Structure of an Exclusive Management Agreement for a K-Pop Artist (Standard Form Contract)

Posted by Joseph Hwang Joseph Hwang 7/31/2024

Structure of an Exclusive Management Agreement for a K-Pop Artist (Standard Form Contract) - Part 9.

Joseph Hwang

* Attention: This article is based on the latest version of the "Standard Form of Exclusive Contract for Musicians (hereinafter referred to as "SFEC", Notice No. 2024-0021, Ministry of Culture, Sports and Tourism of the Republic of Korea, amended on June 3, 2024)."

** Contract parties: Artist (hereinafter referred to as "Artist"), and artist management company (hereinafter referred to as "Company")

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Article 8 (Trademark Rights, etc.)

① During the term of the contract, the "Company" may develop, apply for, and register trademarks and designs using the "Artist's" name (including real name, alias, nickname, group name, etc.), photograph, portrait, handwriting, voice and anything else that indicates the "Artist's" identity in its own name.

The "Company" shall use the trademark or design rights acquired pursuant to Paragraph ① only for the "Company's" business or the "Artist's" popular culture artistic services (including licensing to third parties).

Upon termination of the Agreement, the Company shall transfer the trademark or design rights acquired pursuant to Paragraph ① as follows. However, other arrangements may be mutually agreed upon.

1. If the Artist has acted as a member of a group: The rights shall be transferred in accordance with the agreement between the Company and the group members.

2. If the Artist has acted alone: The rights are transferred to the Artist. However, the Artist may waive the transfer of rights by his/her own will.

If the Company has made special contributions, such as investing substantial costs in the development of trademarks and designs, when transferring rights under Paragraph ③, the Company may require the Artist to pay reasonable compensation. However, if the Company has already deducted the Artist's costs when settling with the Artist, the Company shall not require the Artist to pay them again.

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In the entertainment business, the revenue model, the product sold to the consumer, is a variety of products based on the inalienability of the entertainer and his or her personality. Only when value is exchanged between suppliers and consumers is value-added, and only when that value is accumulated is reinvestment and surplus capital created. When this process is repeated, "wealth" is created.

The human personality and physical attractiveness of an artist's products are exclusive to the artist, and the management company, which is the impresario, monopolizes the product elements during the period of the artist exclusive management contract. When the artist exclusive contract period ends, the relationship between the artist and the management company ends, and there is no further economic production between the both parties. This is where the problem arises.

Therefore, the artist and the management company must decide what to do with the artist's exclusive rights during the contract term and with the rights to the resulting products after the termination or cancellation of the contract. Most disputes over exclusive artist management contracts arise from this issue. To solve this problem and prevent disputes, the SFEC provides the basic solution in several articles, including Article 8, which deals with the using the artist's name, i.e. the trademark rights of the artist's name or group name.

First of all, the names of artists or groups are not eligible for trademark registration with the Patent Office. There is a link to my previous post on this in the "References and quotations" section below. As I mentioned in that post, applicants may be able to trademark a person's name or the name of a group of people in exceptional circumstances.

Trademark rights are exclusive rights that only the person who registers the word with the Patent Office can use exclusively in the business for which it is registered. For example, if the name "Joseph" could only be used by a specific person in the entertainment field, someone else with the same name would suffer a bona fide injury because their freedom to use their name would be restricted because the person who registered the name with the Patent Office first. This is unreasonable and could cause many other harm to bona fide third parties. Therefore, the Patent Office accepts applications for trademark registration of such names of persons or groups with very limited and careful consideration.

On the other hand, an artist management company invests a lot of money and effort into the debut and career of the artist they sign. Fortunately, if the artist debuts and becomes famous, the artist management company will be able to recoup its investment and share the profits with the artist. However, if someone takes advantage of this situation to capitalize on the fame of an artist who has spent a lot of money and wants to use the artist's name exclusively for his or her own benefit and registers the name as a trademark with the Patent Office on behalf of the artist, the artist and his or her management company will suffer great losses. Therefore, the management company should register the artist's name or group name as a trademark with the Patent Office before the artist debuts, even before the artist becomes known to the public.

But what happens to the registered rights if the artist's or group's name is trademarked and the management company's exclusive contract with the artist or group is terminated or canceled? The SFEC basically stipulates that if the artist is an individual, the trademark rights revert to the artist upon termination of the contract, and if the artist is part of a group, the rights to the group name revert to the management company.

Of course, this basic rule is not an absolute, immutable principle. The SFEC provides that the artist and the management company can always agree on how the trademark rights related to the artist's name will be attributed after the termination or cancellation of the contract. Thus, although the SFEC contains the basic rules, most artists and management companies often negotiate these rules in separate agreements tailored to their specific circumstances.

Even if the artist management agreement and its supplemental agreements provide for the registration of trademark rights using the artist's name, the parties must separately file a trademark application with each country's patent office after signing the artist management agreement, because the worldwide trademark registration system is based on "registrationism," which means that exclusive rights are granted only after registration with the patent office. As part of this application, the Patent Office requires that a consent form for the use of the artist's personal name be attached to the application.

Therefore, when signing an exclusive artist contract with a management company, an artist must understand who owns the trademark rights to his or her name during the term of the contract and who owns the trademark rights after the contract ends. In addition, while the management company owns most of the trademark rights related to the artist's name during the term of the contract, it is important to ensure that the management company is granted the right to continue to use the work created during the term of the contract after the contract expires. In this case, the SFEC provides that the standard contract allows the management company to continue to use the work in perpetuity after the contract expires because the management company has invested in it. However, it is also possible to make special arrangements between the artist and the management company other than the standard contract.

Another thing to be aware of is that if the management company continues to use the results of the trademark use during the term of the contract in a way that insults or defames the artist's personality, the artist - or the new management company - may be sued. Also, if the management company redesigns and reissues the old music merchandise in time for the artist to release and promote new music, there may be a conflict in the marketplace. If there is only one artist and more than one company associated with the artist, fans may be confused and unfair competition may occur between the companies. This has been a real problem in the K-pop industry in the past, so it's a matter of business ethics.

* Standard contract analysis continues in the series.

** References and quotations:

https://www.mcst.go.kr/kor/s_data/ordinance/instruction/instructionView.jsp?pSeq=2413

https://www.musicbusiness.co.kr/2024/06/attrakt-has-secured-trademark-rights-of.html

Series Articles

Overview

https://www.musicbusiness.co.kr/2024/05/structure-of-exclusive-management.html

Part 1.

https://www.musicbusiness.co.kr/2024/05/structure-of-exclusive-management_26.html

Part 2.

https://www.musicbusiness.co.kr/2024/06/structure-of-exclusive-management.html

Part 3.