An Introduction To The Basics of Licensing Law (Greg Battersby)

Transcript An Introduction To The Basics of Licensing Law (Greg Battersby)

Gregory J. Battersby Grimes & Battersby, LLC www.gandb.com

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INTERNATIONAL LICENSING INDUSTRY MERCHANDISERS’ ASSOCIATION

Founded in 1985, LIMA has more than 1000 member companies representing over 35 countries who represent all facets of the licensing industry, i.e., licensors, licensees/manufacturers, licensing agents, consultants and support groups including retailers, accountants, attorneys, graphic design firms and more. Headquartered in New York City, LIMA has branch offices in London, Munich, Tokyo, Hong Kong and Shanghai and regional representatives in at least six other regions around the world. . For membership information contact: Louis Caron, VP Membership LIMA 350 Fifth Avenue, Ste. 4019 New York, New York 10118 212-244-1944 x 5 212-563-6552 (Fax) [email protected]

www.licensing.org

Upcoming LIMA Events

June 12-14, 2012 Licensing Expo, Mandalay Bay, Las Vegas (including Licensing University) July 4-6, 2012 Oct. 10, 2012 Licensing Japan 2012, Tokyo Big Sight, Tokyo Japan 2 nd Annual LIMA Retail Symposium, Yale Club, New York, NY Oct. 14-16, 2012 Brand Licensing Europe 2012, Olympia, London, England

LIMA Programs of Interest

   LIMA’s Certificate of Licensing Studies (“CLS”) program—a 60 hour program (in person and on-line courses covering all aspects of licensing). Contact Christina Attardo. [email protected]

Free Listing in LIMA Directory of the Licensing Industry. Contact Louise Attardo at [email protected]

Listing in LIMANET, the on-line marketplace for licensing (LIMA Members only). Contact Adam Berg at [email protected].

Intellectual Property 101

Trademark Protection

1. Can be any word, logo, symbol or the like which serves as an indicator of source, origin or sponsorship. Can also be a product configuration.

2. Rights based on use in many countries, not registration. Common law rights & for false designation of origin (Sec. 43(a) of Lanham Act).

Intellectual Property 101

3. Not all marks are created equal. The “strength” of a mark is based on the following scale: a. Generic. Incapable of functioning as a trademark, e.g., Chair for a chair. Marks can become generic when overused, e.g., Escalator or Aspirin b. Descriptive. Conveys some idea about the product. Only registrable with showing of secondary meaning, e.g., POCKET BOOKS for books. c. Suggestive. May imply feature of product without describing it, e.g., PLAYBOY for men’s magazine. d. Arbitrary or Fanciful. Strongest type. KODAK (a coined word) for camera.

Intellectual Property 101

4. Generally, the title of a single book cannot be trademarked—need showing of secondary meaning or title of series of books 5. Character name can be protected as a trademark if it has developed secondary meaning, Waldo, Superman.

6. Can obtain a trademark for a character where the copyright expired, e.g., Peter Rabbit

Intellectual Property 101

International Classification System: Goods and services are broken down into one of 45 classes. Examples include clothing (Class 25), toys/games (class 28) and paper products (class 16) Registration: use vs. intent to use.

U.S. Cost depends on whether filing online or by mail: Online: $325 per class; Mail: $375 per class Term: Registrations in U.S. for 10 year terms, subject to renewal for infinite period of time. Rights based on use.

10. Territorial—Madrid Protocol and European Community Trademark

Intellectual Property 101

11. Searching—federal, state and common law. All-Class Merchandising Searches. Search Considerations:  Consider Other Established Uses o Penguin books v. Pittsburgh Penguins o Harlequin books v. Harlequin wall coverings   Intent to Use Trademark Applications Merchandising Classes, e.g. 9, 16, 25, 28 12. Infringement Analysis—likelihood of confusion 13. Counterfeiting Considerations.

