Exclusive Rights Contract

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Exclusive Rights Contract

Brief Introduction About Exclusive Rights Contract

When you grant someone exclusive rights for a product or service, it means that the buyer is free to use that product or service as per his wish. The grantor cannot grant those rights to anyone else. They are for the exclusive use of the buyer. This grant of exclusive rights can be seen in various fields. In technology, the exclusive rights to use the technology or patent are granted.

Similarly, in the music industry, it is common to grant exclusive rights for a beat or song. This is carried out with the help of an exclusive rights contract for music. It is a legally binding document between the producer (grantor) and the artist or record label (buyer) of exclusive rights. It sets out the terms that they have agreed to. These include granting of exclusive rights, what all the artist is allowed to do under exclusive rights, compensation paid to the producer and the obligations of the parties.

Purpose of an Exclusive Rights Contract

This contract is very useful for artists who wish to use a beat or song in their music. The contract would allow them to use the beat/song in any manner. For example, an exclusive rights contract for beats will enable the artist to use the beat in any number of recordings as she wants. In case of exclusive rights to a song, the artist will be able to use the song in her album, videos, and live performances.

This contract also protects the producers who own the exclusive rights. It lists the ways in which the artist can use the beat/song. These are included with the producers’ consent. If the artist violates any of the terms, she will have to compensate the producers. Both parties set the conditions for each other. The contract also contains a dispute resolution clause which explains what steps are to be taken in case of an issue between the parties. Thus, the contract is an important tool to avoid misunderstandings between all the parties involved.

Contents of an Exclusive Rights Contract Template

A sample exclusive rights contract contains the following terms:

  • Names of the parties
  • Date of the agreement
  • Purpose of the agreement
  • Grant of exclusive rights in the beat/song
  • Fee paid to the producer
  • Royalty claims
  • Obligations of the artist/record label
  • Obligations of the producer
  • Term of the agreement- It is mostly indefinite.
  • Dispute settlement
  • Governing law
  • Signature of the parties

How to Draft an Exclusive Rights Contract

When the negotiations are completed between the parties, the drafting process starts. All the provisions of the contract must comply with federal copyright law. Some important points to note are:

  • Grant of exclusive rights: This clause must state all the ways in which the artist can use the song or beat. These may include mixing, recording, altering, performing and distributing the beat/song. The use can extend to singles, music albums, videos and an unlimited number of plays, and downloads.
  • Fee: This term must clearly state the amount of fees that the artist has to pay to the producer. It should also mention when and how this amount has to be paid.
  • Royalties: This term in a producer exclusive rights contract must express the royalties that the producer will get from the sale of the song/beat. The percentage and how it will be calculated should be explained.
  • Obligations of the artist/label: This clause must be coherent about the artist’s obligations. The producer can ask the artist to give him due credit for the song or beat whenever it is used. He can also place an obligation on the artist that she will not resell the beat/song to any third party.
  • Obligations of the producer: These may include terms such as how the producer will submit the beat/song to the artist and that he will remove the concerned song from his website.

[ Also Read: Video Licensing Agreement ]

Negotiation Strategy

For the producer: The producer can negotiate certain restrictions on exclusive rights, such as limiting the distribution to a particular medium. He may also negotiate the compensation to get a good value. Royalties are another point that he may discuss with the artist and get a certain percentage.

For the artist/record label: The artist, on the other hand, can negotiate for the widest scope of exclusive rights. This means that she may negotiate for using the song/beat in any manner that she wants and distribute it in any medium of her choice. This also extends to using the song/beat in movies, TV shows or advertisements.

Benefits and Drawbacks of an Exclusive Rights Contract

Benefits:

  • It allows the artist to use the music as she desires. No one else can get the right to use that same music.
  • In many cases, there is no royalty to be paid by the artist to anyone.

Drawbacks:

  • Since exclusive rights are valuable, they usually come at a very high price.
  • Its negotiations may take a long time to complete.

What Happens If It Is Violated?

If the contract is violated by any party, it will be addressed as per its terms. The dispute settlement clause will state how such situations are to be handled. It may prescribe negotiation or arbitration as a method(1). If they fail, the defaulting party can be sued in the court of the state that is mentioned in the ‘governing law’ clause. Laws of that state will be applied to the contract to resolve the issue.

An exclusive rights contract is an important instrument for artists to get access to a variety of music. It is a relatively simple document to draft. But it is advisable to use a sample agreement that has been reviewed by attorneys. This will ensure that it adheres to all applicable laws and regulations.