Transcript WIPO/NIFT national seminar on The Importance of IP for the Handicrafts Sector Hyderabad, India, April 5-7, 2005

WIPO/NIFT national seminar on
The Importance of IP for the
Handicrafts Sector
Hyderabad, India, April 5-7, 2005
Commercialising Handicrafts:
Role of IP in Improving Enterprise
Profitability through Direct Exploitation,
Licensing, Franchising, and/or
Merchandising:
Case Studies
Lien Verbauwhede
Consultant, SMEs Division, WIPO
1.
Introduction
How can you generate
income from your
creations?
(a) Commercialize your works yourself
– Exploit your works individually :
• simply sell the products
• make copies of the products and sell them
• reproduce the works on t-shirts, posters, etc.
• exhibit the works in museums, craft exhibitions, fairs, etc.
If you sell your work, do you lose your
IPRs over it?
• Merely selling a copy of a work protected
by copyright does not automatically
transfer copyright to the buyer
• Merely selling a work that incorporates an
industrial design does not automatically
transfer design rights to the buyer
• Merely selling a patented work does not
transfer patent rights to the buyer
• The property rights over a physical object
(work) are completely independent from
the IP rights of the creator.
• The buyer of a work acquires the physical
object, but not the copyright, design rights,
etc. over the work
– pigments, canvas, frame, stretcher
• IP rights in the work remain with the
creator unless he expressly assigns it by
written agreement to the buyer
Selling a work
does not mean
loosing it
Example.
Artist sells his sculpture ...
 Buyer cannot make copies and sell
them (reproduction right)
 Buyer cannot print the sculpture on
postcards and sell them
(reproduction right)

Buyer cannot exhibit the sculpture
in art gallery or other public place
(exclusive right to show the work in
public)
 Buyer cannot alterate the work in a way
that is prejudicial to the honour or
reputation of the author (moral right to
object to derogatory treatment)
• Ex. Geese in Canada
• Ex. Painting burned in chimney after dispute with wife
(b) Sell your IP rights
– You can transfer all or part if your exclusive
rights to someone else
• “assignment”
• irrevocable transfer of the owner’s entire interest in all or
some part of the intellectual property
• in writing + signed
• may be partial (type of right / time)
– Buyer becomes the new owner of the
transferred rights (trademark, design, copyright)
• Example.
Artist sells copyright in his sculpture ...

Buyer can exhibit the sculpture, reproduce it on
postcards, take a photograph of it, etc.

Artist cannot reproduce it on postcards, etc.
without explicit authorization from the copyright
owner.

