Leadership Laboratory

Leadership Lab: Intellectual Property Series

This series of essays can help the IT manager learn how to identify and protect intellectual property and intangible assets.

Trademark Infringement - The Likelihood of Confusion - Updated October 27th, 2008
Valuation of Intellectual Property Case Study - IPWatchdog.com -
What is Intellectual Property - March 14th, 2007
Creative Commons and Intellectual Property - May 1st, 2007
What Is a Patent? - April 7th, 2007
Copyright - April 7th, 2007
Digital Rights Management - April 7th, 2007
Trademark and Brand - April 7th, 2007
Trade Secrets - April 7th, 2007
The Value of IP - April 7th, 2007
Licensing and Franchising - April 3rd, 2007
10 Steps to Protect IP - March 13th, 2007

Licensing and Franchising

April 3rd, 2007
By Stephen Northcutt


According to the World Intellectual Property Organization, "A licensing agreement is a partnership between an intellectual property rights owner (licensor) and another who is authorized to use such rights (licensee) in exchange for an agreed payment (fee or royalty). A variety of such licensing agreements are available, which may be broadly categorized as follows1:
In general, unless you are licensing a discrete intellectual property such as a patent, the odds are that many rights will be involved and you start looking at something more like a joint venture or partnership. For instance, many years ago we were approached by the Nomura Research Institute for a license to translate our books into Japanese, but over the years that has evolved to become SANS Japan2, where we run courses in Japan with our partner.

The Information Security Manager does not have much of a role in most licensing agreements. It is a good idea to coordinate with your legal department and try to be one more set of eyes to make sure that the bases are covered. If your organization has a lot of intellectual property (IP) that you are willing to consider licensing, you might want to join the Licensing Executives Society International (LESI) or one of their member groups. They have training, conferences and newsletters that could help you get sharp eyes.3 To get an idea of how complex this is, type "license agreement" into Google, plus take a look at bunkspeed4. In addition, SANS has a multi-day course on legal issues for IT5 designed for Security managers.

"A franchise is a license or right to use a brand, style, name or method of doing business or producing a product which is owned by another person."6 Through a franchise agreement, the owner of certain technical or other expertise who has usually gained a reputation in connection with the use of a trade or service mark (franchiser) may team up with another enterprise (franchisee), who will bring in expertise of his own or financial resources to provide goods or services directly to the consumer.7 The franchiser will ensure, through the supply of technical and management skills, that the franchisee maintains the quality and other standards in relation to the use of the trade or service mark which often require certain standardized features such as a uniform trade dress.8 In the US at least, franchise law is fairly restrictive; if you are licensing rights, make sure you have an experienced attorney. The line between licensing and franchising can be thin.9 From Coollawyer, "The line between franchising and licensing is not always a clear one. However, as you evidently know, offering a franchise subjects the offering party to FTC and state regulations, which require disclosure statements to accompany such an offering."10

Our favorite licensing story is Coyote Ugly
Liliana Lovell's Cabo San Lucas bar changed drastically when Elizabeth Gilbert, a former coyote, wrote a story for GQ magazine about the bar. Disney picked up the movie rights for Coyote Ugly, a movie set in a Hollywood version of her bar, and the movie was released. You cannot buy that kind of publicity.

Immediately copycats entered the scene. Her lawyers created a deal with the most prominent copycat, Jorge Manterola, to open a Coyote Ugly in Cabo on which he would pay license royalties. Lovell's licensing company brought in $1.5 million in 2002, which would be more except that she insists on strict control.11,12,13,14 The Inc Magazine piece on this subject is a great read, http://www.startupjournal.com/columnists/enterprise/20041118-carrel.html


1 http://www.wipo.int/sme/en/ip_business/licensing/licensing.htm
2 http://sans-japan.jp/SJ/
3 http://www.lesi.org/
4 http://www.bunkspeed.com/products_terms.html
5 http://www.sans.org/training/description.php?tid=862
6 http://www.mylawyer.com/glossary.htm#sectF
7 http://www.1000ventures.com/business_guide/ipr/sme_guide_licensing_bywipo.html
8 http://www.federlegno.it/servizi/tutela/pdf/ipbusiness.pdf
9 http://www.franchisedistriblaw.net/
10 http://www.coollawyer.com/webfront/internet_law_library/articles/0,4621,309132,00.php
11 http://www.inc.com/magazine/20031101/ugly.html
12 http://www.startupjournal.com/columnists/enterprise/20041118-carrel.html
13 http://www.bookreporter.com/authors/au-gilbert-elizabeth.asp
14 http://www.jorgemanterola.com/BARS%20FRONTPAGE.html