MERCOSUR & Chile IPR SME HELPDESK

Licencing in Latin America

MERCOSUR IPR SME Helpdesk

WHO ARE THE PROJECT PARTNERS?

Project Partners:

• University of Alicante, Spain (General Coordinator)

• Eurochambres, EU

• Steinbeis Innovation gGmbH, Germany

• Instituto Nacional de Propiedad Intelectual, Chile

• University of Campinas, Sao Paulo, Brazil

• University Simon Bolivar, Venezuela

• Association ORT, Uruguay

• Universidad Nacional del Litoral, Argentina

• Senior Experts from Mercosur, Chile and other Latin American countries

• Project duration: November 2013 – June 2015

• Budget: 659.825,68 EUR

MAIN FEATURESOUR SERVICES, OUR OBJECTIVES

Services of the Mercosur IPR SME Helpdesk for SMEs in Europe?

• Facilitate the expansion of European SMEs interested in or operating in the Mercosur region and Chile, through increased know-how of the usage and enforcement of the IP system and the IP rights.

• Provide first-line assistance and support to EU SMEs

operating in or interested in the Mercosur region and Chile, through a Helpdesk service.

• Offer a first-line Helpdesk service to European SMEs on IP protection and rights, including a physical office in Brazil;

• Host a multi-lingual web portal for IP and enforcement issues, focused on MERCOSUR and Chile;

• Offer training via webinars, face-to-face and e-learning modules within SME workshops and clinics;

• Work together with a wide range of stakeholders and networks to ensure the needs of the target group are met;

• Monitor on-going developments in the sector and exert influence for policy-making;

How we do it?

Who is our target group?

• European SMEs • Intermediary & multiplier organisations in EU• SMEs and PROs from Mercosur and Chile• Other stakeholders:

Policy-makers European Commission Services, NCPs, DGs, and IP services (other

Helpdesks, IPorta) Higher education and research institutions and organisations Large enterprises and other stakeholders

FOCUSSED ON SERVICES FOR SMEs

SERVICES

MULTIMODAL PERSONALISED ASSISTANCE

• Info service for EU SMEs including first-line assistance on IP protection and enforcement in MERCOSUR and Chile. Responses within 5 working days.

FIRST LINE ADVICE SERVICES ON IPR PROTECTION AND ENFORCEMENT

• Facilitating contacts to relevant government agencies, EC services and projects, NPs, research organisations, enterprises, attorneys, or consultants for further follow-up

SIGNPOSTING SERVICES AND EXPERT LIAISON

• Facilitates co-ordination users based in the target region

BRAZIL OFFICE

WEB AND INFO SERVICE

• Training and e-learning materials • IPR case studies, interviews, FAQs• Up-to date news and events, bi-monthly newsletter • Step-by-step guide for doing business in MERCOSUR and Chile• Gateway to the Helpline and self-assessment tool

USER FRIENDLY LEGAL SUPPORT MATERIALS

• MERCOSUR IPR SME Helpdesk NetSpace

NETWORKING AND INTERACTION

• English, French, German, Portuguese and Spanish

MULTI-LINGUAL PORTAL AND SERVICES

Identify the various ways of entering the global marketplace.

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GLOBAL MARKETPLACE QUESTIONS

• What are our options in selling abroad?

• How difficult is global marketing?

• What are the potential risks and returns?

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WHY “GO GLOBAL”?

•Earn additional profits

•Leverage a unique product or tech. advantage

•Possess exclusive market information

•Utilize “economies of scale”

What is the external environment facing global marketers?

THE EXTERNAL ENVIRONMENT

SOCIO-CULTURAL ASPECTS

The common set of values shared by its citizens

that determine what is socially acceptable.

SOCIO-CULTURAL ASPECTS

DEMOGRAPHIC MAKEUP:MARKETING CONSIDERATIONS

Population density

Urban or rural

Personal income

Rise of global middle class

Supply of professionals

NATURAL RESOURCES

Differences in Resources create…

International dependencies Shifts of wealth Inflation and recession Export opportunities if resources are abundant Stimulus for military intervention

ECONOMIC AND TECHNOLOGICAL DEVELOPMENTType of Society Description

Traditional

Pre-Industrial

Takeoff

Industrializing

Agricultural, Little Upward Mobility

Social and Economic Change

New Industries

Spread of Technology

FullyIndustrial

Exporter, Technology as Driverof New Innovation

ECONOMIC AND TECHNOLOGICAL DEVELOPMENT

POLITICAL STRUCTURE EXTREMES

LEGAL CONSIDERATIONS

Tariff

Quota

Boycott

Exchange Control

Market Grouping

Trade Agreement

Legal Structures favoring or

limiting trade

LEGAL CONSIDERATIONS

Tariff

Quota

Boycott

Exchange Control

Market Grouping

Trade Agreement

A tax levied on goods entering a countryLimit on the amount of a product entering a countryExclusion of products from a countryForeign exchange must be sold to a control agency

Common trade alliance

An agreement to stimulateinternational trade

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TRADE AGREEMENTS: DOHA ROUND

Reduces tariffs by one-third world-wide

Patent/copyright protection

Services under international rules

Reduction of farm subsidies

POLITICAL AND LEGAL CONSIDERATIONS

FTAAFTAA NAFTANAFTA European UnionEuropean Union

Trade agreementsTrade agreements

SEICASEICA Andean PactAndean Pact MERCOSURMERCOSUR

RISK LEVELS FOR GLOBAL ENTRY

REVENUE VS.

RISK

ENTERING THE GLOBAL MARKETPLACE

Licensing Legal process allowing use of manufacturing/patents/knowledge.

