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WIPO-ARIPONational Seminar on Intellectual Property
for the Competitiveness of Small and Medium-Size Enterprises (SMEs)
Harare, February 7 to 9, 2007
Leveraging IP Assets:Licensing, Franchising & Merchandising
SMEs Division WIPO
Introduction
How can you generate income from your creations?
Exploit your works individually :
* simply sell the products
* make copies of the products and sell them
* reproduce the works on t-shirts, posters, etc.
* exhibit the works in museums, craft exhibitions, etc.
Commercialize your works yourself
If you sell your work, do you lose your IPRs over it?
• Merely selling a copy of a work protected by copyright does not automatically transfer copyright to the buyer
• Merely selling a work that incorporates an industrial design does not automatically transfer design rights to the buyer
• Merely selling a patented work does not transfer patent rights to the buyer
• The property rights over a physical object (work) are completely independent from the IP rights of the creator.
• The buyer of a work acquires the physical object, but not the copyright, design rights, etc. over the work – pigments, canvas, frame, stretcher
• IP rights in the work remain with the creator unless he expressly assigns it by written agreement to the buyer
SO……. Selling a work does not mean loosing it!!!!
If you sell your work, do you lose your IPRs over it?...
Buyer cannot make copies and sell them (reproduction right)
Buyer cannot print the sculpture on postcards and sell them (reproduction right)
Buyer cannot exhibit the sculpture in art gallery or other public place (exclusive right to show the work in public)
Buyer cannot alterate the work in a way that is prejudicial to the honour or reputation of the author (moral right to
object to derogatory treatment)
Example: Artist sells his sculpture ...
Sell your IP rights
– You can transfer all or part if your exclusive rights to someone else
• “assignment”
• irrevocable transfer of the owner’s entire interest in all or some part of the intellectual property
• in writing + signed
• may be partial (type of right / time)
– Buyer becomes the new owner of the transferred rights (trademark, design, copyright)
Buyer can exhibit the sculpture, reproduce it on postcards, take a photograph of it, etc.
Artist cannot reproduce it on postcards, etc. without explicit authorization from the copyright owner.
BUT: Moral rights remain with the artist • No derogatory treatment
• Right to be identified as author
Example: Artist sells his sculpture ...
• Artisan can authorize someone else to exploit his IP rights, against payment
• Authorized person (licensee) can only use the rights in the specific form and under the specific conditions allowed by the license
E.g. Only one reproduction, in specific magazine, in color, with a biography of the artist, etc.
Authorize someone else to reproduce or use your work
Artisan (licensor) retains the IP rights • Artisan can authorize several people to exploit the
works simultaneously
• Exclusive vs. non-exclusive licenses
Licensee does not acquire any ownership of the IP rights
License Transfer of rights
Licensing
What is licensing?
• License is an agreement between the owner of the IP right (licensor) and another person (licensee) in which the licensor permits the licensee to use the IP right in commerce in the manner and for the time period specified in the agreement.
only right to use (not own) the rights
only in a specific manner
Examples of licensing
Trademarks… * word + figurative element
* Spain CTM (registered with the OHIM)
* for toys, especially “maquettes” (sailing boats, wooden cars, teddy bears, etc.)
Industrial designs…
•Owner of industrial design grants to someone else certain rights related to the design.
• This may include such things as the right to use, manufacture and sell the design.
• Income: Can generate lucrative fees and royalties
• New markets: Allows artisans to enter into new product categories or in new geographical areas in a relatively risk- free and cost-effective way
• Marketing tool: increases the artisan’s exposure and recognition
Why licensing should be considered?
1. Protect your IP rights
• deposit and register, if possible
• keep confidential information secret
• place notice on the works
– ©, Name, Year
– "Protected Design”, Name, Year
– Trademark ®
How to develop a proper licensing strategy ?
2. Find right licensee• look for potential users
• Internet, licensing organizations, specialized merchandising companies, etc.
– E.g. International Licensing Industry Merchandisers’ Association (LIMA)
• trustworthy and diligent partner
3. Assess foreign markets
• Usually, the licensee will be responsible for local manufacture, localization, logistics and distribution
• Protect your IP in the relevant markets
– IP rights are territorial
– International treaties– Differences in national IP laws
(term, etc)
How to develop a proper licensing strategy ?…...
4. Preserve control over the commercial use of your works
• Licensee must place IP notice
• Require samples of the products QUALITY
• artwork
• design
• trademark
5. Limit, as much as possible, the scope of the license
• No assignment of rights• Only non-exclusive licenses• Limited in their scope to the
specific needs and interests of the licensee (intended business goal)– If assignment or exclusive
license negotiate fair compensation
– Once you assign your rights, you loose all its future income earning potential
How to develop a proper licensing strategy ?…...
6. Draft a solid license agreement
• Content
• In written + signed
• In many countries: must be registered with the national IP Office in order to be opposable to third parties
7. Negotiate fair compensation
– fee
– royalty
YOU DON’T GET THE DEAL YOU DESERVE, YOU GET
THE DEAL YOU NEGOTIATE
How to develop a proper licensing strategy ?…...
8. Take action against infringements
– Parties: Who bill be bound by it
– Subject matter: What exactly is being licensed
– Goods: Types of products/services the IP right will be used for
– Targeted Use: • manufacture and/or distribution of the goods• sale of those goods • use on corresponding packaging and advertising materials• use for advertising campaign, Internet
What should be mentioned in a licensing contract?
