Licensing Defined: Artwork Review

As we have previously covered in the “Licensing Defined” blog series, intellectual property protection is one of the primary reasons to establish a licensing program. Your brand shapes consumers’ perception of your institution. Therefore, it is vital to manage your brand in the marketplace. We discussed when protection of a trademark begins and how to register your trademarks with the United States Patent and Trademark Office (USPTO), which offers additional protection to your property. Utilizing an artwork review process helps SMA and its client institutions establish a consistent brand identity in the marketplace.

The idea behind an artwork review process is to regulate trademark usage on all licensed products. The process gives brand managers knowledge of the product, the mark or logo placement and size and even identifies any third-party brands.

Artwork review can come in a variety of formats. Depending on the size of the licensing program, it may be a simple process with licensees emailing or sending each proposed product design to the brand owner for approval. SMA utilizes Approvals on Demand (AOD) for all artwork submissions and review. AOD is a quality control application that allows all licensees to submit designs, in various digital formats, through a web-based approval system. Such a system can allow the licensee to upload a file containing an image of the design and submit it to the brand owner for review. SMA reviews all design submissions to ensure they meet minimum brand standards before sending to the institution for final review. At this point the brand owner can approve the design, mark it for changes that need to be made, or send it back to the licensee for corrections. Once reviewed, the licensee receives a notification of the design’s approval status and may proceed accordingly with the submission, either revising the artwork as requested or producing the order.

Licensing Defined: Types of Licensing

Licensable properties come from a variety of sources. The definitions of various property types are not always clear and they often overlap. Although every licensing program is unique, different areas of the licensing business have specific patterns in terms of how they are organized, and how business is done.

The chart below shows the different property types of licensed merchandise with their relative shares of estimated overall licensing industry revenues generated in 2007. The chart is followed by a brief description of key industry segments.

Estimated   Licensing Revenues (2007)
Property   Type	Est. Licensing Revenue (in millions)
Art	$175
Character (Entertainment, TV,   Movie)	$2,710
Collegiate	$201
Fashion	$810
Music	$125
Non-profit (Museum, Charities)	$43
Sports (Leagues, Individuals)	$815
Trademarks/Brands	$1,060
Publishing	$41
Other	$9

Character and entertainment licensing
Character and entertainment licensing is one of the largest segments of the licensing business, and is probably the part most recognized by the general public. Although the predominance of character and entertainment licensing in the merchandising industry lessens somewhat as other types of licensing emerge and flourish, this is still one of the most prominent. This category of licensing encompasses properties springing primarily from feature films, television shows, videogames and online entertainment. (Characters and franchises that are created via book publishing books are also a popular licensing category, but are generally classified as “publishing” properties for the purpose of LIMA’s numbers.) While at one point the business was dominated by a handful of large entertainment organizations and publishers (mostly U.S.-based), the world has changed somewhat, with popular characters being produced by companies from around the globe.

The largest portion of the entertainment and character licensing business is aimed at children, through a broad range of merchandise categories such as toys, apparel, publishing, food and beverages, videogames and electronics, among many others. Child-targeted entertainment and character properties also often play a large role in promotional licensing But the category also features adult-targeted classic characters whose appeal is centered on a nostalgia factor, and even some child-oriented properties are marketed secondarily to adult audiences by creating a “cool” factor around them.

Corporate trademark and brand licensing
The licensing of company names, logos, or brands (referred to as corporate trademark/brand licensing) is one of the fastest-growing segments of the licensing business. Much of the growth is spurred by the fact that licensing provides enormous strategic, marketing and earning benefits to both licensor and licensee.

An ever-increasing number of major corporations in the trademark/brand sector are using their corporate trademarks and brands to build marketing visibility for a core brand by licensing its use in non-core businesses; to protect the company’s trademarks; to enhance their brand images; to increase their brand exposure; and to generate extra revenues and profits. For a brand owner, licensing offers a way to achieve any or all of those goals without making a large upfront investment in internal product development and manufacturing.

