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Maximizing Intangible Benefits from IPRs protection to Exploitation of IPRs: Business Strategies based on Franchising an

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. Introduction. Terminology:

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Maximizing Intangible Benefits from IPRs protection to Exploitation of IPRs: Business Strategies based on Franchising an

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  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 person’s 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: Franchisor’s 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: Franchisee’s 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: Franchisee’s 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 IPR’s (and a successful business model)

  8. Franchising & IP Rights: Franchisee’s 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 licensee’s field

  11. Merchandising: Licensor’s 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: Licensee’s perspective • Market products and services by exploiting the popularity of other’s 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: Licensor’s 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: Licensee’s 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 Licensor’s business • The variety of arrangements makes difficult standardization of contracts

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