Contract Document for Virtual YouTubers (VTubers) Affiliated with Agencies

Since around 2017, the profession of Virtual YouTuber, or VTuber, has rapidly gained attention. A Virtual YouTuber or VTuber is a 3D virtual model (avatar) character created with motion capture technology, which appears in videos in place of YouTubers or YouTube creators. The term Virtual YouTuber or VTuber has even been selected for the Internet Buzzword Awards. As this profession has quickly become a hot topic in recent years, I believe there are few people who understand the legal issues related to Virtual YouTubers or VTubers.

Virtual YouTubers or VTubers require a wide range of skills, such as character design and settings, character creation technology, and video production technology. Therefore, it is not uncommon for them to belong to a Virtual YouTuber or VTuber management agency and receive management services.

Consequently, the legal issues related to Virtual YouTubers or VTubers often have a lot in common with the contracts for talent management received from talent agencies, just like Virtual YouTubers or VTubers. These can be considered based on the so-called talent exclusive contract, which is often concluded in the case of celebrities or talents.

In this article, we will explain what a “talent exclusive contract” is, and discuss the important clauses in the contract for joining a Virtual YouTuber or VTuber agency, which are also included in the talent exclusive contract.

Furthermore, in the case of Virtual YouTubers or VTubers, there are differences from the cases of celebrities or talents, such as the appearance of personalities. Therefore, we will also explain the clauses unique to the contract for joining a Virtual YouTuber or VTuber agency.

What is a “Talent Exclusive Contract”

Purpose of the Talent Exclusive Contract

A “Talent Exclusive Contract” generally refers to the contract that a talent signs when joining a talent agency.

The “Talent Exclusive Contract” stipulates that the talent will exclusively perform entertainment activities for the talent agency they belong to, and in return, the talent agency will support the talent’s entertainment activities. Such a contract is concluded to clarify the existence and content of this agreement.

Legal Nature of the Talent Exclusive Contract

The type of contract known as a talent exclusive contract is not stipulated in the Civil Code. Therefore, it is necessary to consider its legal nature. The legal nature of a talent exclusive contract can be considered in the following ways:

1. It is considered a mixed contract of mandate and employment or contract work, which is not named in the Civil Code (Tokyo District Court, July 18, Heisei 13 (2001)).
2. It is considered a quasi-mandate or a similar unnamed contract (Tokyo District Court, June 13, Heisei 12 (2000)).

As such, court precedents diverge in their views on determining the legal nature of a talent exclusive contract, and depending on this, the requirements for termination of the contract and whether there are unavoidable reasons for cancellation of the contract may change.

Even in court precedents, given the differing views on the legal nature of a talent exclusive contract, it is necessary to examine the contract content in detail and make judgments on a case-by-case basis.

Important Clauses in Talent Exclusive Contracts

Clause Regarding Talent’s Name or Stage Name

Entertainment agencies often include a clause in their contracts that allows them to freely use the portraits and stage names of their talents for management purposes. If the relationship between the agency and the talent is good, it’s usually not a problem for the talent to freely use their portrait and stage name.

However, when the exclusive contract with the talent ends due to the talent becoming independent, a different approach is needed. The talent’s name or stage name, while largely due to the talent’s own efforts, can be said to have gained customer appeal through the management of the entertainment agency. Despite this, if the talent can continue to use their name or stage name freely after the contract ends, the management efforts of the entertainment agency will be wasted. Of course, it is desirable to have a clause that both parties can agree on through discussions between the entertainment agency and the talent.

Therefore, there may be a clause stating that the talent needs to obtain permission from their former agency to continue using the same stage name after the exclusive contract ends.

Article ○ (Use of Name, etc.)
1 The entertainment agency (hereinafter referred to as “Party A”) or a person designated by Party A may freely use the talent’s (hereinafter referred to as “Party B”) real name, stage name, abbreviation, photos, portraits, handwriting, biography, and all other matters related to Party B (hereinafter referred to as “Name, etc.”) for the production, sale, distribution of products and sales promotion materials, and for sales, advertising, and publicity, without charge, and Party B shall actively cooperate with this. In addition, during the term of this contract, Party B shall not permit the use of Party B’s Name, etc. for the production, sale, distribution of products, services, sales promotion materials, and other purposes by anyone other than Party A or a person designated by Party A.
2 The right to license the merchandising rights (the right to use Party B’s Name, etc. on products) to third parties and the right to receive usage fees shall exclusively belong to Party A.
3 Party A or a person designated by Party A may freely use Party B’s Name, etc. without charge for the use of master tapes produced during the term of this contract and for sales promotion materials, etc., even after the termination of this contract.
Article ○ (Prior Approval)
Party B shall not use the Name, etc. after the termination of this contract. However, this shall not apply if Party A has given consent to the use of the Name, etc.

Clause Regarding the Burden of Costs for Talent Activities

When conducting talent activities, much costs such as lesson fees, costume costs, and transportation costs are incurred. If these costs are not clearly stated in the contract, there may be disputes over who, the entertainment agency or the talent, should bear these costs.

