Download 1 of 7 Frequently Asked Questions: IFTA® International Multiple

IFTA®
Frequently Asked Questions:
International Multiple Rights Deal Memo
STEP 1
Who is authorized to sign the Deal Memo on behalf of the Parties?
An authorized representative or agent acting within the scope of their relationship to the
principal entity is able to bind a Party to the terms of an agreement. Certain employees or
principals of a company may also bind a Party. It is important to identify the appropriate
legal entities of the Licensor, the Sales Agent and each Distributor, so that it is clear which
are bound to uphold the terms of the Deal Memo and legally resolve any disputes thereunder.
If an individual is to be bound to the Deal Memo and personally liable for performance or
breach, then the Parties, including the person, in their individual capacity, must be named as
a Party and sign the Deal Memo. Once completed and signed by the Parties, the IFTA Deal
Memo an enforceable agreement.
What is the difference between the Agreement Term and the License Period?
The “Agreement Term” refers to the duration of time that the specific contractual
relationship outlined in the Deal Memo between the Licensor and Distributor is in effect. A
“License Period” is a specific period of time indicated in the Deal Memo during which the
Licensed Right(s) may be exploited by the Distributor. The Parties may specify the same
License Period for all Licensed Rights, or separate License Periods for each individual
Licensed Right. The Agreement Term may be longer than the longest License Period.
STEP 2
How to determine the Licensed Territory?
Licensors should designate the Territory using the IFTA® International Schedule of
Territories which outlines individual countries, groups of countries and territories, and
groups of territories as they are often used for purposes of granting distribution rights for
Motion Pictures. The Licensed Territory is typically defined by national boundary. In some
cases a Licensed Territory may be on a pan-regional basis, for example covering “Latin
America”.
Other considerations regarding the Licensed Territory are set out in the IFTA® International
Standard Terms, including the effect of changes in borders and technological safeguards to
ensure that accessing, streaming or downloading of the Motion Picture is limited solely to
reasonably identifiable locations within the Territory (i.e., geofiltering).
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STEP 3
What is an Authorized Language?
“Authorized Language” means a language in which a Motion Picture is authorized to be
exploited in the licensed Territory by means of particular Authorized Language Use(s), such
as dubbing (voices of performers on the original soundtrack are replaced with the voices of
other performers speaking dialogue in an Authorized Language), subtitling (a translation of
the original dialogue appears on the bottom of the screen) or parallel tracking (embodying a
Copy of the Original Language Version of the Picture in a Compact Disc or DVD that also
contains a Dubbed or Subtitled Version of the Picture in the Authorized Language Uses).
The “Original Language” is the primary language spoken in the dialogue of a Motion Picture
in its original version and may be designated as an Authorized Language. Authorized
Languages are closely linked with the licensed Territory and should be carefully considered.
Under the IFTA® International Standard Terms, the Licensor owns all Distributor created
materials.
STEP 4
What is a Licensed Right?
A “Licensed Right” is a grant of a specific intellectual property distribution right in order to
exploit the Motion Picture in a designated media, e.g., Cinematic, Ancillary, PayPerView,
Video, Pay TV, Free TV, Internet or ClosedNet. Each Licensed Right is defined in the
IFTA® International Schedule of Definitions. An “Authorized Use” is a contractual use
which is expressly authorized by Licensor for a specific type of Licensed Right; e.g., IPTV
Use, Catch-Up TV and Kiosk Use. An Authorized Use is an additional contractual
requirement that controls the exercise of a Licensed intellectual property right. When a
certain use requires Licensor’s authorization, such as exploiting the Motion Picture in
Authorized Languages or Authorized Formats, or for a designated number of Authorized
Telecasts, the Agreement should expressly designate those Authorized Uses. Section II of
the IFTA® International Deal Terms contains many sample provisions indicating how
Authorized Uses may be designated. All of the examples of Authorized Uses are defined in
the IFTA® International Schedule of Definitions. Any Authorized Use must be designated in
the Deal Memo and the Deal Terms of the Agreement. As with prior versions of the IFTA®
Model International Licensing Agreements, if a Licensed Right or Authorized Use is not
expressly granted or authorized, it is reserved by the Licensor.
What is the ClosedNet Right?
