This article is written by Sucharita Ghosh who is pursuing a Certificate Course in Intellectual Property Law and Prosecution from LawSikho.

Introduction 

Whenever we hear about the magic world, the first name that comes into our mind is Harry Potter. Written by the world’s most successful fantasy novelist J. K. Rowling, Harry Potter is not just a book or film series, it became a dream world for millions of kids and teens all across the world. Almost all Potterheads at some point in time have dreamt about receiving a Hogwarts letter and stepping into the wizarding world through platform no. 9 ¾ with Harry, Ron, and Hermione. 

Harry Potter fever has been sweeping the planet with amazing books and movies since it came into existence. Even after a decade of releasing its last and final film, this wildly popular adventure of the eponymous boy wizard is continuing to win thousands of hearts.  Millions of young potter heads around the world live and breathe this record-breaking series of harry potter.

Originally published by Bloomsbury, these fantasy novels chronicle the lives of a young wizard, Harry Potter, and his friends Hermione Granger and Ron Weasley and their adventure at Hogwarts School of Witchcraft and Wizardry. The series consists of eight fantasy films, beginning with Harry Potter and the Philosopher’s Stone (2001) and culminating with Harry Potter and the Deathly Hallows – Part 2 (2011).

The magical success of the Harry Potter series

Beginning her journey of writing Harry Potter at a café in Edinburgh, Rowling reached the peak of success after releasing her first harry potter novel. Since the release of the first novel, Harry Potter and the Philosopher’s Stone, on 26 June 1997, the books have found a wide range of audiences from kids to teens to adults and gained immense popularity, positive reviews, and commercial success among all classes of readers worldwide. It’s often considered the cornerstones of modern young adult literature. 

The original seven books were adapted into an eight-part film series by Warner Bros. Pictures, which is the third highest-grossing film series of all time. The value of this story of wizard land, the Harry Potter franchise was estimated at more than $25 billion, making Harry Potter one of the highest-grossing media franchises of all time.

Not sure if any Potterhead kids have ever received the ticket to Hogwarts or not, but Rowling and Warner Bros. have surely reached into the magical world after skyrocketing sales of Harry Potter books, movies, and merchandise. The popularity of the Harry Potter series has translated into substantial financial success for Rowling, her publishers, and other Harry Potter-related license holders. This success has made Rowling the first and thus far only billionaire author.  It has created huge revenues from license and rights holders through commercial exploitation of various intellectual property rights. As per internet sources, the books have sold more than 500 million copies worldwide, making them the best-selling book series in history, and have been translated into eighty varied languages. The total revenue from the book sales is estimated to be around $7.7 billion. The first novel in the series, Harry Potter and the Philosopher’s Stone, has sold in excess of 120 million copies, making it one of the bestselling books in history. This massive success of the books and films has allowed the Harry Potter franchise to expand with numerous derivative works, merchandising shops, games, studio tours, and what not! The films have led to the licensing of more than 400 additional Harry Potter products. 

Harry Potter and its IP rights

Like any other original literary, artistic, or cinematographic work, the creation of Harry Potter is also accompanied by several valuable IP rights. Author J. K. Rowling and Warner Bros., have protected the intellectual assets relating to Harry Potter vigilantly since the very inception. The fate of young Harry, with whom countless children have grown up since his first appearance decades ago, had always been kept a tightly guarded secret by author J.K. Rowling and her publishers Bloomsbury. Later, Rowling sold the filming rights of her books to Warner Bros. Entertainment Inc. who is currently the owner of all IP rights relating to harry potter movies whereas J K Rowling still has exclusive rights over Harry Potter stories and characters. 

The right holder of IP assets acquired from Harry Potter films, Warner Bros has always been vigilant about their IP rights. They had filed their first trademark application for Harry Potter in 1998. They also own several trademarks of this series including the movie names, characters, themes, and other well-known elements. Everything relating to the Harry Potter series is well protected with multiple trademarks by Warner Brothers Entertainment. In fact, it’s difficult to find something related to Harry Potter that isn’t trademarked, from the names of the books and movies to house names, even the term ‘Muggle’ is also trademarked.

Back in 2016, NBCUniversal acquired television and digital rights to the Harry Potter films for the time period of 2018 to 2025. This deal of 250 million dollars includes exclusive airing rights of all wizarding world movies. They also got the right to create theme parks based on which they have already established two wizarding worlds of harry potter themed parks.

Product merchandising of Harry Potter

Apart from selling books and movies, another most popular way of attracting the audience and earning commercial benefit is merchandising. Product merchandising has evolved as the biggest means of generating profit from movies and series once it is released and becomes popular among the young crowd. Merchandising has gained optimum popularity nowadays. Every big banner movie, especially kids’ movies, is accompanied by prolific merchandising. Nowadays, the biggest business interest behind any Warner Bros, Disney, or DC movie are product merchandising. 

