Underlying Technology” means the Program developed by Licensee prior to the performance of any technical work by Licensor as set forth on Attachment E.

“Updates” means any and all modifications, enhancements, customization, updates, replacement and revisions to the Program pursuant to this Agreement or the Maintenance Agreement, as the case may be, and/or that offered by Licensor to any of its licensees. New Versions are excluded from Updates.

4.3 Entertainment Industry Provisions. “Broadcast Television Rights” means all forms of free broadcast television distribution now known or hereafter devised of the entire Program, including but not limited to broadcast by VHF and UHF television stations.

“Internet Downloading” means exploitation of a digital Motion Picture Copy by making it available on the World Wide Web portion of the Internet in a manner that allows its transmission to a Computer for making another exact digital copy of the Motion Picture


Copy and retaining the new digital copy for use for more than a transient period of time after completion of the initial continuous period of transmission. Internet Downloading does not include any form of Internet Streaming.

“Internet Rights” means Internet Downloading or Internet Streaming exploitation of a Motion Picture. Internet Rights do not include any form of PayPerView, Video, Pay TV or Free TV exploitation of a Motion Picture.

“Internet Streaming” means exploitation of a digital Motion Picture Copy by making it available on the World Wide Web portion of the Internet in a manner that allows continuous viewing of the Motion Picture Copy on a Computer in a substantially linear form substantially simultaneously with the transmission of such Motion Picture Copy over the Internet but which does not allow making another digital copy except for a transient period of time necessary to facilitate such viewing. Internet Streaming does not include any form of Internet Downloading.

“Internet Streaming/Downloading” means exploitation of a digital Motion Picture Copy by making it available on the World Wide Web portion of the Internet for both Internet Downloading and Internet Streaming at substantially the same time.

4.4 License Grant.

2. License Grant. Licensor hereby grants to Licensee for the Term a worldwide, nonexclusive license, with a limited right of sublicense, to the object code version of the Program, Updates and Documentation, solely for the following purposes and on the terms and conditions set forth in this Agreement:

2.1 Use. Licensee may install, use, reproduce, and publicly display on the Web the Program and Documentation solely for the purpose of the display of content on Licensee’s Site.

2.2 Sublicensing. Licensee shall be entitled to sublicense its rights under this Agreement (other than the right of sublicense) to Affiliates solely for the purposes set forth above.

Another example:

2. License & Ownership.

2.1 License. Licensor grants to Licensee a limited, non-exclusive, non-transferable license to use, publicly display and modify, solely in accordance with this Agreement, the Program solely on the Platforms.

2.2 Ownership. Licensor agrees and acknowledges that, except as otherwise set forth in this Agreement, information transmitted through the Program is the property of Licensee and/or User, as applicable, and proprietary to such entity or individual.

4.5 One Example of Hollywood’s Take on Ownership


[Studio shall have] the exclusive, irrevocable, right, license, privilege, and authority to exploit the Work in any manner, medium, form or language, now known or hereafter devised, whether or not reasonably contemplated as of the Effective Date, in its sole discretion, and to make copies of such exploitations and to exhibit, distribute, exploit, market, perform and make digital transmissions of the Work throughout the universe in any and all media by any and all means, whether now known of hereafter devised and Licensee automatically and irrevocably shall be deemed to have granted, conveyed, assigned, transferred and set over to Company, all right, title and interest in and to the Work, including without limitation any and all copyrights therein and thereto (and all renewals, extensions, restorations and resuscitations thereof) and any and all rights now known and used, under any and all such copyrights in perpetuity (but in any event for not less than the period of copyright and any and all renewals, extensions, restorations and resuscitations thereof), in any and all languages and in any and all media now known and used, now known and hereafter used, or hereafter known or devised and used for the entire universe(collectively, the "Rights"). Without limiting the generality of the foregoing, the "Rights" shall in any and all events include, without limitation, all right, title and interest in and to the following:(i) the sole and exclusive Motion Picture rights, including, without limitation, the sole and exclusive right to produce one (1) or more Motion Pictures or other derivative works (including, without limitation, sequels, prequels, remakes, musicals and/or serials) based, in whole or in part, on the Work and the right to fix, reproduce, release, distribute, exhibit, perform, transmit, broadcast, advertise, promote and otherwise exploit such Motion Pictures or other derivative works by any and all means and in any and all media whether now known and used now known and hereafter used, or hereafter known or devised and used, including, without limitation, all of the following: theatrical; non-theatrical (including airlines, ships and other carriers, military, educational, industrial and the like); pay-per-view; home video (including video-cassettes, digital videodiscs, laserdiscs, CD-ROMs, video-on-demand; near video-on-demand and all other formats); all forms of television (including pay, free, network, syndication, cable, satellite, high definition and digital): subscription-on-demand; all forms of digital or on-line exploitation, distribution and/or transmission (including, without limitation, the internet),CD-ROMs, fiber optic or other exhibition, broadcast and/or delivery systems and/or computerized or computer-assisted media; all rights of communication to the public, rights of distribution to the public, rights of making available or other forms of public or private communication and/or distribution; and all forms of dissemination, communication or distribution to one or more locations or parties, whether embodied or transmitted utilizing analog, digital or other formats;(ii) all ancillary, incidental and subsidiary rights including, without limitation, all merchandising, (e.g., games, computer, video and other electronic games, toys, comic books, so-called "making of books," apparel, food, beverages, posters, and other commodities, services or items), commercial tie-ins, co-promotions, music, music publishing, soundtrack, photonovel, novelization, screenplay publication, interactive media, multi-media, and theme park (or other "themed" or location-based attraction) rights in and to the Work; (iii) the right to make or publish excerpts, synopses or


summaries of the Work for purposes of advertising, publicizing or exploiting the foregoing rights in and to the Work; (iii) the exclusive right to publish the Work or excerpts therefrom and (iv) the exclusive right to use the title or titles by which the Work may be now or hereafter known, or any components of any such title or titles (a) as the title of Motion Pictures and/or in connection with the advertising, marketing, publicity, promotion and other exploitation thereof, whether such Motion Pictures are based wholly or partially upon the Property or are independent of the Work, (b) in connection with songs, musical compositions, music or lyrics and/or phonorecords, whether or not included in any such Motion Pictures, and (c) in connection with the publication, recordation, performance, and any other use whatsoever of the foregoing items.

Education

M Cal Bar 08 21st C Licensing V1 080108