ClosedNet refers to distribution to subscribers via a Closed Network which is only
accessible to verified Authorized Subscribers. ClosedNet Rights should be distinguished
from Internet Rights on a Subscription basis. ClosedNet Rights are exploited by
Authorized Subscribers to the Closed Network. Internet Rights on a Subscription basis are
exploited by Authorized Subscribers to the Website. A Closed Network means the
interconnected facilities of a closed, private communications network which uses Internet
Protocol or other secure data transmission protocol for communication among Authorized
Computers (including Mobile Devices) of Authorized Subscribers connected to that
Closed Network.
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How does the Deal Memo accommodate multiple distribution models or platforms under
one grant of Licensed Rights?
The IFTA® Model International Licensing Agreements were drafted with an eye toward
the emerging digital marketplace and provide Licensors with the option of licensing a
variety of combinations of Licensed Rights and Authorized Uses. The Deal Memo
accommodates all Licensed Rights in one agreement, including Internet and ClosedNet
Licensed Rights. For example, allowing Authorized Subscribers of a Pay TV service to
access the licensed content transmitted over that Pay TV service at another access point,
such as a secured (closed) Website for an IPTV Use or during a Catch-Up TV Period,
requires a license that is a combination of the Pay TV and ClosedNet Licensed Rights
selected by the Parties in the Deal Memo
Why do the IFTA® International Schedule of Definitions define “VOD” as “Demand
View”?
The Deal Memo includes the Demand View Right as part of the television distribution rights
included in the grant of PayPerView Rights. Specifically, “Demand View” means the
transmission of a Motion Picture Copy by means of an encoded signal for television
reception in homes and similar permanent living places where a charge is made to the viewer
for the right to use a decoding device to view the Motion Picture at a time selected by the
viewer for each viewing. The IFTA® International Schedule of Definitions cross references
VOD with Demand View since many in the industry may use the term VOD to describe
ANY distribution in which a consumer orders a Motion Picture on demand.
As a PayPerView Right, Demand View excludes any form of making the Motion Picture
available on the Internet or over a Closed Network. Under the Deal Memo, a license that
encompasses VOD distribution via the Internet or over a Closed Network must include a
grant of Internet Rights or ClosedNet Rights. Specifically, the grant of rights would include
the Internet Streaming/Downloading and/or ClosedNet Streaming/Downloading Licensed
Right(s) and the applicable Authorized Use(s), such as Subscription, Ad Supported or CatchUp TV uses.
IFTA Terminology Translator FAQ
How can Licensors respond to differences in licensing terms and definitions between the
IFTA® International Schedule of Definitions and those in a distributor’s form agreement?
In the international marketplace, Licensors will likely encounter a broad range of stated
definitions for licensing television, VOD, and digital distribution, especially as the market
continues to develop, new platforms emerge, and traditional service providers expand their
offerings across various media.
Under the IFTA® Model International Licensing Agreements, the various methods of
distribution can be distinguished by the distribution medium and the corresponding Licensed
Rights necessary for exploitation (e.g., Cable, Satellite, Internet, or ClosedNet); the basis on
which the payment is made by the consumer (i.e., subscription, per transaction, or at no
charge to consumer/distributor receives a share of the advertising revenue); the exclusivity
period (if any); and the windows and holdbacks that must be coordinated. Other form
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agreements, however, may define terms by reference to methods of delivering the licensed
Motion Picture to the consumer. When presented with a Distributor’s form agreement as the
basis for negotiation, Licensors should carefully review rights definitions and their
corresponding financial models, windows and limitations on exploitation to understand the
commercial impact on other licenses that may be granted. It is also important to ensure that
only those rights that will actually be exploited by the Distributor are included in the grant of
rights and that all other rights not expressly granted are reserved to the Licensor.
STEP 5
How are “windows” and “holdbacks” related?
Contractual holdbacks are important to preserve strict windows of exploitation throughout the
entire distribution sequence. Coordination of windows and holdbacks is becoming
increasingly complex and must be actively managed by Licensors, Sales Agents and
Distributors. Before licensing television, VOD, or digital distribution, Licensors must
consider whether to establish any contractual holdbacks within the Territory. Determining
and coordinating holdbacks and the length of windows is critical to maintain value of
the licensed content throughout its distribution. For example, it may be prudent to establish
contractual holdbacks that prevent the licensed content from appearing on non-exclusive
Advertiser Supported or “free to consumer” VOD services prior to any Transactional VOD
or exclusive Subscription VOD for which consumers must pay a per transaction or per
subscription fee to view the content. Another example of coordination is that Licensor may
require that its worldwide distributors holdback VOD distribution until after the U.S.
