A situation that is more common than you might expect occurs when a business is bought or sold. A question that arises in this situation is as follows:
If I license commercial use of my photographs to a business & the business is sold, is that commercial use license part of the business sale?
Businesses change hands. They are bought and sold. They are subsumed into larger companies. They are wound down and all assets may be divested. So, what happens to commercial licenses granted to a business by a photographer when and if a business is sold?
In very straightforward terms, if your photography business granted a license to the entity X and entity X is sold to owner Y, then entity X still owns the license.
If entity X is sold, then what has changed is the owner of entity X. In one sense, the sale makes no difference at all to the status of the commercial use licenses. The reason why entity X still owns the license is because a legal entity, like a limited liability company (LLC) or a corporation (INC) is disregarded from the owner or employees. So, the sale of a business does not necessarily change the assets of that business. The owner of a business entity is a separate matter from the assets of a business itself. This legal fiction might be counterintuitive to many business owners for whom their identity is wrapped up in the ownership of their business.
Legally speaking, a commercial use license is a business asset and would form part of the assets that would remain with the entity.
The only exception to the continued ownership of use licenses is if the commercial use license specifically states that the license is time-limited and expires if the ownership of the business to whom the commercial license was extended changes hands or in the event of some other triggering event. Time-limited commercial use licenses are often a savvy business strategy and something that your attorney can draft for you.
Your attorney may also be able to assist you with drafting a commercial license agreement that provides for other contingencies (especially if you have a special relationship with the previous owner of entity X and don’t know if you want to continue to work with the new owner of entity X).
For example, an attorney will be able to assist you in ensuring that any licensing agreement expires on the sale of a business, or some other triggering event. So too, by offering limited commercial licenses rather than perpetual or unrestricted commercial licenses, you may find it easier to maintain an awareness of the status of the commercial licenses you have granted to other business entities.
It is important to restate that a commercial license is not the same as copyright. A license infers specific usage rights to the licensee. A commercial license assumes that the licensee can use the images for advertising and promotion purposes but may have specific allowances for use in certain formats, situations, and to advertise specific products or services. It will be important to review the commercial use of the images to which you have granted licenses by entity X following the sale to ensure that there are no breaches of the agreement. This oversight is important because you will need to actively object to any breach of the commercial license to avoid any assertion of implied license on the basis of an act or omission that you have failed to challenge.
To recap, in order to prevent unintended consequences as a result of the sale of a business entity to whom you have granted commercial licenses, it is important to ensure that any commercial licensing agreements adequately consider contingent circumstances, are appropriately time-limited, and address all preconceived commercial use situations and penalties for breach of the agreement.
A commercial license granted to a business entity is by its nature an asset of the business entity. The assets of a business are usually included in the sale of a business. It logically follows that any commercial licenses held by the business entity would remain an asset of a business and would convey as part of the sale.