TYGlobe

Introduction

In this article, the author, based on his/her prior experience in commercial negotiations concerning influencer contracting and litigation case handling, and particularly drawing on first-hand practice of personally engaging in self-media operation and contracting, provides analysis of contract terms for influencers who intend to enter the industry or have already become top-tier players in the sector. The analysis aims to avoid risks at the stage of contract drafting and negotiation, so as to save influencers from the burden of litigation, or secure a more favorable position for them in the event of future disputes or even contract termination litigation.

Fifth, A Good Tree Provides Good Shade — The Convenience and Costs of Intellectual Property Rights Protection

Most MCNs will explicitly require that all copyrights and copyright enforcement rights in respect of works published through cooperative accounts during the cooperation term shall be vested in the MCN, and will additionally provide an authorization letter for the influencer to sign. One advantage of accepting such an arrangement is that in the event of large-scale plagiarism of the influencer's content after the account gains a substantial following in the later stage of cooperation, top-tier MCNs have sufficient legal resources to deploy, and even have long-term cooperative law firms to handle litigation on a batch basis. However, the cost of enjoying such enforcement convenience may be that upon contract termination, the MCN will also require the influencer to reimburse all copyright enforcement expenses, including but not limited to litigation fees, attorney fees, property preservation fees, travel expenses, etc. As mentioned earlier in this article, such enforcement expenditures may have been implicitly included in the "operation costs" that the influencer is obligated to compensate for upon contract termination by virtue of contractual definitions.

MCNs conduct defensive trademark registration of influencers' account nicknames in different categories of goods and services. The registered trademark right holder shall have the right to require merchants that use an influencer's nickname without permission to cease infringing acts and bear the civil liability for compensation for losses, so as to prevent potential competitors from further seizing the competitive advantages formed by the influencer's IP in relevant goods and service sectors. However, this practice may also deprive the influencer of the right to use their own account nickname. For example, the dispute between Li Ziqi and Weinian Company mainly centers on the trademark "Li Ziqi" and its competitive interests. Weinian Company has registered multiple trademarks successively and launched the "Li Ziqi Flagship Store" on Taobao.

Apart from intellectual property rights protection, some MCNs also require influencers to grant authorization over all their right of name, right of portrait and performer-related rights. The MCN shall be entitled to independently initiate claims, settle claims and participate in litigation against third parties in its own name or in the name of the influencer's agent. To successfully secure cooperation with advertisers, influencers are in a relatively passive position with regard to controlling the term and scope of portrait authorization, especially where the relevant liaison personnel of the MCN fail to uphold a firm stance and lack awareness of the bottom line for safeguarding the legitimate rights and interests of online influencers.

Sixth, The "Price" of Becoming "High-Traffic" — Exorbitant Liquidated Damages and Prohibitive Contract Termination Costs

We often hear of sky-high contract termination disputes involving online influencers where liquidated damages can easily reach millions of yuan, as well as cases where influencers are required to pay up to tens of millions of yuan in compensation. Is it therefore an inevitable rule that influencers must pay exorbitant "breakup fees" if they intend to terminate their cooperation? To answer this question, we may refer to the second section of this article to first identify the legal relationship established between the two parties. If the influencer is an employee affiliated to the MCN, or if the contract between the influencer and the MCN constitutes a contract for mandate and the MCN is negligent in handling the entrusted affairs of the influencer, the influencer may terminate the contract and be entitled to pay less or even no liquidated damages.

However, in cooperation models with strong brokerage attributes, MCNs have provided financial and resource support for the packaging and operation of internet influencers' accounts. Willful termination of the contract by an internet influencer will cause heavy losses to the MCN: the MCN cannot recover all its previously invested costs, and such termination will also set a negative example for other influencers affiliated to the same institution. To maximize the protection of the interests of MCNs, many contracts do not grant the right of termination to influencers at all. Moreover, the breach clauses usually explicitly set very broad trigger conditions for fundamental breach by influencers, and fundamental breach acts are not limited to the unauthorized unilateral termination of the contract by influencers. Liquidated damages shall apply based on the higher standard among such criteria as N times the income and N yuan per fan, and the minimum compensation amount is usually as high as millions of yuan.