Theatrical Release in order to accommodate their U.S. theatrical or All Rights distributor.
STEP 6
What is the difference between a Licensed Right and Authorized Use?
A “Licensed Right” is a grant of a specific intellectual property distribution right in order to
exploit the Motion Picture in a designated media, e.g., Cinematic, Ancillary, PayPerView,
Video, Pay TV, Free TV, Internet or ClosedNet. An “Authorized Use” is an additional
contractual requirement that controls the exercise of a Licensed intellectual property
distribution right and is expressly authorized by Licensor; e.g., IPTV Use, Catch-Up TV and
Kiosk Use. Any Authorized Use must be designated in the Deal Memo and the Deal Terms
of the IFTA® International Multiple Rights Distribution Agreement. As with prior versions
of the IFTA® Model International Licensing Agreements, if a Licensed Right or Authorized
Use is not expressly granted or authorized, it is reserved by the Licensor.
What are the Authorized Uses contemplated in the IFTA® Model International Licensing
Agreements?
The IFTA® International Multiple Rights Distribution Agreement provides samples of
various Authorized Uses at Section II(C) of the deal terms, including Digital Cinema Use,
Kiosk Use, IPTV Use, Catch-Up TV Use, Single Use, Limited Use, Permanent Use,
Subscription Use, and Ad Supported Use.
What is the Catch-Up TV Use?
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Under the IFTA® Model International Licensing Agreements, Catch-Up TV is an
Authorized Use, not a Licensed Right, and requires separate authorization in conjunction
with the PayPerView, Pay TV or Free TV Licensed Rights. Catch-Up TV allows a
broadcaster to make the Picture available for a limited time after an Authorized Telecast.
If the broadcaster is a PayPerView or Pay TV service, then Catch-Up TV involves
ClosedNet Streaming. If the broadcaster is a Free TV service, then Catch-Up TV involves
Internet Streaming. The Licensor may designate whether the Internet or ClosedNet Rights are
exclusive. The Licensor may designate the period for Catch-Up TV, but if not the default
period is thirty (30) days from the Authorized Telecast. The IFTA® International Standard
Terms provide that if Catch-Up TV is allowed, the Licensor will not authorize Catch-Up TV
Use of the licensed Motion Picture in the Territory by any other party in conjunction with
any other PayPerView, Pay TV, or Free TV broadcast as applicable, but this does not
prevent the Licensor from authorizing either Internet or ClosedNet Rights in conjunction
with other rights.
Licensors may consider further limitations on the Catch-Up TV Use and whether to designate
the use as non-exclusive and, if a television series, may limit the number of episodes that
are available for catch-up viewing to a particular time period, including forms of so called
“delayed Catch-Up TV” (such as “stacking rights”, also known in Europe as “box set
rights”), so as to not interfere with other rights, including SVOD, ensuring that the episodes
are offered in chronological order, or by preventing an entire television series from being
available for “binge” viewing, or “in perpetuity” (which is often incorrectly labelled “FVOD
Rights”).
What is the difference between Catch-Up TV and “Free VOD” or “FVOD”?
Under the IFTA® Model International Licensing Agreements, Catch-Up TV allows a
Distributor to make content available to its Authorized Subscribers by Streaming on the
Internet or over a Closed Network for a limited period of time after an Authorized Telecast.
In contrast, “Free VOD” or “FVOD” is not licensed in conjunction with a Television Right
and may have a separate financial model and terms of exploitation.
VOD distribution on an Advertiser Supported basis may sometimes be referred to as “Free
VOD” or “FVOD” because the content is offered at no cost to the consumer; however it
should not be defined in a way that confuses it with Catch-Up TV, or with the often
more lucrative Subscription or Transactional VOD distribution. Advertiser Supported
distribution is not typically licensed in conjunction with a Television Right or connected
to an Authorized Telecast, but rather often paired with the Internet/ClosedNet Licensed
Rights. In the associated financial model, the Licensor and Distributor share revenues from
the ads surrounding or embedded within the content.