Therefore, it is necessary to clearly stipulate the burden of costs in the exclusive talent contract.

Whether the entertainment agency or the talent bears the cost is determined by negotiation between the two parties, but the following provision is basically for the entertainment agency to bear the cost.

Article ○ (Burden of Costs)
1 Party A shall bear the expenses related to the provision of services and the granting of licenses based on this contract (including lesson fees and costume fees).
2 All other costs shall be borne by Party B.

Clause Regarding Remuneration

From the perspective of the entertainment agency, how much remuneration to give to the talent is a major concern, and for the talent, how much remuneration they can receive is a major concern. When money is involved, there is a high chance of disputes, so it is important to clearly state the content.

There are various forms of remuneration, such as a pure commission system, a fixed remuneration system, and a fixed remuneration plus commission system, but the following is an example of a clause based on a pure commission system, which is generally thought to be common in exclusive talent contracts.

Article ○ (Remuneration for Talent)
1 All money paid by third parties in connection with talent services (hereinafter referred to as “Sales”) shall belong to Party A. If the Sales are deposited into an account managed by Party B, Party B shall pay the full amount to Party A by transferring it to an account designated by Party A within one week.
2 Party A shall pay Party B the remuneration stated in a separate document as consideration for Party B’s talent services.

There may be cases where it is not clear what percentage of the amount received by the entertainment agency from the client is the agency’s share and what percentage is the talent’s share.

This clause assumes that the Virtual YouTuber/VTuber will handle so-called client projects from third-party client companies.

While disputes over remuneration are less likely to occur if the talent is satisfied with the amount of remuneration, there may be disputes if the talent’s remuneration is extremely low. Therefore, it may be considered to clearly state in the individual contract how much the entertainment agency is receiving from the client and how much of that is being paid to the talent as remuneration.

Exclusivity Clause

In an exclusive talent contract, the exclusivity clause is also a very important clause. First of all, if exclusivity is granted, talents affiliated with an entertainment agency can only engage in talent activities through the agency they belong to, and they cannot engage in talent activities through other entertainment agencies or engage in talent activities without going through an entertainment agency.

From the perspective of an entertainment agency, even if they have spent time, effort, and money on managing a talent, if the talent engages in work through other entertainment agencies or engages in talent activities without going through an entertainment agency, the agency may not be able to expect much profit.

Therefore, it is necessary for the entertainment agency to include an exclusivity clause. Specifically, the following clause can be considered.

Article ○ (Exclusivity)
During the effective period of this contract, Party B shall only perform the talent services stipulated in Article ○ for Party A, and shall not perform these services for themselves or for any third party other than Party A.

The exclusivity clause is often a source of disputes between entertainment agencies and talents, so in order to prevent disputes from occurring, it is necessary for the entertainment agency to thoroughly explain the exclusivity to the talent.

Important Clauses in Contracts for Virtual YouTubers (VTubers)

Provisions Regarding Character Names and Stage Names

One unique feature of character names and stage names used by Virtual YouTubers or VTubers is that, unlike natural persons, they can be trademark registered. Once a character name or stage name is trademark registered, anyone other than the trademark owner is prohibited from using that name in the same category as the registered trademark. Therefore, it is absolutely necessary to trademark register the character names and stage names used by Virtual YouTubers or VTubers. However, the next issue is to clearly establish the ownership of the trademark rights and, in some cases, it is necessary to include provisions regarding trademark licensing in the contract.

For Virtual YouTubers or VTubers, it is common for the management agency to own the trademark rights and license these rights to the Virtual YouTuber or VTuber. There are many factors to consider in the provisions regarding trademark licensing, such as the extent to which the use of the trademark is permitted, how the licensing fee and payment method should be handled, and under what circumstances the termination of the licensing agreement is allowed. Therefore, it is necessary to thoroughly scrutinize the content of the provisions.

Provisions Regarding Copyright of Character Images and Videos

In addition to trademark rights, there are copyrights associated with the rights of Virtual YouTubers (VTubers) characters. Unlike trademark rights, copyrights do not require applications for registration and are generally granted to the creator of the work at the time it is created. For the copyright of Virtual YouTuber (VTuber) characters, it can be considered that the copyright belongs to the management company at the time of creation, or to the Virtual YouTuber (VTuber) at the time of creation.

In the case where the copyright belongs to the management company at the time of creation, similar to trademark rights, the management company will license the Virtual YouTuber (VTuber), and the situation will be considered in the same way as in the case of trademarks.

On the other hand, if the copyright belongs to the Virtual YouTuber (VTuber) at the time of creation, the management company needs to receive a transfer of the copyright from the Virtual YouTuber (VTuber). If the copyright of the character remains with the Virtual YouTuber (VTuber), it means that the Virtual YouTuber (VTuber) can freely use the character, which would prevent the management company from being able to manage effectively.

Do Characters Have “Copyright”?

