Exploiting IP Assets
Overview of Licensing,
Franchising &
Merchandising
Wong Jin Nee
Roadmap
 An overview of Licensing, Merchandising &
Franchising
 Benefits of these arrangements
 Licensing
Nature
Types
Key elements of a license agreement
 Merchandising
 Franchising
An overview of the Franchise Act 1998
 Conclusion
An Overview
Licensing, Merchandising & Franchising
 Licensing
Permission to use IPR to improve profitability &
expand opportunities, subject to contractually
agreed terms & conditions
 Merchandising
Permission to use of brands/characters/events to
promote sale
 Franchising
Permission to use “proven business system”
(standard products/services, look & feel, signage,
methods of preparation, inventory control) to
replicate success
Why, Oh Why?
 Show me the Money – Generate revenue$
 Recoup R&D expenses & investment
 Vehicle for entry into:
 new geographic markets without major capital investment
 new product markets or product range
 Form strategic alliance
 build relationship
 create new opportunities
 gain know how (new applications of old technology)
 Strengthen market position
 Incorporation of technology into industry standard
Licensing
Nature of Licensing
 IP owner retains ownership
 A tool to leverage & exploit IP rights
Entering a new business
Expanding an existing business (extending
territory or nature of business)
Improving quality of goods/services
Improving market positioning
Settling legal suits
Exclusive, non-exclusive, sole
License
Exclusive
Non-exclusive
Sub-License
Only the licensee
Sole
Owner and Licensee
Owner and
various licensees
Types
 Licensing Out
 Grant right to 3rd Parties to use IPR
 Contract manufacturing
 Distributorship/Dealership/Agency/Marketing
 Expansion into new market, product range, brand, technology
 Licensing In
 Use 3rd Parties’ IPR
 Technology transfer
 Settlement of legal suits
 Cross Licensing
 Exchanging of rights to use IPR
 Co-branding
 Collaboration, joint R&D , joint development
 Co-existence
Stages of negotiations, execution &
management
Negotiations
NDA, confidentiality agreement
Heads of Agreement/MOU/LOI
Due Diligence
Execution, Implementation &
Management
Termination & Post termination
Key Elements of a License Agreement
 Parties
 Definitions
 Grant of Rights




Extent & Scope of licensed rights
Right to sub-license
Field of Use
Territory
 Term & Renewal
 Payable fees





Lump Sum
Royalty
Payment terms
Overdue payment
Taxes
 Parties’ other rights & obligations
 KPI
 Quality control
Confidentiality
Accounts, records & audit
Ownership & Enforcement of IPR
Improvements
Representations, Warranties &
Indemnities
 Termination
 Consequences of Termination
 Miscellaneous provisions










Entire agreement
Compliance with laws
Severability
Notice
Governing laws and dispute forum
Merchandising
Merchandising
 Improve visibility and appeal
 Licensing out
 Revenue generation (royalties, license fees)
 Expansion into new market, extending product range and
business
 Invaluable marketing tool
 Risk free (relatively) and cost effective
 Licensing in
 Increase brand visibility & recognition
 Reduce brand awareness cost
 Shape or reinforce perception
 Revenue generation (more sales)
 Brand extension
Merchandising
Character
Source: http://www.etawau.com/HTML/AirAsia/Lat.htm
Event
Personality
Brand extension
Source: http://www.virgin.com/about-us/
Franchising
Franchise
Efficiencies, economies of scale, market
penetration, increased sales and
profitability
"Franchising means working for yourself,
but not by yourself"
Foundation of Franchising
 A method of growing a business where a franchisee
is granted, for a fee, the right to distribute goods or
provide services under a system determined by the
franchisor
 3 critical components of franchising
Intellectual Property Rights (IPR)
Include trade marks, confidential
information, copyrighted manuals, trade
dress (décor) and all intangible assets that
create customer loyalty
Operating system
Delivers the promise of proven business format
Ongoing support
Tools and tips to expand growth of customer
base and market share
Franchise Act 1998
 Franchise relationship, governed by:
 Franchise Act 1998
 Franchise agreement
 Disclosure document
 Operation/Training manuals
 Franchise Act 1998, in force since 8 October 1999
 Provides for registration and regulation of the franchise
industry in Malaysia
 Sets out the respective duties and obligations of franchisors
and franchisees
 Governmental agency responsible for the Franchise
Act 1998 since April 2009
Franchise Development Division of the Ministry of
Domestic Trade, Co-operatives and Consumerism
(MDTCC or KPDNKK)
http://www.kpdnkk.gov.my/index.php?lang=en
Application of Franchise Act 1998
 Applies to sale of any franchise in Malaysia
 Sale deemed in Malaysia where
Offer to sell or buy
 is made in Malaysia and accepted within or outside
Malaysia; or
 is made outside Malaysia and accepted within Malaysia;
and
Franchised business is operated or will be operating
in Malaysia
 Starting point - determine whether the business
arrangement is a “franchise”
Ingredients of a franchise
 For a business arrangement to be considered a franchise under
the FA, all of the following elements must be present:
 a right to operate business according to franchise system;
 a grant of license to use the intellectual property rights such as
the brand names, confidential information and copyright;
 a continuous control over business operations in accordance with
franchise system;
 assistance rendered to operate business (e.g. provision or supply
of materials and services, training, marketing, and business or
technical assistance);
 in return, there will be payment of fees or other form of
consideration; and
 the business is operated separately.
Common elements
Protected IPR
Core brand identity
Shared connection or theme
Control over commercial use
Identified scope of license
Putting a value to the IPR
Conclusion
Take-Aways
 IP Assets are business tools
 Its use should not be limited internally or simply to
exclude others
 Many different ways to leverage, exploit, maximise &
moneti$e your IP
 Managing expectations
 clear communication to establish mutual trust and respect
 exercise sensitivity to relationships
 After the deal has been struck, important to monitor
and review for compliance
 Licensing management and enforcement
 Development of strategies to manage, monitor and enforce
 Compliance programs and audits
 A need to continuously fine tune the license agreement
Thank you
Email :wjn@wjnt-law.com (Wong Jin Nee)
Tel : 03 20923322
Copyrights & Trade Marks of third parties in this presentation
belong to the respective owners and are used solely for a noncommercial purpose
 Wong Jin Nee & Teo