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Copyright News
By. Paul Kaindo
I
n today’s knowledge driven
economy Intellectual Property
(IP) is a big deal. It is a key
driver for the economy and is
often a fundamental component for
every business model. Businesses
and individuals develop, use and
commercialise IP in view of future
profit, income and growth. IP is,
therefore, a valuable business asset.
However, with insufficient experience
and expertise in IP management
the full potential of IP may remain
unrecognised.
Monetising and commercialising IP
refers to the process of generating a
return on investment and turning IP
into profit generating venture.
IP often represents a significant
investment as it is in most cases costly
and time consuming to produce.
Generating the desired return on
investment and turning IP into profits
is not always easy.
One of the primary reasons for this
is that, selling products (including
IP) requires establishing sales and
distribution channels in order to
reach the market. These channels can
take years, even decades to establish
and are often out of reach for small
and upcoming IP holders.
IP Rights have little or no intrinsic
value unless they are productively
exploited. A copyrighted software
application in itself, for example, has
little or no inherent commercial value
if not commercially utilised.
Its value is only realised when
the software is used to produce an
economic benefit for its owner by
being successful in the marketplace.
There are different commercial
models available to IP owners for
commercialising and monetising IP
assets with an objective of creating
value from the IP.
On the one hand, the IP owner can
decide to use the IP rights exclusively.
On the other hand, the IP owner can
decide to wholly or partially sell or
license the IP rights.
In deciding the most appropriate
model, the first step is to ensure that
you have a clear cut IP strategy which
is in line with you overall commercial
strategy. You should also have a
smart IP rights management system
which covers; confidentiality, target
market, competitors, protection and
enforcement.
It is also important to know
the options available for
commercialisation and monetisation
and choose the one that best suits
your overall commercial strategy.
The probable strategies for
commercialisation and monetisation
of copyright and related rights include
but are not limited to:
Licensing: This is a contractual
arrangement where the licensor/the
IP owner makes available the IP asset
for commercial use by the licensee
in return for either a lump-sum
payment or predetermined periodic
royalty payments.
Licensing IP ensures that the IP
owner retains some level of control
over the IP while at the same time
guaranteeing a royalty revenue stream
if the IP is successful. It is a bad idea
to enter into a licensing agreement on
the basis of an oral agreement as you
may find yourself caught up in a legal
nightmare in case of a dispute.
Most public licensing in Kenya
are done through collective
management organisations such
as Music Publishers Association of
Kenya (MPAKE), Kenya Association of
Music Producers (KAMP), Performing
Rights Association of Kenya (PRISK)
and Reproduction Rights Society of
Kenya (KOPIKEN)
Franchising: This is an
arrangement where one party (the
franchiser) grants another party (the
franchisee) the right to use its IP
especially trademark to produce and
market goods or services according to
certain specifications.
The franchisee usually pays a one-
time franchise fee plus a percentage of
sales revenue as royalty.
In this model, typically multiple
IP rights may be combined with
trademarks to provide a unique brand
identity, which then is designed
into a franchise business system and
licensed to many franchisees for a
certain license fee.
The IP rights that can be combined
could be trade secrets such as recipe,
taste, and flavor; trademarks such
as the logo, the brand, the slogan;
copyrights such as the apparel, the
drawings within the store, the menu
card; designs such as art/design
on the box, the shape of the box,
structure of the building; patents
such as heating oven containing
the patent rights of regulating the
heat depending on the kind of food
product being cooked.
Most franchise systems have at
least three types of copyright works
including artistic, literary and
software works, artwork, the
advertisements, the uniform, website
and intranet, customer data base,
menu, product catalogue etc.
Securitisation: This is a process of
using the cash flows (e.g. royalty)
generated by an asset or pool of
assets to support the issuance of debt
and generate financing. Copyright,
trademark and patent securitisation
agreements have garnered increased
attention from investors in developed
countries due to the relatively stable
risk/return characteristics associated
with a specific IP asset.
Under this model, the IP asset
and revenue streams accruing may
be used as the basis for issuing debt
instruments to the investors. Here
the IP assets can be transferred to
a separate special purpose vehicle
which would be issuing and managing
the debt instrument.
Collateralisation: This occurs when
a borrower pledges his/her IP as a
Commercialisation and
Monetisation of Intellectual Property
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Copyright News
security to the lender in the event
that he defaults on a loan. Like any
other form of property, IP asset may
be collateralised to raise capital. In
other words, third party lenders may
provide loans while holding IP assets
as collateral.
Intermediate guarantors may
provide further assurance to the third
party lender of certain rights in the
event of a default.
Increasingly, in developed
countries IP rights are being accepted
as collateral for financing. This is
especially true when the IP rights
are mature and have some successful
track record represented by a positive
revenue stream.
Sale / Assignment: This is the
outright transfer of IP to a third
party in exchange of money or other
valuable consideration. The IP owner
receives a lumpsum amount as the
purchase price of his IP.
Unlike licensing, franchising,
securitisation and collateralisation the
IP owner loses control of the IP while
the purchaser acquires its unhindered
and unlimited use.
The choice of the method of
commercialisation or monetisation
will largely depend on the kind of IP
in question.
Monetisation through YouTube for
example has been a favorite strategy
for copyright audio and audio visual
works. Initially, one could start
earning from copyright work once
their copyright work hit 10,000
views. This changed on January
16, 2018 when YouTube announced
new eligibility requirements for
the YouTube monetisation Partner
Program.
A copyright work qualifies for
monetisation once it reaches 4,000
watch hours in the previous 12
months and 1,000 subscribers. The
actual amount earned depends on the
number of views, length, country,
currency, etc.
Copyright works such as websites
and blogs (literally works) can also
be monetised through such methods
as affiliate marketing where the
copyright owner agrees to place an
affiliate link to a product on the work
in exchange of a share of the sale price
or a commission.
One could also allow advertisers to
run advertisements on the website or
blog and get paid each time someone
clicks on the advertisement or for the
space used by the advertisement.
In a nutshell, IP assets can be
commercialised and monetized just
like any other property.
In order to get the best value out
of IP, it is important to undertake
periodic IP valuation since IP asset
may change dramatically depending
on market variables.