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Gregory J. BattersbyGrimes & Battersby, LLC
www.gandb.com
A Word from Our Sponsor:
INTERNATIONAL LICENSING INDUSTRY
MERCHANDISERS’ ASSOCIATION Founded in 1985, LIMA has more than 1000 member companies representing over 35 countries who represent all facets of the
licensing industry, i.e., licensors, licensees/manufacturers, licensing agents, consultants and support groups including retailers, accountants, attorneys, graphic design firms and more. Headquartered in New York City, LIMA has branch offices in London, Munich, Tokyo, Hong Kong and Shanghai and regional representatives in at least six other regions around the world.
. For membership information contact:Louis Caron, VP Membership
LIMA
350 Fifth Avenue, Ste. 4019
New York, New York 10118
212-244-1944 x 5
212-563-6552 (Fax)
www.licensing.org
Upcoming LIMA EventsJune 12-14, 2012 Licensing Expo, Mandalay Bay, Las
Vegas (including Licensing University)
July 4-6, 2012 Licensing Japan 2012, Tokyo Big Sight, Tokyo Japan
Oct. 10, 2012 2nd Annual LIMA Retail Symposium, Yale Club, New York, NY
Oct. 14-16, 2012 Brand Licensing Europe 2012, Olympia, London, England
LIMA Programs of Interest LIMA’s Certificate of Licensing Studies (“CLS”)
program—a 60 hour program (in person and on-line courses covering all aspects of licensing). Contact Christina Attardo. [email protected]
Free Listing in LIMA Directory of the Licensing Industry. Contact Louise Attardo at [email protected]
Listing in LIMANET, the on-line marketplace for licensing (LIMA Members only). Contact Adam Berg at [email protected].
Intellectual Property 101Trademark Protection1. Can be any word, logo, symbol or the
like which serves as an indicator of source, origin or sponsorship. Can also be a product configuration.
2. Rights based on use in many countries, not registration. Common law rights & for false designation of origin (Sec. 43(a) of Lanham Act).
Intellectual Property 1013. Not all marks are created equal. The “strength” of a
mark is based on the following scale:a. Generic. Incapable of functioning as a trademark,
e.g., Chair for a chair. Marks can become generic when overused, e.g., Escalator or Aspirin
b. Descriptive. Conveys some idea about the product. Only registrable with showing of secondary meaning, e.g., POCKET BOOKS for books.
c. Suggestive. May imply feature of product without describing it, e.g., PLAYBOY for men’s magazine.
d. Arbitrary or Fanciful. Strongest type. KODAK (a coined word) for camera.
Intellectual Property 1014. Generally, the title of a single book
cannot be trademarked—need showing of secondary meaning or title of series of books
5. Character name can be protected as a trademark if it has developed secondary meaning, Waldo, Superman.
6. Can obtain a trademark for a character where the copyright expired, e.g., Peter Rabbit
Intellectual Property 1017. International Classification System: Goods and
services are broken down into one of 45 classes. Examples include clothing (Class 25), toys/games (class 28) and paper products (class 16)
8. Registration: use vs. intent to use.U.S. Cost depends on whether filing online or by mail: Online: $325 per class; Mail: $375 per class
9. Term: Registrations in U.S. for 10 year terms, subject to renewal for infinite period of time. Rights based on use.
10. Territorial—Madrid Protocol and European Community Trademark
Intellectual Property 10111. Searching—federal, state and common law. All-Class
Merchandising Searches. Search Considerations: Consider Other Established Uses
o Penguin books v. Pittsburgh Penguinso Harlequin books v. Harlequin wall coverings
Intent to Use Trademark Applications Merchandising Classes, e.g. 9, 16, 25, 28
12. Infringement Analysis—likelihood of confusion
13. Counterfeiting Considerations.
Intellectual Property 101Trade Dress Protection
1. Trade Dress is a trademark concept
2. Trade dress consists not of words or symbols, but of a distinctive shape color graphics sales technique or any combination that the public associates with a
particular source.
3. Must be distinctive and non-functional
Trade Dress Protection--Examples
Intellectual Property 101Copyright Protection1. Covers works of authorship fixed in any tangible medium
of expression from which they can be perceived, reproduced or otherwise communicated. Must fall into the following categories: literary works musical works, including words dramatic works, including words pantomimes and choreographic works pictorial, graphic and sculptural works motion pictures and other audiovisual works sound recordings architectural works.
Intellectual Property 1012. Simple and inexpensive; Rights commence
upon creation.3. Register with Copyright Office; $35 filing fee.
Need for filing lawsuit and to get statutory damages and attorneys fees.
4. Term (under Sonny Bono Copyright Extension Act in US and most countries):
a. Life of author plus 70 years or for anonymous works:
b. 95 years from publication or 120 years from creation.
2. International in scope under Universal Copyright Convention (“UCC”) & Berne Convention.
Intellectual Property 101Patent Protection
Used to protect a technical solution in any field of technology, relating to a product or a method that is new and industrially applicable.
Term in most countries is 20 years from the date of filing
Utility patent protection
Design patent protection
Intellectual Property 101Publicity Rights Unique to United States Covers name, likeness, signature, voice, etc. of performer
used for commercial purposes Examples: Michael Jordan image, Michael Jackson
name, image & voice Descendible—Princess Di Sports Leagues—Properties Divisions and Players
Associations College Athletes
Intellectual Property 101Umbrella of IP Rights
Counterfeiting DefinedDefinitionCounterfeiting is the deliberate use of another’s intellectual
property, including trademarks, product designs and copyrights including:
The use of a false trademark that is identical with or substantially indistinguishable from a registered trademark
The passing off of a product whose design is similar or identical to the design of the authentic product
Copyright piracy--the unauthorized copying and distribution of audio-visual works, software and artwork
Extent of the Problem The number of Intellectual Property Rights (IPR) seizures in
U.S. increased by 24% to 24,792 in FY 2011 from 19,959 in FY 2010. That is a 300% increase since 2002.
