Page 11 - Fashion Law

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Fashion Law | MONDAY, SEPTEMBER 12, 2016 | S11
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of the worst misdeeds (e.g. sales outside the territory) being non-curable offenses, and a catch-all for all breaches. Licensees wish to get as many cure rights as possible and to limit non-curable breaches, using materiality language.
Glamoroso should make sure that Too Hot maintains adequate product liability insurance (at least $3,000,000), with Glamoroso named as an additional insured. Glamoroso wants to be protected if the indigo dye in the Glamoroso jeans bleeds on the white leather seats of a customer’s Ferrari.
Too Hot will want to be indemni ed for any claim asserted by a third party that the use of the Glamoroso trademark violates the third party’s trademark rights. Glamoroso may try to limit the amount to be paid out under the indemni cation to the amount of royalties paid by Too Hot. Smoothtalk should never accept that limitation.
Glamoroso should also be indemni ed. Glamoroso should have Too Hot indemnify him for any non- trademark claim a third party asserts in connection with Too Hot’s exploitation of the Licensed Mark.
and Smoothtalk hold off talking about money issues until after their zuppa inglese and tiramisu arrive. Glamoroso tells Smoothtalk that he wants Too Hot to pay the greater of minimum annual royalties of $300,000, or percentage royalties of 12% of Too Hot’s net sales. Glamoroso also wants another 3% to be paid to Glamoroso for advertising. Smoothtalk almost chokes on his double espresso.
In virtually all license agreements, the Licensor will insist on guaranteed minimum royalties as against royalties based on a percentage of sales, and often an advertising payment or expenditure, as well.
Smoothtalk tells Glamoroso (and for good reason) that (a) twelve per cent is too high, (b) he is not happy about paying such heavy minimum royalties for a trademark which has not been previously associated with jeans and (c) he is not happy about being required to pay for an expensive advertising campaign he can’t control. “But Signore you are paying royalties for the Glamoroso name, synonymous with elegance and style; you’ll make more money with it; so must I,” Glamoroso responds.
They compromise on annual minimum royalties of $200,000, percentage royalties of eight per cent, and advertising expenditures of three per cent, with two per cent to go to Glamoroso and one per cent to be spent by Too Hot.
Important Issues That Won’t Come Up At Lunch
-Although the discussions of the principals on these business subjects may end here, there are issues that remain for the lawyers to hammer out. Termination provisions are often hotly negotiated. The Licensor should include a long, speci c list of misdeeds for which the Agreement can be terminated, with some
Charles Klein, Esq. has contributed chapters for “Negotiating Fashion Law”, written and published “Fashion and the Law” and lectured widely about fashion legal issues.
Davidoff Hutcher & Citron LLP (www.dhclegal.com) is a multi-faceted, medium size, commercial law rm, located in midtown Manhattan.
DHC and its Fashion Law Chair Charles Klein, Esq. have represented leading fashion, accessories, and home furnishings companies for more than 25 years.
To learn how DHC can be of help in your licensing, intellectual property, nancing, website, mergers and acquisitions, and litigation matters and other fashion legal matters, please contact Charles Klein at 646-428-3240 or at [email protected]
Termination/Expiration poses two important issues. On termination for breach, the Licensor typically wants all unpaid minimum royalties for the remainder of the term to accelerate; the Licensee may try to cap that amount. The Licensee will try to ensure that it can sell off its remaining inventory for a period of at least 120 days; the Licensor may seek to preclude the sell-off following a termination for a serious breach.
Conclusion - Don’t get lulled into ignoring key issues no matter how many license deals you have done; each agreement is different and requires your complete and careful scrutiny.