Introduction to Intellectual Property for Business

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1 Introduction to Intellectual Property for Business Tamara Nanayakkara Counsellor Small and Medium Sized Enterprises Division World Intellectual Property Organization Outline The New Economy Competitiveness in the new environment The IP system and exclusive rights Beyond exclusivity

2 Old v New Economy Old economy focus on physical goods. Dependant on natural resources (finite) New economy Greater reliance on knowhow, knowledge, human creativity and innovation (infinite) 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 Price Waterhouse Coopers The amount of market value that cannot be traced to tangible assets on the corporate books. Japanese IP Typhoon Still Not Even a Tropical Storm! (II), Terry Ludlow, IP frontline.com, Feb 2008

3 New Economy Global market place Demanding and fickle consumers Shorter product cycles Working through relationships, networks and outsourcing Increased competition Pressure to do more with less Competitiveness To be competitive, produce goods and services that are innovative, of good quality, low cost and interesting to the consumer. Add Value and Differentiate

4 Design Business identifier Reputation Innovative features Quality The IP System Provides exclusivity over the exploitation of innovative products and services, creative designs and business identifiers Provides an appropriate incentive for investing in improving competitiveness Ensures a competitive market place, honest trade practices and overall national development

5 Principal forms of Intellectual Property Patents Copyright Trademarks Industrial Designs Geographical Indications Trade secrets Patents 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.. A patent provides an exclusive right to prevent others from using the invention for a maximum period of 20 years Through exclusivity an opportunity is provided to recoup costs and make a profit

6 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 Any distinctive words, letters, numerals, pictures, shapes, colours, In some countries: sounds, smells, three-dimensional marks Advertising slogans Its finger lickin good (KFC) I can t believe its not butter

7 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

8 Interbrand 2007 Annual Survey of the world s most valuable global brands Coca-Cola: 65 Microsoft : 58 IBM: 57 b US$. Design Rights 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

9 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

10 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.

11 Provides small businesses the possibility of commercializing their products under a common brand Provides recognition and appeal and a 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 economic rights to control the economic use of his work and moral rights to protect his reputation and integrity.

12 Trade Secret If reasonable steps have been taken to keep certain information secret and it has commercial value by virtue of being secret it may qualify for 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

13 Secret Recipes Kentucky fried chicken The secret recipe of 11 herbs and spices lies in a bank vault. Few people know it, and they are contractually obligated to secrecy. The ingredients are mixed by two different companies in two different locations and then combined elsewhere in a third, separate location. To mix the final formula, a computer processing system is used to blend the mixtures together and ensure that no one outside KFC has the complete recipe IP Management Beyond exclusivity IP rights are not only about exclusivity and the right to prevent others from exploiting them They are assets as important or even more important than physical assets (buildings, machinery) Like any asset they must be maintained, managed, exploited and enforced.

14 Exploiting IP Assets Sale or License Joint ventures and strategic alliances Business format franchising Merchandising Defensive patenting, publication Collateral for finance Licensing 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

15 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

16 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

17 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