Maximizing the exploitation
of intangibles… licensing,
franchising and / or merchandising
DR. Prabuddha Ganguli [PhD]
CEO
“VISION-IPR”
FLAT NO. 101/201, SUNVIEW HEIGHTS
SHER – E- PUNJAB SOCIETY , ANDHERI EAST , Mumbai 4001093
e-mail: ramugang@vsnl.com
Presentation at the WIPO-Italy International Symposium on
IPR and Competitiveness of SMEs in Textile and Clothing
Caserta, Italy, November 30-December 1, 2005
Multiple uses
Design
Cost
Quality
Availability
Meeting standards
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Innovation and its protection as
integral part of
Business Strategy
An absolute imperative………….
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Intellectual Creations
Take ownership to convert them into
your property
Therefore get your rights to them
To exploit them as your assets
USE YOUR INTELLECTUAL PROPERTY
RIGHTS
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Exploiting IP Business Tools
• Logo(s)
TM/Copyright
• Words and their combinations
TM/Copyright
• Sound
TM/Copyright
• Ornamentation, Shape, Form
Copyright/TM/Design Registration
• Functionality
Patents
• Geographical Place of Origin
GI
• Know How
Confidentiality/Trade Secrets
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Various aspects of
IPR
Create
Products / Services
Convert to property by claiming ownership
Introduce into the market
and / or
Transfer / sell the rights to other persons or enterprises
Earn royalty/ earn price for selling the rights
Strategically Share MARKETS
Enforce rights
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Patent Number
924284
Design Number
359633
Utility Model Number
1428858
Trademark Number
1183902
U.S.A, Canada, UK, Germany, Holland, France, Spain,
Italy, Sweden, Norway, Iran, Mexico, Chili, Argentina,
Taipei, The Philippines, Hong Kong,
Source: Slide Presented by Mr Yuji Okuma of JPO at the
WIPO Workshop, Guangzhou, China July 10-12, 2002
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IPR Portfolio Building
Seed, nurture, cultivate and harvest
Innovation to create the Present,
Immediate Future and distant future
portfolios
Measuring IP Performance
STRATEGIC ELEMENTS
What is the nature of protection offered by the diverse IPR
tools?
1. Do we have to protect our IPR in every country in which we
wish to do business?
2. When do I have to license / assign any IPR?
3. What is the period of VALIDITY of the IPR tools
4. Are enforcement features uniform across the world?
5. What do I assign? what do I license? What do I keep as
trade secret / know how? How do I keep my business
interest in selected territories?
A clear appreciation of these…. Imperative for all IPR players
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Paths to IP Exploitation
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Delivery of Know-how
Contract Research and Development
Establishing Joint Ventures
Setting up Plants, establishing production
processes, quality control procedures, etc.
on a turnkey basis
• Licensing patents, designs and other forms
of IPR
• Franchising
• Collaborative R&D
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A basket of Legal Frameworks to be
considered in IP Exploitation
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Contract law
Patent Law
Trademarks. GI, Copyrights and Design Law
Law relating to restrictive and unfair trade
practices
• International laws
• Tax and revenue related laws
Note: This is not an exhaustive list
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Group Exploitation of IP…. options
• Trademarks
Certification Marks
Collective Trademarks
• Geographical Indications
• Copyright Societies
• Pooling for essential patents
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How does one realise the value
of one’s intellectual assets
A structured audit is necessary
Managing IPR
… Market Phase
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Some Options for the IP proprietor
• Use the IP … manufacture the product, use the process, sell by
self or by contracting it to another party.
• License it to someone for manufacturing but market the
product by self or by contracting it to another party.
• Sell the IP
• Set-up a Joint venture
• Source of one-time or steady long term income from the
license fees/royalties
• Negotiate License for manufacture by and /or marketing with
geographical breakup of the markets.
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Some Options available to the IPR Holder
• License the IPR to another party (s) with mutually
negotiated benefit sharing arrangements
• Cross License for mutually independent working
and / or collaborative working
• Assign the IPR to another party (s) for an
appropriate return
• Barter rights
• Establish a franchise system involving other
parties
• Take action against those who infringe the IP
• Let the rights selectively lapse in certain
countries
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Options available to the IPR Holder
• License the IPR to another party (s) with mutually
negotiated benefit sharing arrangements
• Cross License for mutually independent working
and / or collaborative working
• Assign the IPR to another party (s) for an
appropriate return
• Barter rights
• Establish a franchise system involving other
parties
• Take action against those who infringe his rights
• Let the rights selectively lapse in certain
countries
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Patent Strategies
• Effective use of International Conventions
• Strategic options in the statutory
provisions
e.g. divisional applications, continuation,
and continuation in part
• Extending life of an invention …variants
• Joint patents
• Patent Leveraging
• Litigation as a strategy
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New IPR Management Approaches
• The 3 G Platform … an approach to cooperative licensing
• DVD Consortium… setting up one stop shop
for licences.
