Dar-es-Salaam, Tanzania TH SEPTEMBER, 2011 “ MANAGING INTELLECTUAL PROPERTY ASSESTS IN INTERNATIONAL BUSINESS” Mboya Rose

Contents Managing IP Assets of SMEs Doing business at international level (Products for export) Export Business Development plan and IP Assets Ways of Commercializing IP Assets Abroad Summary of Ways in which IP may assist SMEs in Export strategy

Objectives How SMEs can Utilize IP Effectively Factors to consider when protecting your IP Abroad Role of IP in Developing a business strategy Commercial exploitation of IP Assets

1-4Micro Enterprises 5-49Small Enterprises 50-99Medium Enterprise > 100 Large Enterprises 1Classification of Enterprises 1. Managing the IP Assets of SMEs

i)Importance of SMEs Employment Creation Poverty Reduction and Wealth Creation Value addition Entrepreneurial development Contributes to the GDP (20% in Kenya)

ii)Characteristics of SMEs products Low quality Less attractive in appearance Low efficiency and effective Lack of standardization of products Products that are not protected and no Name MSMEs very innovative (no vertical growth)

iii)Challenges Facing SMEs in business and market environment Business is done in the market place Nowadays physical markets co exists with virtual markets (internet) based on online marketing, promotion and e commerce. Too many products chasing too few brand very discerning consumers. In today’s economy the supply seems to exceed the demand thus consumer is truly the king

Challenges facing SMEs in business environment conti… Rapidly changing tastes of consumers (consumers prefer natural to other products …..have gone herbal…) Challenge is to provide newer, better, or more attractive products that catch the eye and retain the consumer The real challenge therefore is to be more resourceful, creative and innovative than competitors in all aspects of business

Financial Markets Management Technological Need for new product Need for new or alternative process Need for alternative raw material Challenges facing SMEs in business environment conti…

v). Potential Market for MSMEs 1. Traditional market (local, regional, international) 2. Government Procurement 3. Sub-contracting Difficulty in accessing the Market for MSMEs Products Lack of Competitiveness

vi)Basic ingredients of business success A successful business is one that makes a bigger profit after understanding and meeting the needs of consumers better than its competitors this can be achieved through: A quality product A distinctive brand Effective marketing

Where you are Where you to be Vision Mission Enterprise IP Audit 2.Doing Business at International level Developing Business Export Strategy How to reach there

2. Doing business at international level (products for export) i)Key issues to consider when developing business export strategy Type of existing IP Assets -Identify IP Assets of the company (Carry out internal IP Audit) Effective method of IP Protection Abroad Type of IP Asset useful in the various cycle of Business Development plan Strategies for Commercializing IP Assets abroad Identifying export markets Estimating demand

ii)Company’s IP audit (Assets) Taking stock of SME’s IP Asset Taking stock of SME’s IP Asset Company must either be Using or Creating IP Company must either be Using or Creating IP  Technologically Based IP Assets: Patents, Trade Secrets, Industrial Designs, Software, utility model, integrated circuits.  Institutionally Based IP Assets: Company’s brand, product brand, trademarks, customers’ lists, distribution channels, quality marks, copyright In general the value of intangible assets (IP) is underestimated by SMEs

Identify existing IP Assets IP audit (identify IP Assets)– the link with business devt: 1. Help to understand the enterprise position in the market; 2. An important tool for understanding the existing assets of an enterprise; 3. A key tool in identification of new business opportunities; 4. Serves to identify key business partners/allies. Company’s IP Audit cont..

iii)Protection of IP Assets Determine if the IP Assets is already protected If not determine the best strategy for your company in protecting the IP Asset (patents, ID, Trademarks, copyrights, trade secrets etc) Protect it

A)Advantages of IP Protection Increase in negotiating Powers-IP rights could be exchanged btn your enterprise and another Opportunity to sell or license Invention or innovation if you choose not to exploit Positive Image for your enterprise- high level of technological And innovative capacity Strong market position- reduced competition Higher returns on Investments if own exploited EXCLUSIVE RIGHT FOR A GIVEN PERIOD

