Licensing Your Craft Designs
from The Crafts
Report, by Barbara Brabec
Barbara Brabec is the author of several small-business books including
"Creative Cash," "Handmade for Profit," and "The Crafts
Business Answer Book." Some craftspeople are earning thousands of dollars a year from royalties
on products or designs they have licensed to manufacturers. Not everyone
creates work that is suitable for licensing, but you might be sitting
on a gold mine and don't know it. Those most likely to do well in this
area are fine artists, craft and needlework designers, illustrators,
photographers and others who create one-dimensional "illustrative
work." Many 3-D craft objects, however, can also be mass-produced
in resin or other mediums.
"It's hard to get out of the crafts production train of thought
to consider licensing," says artist Annie Lang of Annie Things
Possible. "To explore the possibilities in this field, you have
to rethink what you're doing. To get an idea of the market potential
for your designs or products, walk through a department store and look
carefully at all the gift items and decorative accessories," she
suggests. "Consider whether your designs would work on similar
products and whether they would be adaptable to different surfaces."
Lang used to sell her artwork at fairs. Today, she has licensing arrangements
with a number of manufacturers who have put her character drawings on
all kinds of products. Her whimsical frogs, turtles, ladybugs, bumblebees
and elves now appear on rubber stamps, giftware, resin castings and
painted wood items manufactured by Westwater Industries; on iron-on
transfers produced by Seitech-Cache Junction; on scrapbook papers produced
by Hot-Off-The-Press; and on a line of fabrics manufactured by Balson-Erlanger.
"You have to think in terms of cross-marketing," Lang emphasizes.
"The trend today is toward designs that can be used on a wide variety
of products. In the near future, I expect to have my designs on other
product lines such as buttons, rugs, towels, sheets and curtains."
Rip-offs or royalties?
Terry Floyd of Laughing Moon Productions has been selling hand-painted
one-of-a-kind jumping jacks, clocks, gifts and decorative accessories
for 30 years. As a purist who didn't want her products made in an inferior
way, she rejected the first offer she got from a manufacturer who wanted
to license one of her jumping jack designs.
"I was approached at a crafts show by a woman representing a manufacturer,"
she says. "Not knowing anything about how the licensing industry
worked, I passed on the idea. She bought one of my jumping jacks, and
I never thought anything more about it until I saw that item in the
company's catalog. I never got a thing from it because I was ignorant
about how to protect my rights in those days."
Later, when another manufacturer stole a different design, Floyd sued
and won a $20,000 settlement. "I saw one of my designs at a show
in the form of a lithograph," she says. "I had a [strong]
case because I had hidden my signature in the art and they didn't see
it."
In the end, Floyd decided it made more sense to get into licensing
than to have her designs stolen by manufacturers. Although she knows
she has lost a lot of money from rip-offs and contractual mistakes,
she has nonetheless earned tens of thousands of dollars in royalties
over the years from the sale of nearly 1,000 jumping jack designs. They
have been used for Christmas ornaments and cross-stitch kits, on stationery,
fabric, glass, beadwork and dishware.
How the licensing industry works
There are no standards in the licensing industry. Because each licensing
agency and manufacturer operates differently, no two licensing deals
are alike.
Some designers have agents who represent them to major manufacturers,
but these agents are hard to find and may take as much as 50 percent
of a designer's royalties. Thus, artists often negotiate their own contracts.
This is not easy, however, and can be disastrous if you don't seek the
advice of an attorney. "If you don't know what you are doing, there
are a lot of [pitfalls] in this kind of arrangement," says one
craftsman who made a bad licensing deal to have his handcrafted clocks
reproduced.
"An attorney can negotiate a contract for you," says Floyd,
"but lawyers tend to scare off small manufacturers, so you might
want to negotiate these contracts yourself, using the attorney as a
consultant."
Royalties are only part of the contract negotiations (see the sidebar).
"You must understand the market potential for a product before
you can successfully negotiate the terms of a contract and the percent
of royalties that will be paid," says Lang.
Royalties normally range from two percent to 10 percent of net sales,
with five to seven percent the most common. (The lower the retail price
of the item, the lower the percentage is likely to be.) "Established
designers may be able to command an upfront designer fee," Lang
explains, "but beginners will be lucky to get a small advance of
$250 to $500 against royalties that won't begin to materialize for a
year or more." Once they start, however, payments are made monthly
or quarterly, depending on the manufacturer's policy.
RESOURCES
International Licensing Industry Merchandisers' Association
(Sponsors annual licensing show in New York)
350 5th Ave., Ste. 2309
New York, NY 10118
(212) 244-1944
Society of Craft Designers and Association of Crafts & Creative
Industries (ACCI)
Box 3388
Zanesville, OH 43702-3388
(740) 452-4541
www.Nolo.com
The Self Help Law Center on the Internet. The site is run by Nolo Press,
publisher of legal advice books for consumers.
Finding and dealing with manufacturers
Terry Floyd found interested manufacturers by touring the L.A. Gift
Mart. "I looked for companies that made high-quality products I
thought my designs would work for and sent them my résumé,
a catalog and my Web address," she says.
Annie Lang has sold her art designs to several manufacturers she found
through networking and membership in professional organizations such
as the Association of Crafts and Creative Industries (ACCI) and the
Society of Craft Designers (SCD). SCD publishes a directory of its members
and holds an annual conference in a different city each year. Here,
designers showcase their work and negotiate directly with publishers
and manufacturers in the crafts industry. "More and more manufacturers
outside the craft industry are now coming to SCD conferences to find
qualified craft designers," Lang notes.
You could also attend the international annual licensing show in New
York but, "This is a monster show," says Lang. "Everything
you can imagine is there -- all kinds of industries."
If a manufacturer expresses interest in your products or designs, check
out the company carefully. You have to be able to trust the manufacturer
because there is no way you can check how many products they make and
sell using your designs. Since contact people change regularly, try
to deal with the owner or someone high up on the ladder.
Ask the company to sign a proprietary rights or disclosure agreement
that states they will merely look at your designs and not copy them.
Sending your designs to the manufacturer without securing a signed disclosure
agreements leaves you virtually unprotected. If a manufacturer is unwilling
to sign a disclosure agreement, you might want to look elsewhere. If
that company steals your designs, you have very little legal recourse.
If a company signs your agreement then copies your work, you have grounds
to sue.
Disclosure agreements vary, but should contain the following:
* a definition of what is and what isn't confidential information,
* obligations of the receiving party, and
* time periods.
If you take the necessary precautions and obtain legal advice, licensing
to manufacturers can be a great way to boost your profits.
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