BUT: Moral rights remain with the artist
• No derogatory treatment
• Right to be identified as author
(c) Authorize someone else to
reproduce or use your work
– Artisan can authorize someone else to
exploit his IP rights, against payment
– Authorized person (licensee) can only use
the rights in the specific form and under
the specific conditions allowed by the
license
• E.g. Only one reproduction, in specific
magazine, in color, with a biography of the
artist, etc.
– License  Transfer of rights
 Artisan (licensor) retains the IP rights
– Artisan can authorize several people to exploit the
works simultaneously
– Exclusive vs. non-exclusive licenses
 Licensee does not acquire any ownership of
the IP rights
2.
Licensing
(a) What is licensing?
•
License is an agreement between the
owner of the IP right (licensor) and another
person (licensee) in which the licensor
permits the licensee to use the IP right in
commerce in the manner and for the time
period specified in the agreement.
 only right to use (not own) the rights
 only in a specific manner
(b) Examples of licensing
Trademarks…
- word + figurative element
- Spain  CTM (registered with the OHIM)
- for toys, especially “maquettes” (sailing
boats, wooden cars, teddybears, etc.)
Industrial designs…
•Owner of industrial design
grants to someone else
certain rights related to the
design.
• This may include such
things as the right to use,
manufacture and sell the
design.
(c) Why should artisans consider
licensing?
• Income: Can generate lucrative fees
and royalties
• New markets: Allows artisans to enter
into new product categories or in new
geographical areas in a relatively riskfree and cost-effective way
• Marketing tool: increases the artisan’s
exposure and recognition
(e) How to develop a proper licensing
strategy ?
1. Protect your IP rights
– deposit and register, if possible
– keep confidential information secret
– place notice on the works
• ©, Lien Verbauwhede, 2005
• "Protected Design”, Lien Verbauwhede, 2005
• Lienky®
2. Find right licensee
– look for potential users
– Internet, licensing organizations, specialized
merchandising companies, etc.
• E.g. International Licensing Industry
Merchandisers’ Association (LIMA)
– trustworthy and diligent partner
3. Assess foreign markets
– Usually, the licensee will be responsible for
local manufacture, localization, logistics and
distribution
– Protect your IP in the relevant markets
• IP rights are territorial
• International treaties
• Differences in national IP laws (term, etc)
4. Preserve control over the commercial
use of your works
– Licensee must place IP notice
– Require samples of the products  QUALITY
• artwork
• design
• trademark
5. Limit, as much as possible, the scope
of the license
– No assignment of rights
– Only non-exclusive licenses
– Limited in their scope to the specific needs
and interests of the licensee (intended
business goal)
• If assignment or exclusive license  negotiate
fair compensation
• Once you assign your rights, you loose all its
future income earning potential
6. Draft a solid license agreement
– Content
– In written + signed
– In many countries: must be registered with
the national IP Office in order to be
opposable to third parties
7. Negotiate fair compensation
– fee
– royalty
8. Take action against infringements
(f) What should be mentioned in a
licensing contract?
– Parties: Who bill be bound by it
– Subject matter: What exactly is being
licensed
– Goods: Types of products/services the IP
right will be used for
– Targeted Use:
• manufacture and/or distribution of the goods
• sale of those goods
• use on corresponding packaging and advertising
materials
• use for advertising campaign, Internet
– Territory:
• Countries where the goods will be sold or
manufactured
– Term:
• number of months/years; or number of units; or time
to achieve the intended business goal
• Can the agreement be prolonged after that period?
• Can the agreement be terminated before that period
under certain conditions?
• Consequences of such early termination
– Conditions after termination
– Compensation
• Advance payment (flat fee); periodic payments
(royalties); combination
• Basis of calculation of royalties (sales, hits)
• Timing of payment
– Exclusive or non-exclusive?
– Sub-licenses?
• If allowed  prior agreement?
– Materials to be provided to the licensee
• E.g. mould of sculpture
– Requirements as to the use of the work
• Size, placement, format, quality, resolution
• Attribution (copyright notice, trademark notice, etc)
• Prior approval (reproduction proof)
– Requirements as to the commercialization
of the products:
• Selling points
• Minimum production
• Obligation to inform about the number of products
manufactured, distributed or sold, etc.
• Marketing duties
– Requirements as to publicity and promotion
• In television, newspaper, radio, etc.
– Third party infringements
• Obligation for the licensee to keep you informed
about any infringements of your IP rights by third
parties of which he comes aware
– Indemnification clause
• Licensee will protect you from any lawsuit that
might arise from licensing activities
– General clauses
• Applicable law
• Jurisdiction
• Dispute resolution
• Confidentiality, etc
3.
Franchising
(a) What is franchising?
•
Franchising is a contractual
arrangement under which an
entrepreneur (franchisor), who has
developed a system for
conducting a particular business,
allows other entrepreneurs
(franchisees) to use that system in
accordance with prescriptions of
the franchisor, in exchange for a fee.
•
At least two levels of people are involved in
