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