STEP 7
What is the difference between an “Exception” and a “Holdback”?
An “exception” refers to a specific item that is NOT included as part of the grant of Licensed
Rights or Authorized Uses. A “holdback” is a contractual limitation on the time for the
particular exploitation of a Licensed Right(s). The IFTA® International Multiple Rights
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Distribution Agreement provides samples of exceptions with respect to Right/Territory,
Language, and the Pay TV window.
STEP 8
What is a Guarantee?
The Guarantee is a minimum net amount to be paid by the Distributor to the Licensor in
exchange for the right to exploit the Licensed Rights under the Agreement. The Guarantee is
expected to be recouped from the revenues derived from exploitation and otherwise payable
to the Licensor. The IFTA® International Multiple Rights Distribution Agreement provides
options for the Parties to specify the payment terms as follows:
___% (_______) on [within [
___% (_______) on [within [
___% (_______) on [within [
Photography; and
___% (_______) on [within [
___% (_______) on [within [
___% (_______) on [within [
___% (_______) on [within [
] days after] execution of this Agreement; and
] days after] Notice of Start of Principal Photography; and
] days after] Notice of Completion of Principal
] days after] Notice of Initial Delivery; and
] days after] Acceptance of Delivery; and
] days after] First Release [of the Picture]; and
] days after] on [________________________].
What should be considered when allocating the Guarantee among the Licensed Rights?
The allocation of the Guarantee among the Licensed Rights is particularly important in light
of talent guild residual payment obligations that may be triggered by the various types of
exploitation (Cinematic, Ancillary, PayPerView, Video, Pay TV, Free TV, Internet and
ClosedNet). Licensors are encouraged to consult competent legal counsel regarding the
potential implications regarding Guild obligations. Under the Deal Memo, if no allocation is
indicated, the entire Guarantee is allocated to Theatrical Rights, if granted.
STEP 9
What are types of arrangements for sharing of Gross Receipts between Licensors and
Distributors?
The Deal Memo outlines three options for the distribution of Gross Receipts: (i) Costs-Off
Deal, (ii) Distribution Deal, and (iii) Royalty Deal. Since each Licensed Right may have a
different financial Disposition of Gross Receipts, the Parties should designate which
disposition applies to which Licensed Right.
Costs-Off Deal. Under this arrangement, the Distributor is permitted to recoup up to 100%
of its recoupable Distribution Costs from the Gross Receipts on a “costs-off-the-top” basis.
The Parties may specify a split of Gross Receipts applicable before and after the Distributor
has recouped the Guarantee. Recoupable Costs are set out in Paragraph 9 of the IFTA®
International Standard Terms.
Distribution Deal. Under this arrangement, the Parties will share in the Gross Receipts on a
negotiated percentage split between the Licensor and Distributor. The Parties may also
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specify whether any part of the Gross Receipts will be used for the Distributor to recoup the
Guarantee.
Royalty Deal. Under this arrangement, Distributor will calculate and recoup Gross Receipts
on a “royalty” basis. The Royalty Deal is intended for use in negotiating the financial terms
for licensing the Video Licensed Rights. It should be used for deals in which hard goods will
be manufactured and shipped and therefore is expressed as a “royalty” on each unit sold.
STEP 10
What are “Additional Terms”?
Additional Terms refer any other core conditions of the license that are not documented
elsewhere in the Deal Memo. For example, the Parties may identify a Key Element. A “Key
Element” means a person committed to render services or materials on the Picture, such as a
lead actor or director. There can be more than one Key Element. Other items such as a
specific script, budget, delivery date, theatrical screen commitment or P&A commitment may
also be significant and should also be addressed in the Additional Terms section or attached
as part of the Deal Memo.
Must the Parties proceed to a long-form agreement?
No. Under the Deal Memo, while the Parties intend to prepare and sign a more formal longform agreement incorporating the terms of the Deal Memo, unless and until such an
agreement is signed, the signed Deal Memo, incorporating the IFTA® International Standard
Terms and the IFTA® International Schedule of Definitions contained in the IFTA® Multiple
Rights Distribution Agreement, remains fully enforceable.
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