Exploiting Intellectual Property Assets Tamara Nanayakkara Counsellor SMEs Division World Intelllectual Property Organization

Summary Slide New Economy Intellectual Property and Competitiveness Intellectual Property Assets Exploiting IP assets

New Economy New economy or the knowledge economy – Greater reliance on know-how, knowledge, human creativity and innovation (infinite)  “It is estimated that by 2007, as much as 90% of the value of the world’s top 2000 enterprises will consist of intellectual property” Price Waterhouse Coopers

The amount of market value that cannot be traced to tangible assets on the corporate books. Japanese IP Typhoon Still Not Even a Tropical Storm! (II), Terry Ludlow, IP frontline.com, Feb 2008Terry Ludlow

New Economy Global market place Demanding and fickle consumers Shorter product cycles Working through relationships, networks and outsourcing Increased competition Pressure to do more with less

Design Source Innovative features Quality Reputation IP and Competitiveness

Intellectual Property and Competitiveness The intangibles that add value and differentiate a product are protected by IP The IP system provides exclusivity over the exploitation of innovative products and services, creative designs and business identifiers Exclusivity means that an owner of IP has the right to prevent anyone else from using and exploiting the IP right

Intellectual Property Assets Innovative products/ processes Cultural, artistic and literary works Goods that have a certain quality or reputation due to where it comes from Creative designs Distinctive signs Confidential business information Patents or utility models Copyright and related rights Geographical Indications Design rights Trademark Trade secrets

Patents A product or process providing a new way of doing something, or a new technical solution to a problem (which may lower cost, create efficiencies, enhance performance, add new features etc..) If it is new, not obvious and has industrial applicability it could be granted a patent which would provide an exclusive right to prevent others from using the invention for a maximum period of 20 years

Trademarks A sign that distinguishes the goods and services of one enterprise from that of another Right to prevent others from using identical or similar marks with respect to goods or services that are identical or similar Rights obtained through registration (or use) Famous marks have greater rights

Design Rights The ornamental or aesthetic aspects of a product, that which distinguishes that product from the competition and makes the product appealing to a consumer Right to prevent others from using identical or similar designs Rights obtained by registration but in some countries there exists an unregistered design right

Geographical Indications Goods that have a certain quality or reputation due to the geographical region it comes from Generally pertaining to agricultural products Examples: Bordeaux wine, Ceylon tea, Gruyere cheese, Swiss chocolates, Champagne, Colombian coffee, Greek feta cheese

Copyright Copyright law grants authors, composers, and other creators legal protection for their creations usually referred to as “works.” From a business point of view these will include computer programs or software, content on websites, catalogs, newsletters, manuals, artwork and text on product literature, labels or packaging, posters etc, It gives an author or creator economic rights to control the economic use of his work and moral rights to protect his reputation and integrity. No registration required to obtain rights

Trade Secret If reasonable steps have been taken to keep certain information secret and it has commercial value by virtue of being secret it may qualify for trade secret protection Use of confidentiality agreements, physical barriers to access to information and a HR policy that values and protects the confidential information of the business

Exploiting IP Assets The right to prevent a third party from using and exploiting the IP right vests in the owner an asset not very different to a physical asset, such as a car or a house Like physical assets, IP assets could be creatively and profitably exploited

Exploiting IP assets Core to the competitiveness of the product or service Other options  Sale, license, franchise or merchandise  Joint ventures and strategic alliances  Defensive patenting, publication Finance

Core to the product or service Copyright – ring tones, games, software Trademark – Nokia connecting people, signature tune Patent – over 10,000 patented inventions, caller name display and caller specific ring tone two nokia patents used by most phones, industry standard technologies. Nokia, Ericsson and Motorola account for more than 60% of the industry's R&D – significant entry barriers Design – shape, look, keypad etc. The mobile phone has become a status icon, making the product design critical in the purchase decision Trade secret – all of the know-how and confidential business practices that went into the manufacture of the device

Licensing Licensing is when an owner of such an intangible asset, transfers the right to use that asset to another, for a price, while retaining ownership of that asset.

Licensing The inventor licensed the system to Coca-Cola at 1/10 of a penny per can. During the period of validity of the patent the inventor obtained 148,000 UK pounds a day on royalties

Why License For the Licensor  Simultaneous use by many  Marketing  Expand manufacturing  Earn revenue  Access to markets  Stick licensing  Create standard For the Licensee  Ahead of competition  Despite lack of R&D, access to new technologies and know how  Possibility of creating innovative products  Settle infringement dispute  Manufacture standardized product

Why Not License For the licensor  Create competitor  Bad choice of licensee could damage reputation  Lose control of proprietary information For the Licensee  Royalties add cost  Secrecy requirements  Administrative burdens - audits, reports etc  May be obliged to grant back improvements

Franchise A 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

Why enter into a Franchise Lower risk of failure Recognisable image On going support Easier to obtain financing Benefit from franchisors R&D Why not enter into a Franchise All IPR owned by the Franchisor Payment of fees Obliged to follow the business model Innovations may be assigned back to the Franchisor Depend on the success of the Franchisor

Merchandising The licensing of trademarks, designs, artworks as well as fictional characters (protected by these rights) and real personalities are broadly referred to as merchandising

Why merchandise? For the licensor  Extend into new products  Increases exposure, strengthens image (could also damage)  Revenue  Relatively risk free For the licensee  Increase appeal of its products  Relatively low cost way of gaining market share

Trade Mark License A license giving the right to manufacture a particular product using the licensors technology may also include an agreement to use the licensors trademark. It may also be a trademark license agreement in the context of merchandising In either case, in addition to the general clauses above, there may be clauses particularly relevant to trademark license agreements Particularly quality control – products must meet the quality standards set by the licensee, submit samples of products, labels, packaging etc for checking The trademark must be protected in relation to the goods or services for which it is applied

Defensive Patenting and Cross Licensing Where a product has a multitude of technologies integrated in it covered by patents owned by different owners access to each others' technologies is necessary. Here the different companies will cross license each other rather than sue each other. Offensive patent is one that license revenue is ensured as the other party does not have a patent and defensive one is when the other party has one and then you cross license each other.

Strategic Alliances Easier to enter into alliances when you have a strong IP portfolio

Publication By publishing, the invention is no longer new and not patentable. Decide not to patent and prevent others from patenting

Finance As assets they could be pledged as a collateral for a bank loan Angel investors and Venture Capitalists are inclined to invest in companies that have a good IP portfolio