B) Implications of not Filing for IP Protection B) Implications of not Filing for IP Protection NO PROTECTION FOR YOUR INVENTION OR INNOVATION Transfer of technology difficult Possibility to license or sell hindered Somebody else might protect it Prevent you from exploiting it Competitors will take advantage of your invention If the product is successful

C)Factors to consider when protecting IP Abroad. IP rights are territorial rights Protection of IP Rights is granted on a territorial basis Most companies assume that IP Protection in your country provides protection in other countries as well

Important differences in IP laws world- wide Different countries have varying requirements with regards to IP Protection Differences in legal requirements e.g most countries copyright is automatic, other countries provide for registration of the same mainly for evidential purposes Differences in what cannot be protected e.g in Sudan alcoholic products not protected, Differences in how a specific product may be protected: e.g. software, business methods as patents in US as opposed to Kenya where it is protected as copyrights

Important differences in IP procedures worldwide Differences in how applications are examined (registration, or substantive examination) Differences in options available to applicants, e.g. provisional patent applications, utility models. Most countries require foreign applicants to hire a local (resident) agent/attorney Requirement for working the invention, using the trademark after a given period of time (three years after grant/four years from filing date)

Options for filing applications for IP protection abroad (National, regional or international routes) and companies may be in a position to choose their filing strategy based on issues such as: Membership to international treaties (Tanzania not a member of Hague Agreement, thus may not be able to protect through the Hague system, Lisbon,) Countries in which protection is sought (if members of the Treaty) Convenience of reducing certain costs (Through International Treaties, regional as opposed to national eg ARIPO, PCT, ) Time taken to register/grant the right through different routes (National 18 months, PCT 36 months)

Decision on where to seek IP Protection may be based on Availability and size of market Markets where benefits of protection can be derived Main competitors Potential licensees based Potential infringers Effective enforcement system in case of infringement

Timing of application Priority date : case of patents and industrial designs, trademarks Grace period Exhibitions Requirement for non disclosure of invention or industrial designs First to file vs first to use (invent) many (countries the law favours the first to file)

Type of protection granted by each IPR Patent Industrial design Trademark Trade secrets copyrights

Duration of the protection Patents Utility models Trade secrets Industrial design Trademarks copyrights

3)Export Business Development plan and IP assets Production Expansion Market Expansion Capital Expansion New Product Channels; Joint Ventures or Partnerships

i)Production Expansion and relevance of IP a) Expanding the production capacity  New technologies – Patents/trade secrets;  Quality control – patents/trademarks b)Product Development  Patents  Trademark  Industrial Designs  Trade secrets  Copyrights Adaptation of product / brand / design / packaging, will involve creative or inventive work that may be protected through the IP system

Production Expansion and relevance of IP cont… c) Product Pricing Pricing of the product will partly depend on the extent to which the patents, ID, and trademarks is recognized and valued by consumers, and the extent to which product will face competition from rival products

ii)Market Expansion and relevance of IP in the business Cycle a)Carrying out Market Research  Trademarks  Patents  Trade Secrets  Industrial Designs

Market expansion cont.. b) Expanding the market  Trademarks – whether there is a competing trademark?  Patents – whether the technology used is protected in the market?  Industrial Designs  Copyright Issues

Market expansion cont.. c)Product Promotion  Patents  Trademark  Industrial Designs  Trade secrets  Copyrights

d). New Product distribution Channels  Trademark – should it be a new or build on the existing?  Patents – technical needs – invent or license in?  Copyright – any potentials?  Industrial Design – commissioned? If so under what arrangement?  Trade Secrets – is there a mechanism in place already.

iii). Capital Expansion and Relevance of IP  Access to credit facilities – Securitization of IP assets; patents, trademarks, industrial designs, copyrights etc  Confidence of Financial Institutions – IP Portfolio;  Accessing grants in specific technologies – patents;  Business Reputation – branding;  Revenue from Licensing – patents, copyright, ID

iv). Joint Venture/Business Partnership/M&A Value of your IP asset – boost your bargaining power.  The business brand;  Valuable business information;  Market channels;  Technological edge – patents;  Production manuals;  Customer base.

