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WIPO/NIFT national seminar on The Importance of IP for the Handicrafts Sector Hyderabad, India, April 5-7, 2005.

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Presentation on theme: "WIPO/NIFT national seminar on The Importance of IP for the Handicrafts Sector Hyderabad, India, April 5-7, 2005."— Presentation transcript:

1 WIPO/NIFT national seminar on The Importance of IP for the Handicrafts Sector Hyderabad, India, April 5-7, 2005

2 Commercialising Handicrafts: Role of IP in Improving Enterprise Profitability through Direct Exploitation, Licensing, Franchising, and/or Merchandising: Case Studies Lien Verbauwhede Consultant, SMEs Division, WIPO

3 1. Introduction

4 How can you generate income from your creations?

5 (a) Commercialize your works yourself –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, fairs, etc.

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

7 The property rights over a physical object (work) are completely independent from the IP rights of the creator. 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

8 Selling a work does not mean loosing it Selling a work does not mean loosing it

9 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) Example. Artist sells his sculpture...

10 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) Ex. Geese in Canada Ex. Painting burned in chimney after dispute with wife

11 (b) Sell your IP rights –You can transfer all or part if your exclusive rights to someone else assignment irrevocable transfer of the owners 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)

12 Example. Artist sells copyright in his sculpture... 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

13 (c) Authorize someone else to reproduce or use your work –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.

14 –License Transfer of rights 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

15 2. Licensing

16 (a) 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

17 (b) Examples of licensing Trademarks… - word + figurative element - Spain CTM (registered with the OHIM) - for toys, especially maquettes (sailing boats, wooden cars, teddybears, etc.)

18 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.

19 (c) Why should artisans consider licensing? 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 artisans exposure and recognition

20 (e) How to develop a proper licensing strategy ? 1. Protect your IP rights –deposit and register, if possible –keep confidential information secret –place notice on the works ©, Lien Verbauwhede, 2005 "Protected Design, Lien Verbauwhede, 2005 Lienky®

21 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

22 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)

23 4. Preserve control over the commercial use of your works –Licensee must place IP notice –Require samples of the products QUALITY artwork design trademark

24 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

25 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

26 7. Negotiate fair compensation –fee –royalty

27 8. Take action against infringements

28 ( f) 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

29 –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

30 –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

31 –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.

32 –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

33 3. Franchising

34 (a) 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.

35 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

36 (b) Examples McDonalds

37 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 McDonalds brand quality control tests

38 Case Study: Fonart, Mexico

39 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.

40 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

41 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.

42 Products : –store owners agree to buy all merchandise directly from Fonarts catalogs Corporate identity –trademark –advertising –location, architectural design Assistance –manuals of operation –training, seminars Cost –initial fee –montly: 1,5% publicity Concepts

43 The owners of 100% Mexico Hecho A Mano (Washington) are Juan Antonio Santacruz and Rahul 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. Rahul 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. Washington shop

44 4. Merchandising

45 (a) 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

46 (b) Examples of merchandising Paintings… Picasso Botero

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

48 Architectural works … Eiffel Tower, Paris Atomium, Brussels Taj Mahal, India

49 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

50 –For the artist: His work is promoted, and will gain recognition and value in the market Receives additional and constant remuneration (+ heirs) Maintains ownership over his rights and controls the uses of his works –For the merchandisor: Can use the attractiveness of a work to promote the sale of his products

51 Case Study: Mary Engelbreit 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. Wanted was to be a children's book illustrator. Went to New York "mild reception" from publishers Suggestion: illustrating greeting cards

52 Several well-known card companies bought her designs, and sales were brisk.

53 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.

54 1986: Mary Engelbreit greeting cards had blossomed into a million-dollar-a-year business. She decided to license her cards to Sunrise Publications to free up more time for her art and to grow her business in other areas. 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.

55 2001: Mary saw her original dream come true when she signed a contract to illustrate children's books for publishing giant HarperCollins. When Mary was young, people told her that being an artist was not a realistic way to make a living, but Mary Engelbreit was never one to be easily discouraged. "I believed in myself," she says, "and now I'm living my dream." Source:

56 5. Conclusions

57 Artisan, as owner of 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


59 Thank you ! Lien Verbauwhede Thank you ! Lien Verbauwhede

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