Different from the content-focused internet influencers who create original short videos and image-text works and are active on platforms including Xiaohongshu, Weibo and Douyin as discussed in this article, most of the influencers involved in cases concerning liquidated damages of millions or even tens of millions of yuan are game streamers on gaming platforms. Top streamers on gaming platforms obtain millions of yuan in signing fees by entering into contracts with the platforms, and are also entitled to high proceeds during their cooperation with guilds and the platforms. Where other platforms poach such streamers and the streamers consequently move to other platforms, the streamers have strong subjective intent to breach the contract, which constitutes a serious violation of the contractual spirit. Accordingly, compared with internet influencers engaged in other forms of online entertainment performances, such streamers usually see a higher rate of upheld compensation claims and higher awarded compensation amounts. Similarly, for high-income content-focused internet influencers, contract termination will cause losses to agencies or platforms that have invested enormous resources to support them. Therefore, high or even full amounts of liquidated damages are often upheld in similar cases.

In recent years, with the development of the we-media industry and the gradual deepening of judicial organs' understanding of this sector, there have been relatively fewer cases where content-creating online influencers are ordered to pay full liquidated damages. In practice, even where a clear amount or calculation method of liquidated damages is specified in the contract, if an influencer claims that the agreed liquidated damages under the contract are unreasonable, the people's court shall adjust the excessively high liquidated damages agreed in the contract on a discretionary basis, taking into account the degree of fault of both parties, the total actual investment made by the MCN institution, the respective incomes of the MCN institution and the online influencer, the remaining term of cooperation between the two parties, the loss of expected interests of the MCN institution, contract stipulations, the fault of the parties concerned, and the actual performance of the contract. The specific amount of damages awarded fluctuates within a certain range based on the above factors, and clauses that require the return of all proceeds obtained during the cooperation period may also be deemed invalid.

In litigation, the company may first claim liquidated damages against the anchor for acts of breach of contract such as non-cooperation in work, and further claim relevant liquidated damages for contract termination after the influencer files a petition for contract termination. During the preliminary negotiation of the contract, it is recommended that the influencer first clarify the different liabilities for breach of contract corresponding to ordinary breach of contract and fundamental breach of contract. Ordinary breach of contract may be subject to penalties such as deduction of proceeds, rather than large-amount compensation of liquidated damages. The trigger conditions for liabilities for material breach of contract shall be as clear and controllable as possible; clauses on compensation for the expected benefits of both parties for the remaining cooperation term shall be treated with particular caution and rejected to the greatest extent possible. It is recommended that the influencer may set the "breakup fee" capped at the income earned within a certain period prior to contract termination, and provide for their own right of termination corresponding to the minimum agreed proceeds. Rather than bearing the mental pressure of paying millions of yuan in liquidated damages, the influencer should strive for a relatively fair range of liquidated damages at the very beginning of contract signing and negotiation.

In conclusion, the signing of contracts between influencers and MCN institutions is fraught with both temptations and pitfalls. The shared goal of influencers and MCN institutions is to increase the follower count and popularity of their jointly operated accounts and realize traffic monetization. Only when MCN institutions and influencers cooperate closely and make concerted efforts can they successfully break through the encirclement formed by multiple stakeholders including advertisers, suppliers, platforms and competing bloggers in the same track. Of course, as the Chinese saying goes, "To forge iron, one must be strong". The author suggests that influencers should carefully select their cooperative partners with a more advantageous negotiation position only after they have built up a certain fan base and content creation experience. If they intend to develop their self-media operation as a long-term career, they may seek assistance and guidance from professionals to identify and eliminate hidden risks on their self-media entrepreneurship path, so as to minimize future concerns.