Q: I am building a Web site to resell a product for women. Recently I found a poem on the Web that perfectly fits with the product I am reselling. I have considered giving it as a free gift with purchase, but I'm not sure how to handle the business end with the owner of the poem. I want to be the only one to offer the poem. Should he pay me for the potential exposure of his poem and other works of his and, if so, how much? Or should I pay him for the exclusive use of the poem and, if so, how much?

Answer:

You have several options:

• License the poem: The owner of the poem can give you an exclusive license to use the poem. This means that only you, and not even the owner, can use it. The license should set forth how you can use it, the geographical scope of use, the time period of use and the price.
• Buy the poem: The owner of the poem can sell you the poem by assigning you the copyright in exchange for a fee. This must be done in writing in accordance with copyright law. This means no other person can use the poem and you have all rights accorded under copyright--the right to copy, perform, distribute, display and create derivative works.

Licensing Cost Methods

There's no set formula for how to license items or how much to charge. There are several methods of structuring licensing fees:

Upfront Fees

The owner can charge you a one-time fee for your use. This method means that you have all rights needed with one transaction. Both parties share the risk of what the poem is worth--a little or a lot--and have little future contact with each other.

Royalties

The owner can earn a percentage for each sale you make using the poem. This method allows you to sell products of different pricing levels and allows both parties to share the potential benefits equally.

Fees by Time or Number of Uses

The owner can charge you a flat fee for each copy of his poem you distribute or a yearly fee with unlimited copies. This method gives you the certainty of a fixed fee and limits the amount you will pay by either time or number.

Determining the Cost

Fees for purchase of intellectual property or license of intellectual property are set by what others in the market charge or have paid for similar items, or by the value to the purchaser or the value to owner. The price for purchase is obviously higher than for license. However, when the value is unknown, the difference may not be that significant.

Marketplace Value

The fee could be determined by finding the value in the marketplace. By inquiring with a few publishers about use of similar works, this should be relatively easy to find. This amount would be affected by how much the owner has received for other works, how well-known he is, whether he is published, whether other parties want to license his works, etc.

Value to Either Party

Alternatively, the poem cost could be set at what the value is to him or what the value is to you. For example, if your product sells for $10 and you make $5 net per sale, you probably would not want the cost to exceed $1 for each use of the poem--otherwise the cost could significantly affect your profit margin. If the poem has emotional or other significance to the owner, the cost may be much higher.

Barter

If you think your use of the poem can offer significant promotional opportunities to the owner, you might offer to attach his bio and contact information with each sale and barter. He should have some idea of his promotional costs and whether exposure to your customers would be beneficial.

Trial Period

With any of the above, you could do a trial period and then formalize your license or purchase agreement depending on the impact of the poem and the resulting benefits to you both. If it turns out that the exposure has great benefit to him, then, as you suggest, he may even agree to pay you for the promotion rather than you paying for the license.

1 Readers are cautioned not to rely on this article as legal advice as it is
no substitution for a consultation with an attorney and an accountant in your state. Based
on jurisdiction and time, the law varies and changes.