Leveraging Intellectual Property Assets for Business Success

Tamara Nanayakkara Counsellor Small and Medium Sized Enterprises Division World Intellectual Property Organization [email protected]

Outline

 The challenge of the new business environment  SME competitiveness  IP and SME competitiveness  Services provided by the SME Division of WIPO

Old v New Economy

 Industrial economy – focus on physical goods. Dependant on natural resources (finite)  New economy – Greater reliance on know how, knowledge, human creativity and innovation (infinite)  1950 knowledge component in manufactured goods 20%, 1990s 70%

 In 1998 intangible assets constituted 80% of value of Fortune 500 companies.



“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”



Building and Enforcing Intellectual Property Value,An International Guide for the Boardroom 2003PriceWaterhouseCoopers

New Economy

  Global market place More demanding and fickle consumers   Shorter product cycles Working through relationships and networks   Differentiating products Selling an image, concept, idea   Out sourcing Efficient use of resources resulting in lower cost

Example

 A pair of jeans bought in a street market may cost US$ 10 while the same pair of jeans bought in a high end boutique will cost US$ 80. The difference accounted for in the intangible components in the latter.

 It is likely that the same (outsourced) manufacturer produced both.

 While a market continues to exist for pure physical products (people will continue to buy jeans) high profit margins cannot be expected.

 High profit margins are possible when there is improved efficiency, lower costs, appealing and differentiated products and services from reputed sources.

 Globalization and trade liberalization has made it crucial for SMEs to become

internationally competitive

even when competing exclusively in domestic markets  Application of knowledge, creativity and innovation key in competitiveness

Competitiveness of SMEs

 To be competitive SMEs need to constantly improve their efficiency, reduce production costs and enhance the reputation of their products and services by :  Investing in research and development  Acquiring new technology  Improving management practices  Developing creative and appealing designs  Effectively marketing their products and services

The IP System

 Provides SMEs exclusivity over the exploitation of their innovative products and services, creative designs and brands  Thus creating an appropriate incentive for investing in improving their competitiveness  Ensures a competitive market place, honest trade practices and overall national development

Intellectual Property Rights

 Innovative products or processes  Cultural artistic and literary works  Creative designs  Distinctive signs  Microchips   Denominations of goods attributable to a geographical origin Confidential business information  Patents or utility models  Copyright and related rights  Industrial design rights  Trademark   Layout-designs or integrated circuits.

Geographical indications  Trade secrets

Patents

    Gives the exclusive right to prevent others from using the invention for a maximum period of 20 years An invention could be a product or process providing a new way of doing something, or a new technical solution to a problem It may lower cost, create efficiencies, enhance performance, add new features etc.. Through exclusivity an opportunity is provided to recoup costs and make a profit

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

 Protects consumers  They can differentiate between similar goods   Information as to the source (quality, reputation, trust) Protects the company –  Enables the company to build up a reputation and a loyal clientele and thus a market niche (brand)  Creates an overall competitive environment which benefits society as a whole

Case Study on Trademarks

 An Italian businessman buys unmarked t-shirts from manufacturers of generic clothing, attaches his trademark (

Pickwick®

, which pictures a rebellious-looking teenager) and begins to sell them to retail stores    Started in a garage in the periphery of Rome Today the

Pickwick®

trademark is perceived by Italian teenagers as a synonym of style and quality

Pickwick®

has began to export its products across Europe  Its trademark is its most valuable asset

Interbrand 2006 Annual Survey of the world’s most valuable global brands

Coca-Cola: 67 Microsoft

:

57 IBM: 56 b US$.

Industrial Designs

 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

Design Rights

 Adds value to the product by making it more appealing to consumers.

 Some products (e.g. furniture) are primarily sold on the basis of their appearance  Enables customization of products to specific markets

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  Protects local industries, preserves traditional ways of producing and builds regional reputation and image.

 Used by SMEs to jointly commercialize products  Provides SMEs the opportunity to make their products recognized by consumers, distributed by the main distributors and sold by the main retailers  Provides consumers certain quality guarantee

Copyright

    Copyright law grants authors, composers,and other creators legal protection for their creations usually referred to as “works.” It protects books, music, films magazines, paintings, photographs, sculptures, architecture, computer programs, etc It gives an author or creator certain rights for a limited period of time. They are economic rights which enable the author to

control the economic use

of his work and moral rights

,

which protect an author’s reputation and integrity.

