Overview of Licensing, Franchising & Merchandising 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 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 Sole Sub-License Only the licensee Owner and various licensees Owner and Licensee

Types Licensing Out Licensing In Cross Licensing 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 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 Brand extension 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 Event Personality Character Source: http://www.etawau.com/HTML/AirAsia/Lat.htm

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 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 non-commercial purpose  Wong Jin Nee & Teo