Naturally this huge success of the books and series encouraged the Harry Potter franchise to launch various merchandise for potter heads. The harry potter fans are gifted with various amazing products from the wizard worlds such as labeled T-shirts, Time turner, snitch, deathly hallows jewelry, resurrection stone, elder wand, Horcrux, Slytherin’s locket, Hufflepuff’s cup, a lost diadem of Ravenclaw, tom riddle’s diary and so many stuff!

One of the most popular forms of product merchandising in fictional movies is character merchandising. Character merchandising is the smartest method of commercial exploitation of the IP rights through generating a huge profit by selling a wide range of goods and services inspired by well-known characters, be it fictional or real. There are various kinds of character merchandising such as personality merchandising, fictional or cartoon character merchandising, and image merchandising.  One of the biggest examples of such merchandising includes Harry Potter star, Daniel Radcliffe. In many situations, a dual reputation for individuals is created whereby the same person develops a reputation of his own as well as carries the reputation of the character portrayed by him, like till now Danial Radcliff is more popular as Harry Potter than his real name.  

Basically merchandising is a marketing tool, which targets the customers by making merchandisable products by way of adopting a character’s name, image, voice, features, etc., through various modes of depictions and presentations. It is a profitable manipulation of a renowned personality using their name and fame. Characters in character merchandising are usually taken from various products of a literary work, artistic work, or cinematographic work. 

License holders of Harry Potter merchandise

Since the beginning, multiple companies had paid significant sums to be officially associated with the Harry Potter world. Warner Bros have selected multiple key official merchandising sellers in various different sectors to turn their merchandising dream into reality. Companies like W H Smith, Hewlett Packard Lego, etc have all spent a huge amount of money to acquire the right to become ‘official’ merchandisers. They have distributed harry potter merchandise rights in around 400 different products among its licensees who all are various well-reputed brands all across the world. Such as- 

• Hasbro Inc. got a license for selling harry potter themed electronic toys, trading cards, and candy. They are the licensed distributor of Harry Potter sweets such as Cockroach Clusters, Chocolate Frogs, and Fizzing Whizbees. 
• Mattel got the official right to make Harry Potter action figures, games, and puzzles. 
• Electronic Arts got the license to manufacture Harry Potter computer and video games; 
• Coca-Cola secured rights in the marketing of the film together with its products. 

In India, there are several license holders who can sell official merchandise of Harry Potter-like Hamleys India, Bigsmall.in, Hottopic India, Marks & Spencer, Souled store, redwolf, etc.

The shelf-life of Harry Potter is record-breaking, till now it has wide popularity. Warner Brothers are still generating billions and billions of dollars from this hugely successful movie merchandise.

How are merchandise rights distributed?

Any successful literary, cinematographic, or artistic creation generates huge profit from the commercial exploitation of its various intellectual property assets. Therefore, from the very beginning, it is necessary for the right owners to take all the necessary measures to protect their intellectual property, so that they can exploit its commercial benefit to the maximum possible extent later when the merchandise hits the market. After producing successful movies the media houses select the list of official merchandising products to be produced and hand over the licensees to design, supply, and sell them. Once the types of merchandise have been selected, then prospective design agencies, licensees, and marketing consultants can be identified. The brand owners tend to bind their licensees to strict contracts, allowing maximum return for the license of its rights. The licensees also tend to keep royalty payments and risks to a minimum.

This commercial exploitation or adaptation of the registered character through merchandising can be done either by way of an assignment agreement or a licensing agreement or a merchandise distribution agreement. Therefore to commercially pierce the market by way of merchandised goods or services it is imperative to give rights through licensing or assignments to the authorized third parties to use the characters in merchandised products or services.

Two primary essential clauses of such agreement are merchandising clause and trademark licensing clause along with other expressed terms and conditions, authorizing the third party to indulge in using their characters or one or several traits of the characters upon their products and thus promoting the character. The following kinds of agreements can be made to authorize a third party to sell official merchandise.

Trademark licensing agreement

To license a third party is to create merchandise firstly the film owners should protect their movie characters through various copyright and trademark by graphically representing its different entities such as design, sound, dialogue, name, etc. Here it is pertinent to mention that a trademark can only be protected when it can be graphically represented.  Such graphically represented characters of a movie can be protected as trademarks, apart from being protected as fictional characters under the copyright law. Once the owners registered the desired trademarks, they can promote their character, they can license such marks through a licensing agreement, and enable the registered user to reap the commercial benefits. A registered user is the licensee of the trademark who is authorized to deal with the trademark exclusively or non-exclusively as decided upon in the trademark license agreement.

Even though there is no direct provision for Trademark Licensing under the Indian Trademarks Act, Section 48 and 49 of the Act deals with ‘Registered User’. As per Section 48 of the act, any person except the registered owner or proprietor of a trademark may be registered as a registered user for any or all the goods or services in relation to the registered trademark. 