the franchise system:
•
•
franchisor: lends his trademark or trade
name and a business system;
•
franchisee: pays a royalty and often an
initial fee for the right to do business under
the franchisor's name and system.
IP is central to franchising
–
trademarks
–
trade names
–
industrials designs
–
trade secrets
(b) Examples
McDonalds
•
70% of McDonald's worldwide restaurant
businesses are owned and operated by
independent businessmen and women, the
franchisees
•
right to use the trademarks, signs, equipment,
formulas and specifications for menu items,
methods of operation, inventory control,
marketing, etc.
•
9 months full-time training
•
uniformity: standard branding, menus, design
layouts, administration systems
•
passion for enhancing and protecting the
McDonald’s brand
•
quality control tests
Case Study: Fonart, Mexico
• Fonart (Fondo Nacional para el Fomento de
las Artesanías Mexicanas) is the Mexican
National Foundation for the Development of
Folk Art.
• government institution designed to promote
the production and sales of handicraft objects
produced in Mexico.
• a nonprofit organization  Its earnings go to
fund, purchase, market, promote and support
arts and crafts in Mexico.
• 2001: Fonart developed
concept of privately owned
and operated franchise “100%
México Hecho a Mano”
• Franchisee stores sell a choice
selection of handmade
Mexican pottery, ceramic
tableware, glassware,
lacquered wood, shawls,
handcrafted metal objects and
basketry
• Since FONART buys directly from
artisans and is non-profit, the store
is able to offer reasonable prices
to customers.
• At the same time, the artisans, the
majority of whom are indigenous
and/or women, receive a fair
price.
A woven palm leaf basket
made in Oaxaca.
Concepts
• Products:
– store owners agree to buy all
merchandise directly from Fonart’s
catalogs
• Corporate identity
– trademark
– advertising
– location, architectural design
• Assistance
– manuals of operation
– training, seminars
• Cost
– initial fee
– montly: 1,5% publicity
Washington shop
• The owners of 100% Mexico Hecho A Mano (Washington)
are Juan Antonio Santacruz and Rahul C. Desai.
• Juan Antonio is originally from Mexico City and is realizing a
dream by opening his own store in the USA selling Mexican
folk art.
• Rahul has worked with Mexico for many years in development
finance and venture capital and is testing his theoretical skills
by opening a business of his own.
4.
Merchandising
(a) What is merchandising?
•
Merchandising is a form of marketing
whereby IP rights (typically trademarks,
industrial designs and copyright) are used
upon corresponding goods
•
Generally through licensing : No
assignment of rights, only an authorization
to use the work in a specific manner
(b) Examples of merchandising
Paintings…
Botero
Picasso
Drawings and cartoons …
• Panda from the WWF
• Fido Dido < Joanna Ferrone and Susan Rose
Architectural works …
Taj Mahal, India
Eiffel Tower, Paris
Atomium, Brussels
Photographs …
• “Guerrillero Heroico” < Alberto Korda (1960)
• Key rings, agendas, hats, socks, bed linen,
kitchenware, etc.
• However, Alberto Korda received only very little
financial remuneration for the use of his
photograph
– For the artist:
• His work is promoted, and will gain recognition and
value in the market
• Receives additional and constant remuneration
(+ heirs)
• Maintains ownership over his rights and controls the
uses of his works
– For the merchandisor:
• Can use the attractiveness of a work to promote the
sale of his products
Case Study:
Mary Engelbreit
• Mary Engelbreit is known
throughout the world for her colorful
and intricate designs, and has
become a pioneer for art licensing.
• Beginning: "drawing to order" for
free-lance clients.
• Wanted was to be a children's book
illustrator.
• Went to New York  "mild
reception" from publishers
• Suggestion: illustrating greeting
cards
• Several well-known card companies
bought her designs, and sales were brisk.
• Other companies were anxious to
merchandise Mary's distinctive artwork
on a wide range of products including
calendars, T-shirts, mugs, gift books,
rubber stamps, ceramic figurines and
more.
• 1986: Mary Engelbreit greeting cards had blossomed
into a million-dollar-a-year business. She decided to
license her cards to Sunrise Publications to free up
more time for her art and to grow her business in other
areas.
• Mary Engelbreit Studios now has contracts with
dozens of manufacturers who have produced more
than 6,500 products in all.
• Mary takes extreme care in choosing only the best
companies to work with and goes to great lengths to
make certain that her artwork is reproduced as
faithfully to her original work as possible.
• 2001: Mary saw her original dream come true when
she signed a contract to illustrate children's books for
publishing giant HarperCollins.
When Mary was young, people told her that
being an artist was not a realistic way to make a living,
but Mary Engelbreit was never one
to be easily discouraged.
"I believed in myself," she says, "and now I'm living my
dream."
Source: www.maryengelbreit.com
5.
Conclusions
• Artisan, as owner of trademark, copyright, design,
trade secret, patent … has a large gamma of
possibilities to commercialize his works.
• Owners of IP have great power to define how
their works are used.

Possible to simultaneously grant various licenses for one
single work:
– To different users
– For specific manners of exploitation
– For limited period of time
– In limited territory
– For specific purpose
Thank you !
Lien Verbauwhede
www.wipo.int/sme/