Merchandising

Merchandising, or derivative exploitation, refers to the commercial exploitation of a sign, a character, a title, a work or a person’s image on goods or services outside their original field. The practice rests on no specific right. Depending on what is exploited, it draws on trade mark law, copyright, design law and image rights, governed by Article 9 of the Civil Code.

The basis of exclusivity

Derivative exploitation presupposes that its subject matter is reserved by an exclusive right. A fictional character is protected by copyright where its features or personality are original. A name, a logo or a shape may be filed as a trade mark in the classes covering merchandise, provided the sign is distinctive for those goods and the applicant is not acting solely to block a market. The image and name of a natural person fall under personality rights, which may be the subject of a contractual authorisation limited in purpose, duration and territory. Elements covered by none of these rights remain free to use, subject to the rules on parasitism.

The merchandising agreement

The agreement takes the form of a licence, exclusive or not, by which the right holder authorises a manufacturer or distributor to exploit the protected subject matter on specified goods. It sets out the product categories, territories, distribution channels, term and remuneration, most often a royalty proportional to turnover with a guaranteed minimum. Where the licence covers copyright, the formal requirements of Article L. 131-3 of the French Intellectual Property Code apply and each right granted must be stated separately. In practice the right holder retains control over the quality of the goods and over derivative creations, in order to protect the image of what is exploited.

Limits and risks

A trade mark registered for merchandise must be put to genuine use within five years of registration for each category, failing which it is liable to revocation. Use of an artist’s name or a work’s title on goods may also be challenged as misleading where it suggests a commercial link that does not exist. In copyright, derivative exploitation of a character or a work also requires respect for the author’s moral rights, which the author cannot waive in advance. Disputes most often arise from licences that are vague about the goods covered, from unauthorised sub-licences or from continued exploitation after the agreement has expired.

Key points

Derivative exploitation is possible only if what is exploited is reserved by a trade mark, a copyright, a design or a personality right. The licence must list precisely the goods, territories and term, and comply with copyright formalities where they apply. Before any campaign, check title to the rights, the scope of the trade mark filings and the existence of genuine use for each category of merchandise.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats is a patent litigation firm. Matters outside that field, such as trade marks, designs, copyright and IT contracts, are handled by practitioners the firm works with regularly, and by the firm itself when they arise in a patent dispute.

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