WIPO-ARIPO
National 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?
Commercialize your works yourself
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.
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.
If you sell your work,
do you lose your IPRs over it?...
• 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!!!!
Example: Artist sells his sculpture ...
 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)
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)
Example: Artist sells his sculpture ...
 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
Authorize someone else
to reproduce or use your work
• 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.
License  Transfer of rights

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
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.
Why licensing should be considered?
• 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 riskfree and cost-effective way
• Marketing tool: increases the artisan’s exposure and
recognition
How to develop a proper
licensing strategy ?
1.
Protect your IP rights
• deposit and register, if possible
2.
Find right licensee
• look for potential users
• keep confidential information secret • Internet, licensing organizations,
specialized merchandising
• place notice on the works
companies, etc.
– ©, Name, Year
– E.g. International Licensing
– "Protected Design”, Name, Year
– Trademark ®
Industry Merchandisers’
Association (LIMA)
• trustworthy and diligent partner
How to develop a proper
licensing strategy ?…...
3.
Assess foreign markets
• Usually, the licensee will be
responsible for local manufacture,
localization, logistics and
distribution
• Protect your IP in the relevant
markets
4. Preserve control over the
commercial use of your works
• Licensee must place IP notice
• Require samples of the products 
QUALITY
– IP rights are territorial
• artwork
– International treaties
– Differences in national IP laws
(term, etc)
• design
• trademark
How to develop a proper
licensing strategy ?…...
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
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
How to develop a proper
licensing strategy ?…...
7. Negotiate fair compensation 8.
– fee
– royalty
YOU DON’T GET THE DEAL
YOU DESERVE, YOU GET
THE DEAL YOU NEGOTIATE
Take action against
infringements
What should be mentioned
in a licensing contract?
– 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?
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 licensee
E.g. mould of sculpture
What should be mentioned
in a licensing contract?
– 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
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.
Basic Elements
•
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
Classic Example
McDonalds…..
•
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
Case Study: FONART, Mexico
FONART…...
• 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.
• 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
Concept
• Corporate identity
– trademark
– advertising
– location, architectural design
• Assistance
– manuals of operation
– training, seminars
• Cost
– initial fee
– montly: 1,5% publicity
FONART: Washington Shop
• 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.
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…
Botero
Picasso
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
Advantages of Merchandising
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
Final Remarks
• 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
THANK YOU
Email:
german.cavazostrevino@wipo.int
http:/www.wipo.int/sme/