Essential Clauses of a Digital License Agreement


With the development and widespread use of internet and digital networks, we are now witnessing a revolution as to how copyrighted contents are acquired, displayed and disseminated. In the pre-internet days, there were limited options for distribution and exhibition of copyrighted contents. For example, the distribution of cinematographic films was limited to cinema halls and video cassettes. The internet revolution has opened several doors for content owners by creating new modes and formats of exploitation.

Licensing out, creative contents like cinematographic films or sound recording through digital platforms forms an integral part of the entertainment business. In this post we will be looking into the structure of a digital license agreement.

Definitions: It is essential to have all key terms such as Licensed Contents, Term, Territory etc clearly defined in the agreement in order to avoid any confusion with respect to the interpretation of the terms used in the draft. It is also important to clearly define the platforms, modes and medium through which the licensee is allowed to use the licensed contents.

Grant of License: The most important clause of any license agreement is the grant clause wherein the rights are granted to the licensee. The grant clause must be drafted clearly detailing the specific rights granted by the licensor to the licensee. The grant clause shall also identify the specific restrictions that the licensee must follow while exercising or exploiting the rights granted to it under the agreement. Some of the generally used restrictions are as follows:

  • Not to dub or sub-title the licensed content
  • Not to edit or alter the fundamental character of the licensed content
  • Not to use the licensed content in any manner other than through the licensed platforms
  • Not to use the licensed content in any manner that is obscene, scandalous, blasphemous or is any manner derogatory to any person alive or dead.

The grant clause shall also specify that all residual rights with respect to the licensed content shall vest absolutely with the licensor.

Consideration: The next key clause to be included in digital license agreement is the consideration clause. The consideration clause shall detail the total amount of license fee to be paid by the licensee to the licensor as well as the schedule for paying the license fees.  The agreement shall also specify whether the license fee to be paid is inclusive or exclusive of taxes. Under the Copyright Amendment Act 2012, for any uses or exploitation of a cinematographic film outside cinema hall or use or exploitation of a sound recording, the underlying authors shall have a right to claim an equal share of royalties. In light of this new addition, it is important to negotiate and include a clause which clarifies the liability of making any payments to underlying authors or copyright societies claiming on behalf of such underlying authors.

We will discuss the rest of the important clauses that have to be part of the licenses in our next post.
Authored by Nithin V
Contributed by the Entertainment Law Group at BananaIP
For any further information on entertainment law in India, write to [email protected]