Exploiting IP Exploiting IP AssetsAssets

Overview of Overview of Licensing, Licensing,

Franchising & Franchising & MerchandisingMerchandising

Wong Jin Wong Jin NeeNee

Roadmap Roadmap An overview of Licensing,

Merchandising & Franchising Benefits of these arrangementsLicensing

NatureTypes Key elements of a license agreement

MerchandisingFranchising

An overview of the Franchise Act 1998Conclusion

An Overview

Licensing, Merchandising & FranchisingLicensing Licensing

Permission to use IPR to improve profitability & expand opportunities, subject to contractually agreed terms & conditions

MerchandisingMerchandisingPermission to use of

brands/characters/events to promote saleFranchising Franchising

Permission to use “proven business system” (standard products/services, look & feel, signage, methods of preparation, inventory control) to replicate success

Why, Oh Why?Why, Oh Why?

Show me the Money – Generate revenue$Recoup R&D expenses & investmentVehicle for entry into:

new geographic markets without major capital investment

new product markets or product rangeForm 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 LicensingNature of LicensingIP owner retains ownershipA tool to leverage & exploit IP rights

Entering a new businessExpanding an existing business

(extending territory or nature of business)

Improving quality of goods/services Improving market positioningSettling legal suits

Exclusive, non-exclusive, sole

License

Exclusive

Sole

Non-exclusive

Only the licenseeOwner and Licensee

Owner and various licensees

Sub-License

TypesTypes

Licensing Out Grant right to 3rd Parties to use IPR

Contract manufacturingDistributorship/Dealership/Agency/MarketingExpansion into new market, product range, brand,

technologyLicensing In

Use 3rd Parties’ IPRTechnology transferSettlement of legal suits

Cross Licensing Exchanging of rights to use IPR

Co-brandingCollaboration, joint R&D , joint developmentCo-existence

Stages of negotiations, execution & management

NegotiationsNDA, confidentiality agreementHeads of Agreement/MOU/LOI

Due DiligenceExecution, Implementation &

ManagementTermination & 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

MerchandisingMerchandising Improve visibility and appealLicensing 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

Character PersonalityEvent

Source: http://www.etawau.com/HTML/AirAsia/Lat.htm

Brand extension

Source: http://www.virgin.com/about-us/

Franchising

FranchiseFranchiseEfficiencies, economies of scale,

market penetration, increased sales and profitability

"Franchising means working for yourself, but not by yourself"

Foundation of FranchisingA 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 franchisingIntellectual Property Rights (IPR)Intellectual Property Rights (IPR)

Include trade marks, confidential information, Include trade marks, confidential information, copyrighted manuals, trade dress (décor) and copyrighted manuals, trade dress (décor) and all intangible assets that create customer all intangible assets that create customer loyaltyloyalty

Operating systemDelivers the promise of proven business format

Ongoing supportTools and tips to expand growth of customer base and

market share

Franchise Act 1998Franchise Act 1998Franchise relationship, governed by:

Franchise Act 1998 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 2009Franchise 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 Application of Franchise Act 1998 Franchise Act 1998 Applies to sale of any franchise in Malaysia

Sale deemed in Malaysia whereOffer 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 Ingredients of a franchise 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 IPRCore brand identity Shared connection or themeControl over commercial useIdentified scope of licensePutting a value to the IPR

Conclusion

Take-Aways IP Assets are business tools Its use should not be limited internally or simply

to exclude othersMany different ways to leverage, exploit,

maximise & moneti$e your IPManaging expectations

clear communication to establish mutual trust and respect

exercise sensitivity to relationshipsAfter the deal has been struck, important to

monitor and review for compliance Licensing management and enforcement

Development of strategies to manage, monitor and enforceCompliance programs and auditsA need to continuously fine tune the license agreement

Thank youThank 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