Trademark rights are acquired in names, logos, symbols and other marks by any person or business entity by using it in the normal course of business (for instance on a tag or label for merchandise being sold to the public) or by filing an application for registration of the mark in the United States Patent and Trademark Office (USPTO).  Merchandising can be defined within the purview of the entertainment industry, as the manufacture or production and sale of a film’s or television’s program name, artwork, logo, characters, or other elements related to the film or program.  Commonly, the owner or producer of an artistic work licenses or offers the right to produce and merchandise these products that carry any of these artistic elements.  The owner or the producer gets payment normally in the form of a royalty on each product sold, in return for that permission.  This licensing agreement is more or less similar to a rental contract.  The owner of the film or television program grants the permission to use the elements in that film or television shows on certain products for a specific period.  The owner may agree with manufacturer to use the elements in that film or television shows in a specified distribution network for a certain payment.

If it is a name, logo, character, or other parts of a film or show, which is a licensable element, it must first be legally protected under the trademark or copyright laws.  These elements are referred to as the “property”, and the owner of this property is called the “licensor”, while the manufacturer is called the “licensee”.

Licensing is based primarily upon the legal protection given under trademarks.   Names, graphic depictions, slogans and other elements that vary from a company’s line of product from those of a competitor can be trademarked through the Patent and Trademark Office.  Trademark protection is vital because a film or television program after licensing will become an apparel brand, a toy brand, or a brand of stationery, and many others.  However, a secondary method of legal protection is offered under the copyright law.  Copyright law protects artistic creations like music, text, scripts, screenplays, and artwork.

The advantages of merchandising can be categorized into two broad areas.

1. The producer needs advertising to educate consumer about their products and to generate a consumer awareness and interest for the product.  Merchandising helps producer to support other marketing activities that is attached with the film or show.  Such marketing activities are promotions to exhibitors and cinemagoers, and electronic advertising at retail level and with broadcasters.  Merchandising helps to create an excitement and eagerness in the minds of people for the product.  Thus, merchandising expands the total number of people who hear about the film, television shows and further reminds about the existence of the product in the market.  Therefore, merchandising plays a crucial role in gaining greater recognition and preference for a filmmaker or program producer’s products.
2. Television program series producers and filmmakers are entitled to get an amount as royalty form licensees by selling his/her licensed merchandising items.  Money raised from these royalties can offset part of the rising costs of film and television program production.  In addition to the royalty, the producer may also receive a minimum guarantee amount as advance payment from the licensee.  Another benefit is that the licensor has trademark protection that prevents others from exploiting his/her logo or characters.