The realm of brand licensing stretches from the rather mundane are of featuring a corporate logo on a t-shirt to much more sophisticated integrated marketing and product development efforts in which a brand is extended into new product areas in ways that are seamless to consumers.

Fashion licensing
The licensing of designer fashion names and brands into such categories as apparel, fashion accessories, health & beauty aids and home goods is one of the best known facets of the business.

In some cases a fashion label may exist only as a license – even the main “core” apparel categories are licensed to third parties for manufacturing, marketing and distribution. The designer or brand owner is responsible for creating the design direction and the marketing umbrella that defines the brand’s appeal. In most other cases, however, the designer or brand owner creates, markets and manufactures specific core categories, and uses licensing as a way of extending the brand into tangential areas such as other apparel areas (i.e. outerwear or intimate apparel), accessories (i.e. belts, headwear, watches, luggage and footwear), fragrances and beauty products, or home fashions.

Fashion licensing is meant to be invisible to the consumer, who is not to even consider that a third party licensee is making the products that carry the designer’s name. Of course, in a well-executed, tightly run licensing program, the brand owner maintains strict control over design and quality, and the licensee manufactures and the agreed upon specifications, so the brand image is seamlessly maintained.

Sports licensing
Sports licensing has grown in scope and sophistication over the past decade, and is one of the top four revenue producers in the licensing world. In the U.S., the business is dominated by the four major sports leagues — National Football League, Major League Baseball, National Basketball Association and the National Hockey League – along with NASCAR. Each of those leagues runs the licensing business on behalf of its teams out of a centralized league office.

Other significant licensing campaigns surround professional sports leagues (i.e. Major League Soccer, Minor League Baseball), organizations such as the U.S. Olympic Committee and the National Collegiate Athletic Association (NCAA), and major sports events such as the Olympics and soccer’s World Cup. In addition more than 300 colleges and universities in the U.S. are involved in collegiate licensing, marketing their rights primarily to the apparel market with sometimes very respectable revenues, depending on the performance of their sports teams and the size of the university or college.

Art licensing
The art licensing community is relatively small and fragmented compared to the other major categories of licensed properties. Art licensing encompasses everything from individual artists who support their artistic endeavors via licensing to well-established businesses that create art and design specifically to decorate a wide range of products, including prints, home décor, housewares, home textiles, publishing, giftware, apparel – literally any product whose appeal can be enhanced via an attractive or evocative image, design or pattern. Today art licensing, because of its timelessness, the ability to target specific niches, year-round profit potential and moderate costs, is a vitally important segment of the worldwide licensing industry.

Source: http://www.licensing.org/education/introduction-to-licensing/types-of-licensing/

Licensing Defined: How To Protect Your Trademark

As discussed in a previous Licensing Defined posts, one of the primary reasons to begin a licensing program is protection. But how exactly does an owner protect his or her property?

A trademark is a type of intellectual property used to identify the owner of a good, service, brand, property etc. A trademark can be a logo, symbol, word, device or a combination and is used to distinguish one property from another as well as identify the source of a good or service.

When you see a TM or ® you know that particular mark is a trademark and someone is claiming ownership. Both the TM and ® represent a trademark, but differ in the amount of protection that is offered. If the owner of a property wants to claim their ownership, he or she should add a TM designation next to the trademark. This tells consumers this is a trademark and is protected against infringement. A ® is the symbol of a federally registered trademark through the United States Patent and Trademark Office (USPTO). Registration is not required for any trademark, however, it does offer some advantages, including a notice to the public of the registrant’s claim of ownership of the mark, a legal presumption of ownership nationwide, and the exclusive right to use the mark on or in connection with the goods or services set forth in the registration.