– Territory: • Countries where the goods will be sold or manufactured
– Term: • Number of months/years; or number of units; or time to achieve
the intended business goal
• Can the agreement be prolonged after that period?
• Can the agreement be terminated before that period under certain conditions?
• Consequences of such early termination
– Conditions after termination
What should be mentioned in a licensing contract?
What should be mentioned in a licensing contract?
Compensation
Advance payment (flat fee); periodic payments (royalties); combination
Basis of calculation of royalties (sales, hits)
Timing of payment
Exclusive or non-exclusive?
Sub-licenses?
If allowed prior agreement?
Materials to be provided to the licenseeE.g. mould of sculpture
– Requirements as to the use of the work• Size, placement, format, quality, resolution• Attribution (copyright notice, trademark notice, etc)• Prior approval (reproduction proof)
– Requirements as to the commercialization of the products: • Selling points• Minimum production• Obligation to inform about the number of products manufactured, distributed or
sold, etc. • Marketing duties
– Requirements as to publicity and promotion• In television, newspaper, radio, etc.
What should be mentioned in a licensing contract?
– Third party infringements• Obligation for the licensee to keep you informed about any infringements of
your IP rights by third parties of which he comes aware
– Indemnification clause• Licensee will protect you from any lawsuit that might arise from licensing
activities
– General clauses• Applicable law
• Jurisdiction
• Dispute resolution
• Confidentiality, etc
What should be mentioned in a licensing contract?
Franchising
What is franchising?
Franchising is a contractual arrangement under which an entrepreneur (franchisor), who has developed a system for conducting a particular business, allows other entrepreneurs (franchisees) to use that system in accordance with prescriptions of the franchisor, in exchange for a fee.
• At least two levels of people are involved in the franchise system:
• franchisor: lends his trademark or trade name and a business system;
• franchisee: pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.
• IP is central to franchising
– trademarks
– trade names
– industrials designs
– trade secrets
– patents
Basic Elements
Classic Example
• 70% of McDonald's worldwide restaurant businesses are owned and operated by independent businessmen and women, the franchisees
• right to use the trademarks, signs, equipment, formulas and specifications for menu items, methods of operation, inventory control, marketing, etc.
• 9 months full-time training
• uniformity: standard branding, menus, design layouts, administration systems
• passion for enhancing and protecting the McDonald’s brand
• quality control tests
McDonalds…..
Case Study: FONART, Mexico
• FONART (Fondo Nacional para el Fomento de las Artesanías Mexicanas) is the Mexican National Foundation for the Development of Folk Art.
• government institution designed to promote the production and sales of handicraft objects produced in Mexico.
• a nonprofit organization Its earnings go to fund, purchase, market, promote and support arts and crafts in Mexico.
FONART…...
• 2001: FONART developed concept of privately owned and operated franchise “100% México Hecho a Mano”
• Franchisee stores sell a choice selection of handmade Mexican pottery, ceramic tableware, glassware, lacquered wood, shawls, handcrafted metal objects and basketry
• Since FONART buys directly from artisans and is non-profit, the store is able to offer reasonable prices to customers.
• At the same time, the artisans, the majority of whom are indigenous and/or women, receive a fair price.
A woven palm leaf basket
made in Oaxaca.
• Products– store owners agree to buy all merchandise directly
from Fonart’s catalogs
• Corporate identity– trademark
– advertising
– location, architectural design
• Assistance– manuals of operation
– training, seminars
• Cost– initial fee
– montly: 1,5% publicity
Concept
• The owners of 100% Mexico Hecho A Mano (Washington) are Juan Antonio Santacruz and Raúl C. Desai.
• Juan Antonio is originally from Mexico City and is realizing a dream by opening his own store in the USA selling Mexican folk art.
• Raúl has worked with Mexico for many years in development finance and venture capital and is testing his theoretical skills by opening a business of his own.
FONART: Washington Shop
Merchandising
What is merchandising?
• Merchandising is a form of marketing whereby IP rights (typically trademarks, industrial designs and copyright) are used upon corresponding goods
• Generally through licensing : No assignment of rights, only an authorization to use the work in a specific manner
Examples of merchandising
Paintings…
PicassoBotero
Drawings and cartoons …
• Panda from the WWF
• Fido Dido < Joanna Ferrone and Susan Rose
Architectural works …
Eiffel Tower, Paris Taj Mahal, India
Photographs …
• “Guerrillero Heroico” < Alberto Korda (1960)• Key rings, agendas, hats, socks, bed linen, kitchenware,
etc.• However, Alberto Korda received only very little financial
remuneration for the use of his photograph
For the creator:
His work is promoted, and will gain recognition and value in the market
Receives additional and constant remuneration
Maintains ownership over his rights and controls the uses of his IP asset
For the merchandisor:
Can use the attractiveness of a work to promote the sale of his products
Advantages of Merchandising
• Any creator of an IP asset, as owner of a trademark, copyright, design, trade secret, patent … has a large gamma of possibilities to commercialize his works.
• Owners of IP have great power to define how their works are used.
• Possible to simultaneously grant various licenses for one single work:– To different users– For specific manners of exploitation– For limited period of time– In limited territory– For specific purpose
Final Remarks
