1. Overview of Licensing, Franchising & Merchandising
Exploiting IP Assets
Overview of Licensing, Franchising & Merchandising
Wong Jin Nee

2. Roadmap An overview of Licensing, Merchandising & Franchising
Benefits of these arrangements
Licensing
Nature
Types
Key elements of a license agreement
Merchandising
Franchising
An overview of the Franchise Act 1998
Conclusion

3. An Overview

4. Licensing, Merchandising & Franchising
Permission to use IPR to improve profitability & expand opportunities, subject to contractually agreed terms & conditions
Merchandising
Permission to use of brands/characters/events to promote sale
Franchising
Permission to use “proven business system” (standard products/services, look & feel, signage, methods of preparation, inventory control) to replicate success

5. Why, Oh Why? Show me the Money – Generate revenue$
Recoup R&D expenses & investment
Vehicle for entry into:
new geographic markets without major capital investment
new product markets or product range
Form strategic alliance
build relationship
create new opportunities
gain know how (new applications of old technology)
Strengthen market position
Incorporation of technology into industry standard

6. Licensing

7. Nature of Licensing IP owner retains ownership
A tool to leverage & exploit IP rights
Entering a new business
Expanding an existing business (extending territory or nature of business)
Improving quality of goods/services
Improving market positioning
Settling legal suits

8. Exclusive, non-exclusive, sole
License
Exclusive
Non-exclusive
Sole
Sub-License
Only the licensee
Owner and
various licensees
Owner and Licensee

9. Types Licensing Out Licensing In Cross Licensing
Grant right to 3rd Parties to use IPR
Contract manufacturing
Distributorship/Dealership/Agency/Marketing
Expansion into new market, product range, brand, technology
Licensing In
Use 3rd Parties’ IPR
Technology transfer
Settlement of legal suits
Cross Licensing
Exchanging of rights to use IPR
Co-branding
Collaboration, joint R&D , joint development
Co-existence

10. Stages of negotiations, execution & management
NDA, confidentiality agreement
Heads of Agreement/MOU/LOI
Due Diligence
Execution, Implementation & Management
Termination & Post termination

11. 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

12. Merchandising

14. Merchandising Brand extension Improve visibility and appeal
Licensing 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

15. Merchandising Event Personality Character
Source:

16. Brand extension
Source:

18. Franchising

19. Franchise
Efficiencies, economies of scale, market penetration, increased sales and profitability
"Franchising means working for yourself, but not by yourself"

20. Foundation of Franchising
A 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 franchising
Intellectual Property Rights (IPR)
Include trade marks, confidential information, copyrighted manuals, trade dress (décor) and all intangible assets that create customer loyalty
Operating system
Delivers the promise of proven business format
Ongoing support
Tools and tips to expand growth of customer base and market share

21. Franchise Act 1998 Franchise relationship, governed by:
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 2009
Franchise Development Division of the Ministry of Domestic Trade, Co-operatives and Consumerism (MDTCC or KPDNKK)

22. Application of Franchise Act 1998
Applies to sale of any franchise in Malaysia
Sale deemed in Malaysia where
Offer 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”

23. Ingredients of a 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.

24. Common elements Protected IPR Core brand identity
Shared connection or theme
Control over commercial use
Identified scope of license
Putting a value to the IPR

25. Conclusion

26. Take-Aways IP Assets are business tools
Its use should not be limited internally or simply to exclude others
Many different ways to leverage, exploit, maximise & moneti$e your IP
Managing expectations
clear communication to establish mutual trust and respect
exercise sensitivity to relationships
After the deal has been struck, important to monitor and review for compliance
Licensing management and enforcement
Development of strategies to manage, monitor and enforce
Compliance programs and audits
A need to continuously fine tune the license agreement

27. Thank you
(Wong Jin Nee)
Tel :
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