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

WIPO/NIFT national seminar on

The Importance of IP for the Handicrafts Sector

Hyderabad, India, April 5-7, 2005

Commercialising Handicrafts: Role of IP in Improving Enterprise

Profitability through Direct Exploitation, Licensing, Franchising, and/or

Merchandising: Case Studies

Lien VerbauwhedeConsultant, SMEs Division, WIPO

1.

Introduction

How can you generate income from your

creations?

(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.

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

• 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

Selling a work

does not mean

loosing it

Selling a work

does not mean

loosing it

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 ...

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

(b) Sell your IP rights

– You can transfer all or part if your exclusive rights to someone else

• “assignment”

• irrevocable transfer of the owner’s 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)

• 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

(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.

– 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

2.

Licensing

(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

(b) Examples of licensing

Trademarks…

- word + figurative element

- Spain CTM (registered with the OHIM)

- for toys, especially “maquettes” (sailing boats, wooden cars, teddybears, etc.)

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.

(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 artisan’s exposure and recognition

(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®

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

– Protect your IP in the relevant markets

• IP rights are territorial

• International treaties

• Differences in national IP laws (term, etc)

4. Preserve control over the commercial use of your works

– Licensee must place IP notice

– Require samples of the products QUALITY

• artwork

• design

• trademark

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

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

7. Negotiate fair compensation

– fee

– royalty

8. Take action against infringements

(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

– 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

• 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

– 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 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

3.

Franchising

(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.

• 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

(b) Examples

McDonalds

• 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 McDonald’s brand

• quality control tests

Case Study: Fonart, Mexico

• 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.

• 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

• 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.

• Products:

– store owners agree to buy all merchandise directly from Fonart’s catalogs

• Corporate identity– trademark– advertising– location, architectural design

• Assistance– manuals of operation– training, seminars

• Cost– initial fee – montly: 1,5% publicity

Concepts

• 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

4.

Merchandising

(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

(b) Examples of merchandising

Paintings…

PicassoBotero

Drawings and cartoons …

• Panda from the WWF

• Fido Dido < Joanna Ferrone and Susan Rose

Architectural works …

Eiffel Tower, Paris

Atomium, Brussels

Taj Mahal, India

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

– 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

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

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

• 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.

• 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.

• 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: www.maryengelbreit.com

5.

Conclusions

• 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

Thank you !

Lien Verbauwhede

www.wipo.int/sme/

Thank you !

Lien Verbauwhede

www.wipo.int/sme/