The domestic value of IPR seizures decreased by 5% from $188.1 million to $178.9 million principally due to greater vigilance
The estimated MSRP for all FY 2011 IPR seizures was $1.1 billion, a slight decline from FY 2010
The value of consumer safety and critical technology seizures soared to more than $60 million due to an increase in pharmaceutical and perfume seizures
Extent of the ProblemSeizures by Domestic Value (in millions)
Extent of the ProblemEuropean Customs reported 80,000 cases of counterfeiting in
2010 which was double the number of 2009. 103 million counterfeit products were detained at the borders; Cigarettes accounted for 34% followed by office stationary, tobacco
products, labels, clothing, and toys; Estimated value of genuine products was over £1 billion; 85% of seized products came from China.
Extent of the ProblemIndustries Affected
Designer Products Automotive & Aircraft Parts Food Pharmaceuticals Toiletries/Cosmetics Toys Entertainment & Recording Industries
Extent of the Problem
Impact of the ProblemCounterfeiting steals the identity of trademark owners and robs consumers of comfort, reliability and their personal safety. It is not a “victimless crime” since:
Countries are deprived of tax revenues Trademark owners are deprived of sales revenue Trademark owners lose “goodwill” of well-known brand names Consumers are deceived Used to fund terrorist activities Software industry loses between $12-16 billion a year U.S. automobile manufacturers lose $12 billion/year and could
hire 210,000 more workers by eliminating counterfeit auto parts.
Negotiation Basics
Negotiation BasicsNegotiation Strategy
1. Be Aware of Who You Are
2. Know Your Strengths and Weaknesses
3. Know Your Market—Furniture; H Koch & Sons
4. Don’t Let Ego Overtake You
5. Know Your Adversary
A. Overview1. Type—Exclusive, Non-Exclusive; Form of
Agreement
2. Basic Terms a. Compensation:
1. Royalty Rates2. Domestic v. FOB Rates3. Split Royalty Rates
b. Net Sales c. Advance
d. Guaranteed Minimum Royalties vs. Minimum Royalties e. Royalty Periods--Quarterly Reportingf. Term of Agreementg. Warranties
1. Power To Enter Into Agreement2. Non-Infringement
h. Indemnification1. Product Liability2. Infringement
i. Insurance j. IP Rights
1. Responsibility2. Enforcement Against Infringers
k. Termination1. Product Introduction Date
2. First Shipment Date3. Breach --30 Day Notice
l. Choice Of Law
License Agreements BasicsB. Wish List for Licensors
1. Clearly define the Licensed Property and Licensed Products2. Make sure you are comfortable with the financial terms, e.g.,
royalty rate, advance, guarantee 3. Be aware of how licensee intends to sell product, e.g., F.O.B.
sales command higher royalty rate4. Build in performance requirements, e.g., First Sale, Product
Introduction Date, Minimum Sales, Continued Sales5. Reps, warranties and indemnities do not have to be equal or
mutual
6. Build in quality control requirements and pay attention to them—it is necessary to monitor quality
7. Require product liability insurance—watch the deductible
8. Disputes and venue provisions do matter—arbitration, litigation, etc. Consider mediation as a condition to bring an action
9. Integration clause saves litigation costs10. Build in strong termination provisions
License Agreements BasicsC. Wish List for Licensees
1. Licensed Property and Licensed Products should cover what you intend to produce or publish
2. Understand the financial terms, e.g., guarantees & net sales definition in particular
3. How much support will licensor provide? TRY to get them to include it in the agreement.
4. Watch the performance requirements—you can be terminated for failure to meet them
5. Seek options to renew the term of agreement upon meeting performance requirements
License Agreements Basics
6. Seek broadest possible territories and channels of distribution or get options for them
7. READ the quality control provisions. Can you comply with them?
8. Docket all dates required under the agreement lest you will be terminated
9. READ the royalty reporting provision. Can your computer system comply easily?
10. Watch assignability and non-transfer provisions as they can stand in the way of a sale or change of control
Current Licensing Royalty Rates*
Art 3-8%
Celebrity 7-11%
Entertainment 8-12%
Collegiate 6.5-10%
Corporate 6.5-10%
Designer/Fashion 4-8%
Events 10-14%
Sports 8-11%
* As reported in Battersby & Grimes, Licensing Royalty Rates 2012, Walters Kluwer available at www.aspenpublishers.com
Agent Agreements Simplified1. Identifications
Parties to the Agreement Properties to be Included Territory Categories or Specific Manufacturers Term of the Agreement
2. Agent Grant Exclusive v. non-exclusive
Agent Agreements Simplified3. Agent Responsibilities
Meet and confer with Licensor Develop merchandising plan Implement merchandising plan Negotiate license agreements Collect and disburse royalties Investigate infringements Oversee audits Approve products Non-competition
Agent Agreements Simplified
4. License Agreements Privity should be between licensor and licensee, not agent
and licensee. Licensor should provide form Licensor should approve and sign all agreements
5. Agent Compensation Typically a commission Retainer not uncommon Post-termination compensation--CRITICAL
Agent Agreements Simplified
6. Term & Termination VERY IMPORTANT Common to include milestones Shorter with options vs. longer with milestones
7. Payments Typically made to agent Can be direct to property owner Alternatives—escrow, lockbox, directly to licensor
PowerPoints of both sessions are available on LIMA website at www.licensing.org
LIMA reference Guide:
“Basics of Licensing” by Gregory Battersby & Danny Simon
Available at www.basicsoflicensing.com
