The contract should include a detailed description of the individual uses of the copyrighted works or artistic performances. Do not use general phrases such as “the composer assigns all rights to the incidental music to the producer” as such phrases give rise to legal uncertainty. Even though an unlimited license agreement (buy-out) for a one-off license fee may be entered into, please note that the artist may become entitled to additional fair compensation if the one-off fee agreed in the agreement is disproportionately low with respect to the profit made under the license (“bestseller clause”).
In consideration for the license, artists are entitled to reasonable remuneration. The remuneration may have two forms: a flat fee (e.g. CZK 5000) or a percentage fee (e.g. 30% of the revenues of the producer from the use of the license). The forms may be used separately or combined.
It is also important that the agreement includes a clear separation of the fee for the creation of the work or performance and the license fee for the use of the work or the performance. The reason is that the law requires that the fee be specific; if the fee was agreed as a total sum without such break-down, it would not be clear what part corresponds to the creation of the work and what part corresponds to the license. In extreme cases, such a fee could be held to be invalid as being unclear. The usual practice is to give a percentage of the fee corresponding to the each of the components (e.g. 70% accounts for the creation of the work and 30% accounts for the license fee). This also involves accounting and tax consequences (the VAT rate is different for the creation of the work and for the license fee; the flat rate of expense deductions is different for license income and business income for some professions such as photographers).
International projects with the participation of foreign artists and other professionals raise the issue of applicable law. Under Article 3(1) of the Rome Convention on the Law Applicable to Contractual Obligations (Rome I Convention), the contract should be governed by the law chosen by the parties. It may, thus, be agreed in the contract that the agreement is governed by Czech (contract) law. It is recommendable that Czech managers, producers and artists make an effort to have their agreements subject to the Czech governing law so that they do not have to face the issue of ignorance of foreign law. If no law is chosen by parties in the agreement or if there is no close connection with a law of another country (e.g. determined by the place of the creation of the work or the place of performance), Article 4(2) of the Rome I Convention stipulates that the agreement is governed by the law of the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence.