1. WELCOME TO ...
Intellectual Property Rights and Business Opportunities for SMEs in the Textile Sector
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WIPO NATIONAL SEMINAR ON INTELLECTUAL PROPERTY FOR Damascus, October 13 and 14, 2010
SMALL AND MEDIUM-SIZED ENTREPRISES (SMEs) Larysa Kushner
IN THE TEXTILE INDUSTRY 1 1

2. Overview How can you generate income from your
creations protected by IP?
Direct Use
Selling and Licensing
Franchising
Merchandising
Joint ventures and strategic alliances
New business models

3. How can you generate income from
your creations protected by IP?

4. IP as a business asset of your company
The crucial importance of the IP protection:
Transformation (even though for a limited time) of the intangibles that add value and differentiate a product into the proprietary rights = IP rights
The IP system provides exclusivity over the exploitation of innovative products and services, creative designs and business identifiers
to be acknowledged as an owner and prevent anyone else from using them
to exploit the their potential to maximum

5. Exploiting IP Assets
Direct Use: Core to the competitiveness of the product or service
Indirect Use:
Sale, license, franchise or merchandise
Joint ventures and strategic alliances
Other possibilities: Defensive patenting, publication
Finance

6. 2. Direct Use

7. Direct commercialization of the IP assetrs by yourself
Individual Exploitation to maintain the competiveness of the product
Make/produce copies of the products and sell them
Reproduce the works on different types of products
Exhibit the works in craft exhibitions, fairs, online catalogs, etc.
Enforce your IPRs against infringers
Advantages: direct quality and exploitation control
Disadvantages: high costs and risks

8. Case Study: Burqini From SmartStart Project of Australian IP Office
Aheda Zanetti, originally from Lebanon, is a Australian Designer and Entrepreneur who designed in an innovative solution to this age-old problem for women of Muslim or Arab descent who wished to preserve their modesty when enjoying sport and swimming: Burqini
Design registration and later Trade Mark registration for the logo and company name
The Burqini is now distributed worldwide through online sales and key retailers in Bahrain and the Netherlands, along with a stand-alone store in Sydney’s Punchbowl
The head-to-toe two-piece suit is made from a high performance innovative fabric and takes its name from the Burqa with its unique element Hijood – a variation of the hood shaped Hijab worn by Muslim women to cover their head
From

9. Indirect Commercialization of IP Assets
Mediate exploitation of IP Assets by third parties based on contractual agreements with the IP owner
Advantages:
Low investment / Low risks
Potentially high return
Drawback: Lack of control
Special attention to contracting

10. Indirect Exploitation by the third parties
Concerning:
All (registered and not registered) IPRs: trade marks, patents, industrial designs, copyright, know-how
Part of IPR (type of right)
Combination of IPRs
Can be in a form of:
Assignment of the IPRs to a third party vs
License of the IPRs to a third party

11. 3. Assignment and Licensing

12. Why should business consider
Licensing IP...
Selling (Assigning) IP …
Grant of a right to use the IPRs to a third party under contractually agreed conditions
(// lease): possibility to limit
Market; Geography; Time; Specific Application; Grant of Rights Usage
Direct way to increase the value and benefits of your IPRs: Can generate lucrative fees and royalties
New markets: Allows business to enter into new product categories or in new geographical areas in a relatively risk-free and cost-effective way
Marketing tool: Increases the business’ exposure and recognition
Transfer of the ownership of the IPRs (//sale)
Loss of all future income-earning potential
Buyer becomes a new owner of all assigned IPRs
If no alternative
If adequate price
If no interest for further commercialisations
Note: Sandvik's subsidiary company, which holds the IP, has only 12 employees and has a book value of EUR 1800 million (in 2007).
Dolby Laboratories
Invented noise-reduction technology in the 1960s.
Used a combination of patents to protect the technology and trade marks.
Became a successful high-tech company.
W.L. Gore
Founded by the Gore family in the basement of their house in 1958.
PTFE (Teflon®) related high-tech products.
Patent protection and strong trade marks (Gore-Tex®).
Now has employees.
Additional examples for audiences familiar with the concept of licensing technology:
ARM Ltd.
Develops energy-efficient microprocessors but does not make them (earns licensing royalties)
Founded 1990, now market leader in microprocessors for mobile phones
ARM founder Hermann Hauser: "I gave (the design team) two things which National, Intel and Motorola had never given their design teams: the first was no money; the second was no people. The only way they could (design a microprocessor) was to keep it really simple."

