Licensing. Some Nuggets... US IP value = $5.5 trillion or more $180 billion in revenue annually – $2.8B in 1970; $27B in 1990 US IP exports = more than.

Licensing

Some Nuggets...

• US IP value = $5.5 trillion or more

• $180 billion in revenue annually

– $2.8B in 1970; $27B in 1990

• US IP exports = more than 60% of total exports

• In 2011, $1.2 trillion invested into R&D

• In 2011, US issued 224,505 patents (many to Asian companies/inventors)

• In 2011, IBM secured 6,180 patents

– IBM invests $6B in R&D; sees $1B in licensing royalties

Licensing Basics

• What is a license? A GRANT!

– A grant by IP owner for someone else to use IP. A CONTRACT!!!

• When we buy a DVD, software, MP3, book, etc. we are paying a licensing fee for IP and cost for any physical production

• All media industries are based on licensing

• Licensor: owner of IP who grants license

• Licensee: party that licenses the IP

• Assign: outright sale or transfer of IP

Types of Licensing Agreements

• Exclusive: all but ownership. Usually deprives licensor the right to use IP.

– License granted at exclusion of all others

– (preferable for a licensee)

• Non-exclusive: permission to use property in limited manner (markets, products, etc.)

– (preferable for a licensor)

• Sole: a hybrid license. Exclusive, but allows licensor to ALSO use IP

Software Licenses

• We NEVER buy software, we license

• “Shrink-wrap license”: when you break the wrapping you are agreeing to the license

• “Click-wrap license”: by clicking “I agree” you accept terms of the license (iTunes!)

• “Webwrap”: when you download the software you agree to the accompanying terms of license

• Software companies use these license to prevent reverse engineering

Royalties

• Income generate by licensor

• “Paid up”: lump sum payment

• “Running royalties”: periodic payment based upon sales

• Cross License: no royalties, but two parties “pool” their IP instead of licensing or suing

In Action

In patent: you license the right to use the patented idea

In trademark: you license the right for the use of your mark. Must be diligent to maintain mark.

In copyright: you license any or all of the RP3Ds

Compulsory Licenses

• Aka “Statutory license”

• Comes from 1909 Copyright Act

• Both patent and copyright

• Don't need expressed consent from IP owner

• Must provide notice to IP owner and pay a set royalty based on “sales”

Mechanical License

• Paid to songwriters, composers, publishers

• Compulsory mechanical license: can make a sound recording of a musical work w/out permission

– Must already be recorded

– Cover version, arrangement, print copies of notation

– Cannot change melody or lyrics (moral rights?)

• Statutory royalty rate = 9.1-cents (-5 minutes) per copy

• 24-cents per copy for ring tones

Songwriters/Composers/Publishers

• Royalty rights:

– 1) print rights= reprint sheet music

– 2) mechanical rights= sound recording of work

• Harry Fox Agency

– 3) performance rights= concert, tv/radio, clubs

• ASCAP, BMI, SESAC

– 4) sync rights= sync with visual element

– 5) digital rights= webcasting, streaming

• SoundExchange

• DJ food stamp advice: write songs!

Master Use License

• For using a sound recording in another media

– Film, television, video game, tv ads

• Negotiated between a record company and potential licensor

• Negotiated with whoever owns the copyright of the “master” recording

• Up front fee and running royalties

Sync License

• Any visual paired with sound, hence “sync” or synchronization

• Paid to publisher/songwriters/composers

• Can re-record a composition to pair w/ a visual element

• Usually lasts for a set amount of time

• Royalties are “paid up” not based on sales

Most Favored Nations

• Aka “MFN”

• A clause that means that if you license to other parties the terms must be the same or as fair someone already licensing

• It can also mean a 50/50 split between parties involved in the license