Maximizing Intangible Benefits from IPRs protection to Exploitation of IPRs: Business Strategies based on Franchising and /or Merchandising Avv. Fabrizio Jacobacci Rome, 11th December 2009

Introduction Terminology: –Franchising: using another person’s business model to provide services, distribute goods, etc. (Legal definition: art. 1 Law 129/2004) –Merchandising: the brand or image from one product or service is used to sell another

Franchising: Franchisor’s perspective Expansion: access to venture capital w/o giving up control of the operations Possibility to build a distribution network by leveraging the franchisees Avoid initial burden to start a new point of sale Franchisee has great incentive to successfully operate the business Huge business worldwide

Franchising: Franchisee’s perspective Quick access to business ownership –based on an established trademark and proven formula of doing business Training and mentoring –the franchisees may be able to grow their franchised businesses to a level which they wouldn't have been able to w/o the franchisor

Franchising: the Legal Strategy Hot Issues As a franchisor: –Supply terms; –Disclosure requirements; –Financial payments; –Marketing plans –Pricing & Rebates –Default & Termination –Intellectual Property –Dispute Resolution Procedures

Franchising: the Legal Strategy Hot Issues As a Franchisee: –Territorial rights –Ownership and Assets rights –Lease –Bank Guarantees –Prior Disclosure

Franchising & IP Rights: Franchisee’s perspective IP rights are at the core of the deal –They represent and protect the business model proposed by the Franchisor –Identify IP rights involved –Check national IP laws –How secure are the IP rights? Franchisee must be convinced he is paying for valid and enforceable IPR’s (and a successful business model)

Franchising & IP Rights: Franchisee’s perspective cont. –Check the enforceability of the IP rights –Check the duration of protection of the licensed IP rights –Are there competing IP protected comparable products in the market –Is the value of the IP rights worth the investment? –Future scenario: Do you intend to develop your own IP rights?

Franchising – Legal Strategy The exact form of the franchise agreement must reflect the commercial intent and means of operation of the business rather than be structured purely on legal considerations Franchising is a heavily regulated area: beware of commoditized amateur approach!

Merchandising Covers a variety of marketing practices including a specific form of licensing There is no statutory/legal definition –Trade mark merchandising –Character Merchandising Licensor does not have a business in the licensee’s field

Merchandising: Licensor’s perspective Generate lucrative license fees and royalties with small investment (exploit existing assets) Enter new product/service categories Increase brand exposure Attract sponsorship (by permitting to manufacture and sell goods at sponsored events)

Merchandising: Licensee’s perspective Market products and services by exploiting the popularity of other’s IP rights, i.e., make them more eye catching Advertise products by associating them with an attractive personality or fictional character

Merchandising Legal Strategy: Licensor’s Perspective Not much different from that of licensing, but: –Licensor has no direct experience in the field of the licensed goods / services: beware of quality control issues

Merchandising Legal Strategy: Licensee’s Perspective IP rights are the object of the deal Due diligence on the IP Rights –Depth of due diligence analysis depends on duration of program Responsibility for IP enforcement (including market monitoring) Negotiate a way out clause if the licensed property does not give the expected ROI

Conclusions Franchising and Merchandising are important tools for establishing or developing a business with relatively limited resources and lower risks They involve the proper management of vital assets of the Licensor’s business The variety of arrangements makes difficult standardization of contracts