13. Licensing that might be of interest for your business might concern...
31st March 2008
Licensing that might be of interest for your business might concern...
Strategic, core technology or patents
Non-core or “mature” technology and patens, products
Struggling businesses or products (new or mature)‏
Technology that can be applied to other markets
Trademrks, designs, copyright, know-how, any combination of them
Services 13 13

14. For the Licensee Why to license … For the Licensor Earn revenue
Strengthening relations with partners in the value chain
Capital saving
Expanding an existing business (extending your territory or the nature of business)
Access to markets
Turning infringer/competitor into a partner
Create standard
Lower costs
Starting a new business
Access to new technologies and know how
Possibility of creating innovative products
Settle infringement dispute
Manufacture standardized product

15. Bad choice of licensee could damage reputation
Why NOT to license …
For the Licensee
Create competitor
Bad choice of licensee could damage reputation
Loose control of proprietary information
Royalties add cost
Secrecy requirements
Administrative burdens - audits, reports etc
May be obliged to grant back improvements

16. Case Study: Non exclusive licensing strategy
From Case Studies Collection of WIPO SMEs Division
Intelligent Textiles: patents, trade secrets
Innovative process of weaving complex electrical circuits into conductive fabrics such as cotton, wool and polyester was developed by two academics
Selling back the patent rights from the university, establishing a company, registering trade mark
Operating out of a two-room studio near London with limited staff
Use of technology in the jackets’ sleeve to control an MP3 player; in an easy chair that reclines at the squeeze of the armrest; and in foot-warming insoles for shoes and ski boots
Selling the technology through consulting contracts to a range of industries in Europe and the United States
Outsourcing what they do not have time to do themselves

17. Case Studies: Non exclusive licensing strategy
Examples of licensing
Patents
Patented technology for the treatment of “stone washed” denim jeans of Novozymes, a Danish, biotech company specializing in enzymes and microorganisms
Novozymes’ technology for improving production methods and fabric finishing has been licensed worldwide
Trademarks
Certification marks
Treatment of cotton
without cellulase with cellulase
Novozymes

18. Case Studies: Non exclusive licensing strategy
Copyright
Su Embroidery Studio
Embroidery Stock design:
Library of designs for commercial embroidery companies to sew on garments for sale
Download online
License agreements to use design
Allows embroiders to choose according to their preferences and project needs
Dakota Collectibles
Embroidery Design Center
Jammin' People
Sm. Jumper

19. Case Study: Combined licensing strategy
Industrial Design:
BABY AND CHILDREN
The small French enterprise
BABY AND CHILDREN designed and produced a baby hammock for the bathroom.
Obtaining design registration on the hammock
Commercialization of the product in over ten countries in three different continents directly and by granting licenses

20. Case Study: Exclusive Strategic Licensing
Based on the materials of Julian Nolan
Avionics system
mature product
commitment to support customers
high cost to change
still profitable, but none core
Licensed to main customer
Deal structure
NPV increased, GNPV
Regain strategic focus
Win-Win result

21. You don’t have capacity to distribute elsewhere
Licensing
Consider licensing:
You are an artist/designer/inventor and don’t want to be involved in manufacturing
You don’t have capacity to produce more items
You don’t want to produce elsewhere (in Syria/abroad)
You don’t have capacity to distribute elsewhere
You want to benefit from a better reputation of a partner