Intellectual Property 101

Trade Dress Protection

Trade Dress is a trademark concept Trade dress consists not of words or symbols, but of a distinctive      shape color graphics sales technique or any combination that the public associates with a particular source.

Must be distinctive and non-functional

Intellectual Property 101

Trade Dress Protection--Examples

Intellectual Property 101

Copyright Protection

1. Covers works of authorship fixed in any tangible medium of expression from which they can be perceived, reproduced or otherwise communicated. Must fall into the following categories:  literary works  musical works, including words   dramatic works, including words pantomimes and choreographic works   pictorial, graphic and sculptural works motion pictures and other audiovisual works  sound recordings  architectural works.

Intellectual Property 101

2. Simple and inexpensive; Rights commence upon creation.

3. Register with Copyright Office; $35 filing fee. Need for filing lawsuit and to get statutory damages and attorneys fees. 4. Term (under Sonny Bono Copyright Extension Act in US and most countries): a. Life of author plus 70 years or for anonymous works: b. 95 years from publication or 120 years from creation.

2. International in scope under Universal Copyright Convention (“UCC”) & Berne Convention.

Intellectual Property 101

Patent Protection

 Used to protect a technical solution in any field of technology, relating to a product or a method that is new and industrially applicable.

  Term in most countries is 20 years from the date of filing  Utility patent protection  Design patent protection

Intellectual Property 101

Publicity Rights

 Unique to United States  Covers name, likeness, signature, voice, etc. of performer used for commercial purposes  Examples: Michael Jordan image, Michael Jackson name, image & voice  Descendible—Princess Di  Sports Leagues—Properties Divisions and Players Associations  College Athletes

Intellectual Property 101

Umbrella of IP Rights

Counterfeiting Defined

Definition

Counterfeiting is the deliberate use of another’s intellectual property, including trademarks, product designs and copyrights including:  The use of a false trademark that is identical with or substantially indistinguishable from a registered trademark  The passing off of a product whose design is similar or identical to the design of the authentic product  Copyright piracy--the unauthorized copying and distribution of audio-visual works, software and artwork

Extent of the Problem

 The number of Intellectual Property Rights (IPR) seizures in U.S. increased by 24% to 24,792 in FY 2011 from 19,959 in FY 2010. That is a 300% increase since 2002.

 The domestic value of IPR seizures decreased by 5% from $188.1 million to $178.9 million principally due to greater vigilance   The estimated MSRP for all FY 2011 IPR seizures was $1.1 billion, a slight decline from FY 2010 The value of consumer safety and critical technology seizures soared to more than $60 million due to an increase in pharmaceutical and perfume seizures

Extent of the Problem

Seizures by Domestic Value (in millions)

Extent of the Problem

 European Customs reported 80,000 cases of counterfeiting in 2010 which was double the number of 2009.    103 million counterfeit products were detained at the borders; Cigarettes accounted for 34% followed by office stationary, tobacco products, labels, clothing, and toys; Estimated value of genuine products was over £1 billion;  85% of seized products came from China.

Extent of the Problem

Industries Affected

 Designer Products  Automotive & Aircraft Parts  Food  Pharmaceuticals  Toiletries/Cosmetics  Toys  Entertainment & Recording Industries

Extent of the Problem

Impact of the Problem

Counterfeiting steals the identity of trademark owners and robs consumers of comfort, reliability and their personal safety. It is not a “victimless crime” since:     Countries are deprived of tax revenues Trademark owners are deprived of sales revenue Trademark owners lose “goodwill” of well-known brand names Consumers are deceived    Used to fund terrorist activities Software industry loses between $12-16 billion a year U.S. automobile manufacturers lose $12 billion/year and could hire 210,000 more workers by eliminating counterfeit auto parts.