Protection of a trademark begins with first use. As soon as you begin using a trademark, you as the owner have protection rights, so long as the trademark is not already being used. Any time you claim rights in a mark, you may use the TM designation to alert the public to your claim of ownership, regardless of whether you have filed an application for registration of the mark. The process of filing for a federally registered trademark begins at the United States Patent and Trademark Office. Those interested in applying for registration should first look through the USPTO’s Trademark Electronic Search System (TESS). It is important to search this system thoroughly to discover whether any similar trademarks currently exist that may prevent registration due to a likelihood of confusion refusal – the most common reason for refusing registration.  Once comfortable that similar trademarks do not exist an application will need to be completed and submitted to the USPTO.  It will then be reviewed by the USPTO and, if passed, published for opposition should someone feel the proposed trademark infringes upon their protected mark.  If the mark is not contested the process will continue to obtain a ® designation.

Additional details regarding the federal trademark application process and requirements may be viewed on the USPTO website.

Sources:
http://www.uspto.gov/trademarks/index.jsp
http://www.uspto.gov/trademarks/process/index.jsp
http://smallbusiness.findlaw.com/intellectual-property/what-is-a-trademark.html?DCMP=GOO-BUS_Trademark-WhatIs&HBX_PK=what+is+a+trademark

Licensing Defined: Why License?

Why License?

The use of licensing as a marketing and brand extension tool has proliferated over the last 30 years. When well-executed, a strong licensing relationship brings benefits to all parties to the deal – property owners and their agents, licensees and their affiliates, retailers and, ultimately, consumers, Each of those parties has its own goals and aims that ultimately adds value to the final product or service.

To maximize the outcome, each participant in the licensing process has certain responsibilities to fulfill. Every agreement between the licensing parties is unique in its specifics, so even these responsibilities vary to some extent.

Licensors

There are many reasons for an intellectual property (IP) owner to grant a license. The most obvious one is to generate revenue from the guarantee and royalty payments. But licensing also can serve a number of other purposes. In some cases, those “other” reasons to license might actually be more important to the licensor than the sheer dollars (or euros, pounds, pesos, won, rupees) that are earned. Among them:

Marketing support for the core business. For a television show, movie, children’s book or sports franchise, the retail display and proliferation of licensed products doesn’t only generate product sales, but it also promotes the core property. An array of toys or apparel tied to a movie, sitting on a store shelf, also helps to promote the movie itself. A sports fan wears a sweatshirt with the logo of her favorite team expresses her enthusiasm about the team, but also subtly promotes the sports, the league and the team to anyone who passes her by on the street. The same goes for a beer brand. Seeing a store display of glassware carrying a well-known beer logo, or walking into a neighbor’s home and seeing the glasses on his bar reinforces the brand image, supporting the brands overall marketing efforts.

Extending a corporate brand into new categories, areas of a store, or into new stores overall. Licensing represents a way to move a brand into new businesses without making a major investment in new manufacturing processes, machinery or facilities. In a well-run licensing program, the property owner maintains control over the brand image and how it’s portrayed (via the approvals process and other contractual strictures), but eventually reaps the benefit in additional revenue (royalties), but also in exposure in new channels or store aisles. Examples might include:

• A well-known brand of construction tools licensed into such areas as work gloves or work boots;
• A brand of beauty products extended into a new vitamin line that promotes better looking skin.
• A popular restaurant chain licensing a frozen food manufacturer to market a line of appetizers under its brand.
• A well-known fashion label licensing its name into such natural extensions as leather accessories, shoes, fragrances or home textiles.

Trying out potential new businesses or geographical markets with relatively small upfront risk. By licensing its brand to a third-party manufacturer, a property owner can try new businesses, or move itself into new countries with a smaller upfront investment than by building and staffing its own operations.

Maintaining control over an original creation. Licensing represents a way for artists and designers to profit from their creative efforts, while maintaining control over how they are used. For brand owners (particularly those doing business in the global marketplace), licensing and registering the brands in multiple markets is a way to protect the brand from being used by others without authorization.