22. How to develop a proper licensing strategy ?
Protect your IP rights
Find right licensee
Assess foreign markets
Tailor scope of license to actual needs of licensee
Preserve control over the commercial use of your works
Negotiate fair compensation
Draft a solid license agreement
Management of licenses
Protect your IP rights
Deposit and register, if possible
Keep confidential information secret
5. Tailor scope of license to actual needs of licensee
Avoid assignment of rights
Prefer non-exclusive licenses
Limit the 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
Place notice on the works
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
3. Assess foreign markets
Usually, the licensee will be responsible for local manufacture, localization, logistics and distribution
4. Preserve control over the commercial use of your works
Licensee must place IP notice
Require samples of the products  QUALITY
Protect your IP in the relevant markets
IP rights are territorial (except for copyright )
International treaties
Differences in national IP laws (term, etc)
6. Draft a solid license agreement
Content
In written + signed
In many countries: must be registered with Copyright Office in order to be able to enforce rights against others (Syria)
7. Negotiate fair compensation
Fee
Royalty
Regular analysis
To identify the compliance with current licenses;
To identify the necessity for new negotiations to get access to the IPRs owned by others;
To identify absence of necessity to license the IPR owned by others because it is not used any more;
To identify possible violations of the IPRs owned by others because of the absence of license

23. Key elements of a licensing agreement
Licensor: grant of the right to use specified IPRs by licensee
Licensee: payment of royalties to the licensor
Scope of the license:
Exclusivity
Scope of use (manufacture / distribution)
Territory
Right to sublicense
Representations and warranties
Validity of the IPRs (best knowledge?)
Indemnification (limitation of)
Enforcement of the IPRs against third party infringers
Liability of the licensor ?
Standing to sue of the (exclusive) licensee ?
Various systems of remuneration: flat upfront fee,
unit-based royalties, profit-based royalties (etc.)
Right of the licensee to register a domain name corresponding to the licensor’s trademark ?
What should be mentioned in a licensing contract?
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
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
Compensation
One-time 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 garments
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
Third party infringements
Obligation for the licensee to keep you informed about any infringements of your IP rights by third parties of which he becomes 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

24. Key elements of a licensing agreement
Control over licensee’s accounting methods (for purpose of checking the amount of the royalties)
Control over licensee’s use of the IPRs with respect to:
Quality of the products sold under licensor’s IPRs
Prohibition to misappropriate licensor’s IPRs
Confidentiality
Term of the agreement:
early termination / termination for
breach of the agreement / post termination obligations
Governing law
Jurisdiction / dispute settlement (mediation – arbitration under the WIPO rules)
Problematic elements of a licensing agreement
Obligation of the licensee to use the licensed IPRs ?
Prohibition to challenge the validity of the licensed IPRs ?
Obligation to pay royalties after the expiration of the relevant IPRs ?
Contractual constraints resulting from competition law

25. You don’t get the deal you deserve, you get the deal you negotiate
Licensing
You don’t get the deal you deserve, you get the deal you negotiate

26. 4. Franchising

27. Franchising
Specialized license where the franchisee is allowed by the franchisor in return for a fee to use a particular business model and is licensed a bundle of IP rights (TM, service marks, patents, trade secrets, copyrighted works…) and supported by training, technical support and mentoring
All franchisees are licensees but not all licensees are franchisees

28. Franchising
Franchising vs licensing
Licensing of IPRs is an element of franchising
Licensing of IPRs is the means to reach the end
Goals of franchising
For the franchisor: geographically expand its business without taking financial risks
For the franchisee: benefit from the brand, experience and know-how of the franchisor

29. Why …
Why enter into a Franchise?
Why not enter into a Franchise?
Lower risk of failure
• Recognizable image
• On going support
• Easier to obtain financing
• Benefit from franchisors R&D
All IPR owned by the Franchisor
• Payment of fees
• Obliged to follow the business model
• Depend on the success of the Franchisor

30. Key elements of franchise agreement
Franchisor:
Making available its commercial concept (including IPRs)
Instruction / assistance to the franchisee (services)
Supply of products to the franchisee
Exclusivity
Franchisee:
Payment of royalties
Following the guidelines of the franchisor
Promotion +
Non-Disclosure Document: Confidentiality agreement
contract between franchisor and franchisee to keep the information secret

31. 5. Merchandising

32. Merchandising
Commercial exploitation of a name, symbol or distinctive sign which has acquired a certain brand recognition in a specific field(s) for the purpose of selling goods or services in other fields
Often distinctive signs or characters themselves derive from television, film, toys, books, comics, and computer games

