1. WIPO-ARIPO National Seminar on Intellectual Property for the Competitiveness of Small and Medium-Size Enterprises (SMEs) Harare, February 7 to 9, 2007

2. Leveraging IP Assets: Licensing, Franchising & Merchandising SMEs Division WIPO

3. Introduction

4. How can you generate income from your creations?

5. 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

6. 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.

7. 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?...

8.  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...

9. 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)

10.  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...

11. 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

12.  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

13. Licensing

14. 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

15. Examples of licensing Trademarks… *word + figurative element *Spain  CTM (registered with the OHIM) *for toys, especially “maquettes” (sailing boats, wooden cars, teddy bears, etc.)

16. 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.

17. 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?

18. 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

19. 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

20. 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

21. 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

22. –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?

23. –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?

24. 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

25. –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?

26. –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?

27. Franchising

28. 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.

29. 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

30. Classic Example

31. 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…..

32. Case Study: FONART, Mexico

33. 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…...

34. 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

35. 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.

36. 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

37. 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

38. Merchandising

39. 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

40. Examples of merchandising Paintings… Picasso Botero

41. Drawings and cartoons … Panda from the WWF Fido Dido < Joanna Ferrone and Susan Rose

42. Architectural works … Eiffel Tower, ParisTaj Mahal, India

43. 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

44. 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

45. 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

46. THANK YOU Email: german.cavazostrevino@wipo.int http:/www.wipo.int/sme/