Overview
It is important to recognize that license agreements are the core documents regulating rights on the Internet. This
is because the Internet is simply software residing on servers, which communicate with each other, and which contain content composed
of intellectual property such as copyrights, patents, trademarks, trade secrets and protected personalities. Therefore, rights and
usage of this infrastructure and content are governed and regulated primarily by license agreements.
Key Provisions
§ Scope of license rights. The grant of rights is the core provision of a license
agreement. A license differs from ownership in that ownership comprises the control of all rights whereas a license grants specific
rights, which are something less than all rights. Licenses are therefore by definition limited. Rights may be limited in an endless
manner, including: (1) perpetual or limited, (2) exclusive or non-exclusive, (3) worldwide or limited to territory, (4) sublicensible/transferable
or non-sublicensible/non-transferable, (5) royalty-free or royalty bearing, (6) specific field of use or all fields of use, (7) use
on standalone basis or use only with specified components, and (8) right to modify or no right to modify. The license grant defines
how the licensee may use content. More often than not, territory, which is usually a relevant limitation in license agreements, is
irrelevant on the Internet. It is critical to realize that when drafting a license grant any right not expressly stated is not granted
to the licensee.
§ Potential uses. In online licenses, broad language needs to
be prepared that will encompass all known and unknown uses, because new uses and platforms are developed almost daily, and the licensee
itself may not be able to contemplate the potential uses available one year forward. For instance, In Tasini v. The New York Times,
206 F. 3d (2001), the U.S. Supreme Court ruled that under freelance agreements entered into before 1995 that did not anticipate electronic
rights, the The New York Times did not have the right to post articles electronically on the newspaper’s website archive. Additional
license rights may be necessary for trademarks, trade secrets, public personalities and patents, if applicable. Part of the challenge
of drafting content license agreements is to try to anticipate the future. For this purpose, licensees will want very broad license
grants and licensors will want narrow specific license grants.
As mentioned, license grants need to anticipate the future, and
even the “unknown unknowns.” For instance, a website receives broad rights to use content on its website. Can the content be used
on a mobile site? On other mobile devices? Can content be incorporated into widgets which the users insert onto their own websites
or onto their Facebook pages or distributed through RSS feeds? The business model of the particular website will indicate how creative
the license grant needs to be.
§ Royalties. Royalties can be charged in a variety of ways – for instance, based upon
time (e.g., use for one year), based upon numbers of downloads, based upon a revenue share from advertising and other income generated
on pages where the content appears, based upon impressions or in the form of barter, such as receipt of free advertising on pages
where content appears. However, there is often much value to content being offered on the Internet royalty-free. It becomes free advertising
and promotions, like humorous viral videos. The production of which costs money, but then the distribution becomes free as they appear
on multiple video sites and can be inserted into social network personal pages or emailed between friends. New and unexpected uses
of content may require royalties or change in royalty level. Therefore, it might be worthwhile to include a mechanism by which these
royalties can be fairly and reasonable determined in accordance with market conditions in order to allow the website continue to expand
its offerings as the commercial details are worked out in the background.
§ Digital
rights management. Digital rights management systems can be included in many types of content. This system enforces licensing terms
on the end user's use of the content. For instance, a downloaded game will often contain such a system. If an owner is allowing a
third party to distribute its content, under certain circumstances, the distributor may be required to utilize a digital rights management
system approved by the owner.
§ Warranties. Most of the warranties will come from the rights holder or owner, and
should include:
1. that the licensor has the right to grant the license. This right may derive from the fact
that the licensor developed the content or from the fact that the licensor has licensed the content from another party. In this latter
case, it is important to verify that the license rights received from the 3rd party include the rights now being granted to the website.
While the warranty is helpful, if the licensor does not have the right to grant the specific license to the website, then the website
will not receive those rights, regardless of what the warranty says. An additional protection could be that if any third party claims
that the website owes royalties to such third party, then the licensor agrees to pay these royalties. The obligation to pay these
amounts might arise under an intellectual property indemnification. However, that obligation only arises once there is a lawsuit.
2. that the content does not contain components that are libelous, violate anyone’s right to privacy or publicity, pornography, etc.Sometimes, content will be viewed by the website before it is uploaded, so that some of these issues can be covered by simply choosing
not to upload. In other cases, content is automatically uploaded or it is not apparent from the content that it violates this warranty.
3. that the content has been subjected to available testing. As technology advances, each day there are new
capabilities. For instance, there are systems currently available that grab a “fingerprint” which is a short portion of music and
test it against massive databases to determine whether the music violates a 3rd party’s copyright. Similarly, there is technology
that tests source code to determine if it contains infringing code. Under certain circumstances, it may be appropriate to require
a licensor to verify that specific testing has been performed.
4. that the content does not contain viruses,
disabling code, spyware, etc. A digital photograph is not a photograph, it is essentially code that can, intentionally or unintentionally,
contain harmful or otherwise unwanted code. Therefore, the licensor should warrant that there is no such code and that it has performed
industry-standard procedures to verify that there is no such code in the content.
§ Disclaimers. There are circumstances when a licensor may validly want to disclaim
responsibility for liability that may arise from use of content. For instance, where the licensor is licensing out user-generated
content (YouTube is a classic example) – the licensor will not want to take any responsibility for liability that arises from use
of the content on third party websites. The licensor may have received indemnifications from the users supplying the content, but
these may be of little value, depending upon the size of the user’s bank account. Also, there are circumstances when content is considered
public domain – but it still may be subject to 3rd party claims. For instance, public companies are required to publicly release their
conference and earnings calls. Can they claim copyright ownership in something that they are legally obligated to publicly release?
If a company then transcribes these conference calls and licenses them out without permission of the subject public company (and this
is currently being done), the licensor may want to disclaim any liability for claims of infringement.
§ Indemnification. Content can generate liability to a licensee from intellectual property infringement, libel, violations of privacy
and rights to publicity, pornography and other illegal elements. A broad indemnification is often necessary to protect the licensee.
On the other hand, if a claim arises, the licensor would want the right to immediately require the licensee to remove the content
so as to mitigate any damages, and not be liable for damages arising after notifying the licensee to remove the content.
§ Post termination. Typically, a content license will end upon agreement termination or expiration. However, there are situations were
a licensee will need to retain content for an indefinite period of time. This could apply where news reports are commented on and
archived. To have to delete archived reports might have a negative impact on the websites completeness of information.