However, there is a dispute over whether characters can be recognized as copyrighted works in the first place.

In a court case (Supreme Court, July 17, 1997 (Heisei 9), Minshu Vol. 51 No. 6 p. 2714), it was ruled that characters in manga, which are repeatedly depicted with certain names, appearances, roles, etc., do not constitute copyrighted works. Following this ruling, it can be considered that copyright does not arise in the character itself. Therefore, when considering the transfer of copyright of a character, it is insufficient to transfer the abstract character itself, and only the embodied work can be the subject of copyright transfer.

Therefore, in order for a management agency to receive all copyrights related to a character from a Virtual YouTuber/VTuber who owns the copyright of the character, it is necessary to specify the copyrighted work in the contract.

Specifically, the following two contents need to be described in the clause on copyright transfer:

1. Content on the transfer of rights related to works that have already been drawn in illustrations, videos, images, etc. and embodied as copyrighted works (transfer of all past copyrights)
2. Content on the transfer of rights related to works that will be drawn in illustrations, videos, images, etc. in the future and created as copyrighted works (transfer of all future copyrights)

Article ○ (Transfer of Copyright)
The Party B hereby transfers to the Party A, as of the date of this Agreement, all copyrights (including but not limited to the right of reproduction, broadcasting, translation, film adaptation, the right to use derivative works based on this work, and the rights stipulated in Articles 27 and 28 of the Japanese Copyright Law, hereinafter referred to as “this copyright”) of Party B’s work “○○” (hereinafter referred to as “this work”) and the copyrights of Party B’s works that will be created during the term of this Agreement in connection with this Agreement, and Party A accepts this transfer.

By including the above content in the contract, the copyrights of illustrations, etc. published by the Virtual YouTuber/VTuber on SNS such as Twitter and Instagram during the contract period will be attributed to the management agency.

It is very important to have such clauses in place, especially in relation to the potential sale or business transfer of the Virtual YouTuber/VTuber. Virtual YouTubers/VTubers can be the subject of M&A and business transfers.

Provisions Regarding the Specific Duties of Care Owed by Virtual YouTubers (VTubers)

The fundamental obligations of Virtual YouTubers (VTubers) involve creating and editing videos in accordance with their contracts with management companies, and distributing these videos. However, while the design of the VTuber’s character is important, the image of the character holds significant importance due to the nature of video distribution.

For instance, if a management company wishes to cultivate a character with a pure and adorable image targeted at children, and the VTuber distributes videos that could negatively influence children, or posts on social media that could damage the character’s image, the value of the character could decrease. Therefore, it is necessary for VTubers to maintain the image of their characters. As such, it is crucial to include a clause in the contract stating that VTubers should exercise the care of a prudent manager and refrain from any actions that could harm the character’s image. Once a character’s image is damaged, it is extremely difficult to restore.

To prevent VTubers from engaging in any actions that could damage the character’s image, it is advisable to specify in the contract that if a VTuber does engage in such actions, they will be liable for damages, and the amount of these damages should be clearly defined.

Confidentiality Clause

As previously mentioned, the image of a character in Virtual YouTubers or VTubers is extremely important. Therefore, it is often the case that information such as who is voicing the character or who is in charge of the motion is kept confidential.

For this reason, in addition to the general confidentiality obligation clause, it is necessary to include the following content in the confidentiality clause. By including the following content, you can prevent information about the character from leaking to the viewers and protect the image of the character.

Article ○ (Confidential Information)
The term “information” in this Agreement refers to all information disclosed by Party A to Party B in relation to this project, regardless of whether it is in writing, orally, or in the form of an object. This includes all information related to the formation of the character’s image, such as the fact that Party A and Party B have entered into this Agreement and the fact that Party B is providing this project.

Summary: Entering an Affiliation Contract with Virtual Youtubers need Special Consideration to Create Solid Content

In conclusion, we have discussed the clauses that can be considered in the same way as the contract for Virtual YouTubers (VTubers) affiliated with agencies, within the exclusive contract for talents. The contract between the management agency and the Virtual YouTuber (VTuber) is a new type of agreement that has emerged in recent years, so it is necessary to create a solid contract to avoid any issues.

Especially for Virtual YouTubers (VTubers), it is important for the management agency to properly manage trademark rights and copyrights. Therefore, in addition to the appropriate contract content, it is also important to establish a system that properly manages trademark rights and copyrights.

In the case of Virtual YouTubers (VTubers), in today’s internet society, there is a possibility of becoming instantly famous due to what is commonly referred to as “going viral”. Therefore, it is important to conclude a solid contract in advance to prepare for such situations.

Introduction to Our Firm’s Measures

Monolith Law Office is a legal office with high expertise in both IT, particularly the internet, and law.

In recent times, the need for legal checks such as portrait rights, copyright, and advertising regulations has been rapidly increasing, even among YouTubers and VTubers when managing their channels.

It is also essential to thoroughly prepare in advance for issues related to contracts. Please refer to the details in the article below.