Licensing
Licensing – is the act of one party authorizing and granting permission to a third party to perform an action that would otherwise be unlawful, while a “license” is the document providing evidence thereof.[1]
Licensing is common in many situations where there is an entity holding authorization powers. For instance, in administrative contexts, public authorities grant licenses to citizens to allow them to engage in activities that might pose risks to the community if freely undertaken by anybody, without proper evaluation and prior public authorization, such as driving or hunting.
The industry where licensing plays a paramount role is the creative and inventive sector, where it serves as the primary mechanism for intellectual property rights’ owners to exploit and monetize their intangible assets, such as creative works protected by copyright,[2] inventions protected by patents[3] and/or trade secrets, or brands registered as trademarks.[4] In this sector licensing is formalized in actual license agreements, which consist in contracts where the party owning the relevant intellectual property rights, named “licensor”, maintaining the ownership of its intellectual property, grants to the other party, named “licensee”, the authorization to exercise certain usages of the protected assets that, by law, would be exclusive prerogative of the owners themselves.[5]
Forms
Licensing can take different forms based on the parties’ business interests. A license can be exclusive, thus authorizing licensee only to perform the authorized activities, excluding even the licensor from performing them; it can be non-exclusive, meaning that licensee, licensor, and other possible licensees can perform the authorized activities; or it can be semi-exclusive (s.c. “sole licensing”), meaning that licensor and licensee are the only ones that can perform the authorized activities. A license can authorize sublicensing or not. A license can be granted for free or upon the payment of a consideration, which can be a lump-sum or, more often, be proportional to the commercial results obtained by the licensee using licensor’s intellectual property rights (royalties or of revenues’ share). A license can authorize all the uses granted by the relevant intellectual property right at stake or only some of them; for example, it might authorize the reproduction of physical copies of a product and the relating distribution, without permitting digital copies’ exploitation. A license can be worldwide or territorially limited to certain specific countries. Additionally, licenses may have a limited duration or be granted in a regime of substantial perpetuity.
Also in the digital interactive entertainment industry, licensing confirms its pivotal role in allowing both video games production and distribution, and the spreading and strengthening of competitive video gaming phenomenon; this happens not only through “pure” licenses, but with more complex agreements including licensing element at their core.
As per video games production, for example, licensing is the core element of the principal contract of the industry: the publishing agreement.[6] These sorts of deals usually entail a development studio licensing its intellectual property rights on the video game to a publisher on an exclusive basis and with sublicensing rights, in exchange inter alia of the publisher’s providing: (i) the necessary funds to support the video game’s development; (ii) the performance of marketing activities; (iii) the management of physical and digital distribution as well as the relating royalties’ collecting. Sometimes these agreements are quite broad, and the license granted by the developer can even encompass the authorization to the publisher of managing the creation of derivative works (such as movies, comic-books, TV Series), with the aim of creating s.c. “franchises”. Additionally, licensing is also the means through which video games based on different media and IPs are created, for example, video games based on movies, TV series etc. (s.c., “cross-media licensing”).
In terms of competitive gaming and esports movement, licensing plays a core role in different ways.
Indeed, it is through licensing that video games’ intellectual property rights holders, i.e. the publishers (either because authorized per the relevant publishing agreements or, in some case, as actual owners of the relevant intellectual property rights), authorize third parties to organize esports events and tournaments, which consist in an exploitation of their rights including the execution in public of their game and its broadcasting on the web/TV. Such licensing-authorization can either be based on s.c. community licences, which are license terms and conditions usually available to the public on the publishers’ website in order to allow users and tournament organizers to rely on them to understand how legally organize authorized esports events (s.c., open system). [7] Alternatively, tournaments and events are organized pursuant to bespoke license agreements granted to allow the organization of specific tournaments, as it happens for bigger and more relevant tournaments in terms of prize and communication resonance, or in case of publishers that have decided to have a higher control on the esports movement relating to their games, and thus choosing the organizers and teams playing them (s.c., closed or franchised-system).
Additionally, licensing is integral to sponsorship agreements, which play a paramount role in the expansion of the esports movement, as they allow brands – often traditional ones – to reach the young target characterizing esports viewers. According to these agreements, brands economically support esports tournaments’ organization or esports teams, in exchange of the authorized use of their logo and insignia on the tournament marketing materials (or even on the screens displaying matches) or on the teams’ uniforms. Sometimes these deals can even encompass an obligation of the “sponsees” (i.e.,the teams or the tournament organizers supported by the sponsor) to adopt the sponsor’s name as part of the team’s or the tournament’s name itself (for example: the “Intel® Extreme Masters”); in this case it’s common to refer to these agreements as “naming rights” agreements.
[1] Bryan A. Garner (ed), ‘License’, Black’s Law Dictionary (4th edn, Thomson Reuters, 2011).
See also ‘License”, The Law Dictionary powered by Black’s Law Dictionary 2nd ed., <https://thelawdictionary.org/license/> accessed 11 April 2024.
[2] Silvia Scalzini, ‘La circolazione del diritto d’autore e dei diritti connessi’, in Francesco Antonio Genovese and Gustavo Oliveri (eds), Proprietà Intellettuale – Segni distintivi, brevetti, diritto d’autore (Wolters Kluwer Italia S.r.l., 2021).
[3] Andrea Tatafiore, ‘La circolazione dei diritti di brevetto’, ibid.
[4] Antonio Lamorgese, ‘La circolazione del marchio’, ibid.
[5] An interesting concise and yet broadly applicable definition of intellectual property license agreement can be found in Case C-533/07 Falco Privatstiftung e Rabitsch v. Gisela Weller-Lindhorst [2009] I-03327.
[6] David Greenspan and Gaetano Dimita, contributions from S. Gregory Boyd and Andrea Rizzi, Mastering the game – business and legal issues for video game developers (2nd ed, WIPO 2022) 130
[7] Dan Nabel and Bill Chang, Video Game Law in a Nutshell (2nd edn, West Academic, 2024), 417-457