Negotiation Basics

Negotiation Strategy

1. Be Aware of Who You Are 2. Know Your Strengths and Weaknesses 3. Know Your Market—Furniture; H Koch & Sons 4. Don’t Let Ego Overtake You 5. Know Your Adversary

License Agreements Basics A. Overview

1. Type—Exclusive, Non-Exclusive; Form of Agreement 2. Basic Terms a. Compensation: 1. Royalty Rates 2. Domestic v. FOB Rates 3. Split Royalty Rates b. Net Sales c. Advance

License Agreements Basics

d. Guaranteed Minimum Royalties vs. Minimum Royalties e. Royalty Periods--Quarterly Reporting f. Term of Agreement g. Warranties 1. Power To Enter Into Agreement 2. Non-Infringement h. Indemnification 1. Product Liability 2. Infringement

License Agreements Basics

i. Insurance j. IP Rights 1. Responsibility 2. Enforcement Against Infringers k. Termination 1. Product Introduction Date 2. First Shipment Date 3. Breach --30 Day Notice l. Choice Of Law

License Agreements Basics

B. Wish List for Licensors

Clearly define the Licensed Property and Licensed Products Make sure you are comfortable with the financial terms, e.g., royalty rate, advance, guarantee Be aware of how licensee intends to sell product, e.g., F.O.B. sales command higher royalty rate Build in performance requirements, e.g., First Sale, Product Introduction Date, Minimum Sales, Continued Sales Reps, warranties and indemnities do not have to be equal or mutual

License Agreements Basics

10.

Build in quality control requirements and pay attention to them—it is necessary to monitor quality Require product liability insurance—watch the deductible Disputes and venue provisions do matter—arbitration, litigation, etc. Consider mediation as a condition to bring an action Integration clause saves litigation costs Build in strong termination provisions

License Agreements Basics

C. Wish List for Licensees

Licensed Property and Licensed Products should cover what you intend to produce or publish Understand the financial terms, e.g., guarantees & net sales definition in particular How much support will licensor provide?

TRY

to get them to include it in the agreement. Watch the performance requirements—you can be terminated for failure to meet them Seek options to renew the term of agreement upon meeting performance requirements

License Agreements Basics

10.

Seek broadest possible territories and channels of distribution or get options for them READ the quality control provisions. Can you comply with them?

Docket all dates required under the agreement lest you will be terminated READ the royalty reporting provision. Can your computer system comply easily? Watch assignability and non-transfer provisions as they can stand in the way of a sale or change of control

Current Licensing Royalty Rates

* Art Celebrity Entertainment Collegiate 3-8% 7-11% 8-12% 6.5-10% Corporate 6.5-10% Designer/Fashion 4-8% Events Sports 10-14% 8-11% * As reported in Battersby & Grimes,

Licensing Royalty Rates 2012

, Walters Kluwer available at www.aspenpublishers.com

Agent Agreements Simplified

1. Identifications

 Parties to the Agreement  Properties to be Included  Territory  Categories or Specific Manufacturers  Term of the Agreement 

2. Agent Grant

 Exclusive v. non-exclusive

Agent Agreements Simplified

3. Agent Responsibilities

 Meet and confer with Licensor  Develop merchandising plan  Implement merchandising plan  Negotiate license agreements  Collect and disburse royalties  Investigate infringements  Oversee audits  Approve products  Non-competition

Agent Agreements Simplified

4. License Agreements

 Privity should be between licensor and licensee, not agent and licensee.

 Licensor should provide form  Licensor should approve and sign all agreements 

5. Agent Compensation

 Typically a commission  Retainer not uncommon  Post-termination compensation--

CRITICAL

Agent Agreements Simplified

6. Term & Termination



VERY IMPORTANT

 Common to include milestones  Shorter with options vs. longer with milestones 

7. Payments

 Typically made to agent  Can be direct to property owner  Alternatives—escrow, lockbox, directly to licensor

PowerPoints of both sessions are available on LIMA website at www.licensing.org

LIMA reference Guide:

“Basics of Licensing”

by Gregory Battersby & Danny Simon Available at www.basicsoflicensing.com