In addition to giving the licensee the right to use the property, the licensor assumes several responsibilities that need to be met in order to create a successful licensing program. They include:

• A timely and efficient approval process, so that products can move their way along the development chain in a timely way.
• Giving guidance (often in the form of a printed or digital style guide) about how the brand, character, logo or other IP can be portrayed within the product, on packaging, or in advertising and      promotional materials.
• Assisting in marketing activities and, in many cases, helping to sell the brand into retail.

An IP owner also has to be aware of the risks involved in licensing. The brand owner has to be careful to make a deal with a licensee that can create and deliver products bearing the licensor’s brand that are of agreed-upon quality; that can service the retailer adequately; whose goals for the brand align with those of the brand owner, and who can serve as a true partner in a relationship that, when well-executed, is a win-win proposition for all involved.

Licensees

Licensees lease the rights to a certain property for incorporation into their merchandise, but traditionally they do not share ownership in it. Nevertheless, licensing provides a number of important functions to them.

Gaining the consumer awareness and marketing benefit of a well-known brand, character, logo, design, etc. The most obvious benefit to a manufacturer or service provider the licenses a brand, character, design or other piece of intellectual property is the marketing power it brings to the product. It can take hundreds of thousands or millions of dollars to build a brand from scratch, and licensing represents a way for a manufacturer to take advantage of all the brand building and image building that has gone on before. A child in a toy store doesn’t seek “an action figure.” He’s generally looking for a particular character he’s fond of. Faced with a choice among several cleaning implements, a shopper might be drawn by one that bears the brand of a well known cleaning fluid, rather than a more generic label. In making the decision about whether or not to take on a license, a manufacturer often weighs the potential royalty payments against the cost of building a brand on its own.

Moving into new distribution channels. Taking on a license might help a manufacturer whose brand has been marketed in, for example, mass merchandise outlets to market a more upscale, high quality line in specialty stores or department stores that wouldn’t carry the lower end products.

Reducing in-house costs. A manufacturer who licenses artwork or designs to be applied to hoe textiles, wall coverings, housewares, or on apparel has less reliance on inhouse art staffs that wold otherwise need to be maintained.

Enhancing authenticity and credibility. The publisher of a car-racing videogame might license a host of well-known automotive brands and car models to lend legitimacy and authenticity to the game. Similarly, a maker of automotive parts or accessories will license the car brand to establish in the consumer’s mind that its products will work seamlessly with the cars of the parent brand.

In taking on a license, a licensee takes on a financial obligation, and also an obligation to adhere to agreements in such areas as submitting products for all necessary approvals, creating a product to agreed-upon standards and marketing the product. The risks that the licensee faces in a licensing program are fewer in number than those of the licensor, but potentially greater in magnitude. The major risk is financial – royalties, guarantees and advances. Even if the products do make it to the market, there is no certainty at all that they will do well, no matter what property a manufacturer chooses.

Agents and Consultants

Licensors often retain licensing agents to manage their licensing programs. These agents assume duties for their clients such as contract negotiations or the product approval processes. In return the agent receives a certain percentage of all royalty revenues. For the licensor the advantage of retaining a licensing agent involves the agent’s expertise and network of contacts. The licensor also weighs the cost of the agent against the cost and time involved in building up an internal licensing department to handle the business.

Manufacturers, on the other hand, may retain a licensing consultant whose duties are equivalent (from the other side) to those of the licensing agent. The licensing consultant supports manufacturers who are largely involved in licensing, but who do not have in-house employees to handle the business. It is the consultant’s responsibility to represent manufacturers in their licensing activities, including the evaluation of properties, the checking of their availability or the development and implementation of licensing strategies. The terms under which licensing consultants are paid vary extensively, but the major percentage is paid in commissions derived from product sales.

http://www.licensing.org/education/introduction-to-licensing/why-license/