4)Ways of Commercializing IP Assets Abroad Clearly define issues pertaining to IP ownership with partners Example: if developing a new product with another enterprise, establishing a joint venture, or modifying the design, package or trademark of a product, important to ensure that it is clear (preferably in a written contract) who will be the owner of any IP generated.

Ways of commercializing IP Assets Abroad Adequate protection in foreign market as a pre-requisite to licensing/franchising in that market Companies seeking to license the manufacturing of their product in a number of markets, should ensure that their IP is protected and is not in the public domain in those markets (i.e. protection has been obtained and has not expired)

1. Own exploitation IP in business An inventor chooses to exploit its IP Assets if: Necessary resources available You have business skills There is reasonable market for the product Expected royalty of the IP Assets is too low Ways of commercializing IP Assets Abroad

2. Assignment /Sale of IP Assets Occurs: Owner of the IP asset unable to exploit it by self No financial resources No business skill No time Desires to gain profit at min risk Test and develop untapped market Ways of commercializing IP Assets Abroad

 Technology Licensing  Trademark franchising  Copyright Licensing Licensing of IP Assets Owner of the IP asset allows another to exploit and in return get royalties No financial resources No business skill No time 3. Licensing

Advantages of Licensing to the licensee and licensor For Licensor Rely on better manufacturing capacity, distribution outlets, local knowledge and management of the licensee; IPR retained by licensor Access to new markets, Turning potential infringer into partner; Provides some Degree of Control over innovation, direction, and evolution of technology; For the Licensee: 1. Quick response to the market needs using innovative technology; 2. No need of own research resources base – still have access to technical advances that are necessary in providing new or superior products; 3. Improve a company’s technological portfolio

Disadvantages For the Licensor 1. A licensee can become a licensor’s competitor – especially when they are operating in the same territory. 2. When technology is not clearly defined, a license agreement can be disadvantageous, for it may require continual service from the licensor; 3. The licensor may become critically dependent on the skills, abilities and resources of the licensee for generating profit. For the Licensee : 1. Risk of making financial commitment when the technology is not “ready” to be commercially exploited; 2. A technology license may add a layer of expense to a product that is not supported by the market for that product; 3. The risk of becoming too technologically dependent – in the long-run it may become a barrier to their future expansion;

4.Joint Ventures Where Inventor invites investor to jointly exploit IP The IP is valued and converted into equity Investor bring money Inventor brings technology and know-how Ways of commercializing IP Assets Abroad

5. Acquisition and Mergers The Values of IPRs are important during Acquisition Merger 6. Fundraising – Monetization of IP Monetization of IP is an alternative route for raising money other than loans and equity Intellectual property rich companies can sell expected royalties or revenue streams based on their IPRs for cash Ways of commercializing IP Assets Abroad

9/3/2015 2:47:48 AM45 Summary of Ways in which IP may assist SMEs in Export strategy:  Product Development  Product Design;  Service Delivery  Marketing;  Raising Financial Resources  Exporting  Expanding SMEs Business;  Developing a Business Strategy

9/3/2015 2:47:48 AM46 Conclusions 1. Only companies that continue to provide better products and services at the lower price will be competitive, profitable and maintain an edge in a market economy. 2. A better product may result from improved manufacturing process that increases cost effectiveness by reducing production time using fewer resources; 3. A better product may be superior by virtue of its new features, higher quality, lower cost or combination of all these;

THANK YOU FOR YOUR ATTENTION!

References WIPO, Marketing Crafts and Visual Arts: The Role of Intellectual Property; A practical Guide WIPO Intellectual Property Hand Book: Policy Law and Use WIPO TRIPS Agreement Otieno Odek. Enforcement of Intellectual Property Rights in Kenya MIP Class notes