33. Merchandising
Merchandising vs licensing
Merchandising is based on licensing
Goals of merchandising
For the merchandisor: expand its business to other lines of products / services without taking financial risks
For the merchandisee: benefit from the brand recognition of the merchandisor’s products / services

34. Merchandising Examples: Taj Mahal, India Picasso
Collection of Licensed Products embroidery design
Licensed by Warner Bros. Consumer Products, Inc
Picasso
Elvis '68 Fabric by Cranston Village
Licensed by Elvis Presley Enterprises

35. Case Study: Mary Engelbreit
From WIPO SMEs Division Case Studies Collection
Mary Engelbreit is known throughout the world for her colorful and intricate designs, and has become a pioneer for art licensing
Beginning: "drawing to order" for free-lance clients
Went to New York  illustrating greeting cards
Several well-known card companies bought her designs, and sales were brisk into a million-dollar-a-year business.
Decision to license her cards to Sunrise Publications to free up more time for her art and to grow her business in other areas

36. Case Study: Mary Engelbreit
Other companies were anxious to merchandise Mary's distinctive artwork on a wide range of products including calendars, T-shirts, mugs, gift books, rubber stamps, ceramic figurines and more

37. Case Study: Mary Engelbreit
Mary Engelbreit Studios now has contracts with dozens of manufacturers who have produced more than 6,500 products in all.
Mary takes extreme care in choosing only the best companies to work with and goes to great lengths to make certain that her artwork is reproduced as faithfully to her original work as possible
“A Day At The Beach” new collection of fabric designs

38. 6. Joint ventures and strategic alliances

39. Case Study: Gustavo De Negri & Za.Ma
A small Italian company established in San Leucio in 1998 as a continuation of a long family tradition
Specialization on a exclusiv tailor-made silk fabrics, produced for the business to business sector
Constant self-renewal by creating new fabric designs
Strategic alliances
with Milanese loom maker to incorporate the improvements in their new machines and with local university researchers to develop new techniques for finishing fabrics to gain technical innovation in the mill’s mechanical, chemical and finishing processes
with three other renowned silk textile makers from the district to market silk fabrics from San Leucio
Foundation of a consortium,
Registration and management of San Leucio Textile Silk Quality collective trademark
Easier to enter into alliances when you have a strong IP portfolio

40. Case Study: Heng Yuan Xiang Group (HYX)
HYX was founded in 1927 till 1987 was a small wool store Shanghai
Creation of an eye-catching trademark and development of a successful branding strategy
Continuous R&D and promotion of the brand
Strategic Alliances
with a textile factory that had the necessary assets for production – equipment, factories and capital
By 2010 with over seventy factories that help to manufacture its products
with thousands of franchisee ( 5,000 franchise stores) to sell its products in more than seventy categories via a comprehensive franchise system
Easier to enter into alliances when you have a strong IP portfolio
Mr. Liu Ruiqi took over as General Manager and Chairman of HYX in 1987

41. New business models in textile sector

42. New business models in textile sector
The computer-implemented, software-based business models
supply of a limited quantity of fashion products based on stealth and speed
Trademarks, copyright and trade secrets as core elements to protect such competitive advantage

43. Case Study: ZARA
Spanish retail chain ZARA, uses a proprietary information technology (IT) system to shorten their production cycle
Entire process takes 30 days (most competitors take from 4-12 months)
Electronic communication and management system ensures quick reaction on new trends and fabrics to develop new designs
Automated cut facility and a high-tech distribution system ensures the finished items are shipped and arrive in stores within 48 hours

44. yourself…Bear in mind that third parties may want to use them !
Conclusions
Protect your IP
Choose the best protection
All forms of IPRs can be used in combination for the best effect
In light of the recourses and market opportunities choose the right strategy to benefit from the IP
Even if you can’t or don’t want to use your IPRs
yourself…Bear in mind that third parties may want to use them !

45. Thank you for your attention!
Any Question?
WIPO’s website for SMEs :
Contact address:
A link with the first slide