Section 49 of the Trademarks Act allows the trademark owner to give authority to different parties involved in different activities through separate licensing agreements after giving notice to the other registered proprietors. For example, Marks and Spencer can make harry potter character printed garments whereas Yellow chimes can make Harry Potter-themed jewelry and showpieces. The trademark licensing agreements can either be exclusive or non-exclusive.

Merchandise distributors agreement

The distributors usually enter into a merchandise distribution agreement with the suppliers before producing and selling any official merchandise of any movies or series. Selling those products without proper paperwork and valid authorization attracts various criminal prosecutions. Therefore it is necessary to obtain all legal permission before selling any movie merchandise. 

A merchandising agreement shall be in writing, duly authenticated, and should contain the exclusivity status explaining the degree of control by the proprietor over the permitted use offered to the licensee, definition of the subject matter of the agreement, description of the features relating to the character to be merchandised, Goods and services in which it is to be inculcated, territorial limitation and scope of the agreement, nature of work, a period of permitted use and confidentiality clause.

A merchandise distribution agreement, sometimes also called a distributor agreement, where the supplier is the owner company who supplies or sells the goods to the distributor. Under these agreements, the supplier and the distributor expressly state their expectations regarding the sale and distribution of the goods, as well as the general behavior and limits of the relationship between them. In a distribution agreement, some important details regarding this distribution need to be mentioned. Such as a description of the goods sold, how and when the distributor is expected to pay, details of the trademark licensing, whether the agreement is exclusive or not, geographical territory covered by the agreement, circumstances under which the contract may be terminated, and what the penalties are for early termination, etc. Detail of the trademark licensing has to be expressed property in any merchandise distribution agreement.

Counterfeit goods- the biggest threat to merchandising

Film merchandising is a major promotional tool used to heighten the fate of a film at the box office. The concept of movie merchandising has proved to be a successful hook for film producers, making healthy contributions to a film’s revenue streams and sometimes generating even more than the box-office collections themselves. 

Amidst the promotional aspect there lies the threat of counterfeit products which can cause huge loss to the IP owners. Counterfeit goods are those goods that include a registered trademark, typically a famous mark, and are made or sold by a party who doesn’t have the right to use the mark.  

In the era of the internet, it became a more severe threat as every now and then pirated products can be spotted on various e-commerce sites. Unplanned and non-strategic merchandising can cause serious adverse effects on a brand and it can depreciate the goodwill of a brand if the quality is not controlled properly. Moreover, selling such knock-off products is a serious offense in the eye of law which can lead to criminal prosecution. In India Sections 102 and 103 of the Trademarks Act, enumerate the penalty and punishment for selling a counterfeit product which states selling any products that falsely use any trademark or apply it to goods and services, without the consent of the owner or proprietor invites punishment of imprisonment which may extend to three years, and a fine which may extend to 2 lakhs rupees. Likewise every country US, UK has its different penalties and punishment against such unauthorized sale of pirated merchandise products.

Conclusion

Even after taking all such legal measures to protect their intellectual properties and acquire commercial benefit out of it, counterfeiting pirated products create substantial challenges to the right owners. Therefore the producers not only need to protect their IP rights vigilantly from the very beginning but they should enforce their rights and take timely action against infringers to smooth the running of their merchandising business. Rowling and Warner Bros could earn this huge amount of profit and created history by efficiently protecting and monitoring their IP assets and channelized their merchandising rights artfully for commercial exploitation. This story of Harry Potter is not just a children’s story, it is also the biggest example of the magical transformative powers of creativity and intellectual property J.K. Rowling’s creative talents have made her one of the wealthiest women in the world. Yet it was through the international system of IP rights that she was able to plug that creativity into the global publishing and entertainment networks which propelled her from poverty to plenty.  

References

• Character Merchandising, 02 January 2019, Debleena Ganguly, Khurana and Khurana, Mondaq, https://www.mondaq.com/india/trademark/768282/character-merchandising#:~:text=Character%20merchandising%20is%20a%20clever,%2Drecognized%20national%2Finternational%20appeal.
• India: Character Merchandising, Through Trademark Licensing,  08 April 2020, by Vartika Prasad, Khurana and Khurana, Mondaq https://www.mondaq.com/india/trademark/914782/character-merchandising-through-trademark-licensing
• Buying or Selling Counterfeit Merchandise,  April 3, 2019, Intellectual Property Center https://theipcenter.com/2019/04/buying-or-selling-counterfeit-merchandise/
• Harry Potter – is there magic in merchandising? BrookStreet des Roches LLP, the United Kingdom April 15, 2014, Lexology, https://www.lexology.com/library/detail.aspx?g=4281afdc-6865-4858-99d7-974ce3cf2504

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