• Intellectual Capital Management (ICM)
e.g. Dow Chemicals
• Gene Bank Consortiums
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Licensing Agreement
A reflection of Complimentary Needs
satisfied by a formal contract that
appropriately and equitably addresses
the mutual requirements
within a framework that is enforceable
within specified legal frameworks
Why license out
• Access to foreign markets
– Enter a foreign market without being concerned with
setting up operations, dealing with foreign regulations
and customs, test the market from a distance, access
to low cost labor
• Stick license (make an ally of an infringer)
• Create standard - the more the technology is used
the more likely it could become an industry
standard
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Why NOT license-out
• Create competitor
• Lose control of proprietary information
• The risk of partnering with a “bad” licensee
and risking revenue and the reputation of
your product
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The aim of a licensing
agreement is :
• To put the licensee in possession of the
technology needed to manufacture the
licensed products
• to derive an economic return from this
activity
• to share this return with the licensor
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Licence Agreements
• What is being licensed
• What are the rights of parties involved in the deal
• What are the financial and commercial aspects of
the licensing arrangements
• What is the term of the licence?
• Other aspects of the agreement such as
confidentiality
• Who will own the rights to further developments by
the licensee.
• Will the licenser transfer further developments to
the licensee as part of this agreement. Or what
will be the arrangement.
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Licence Agreements.. Key issues
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The rights… make, use sell ?
Geographical jurisdiction of the rights
Exclusive or non-exclusive
Rights to sub-licence by the licensee?
Rights to the improvements?
Term of the agreement
Are there any minimum time limits set for the licensee to put the
licence into practice? If such time restrictions are not met, what are
the consequences?
Clauses that will survive beyond the term of the agreement
Any anti-competitive practices have been built in the agreement?
Rights to conduct parallel imports?
What will happen if the technology licensed under this agreement
becomes a subject of compulsory licence in a country?
Licence Agreements.. Key issues
• Who will be responsible for the renewal of the IPR associated
with the technologies covered in the licence agreement? Who
will bear the costs for such transactions?
• Who will be responsible for any disputes arising with respect to
the IPR associated with the licence agreement?
• Who will bear the legal costs of the disputes arising out of the
IPR associated with the licence agreement?
• What will be the impact on the commercial terms and the rights
acquired if the IPR associated with the licence agreement get
invalidated?
• What will be the impact on the royalty payments if the disputes
related to the IPR are settled in favour or against the owner of
the IPR associated with the licensing agreement?
• What happens if the licensee files for bankruptcy, insolvency,
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Licensing Agreements
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Access to information
Dispute resolution
Applicability of law and jurisdiction
Expiry and termination
Notices
Liabilities
Penalty Clauses
Any previous securities and pledges of either parties
involved in the licence agreement
• Financial and commercial obligations
• Transmission of the rights and obligations to affiliated
companies, present and future associates through
mergers and acquisitions, legal heirs, employees, etc.
• Options for future amendments to the licensing
agreement
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Issues post licensing..
•Licensees
may take actions that have an adverse impact on the
licensor's ability to get return on his R&D
investments (e.g. poor quality control,
overstepping territorial restrictions, revelation of private
information, etc.)
• May also "invent around" and develop innovations that
will
limit the licensor's ability to valorize his patents.
• After the agreement is signed, the licensor may
withhold
necessary technical and marketing support
for the licensee to effectively integrate the technology
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Opportunistic
behavior
• contractual problems may arise
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because of the parties’ risk aversion
uncertainty concerning the value of the
technology that is licensed
– licensees do not know ex-ante the value of
the
technology, they can be reluctant to pay in
advance for it. When it is transferred,
they can
refuse to pay for the
information that has been
transferred
to them.
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Franchising
How is this different from licensing?
Franchising
• Giving rights to one or more parties to conduct
commercial activities as per laid down business
practices, code of work, meeting quality standards in
raw materials and finished products simultaneously
allowing the franchisee to use the trademark,
service mark, patents, trade secrets, copyright,
design registration, etc. all this for an appropriate
return. E.g. McDonalds, Pizza Hut, etc.
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Key features …. Franchising
http://www.allbusiness.com/
1. Training and/or ongoing support provided
by the franchisor. Each franchisor has its own training
program for franchisees and their staff,
which can include training done at the franchisee's
location or at the corporate headquarters or
a combination. Most franchisors offer ongoing
support including administrative and technical support.
2. Assigned territory. Your franchise Agreement will
designate the territory in which you will operate
and whether or not you have exclusivity rights.
3. Duration of the franchise agreement. This provision
states the length of the agreement.
4. Franchise fee and total anticipated investment.
Franchisees are required to pay an initial
franchise fee that grants them the right to
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Key features …. Franchising
http://www.allbusiness.com/
5. Trademark, patent and signage use.
This provision covers how a franchisee can use
the franchisor's trademark, patent and signage.
6. Royalties and other fees you are expected to pay.
Most franchisors require franchisees to pay an
ongoing royalty, usually 4-8 percent of total sales,
typically on a monthly basis.
7. Advertising. The franchisor will reveal its advertising
commitment and what fees franchisees are required
to pay towards those costs.
8. Operating protocol. This section details how
franchisees run their outlets.
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Key features …. franchising
http://www.allbusiness.com/
9. Renewal Rights and franchisee
termination/cancellation policies. These provisions
deal with how the franchise can be renewed or terminate
Some franchisors have an Arbitration Clause in
the Franchise Agreement, which means that if legal actio
on either side is warranted, an arbitrator
will review the case instead of going to court.
10. Resale rights. Some franchisors allow franchisees
to sell their franchises for whatever reason.
Many, however, write in buy back or right of first refusa
clauses, which allow the franchisor to buy back the
franchise at a rate determined by them or to match
any potential buyer's offer who has expressed
interest in buying your franchise.
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