Help Me Understand How Licensing Works

[sprytel]

I know we have some folks who are quite knowledgeable on this topic, so I'm trying to wrap my head around this.

Suppose I license the exclusive rights to make rubber balls with DC characters on them. I design the balls-- an assortment with Superman, Batman, Wonder Woman, Green Lantern, and the Flash-- and get licensor approval. Then I start manufacturing my rubber balls. I sell them at drug stores and such, plus you can buy them directly from me via my website.

Then my license expires. What exactly happens? The stores that have them on the shelves can keep selling them, I assume. Could I continue to sell them directly from my website? Could stores order more if I am sitting on inventory?

Assuming I can keep selling my existing inventory (directly or via retail), how does the licensor know that I am not just making more product vs. just having a ton of leftover stock to sell?

I realize some things have a natural shelf life that would make this all moot. But a Wonder Woman rubber ball, for instance, could last forever (and probably always have a market).

[palitoy]

It all depends on your contract but essentially, when the license expires, you can't make more. Sometimes it's explicit that you sell off or sometimes destroy existing inventory. If you've sold all the balls to a third-party retailer, then it's their inventory, not yours and they can do with it as they please.

Also, you have to submit quarterly reports to a lot of the majors, telling them how much you've sold/made and have on hand.

During my tenure, I only had one licensor tell me to pull items from shelves after the expiry, but he was a real jerk.

The major thing that would stop you from being dishonest is if the licensor catches you and they go to your customers with a C&D, you're sunk. Your credibility as a supplier is at serious risk.

This is also why so many licenses go through a serious "rebranding" every 18 or so months.

[boss]

Now I want a Wonder Woman rubber ball.

[sprytel]

Thanks, that all makes a lot of sense!

During my tenure, I only had one licensor tell me to pull items from shelves after the expiry, but he was a real jerk.

I know you are too professional to say who. But in my head, I'm picturing someone like Barney or Dora the Explorer... a brand where you wouldn't expect it. Blink twice if I'm right.

Now I want a Wonder Woman rubber ball.

I know, right!

I also realized that I totally shafted Aquaman in my example, which is inadvertently funny to me. Poor Arthur Curry...

[PNGwynne]

...I also realized that I totally shafted Aquaman in my example, which is inadvertently funny to me. Poor Arthur Curry...

I was just about to post as much. Hmppph!

[Fener]

I have the Batman rubber ball! Baravelli license expired in 1967 but I bought this in 2015!

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[sprytel]

I have the Batman rubber ball! Baravelli license expired in 1967 but I bought this in 2015!

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Based on the package, I assume it is anatomically correct.

[Wee67]

The major thing that would stop you from being dishonest is if the licensor catches you and they go to your customers with a C&D, you're sunk. Your credibility as a supplier is at serious risk.

Would I be allowed to sell extra inventory or even returns from wholesalers out of the back of my van and pocket the money rather than report that income on my company's revenue sheets?

Too soon?

[LonnieFisher]

Would I be allowed to sell extra inventory or even returns from wholesalers out of the back of my van and pocket the money rather than report that income on my company's revenue sheets?

Too soon?

Would you be driving around with music playing like an ice cream truck?

[palitoy]

Would I be allowed to sell extra inventory or even returns from wholesalers out of the back of my van and pocket the money rather than report that income on my company's revenue sheets?

Too soon?

That depends if any of the union heads look like this.

[Megotastrophe]

I think Wee is referencing a certain activity of a certain legendary toy maker with certain ties to a certain rebuilt toy company, but I'm not certain.