Litigation and Intellectual Property lawyer Sepideh Nassabi's article "Living in Ryan’s World: How licensing fortifies brands" was published in The Lawyer's Daily. The article discusses how brands can profit from licensing trademarks by looking at a famous 10-year old YouTuber, Ryan Kaji, as an example.
The article was originally published on December 9, 2021. To read it in The Lawyer's Daily, visit: https://www.thelawyersdaily.ca/articles/32077/living-in-ryan-s-world-how-licensing-fortifies-brands (subscription required).
Special thank you to Carol Liu (Student-at-Law) in her contribution to this article.
Living in Ryan’s World: How licensing fortifies brands
If you are a parent of young children born in the 2010s, there is a decent chance that you have heard of Ryan Kaji. On the one hand, Ryan is a typical 10-year-old boy who swims, plays soccer and dreams of becoming a game developer when he grows up. On the other hand, it is anything but typical to have Time magazine publish a profile about a 10-year-old child and his multimillion-dollar business empire built upon an extremely popular YouTube channel.
According to Time, Sunlight Entertainment, the Kajis’ production company, entered into a licensing deal with a company called Pocketwatch in 2017. While their contemporaries on YouTube were still mostly relying on ad revenues paid by Google in the mid-to-late 2010s, Ryan’s family was an enthusiastic early adopter of merchandising deals. Over time, this proved to be a lucrative decision: to date, there are 1,600 products associated with Ryan’s brand. It was reported that Ryan-themed products generated about $250 million in retail sales in 2020.
Licensing, merchandising
Despite the intense media scrutiny and public speculation that always follow families of famous or Internet-famous children, Ryan and his family’s success continues to grow. This is in no small part due to some timely licensing and merchandising deals.
Merchandising, in this context, refers to the creation of specific products for retail sales: the provision of goods to end-user consumers, as in designing, manufacturing and distributing a wide range of child-friendly products for Ryan’s audience to purchase from their local retailers.
How is this merchandise set apart from similar toys by any other reputable brand? The answer lies in licensing. By licensing the trademarks registered in association with Ryan’s personal brand to its merchandising partner, retail sales would likely be bolstered, gaining both endorsement and exposure from any promotional messages sent from Ryan’s social media accounts.
Section 50 of the Trademarks Act is the legal basis of how licensing deals work under Canadian trademark law. If the owner of a trademark gives permission for the trademark to be used for “use, advertising, or display” in Canada or another country (a licence), when the licensee uses that trademark, it is as if the owner has used it themselves. When the public is notified that the use of the trademark is licensed, the legal presumption is that the use is approved by the owner and under the owner’s control.
Involvement of minors
The interconnection between intellectual property, contracts and minors still has not been judicially considered much in Canada. To date, there has not been a case where a Canadian court specifically addressed the issue of whether the intellectual property rights of a minor can be transferred pursuant to a contract, such as a licensing agreement. However, there is a decision of the English Court of Appeal that may provide some assistance on this matter.
In Chaplin v. Leslie Frewin (Publishers) Ltd. and Another [1965] 3 All ER 764, Charlie Chaplin’s son, a minor, entered into a contract to ghost-write his biography in return for a cash advance and royalty on all sales. In turn, the copyright in the book vested with the publisher. Approximately six months after entering into the contract, Chaplin sought to repudiate the contract on the ground of his minority. The court held that the contract was enforceable because it was, “on the whole,” for the benefit of Chaplin as a minor, as it would provide him an opportunity to begin his career as an author. Even if the contract was not enforceable, the court found that the transfer of copyright was still effective, as it was no longer Chaplin’s property upon being vested in the publisher.
Some transferrable takeaways from the Chaplin case are also helpful in the context of licensing trademarks, where trademarks involving a minor are licensed to a company for merchandising ventures or other business activities.
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Make sure that the written agreement clearly sets out that the contract is for the benefit of the minor, on the whole. This, in turn, means that monetary compensation such as royalty rates and payments should be reasonable, with payment amounts and payments schedule written explicitly in the contract.
- The parameters of acceptable and unacceptable uses should also be made clear, with particular attention paid to unacceptable uses that are specifically unsuitable to the minor and the very young demographic of his audience.
Other considerations
Although the minor’s media business is likely operated via a corporation, it is up to the parents and/or business managers to set aside a portion of the proceeds to go into trust accounts for the benefit of the child. To pre-empt any divergent interpretations of the contract, through negotiations it is wise for all parties involved to understand what measures are in place to ensure that income earmarked for the minor is held for his personal benefit.
Most social media companies are based in a jurisdiction in the United States, where the regulatory entities have been more invested in the regulation of the industry. As such, it may be a good idea for parties to seek advice on how the policies of online platforms (such as YouTube, Twitch, Instagram) may bear on the particulars of negotiating and entering into contracts with underage social media influencers.
Re-printed with permission from The Lawyer's Daily - originally published on December 9, 2021.
If you have any concerns or questions regarding an infringement of your intellectual property rights contact Sepideh Nassabi at snassabi@mindengross.com.