There are lessons to be learned by fledgling NYC businesses from the recent legal battle over royalties between Blue Man Group and a collaborator.
If you are a New Yorker, or a tourist visiting New York City, then you probably know of Blue Man Group, a troupe of street artists that have grown into a global brand that has entertain millions annually. Recently, a collaborator and songwriter has sued them for breach of a royalty agreement.
Ian Pai’s lawsuit contends that the parties agreed he was entitled to a fixed percentage of box office revenue from performances allocated into a “pool” for composer royalties for 20 songs used in the original Blue Man Group show. Pai alleges that, over time, he noticed a significant decrease in the percentage allocated to the royalty pool and that he is entitled to more money for his songs.
Royalties are paid to legal owners of intellectual property, such as music used in musical compositions and performances. Often, the amount of payment is based on sales. For instance, when a record label distributes a song either by CD or online, a royalty payment is due as compensation to the owner of the property, patent, copyrighted work or franchise by those who wish to use it to generate revenue. In most cases, royalties are legally binding.
Mr. Pai also alleged that there exists an “industry standard,” or a criteria generally accepted within the field of song writing followed by the members therein, for royalties not lower than 6 percent. We believe Mr. Pai is referencing commonly-accepted arrangements for Broadway shows.
Essentially, a royalty agreement is much like other business agreements bound by the fundamental principles of contract law. However, its applications have a wide range and are an often overlooked tool that small businesses can use to leverage intellectual property. From the situation in the news with Blue Man Group over rights to a song, to multi-million dollar franchise agreements for use of a brand’s intellectual property, NYC small business owners should become familiar with licensing and leverage property for profit.
But, there’s another lesson to learn from this situation. It appears, given the statement regarding “industry standards,” that there may not be a written agreement between the parties in place in this case. This is a common mistake when friends enter into a business arrangement – always reduce your agreements into a written document to protect everyone involved.
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.
- Three Tips To Negotiating The Best Royalty Agreement
- Vital Business Agreements Before Starting a Business in New York: NY Startup Basics
- What Can and Cannot Be Included In A New York Prenuptial Agreement
- How To Create A Valid Non-Compete Agreement in New York
- Buy-Sell Agreements for Multi-owner Businesses in New York: New York Buyout Agreement Basics
- Terminating A Franchise Agreement In New York: NY Franchise Law Basics