Maximizing Intangible Benefits from IPRs protection to Exploitation of IPRs: Business Strategies based on Franchising and /or Merchandising

1
Maximizing Intangible Benefits from IPRs
protection to Exploitation of IPRs Business
Strategies based on Franchising and /or
Merchandising

• Avv. Fabrizio Jacobacci
• Rome, 11th December 2009

2
Introduction

• Terminology
• Franchising using another persons business
  model to provide services, distribute goods, etc.
  (Legal definition art. 1 Law 129/2004)
• Merchandising the brand or image from one
  product or service is used to sell another

3
Franchising Franchisors perspective

• Expansion access to venture capital w/o giving
  up control of the operations
• Possibility to build a distribution network by
  leveraging the franchisees
• Avoid initial burden to start a new point of sale
• Franchisee has great incentive to successfully
  operate the business
• Huge business worldwide

4
Franchising Franchisees perspective

• Quick access to business ownership
• based on an established trademark and proven
  formula of doing business
• Training and mentoring
• the franchisees may be able to grow their
  franchised businesses to a level which they
  wouldn't have been able to w/o the franchisor

5
Franchising the Legal Strategy Hot Issues

• As a franchisor
• Supply terms
• Disclosure requirements
• Financial payments
• Marketing plans
• Pricing Rebates
• Default Termination
• Intellectual Property
• Dispute Resolution Procedures

6
Franchising the Legal Strategy Hot Issues

• As a Franchisee
• Territorial rights
• Ownership and Assets rights
• Lease
• Bank Guarantees
• Prior Disclosure

7
Franchising IP Rights Franchisees perspective

• IP rights are at the core of the deal
• They represent and protect the business model
  proposed by the Franchisor
• Identify IP rights involved
• Check national IP laws
• How secure are the IP rights? Franchisee must be
  convinced he is paying for valid and enforceable
  IPRs (and a successful business model)

8
Franchising IP Rights Franchisees perspective
cont.

• Check the enforceability of the IP rights
• Check the duration of protection of the licensed
  IP rights
• Are there competing IP protected comparable
  products in the market
• Is the value of the IP rights worth the
  investment?
• Future scenario Do you intend to develop your
  own IP rights?

9
Franchising Legal Strategy

• The exact form of the franchise agreement must
  reflect the commercial intent and means of
  operation of the business rather than be
  structured purely on legal considerations
• Franchising is a heavily regulated area beware
  of commoditized amateur approach!

10
Merchandising

• Covers a variety of marketing practices
• including a specific form of licensing
• There is no statutory/legal definition
• Trade mark merchandising
• Character Merchandising
• Licensor does not have a business in the
  licensees field

11
Merchandising Licensors perspective

• Generate lucrative license fees and royalties
  with small investment (exploit existing assets)
• Enter new product/service categories
• Increase brand exposure
• Attract sponsorship (by permitting to manufacture
  and sell goods at sponsored events)

12
Merchandising Licensees perspective

• Market products and services by exploiting the
  popularity of others IP rights, i.e., make them
  more eye catching
• Advertise products by associating them with an
  attractive personality or fictional character

13
Merchandising Legal Strategy Licensors
Perspective

• Not much different from that of licensing, but
• Licensor has no direct experience in the field of
  the licensed goods / services beware of quality
  control issues

14
Merchandising Legal Strategy Licensees
Perspective

• IP rights are the object of the deal
• Due diligence on the IP Rights
• Depth of due diligence analysis depends on
  duration of program
• Responsibility for IP enforcement (including
  market monitoring)
• Negotiate a way out clause if the licensed
  property does not give the expected ROI

15
Conclusions

• Franchising and Merchandising are important tools
  for establishing or developing a business with
  relatively limited resources and lower risks
• They involve the proper management of vital
  assets of the Licensors business
• The variety of arrangements makes difficult
  standardization of contracts