Trade Secret

 You may, either because it is not patentable or because you prefer to do so, keep certain business information secret  If you have taken reasonable steps to keep such information secret and it has commercial value by virtue of being secret you may have trade secret protection

Example – Coca Cola

 Said to be the best kept secret  Formula kept in a bank vault  Can only be opened by a resolution of the company Board of Directors  Only two people know the secret Their identities are unknown They cannot travel together They oversee the production

Trade Secrets or Patents

 No registration (costs/time factor)  Unlimited duration  No disclosure  Wider information  Difficult to enforce  No protection against independent discovery or RE  Registration required (cost/time factor)  Limited duration  Disclosure required  Limited to claims  Easier to enforce  Exclusive rights

One product many IPR

   

Patent

for the fountain pen that could store ink

Utility Model

for the grip and pippette for injection of ink

Industrial Design:

smart design with the grip in the shape of an arrow

Trademark

: provided on the product and the packaging to distinguish it from other pens Source: Japanese Patent Office

 Invention of CD player protected by

patent

 Brand on CD player protected by

trademark

 Design of CD player protected by

industrial design

 Music played on CD player protected by

copyright

Intangible to Tangible

 By providing such protection the IP system gives the owner of those intangibles a right of exclusivity, the right to prevent others from using them.  Bringing intangible rights closer to tangible property

IP Policy

 Beyond exclusivity – IP rights are not only about exclusivity and the right to prevent others from using and exploiting them  They are assets as important or even more important than its physical assets (buildings, machinery)  Like any asset they must be maintained, managed, exploited and enforced.

IP Audit

 Identify the IP assets of a company  Have rights been acquired for them  Are they been maintained  Are they exploited optimally  Is there any redundant IP  Is there any infringement of third party rights

Exploiting IP Assets

 Sale or License  Joint ventures and strategic alliances  Business format franchising  Merchandising  Better bargaining position in licensing in  Defensive patenting, publication  Collateral for finance

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

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

SMEs and IP

• Enterprises worldwide largely under-utilize the intellectual property system due to – Perceived lack of relevance of the IP system – Perceived high costs and complexity of IP system – Limited awareness of the IP system and its usefulness – Lack of qualified human resources to use the IP system

What Can Support Institutions do to Assist

• Awareness-raising and Training Activities • Technological Information Services • Financial Assistance • Customised Advisory Services • Assistance on IP Exploitation and Commercialisation • Diagnosis of the IP needs of the enterprise (IP Audit)

WIPO SMEs Division

38 • Promote greater use of the IP system by SMEs and enable them to make more effective use of their IP assets • Strengthen the capacity of governments to develop strategies, policies and programs to meet the IP needs of SMEs • Improve the capacity of SME support institutions, to provide IP-related services to SMEs

Demystify

• Studies • Guides • Events and missions • Web site and newsletter • Multimedia products

Studies

• Studies on national policies on SME development and the role of IP – completed or under way in Argentina, Bhutan, Mongolia, Nepal, Philippines, Sri Lanka, Tanzania, Sierra Leone, Romania, Chile, Colombia, Costa Rica, El Salvador, Honduras and Paraguay, Egypt, Morocco, Lebanon

IP for Business Series

• Making a Mark (Trademarks) • Looking Good (Designs) • Inventing the Future • (Patents) • Creative Expression (Copyright)

More guides

• WIPO/ITC Guides on: – Marketing of Crafts and Visual Arts; Role of Intellectual Property; A practical guide – Secrets of Intellectual Property: Guide for Small and Medium Sized Exporters – Exchanging Value: Negotiating Technology Licensing Agreements - A Training Manual

Events

• Special programs, seminar and workshops organized by the SMEs Division in Geneva in partnership with selected associations and organizations • Contributing to programs organized by other divisions within WIPO and external organizations

www.wipo.int/sme/en

• The Website of the SMEs Division is in six UN languages (English, French, Spanish, Arabic, Russian and Chinese) • More than 200,000 pages viewed every month in 2007 • Contents include sections such as IP for Business, IP and E-Commerce, Activities, Best Practices, Case Studies, articles and publications

WIPO “Best Practices”

• •

WIPO collects information on policies, programs and strategies that aim to encourage a wider and more efficient use of the IP system by SMEs Objectives:

–

Identify experiences that have had a real impact in making the IP system more accessible to SMEs

–

Identify replicable mechanisms that may be adapted to the institutional and economic context of other countries

–

Encourage exchange of experiences

Newsletter

• Monthly e-newsletter in the 6 UN languages (Free) • Content includes articles, updates with information, links and documents • Launched in August 2001 • Total number of subscribers: >25,000

IP Panorama

• WIPO, KIPO and KIPA have recently released an e-learning product consisting of ten modules on different aspects of intellectual property from a business perspective entitled, “IP PANORAMA”.

Conclusion

• New (knowledge) Economy rewards those enterprises that are creative, innovative and understand the importance of the market for ideas • The IP system provides the formal framework for protecting their knowledge, creativity & innovation • To maximize the potential provided the IP system one has to think beyond exclusive rights to IP assets • IP offices, Chambers and other support institutions have an important role to assist