ContractManufacturing

Private-label manufacturing by a foreign country

Joint Venture Domestic firm buys/joins a foreign company to create new entity.

Export Sell domestically produced products to buyers in other countries.

Direct Investment Active ownership of a foreign company/manufacturing facility.

EXPORT INTERMEDIARIES

Buyer for Export Assumes all ownership risks and sells globally for its own account.

Export Broker Plays the traditional broker’s role by bringing buyer and seller together.

Export Agent Acts like a manufacturer’s agent for the exporter in the foreign market.

LICENCING AS PART OF COMMERCIALISATION PROCESS

Commercialisation is the process of translating IP into marketable goods and services in order to generate profit and growth. The IP financial success of commercialisation depends on the choice of the most appropriate commercial tool, based on:

The organisation’s business objectives and strategy

The form of intellectual property to be exploited

The economic resources at disposition

LICENCING: SETTING THE SCENE

LICENCING

• Drawbacks• Drawbacks

• Advantages• Advantages

Access to expertise Access to innovationAccess to markets

Source of incomeAccess to markets

co-ompete

Licencee is incompetentLicencee challenges agreement

Losing control on information

Protection outdatedUnability to payback royalties

Licencor Licencee

The parties concerned are to be clearly identified

Usually Complex contract terminology explained

Grant of right to be clearly identified...

exclusive vs non-exclusive

Use, reproduce, modify, distribute, etc..

Sub-licenseLimit in geographical scope

Limit in technical /commercial scope: field of use

TIPS AND WATCH-OUTS

Exclusivity of the licence. In Uruguay, Brazil, Argentina and Paraguay, the licence is presumed to be non-exclusive, unless otherwise agreed upon. In Venezuela, there are higher legal restrictions: trademark licences may only be transferred if the business is transferred as a whole.

TIPS AND WATCH-OUTS

Before signing a licensing contract, it is recommended to check through an advisor if the intangible assets have already been protected by a third party in the country. The result of this search shall be the subject of a written report, commonly called “Freedom to Operate” (FTO).

Compensation: lump-sum vs. royality

If royality, How and when? Periodic according to which milestones, selling performance etc..?

If royality, How will they be calculated? Percentage Sale price, unit sold etc.. (brutto vs Netto)

If royality, When payments are due?

If royality, What currency at what exchange rate?

TIPS AND WATCH-OUTS

Price of a trademark licence. Example: In Brazil, the price for the use of a trademark where technology is not transferred should not exceed 1% of the sales of the licensed products, unless there is evidence to the contrary. However, the other MERCOSUR countries do not have specific regulations in this regard.

Mitigating risks

Diligence

ImprovementsInfringements

WarrantiesDispute Settlement

TIPS AND WATCH-OUTSBefore signing a contract, it is necessary to examine the licensee in order to assess whether:o They have expertiseo The products or services that they provide or produce may be complementary

or competitive regarding the products to be licensedo They are capable of introducing the product or service in the marketo They have current or potential clients that may be interested in the products or

services to be licensedo They are familiar with distribution channels o The enterprise is prestigious in the target marketo No problem has been reported regarding the enterprise and its previous

experience as a licensee

Terms of the Licence AgreementCommencement

TerminationDuration

AND Quality…

WATCH-OUTTIPS AND WATCH-OUTSLicence duration. Their duration is normally the same as the one of the IPR that they refer to. Nevertheless, specific time limits may sometimes be set. In the specific case of Paraguay, exclusive licensing contracts may last for up to 5 years. On the other hand, Andean countries may establish time limits under the Andean Pact, e.g. in Venezuela, every IP right has a specific time limit stipulated by Law.

Terms of the Licence AgreementQuality Standards and control

TIPS AND WATCH-OUTS Quality standards of the products manufactured under a licence. For example, Trademark Law in Paraguay states that, in order for a licensing contract to be registered, it must include provisions that enable the right holder to monitor the quality of the licensed products or services. In the Andean Pact countries, licensing contracts must include regulations on quality standards. In Colombia, the holder of the trademark must effectively monitor the quality of the products or services and is responsible for any potential damage caused to third parties.In Argentina, there are no regulations on quality standards regarding products manufactured under licence. However, there are some rules that prohibit the use of clauses to regulate the commercialisation, production and technological development by the licensee.

Applicable Country Law!

Forum of Dispute:Mediation, Arbitration, court..

SOME SPECIAL ATTENTION!

Copyright licencing: Guarantee access to physical copies to lincencee Protection of valuable assets e.g. master copy or source code by an agreed third party

Trademark licencing: consitent use of the trademark Monitoring through specifications, documentations etc… to preserve standards Auditing and right to visit facility or demand samples

International licensing is not like licensing in a domestic setting. EU licensors exploring new markets need to consider the following:

The level of economic developments of the receiving country.The particularities of the geography, history and culture, including the

language and the economic, social and political systems.Differences in business practices and in the manner that negotiations

are conducted in the receiving country. The legal system and the differences with one own system.The intellectual property system of the country. That includes any

considerations on the constitutional and legal regime as well as to the number of international treaties that the country has signed.

In complex licensing e.g. franchising, the characteristics of the local market and of the financial, real estate and labor systems.

CONSIDERATIONS I

Most aspects of international licensing agreements are the same as domestic licensing agreements. Þ It is foreseen in both events a grant clause defining the licensed

subject matter as well as consideration and termination clauses.Þ Licensors are interested to impose controls in the use of the work,

invention or trademarks. Most legislation would allow licensors to do that without facing legal restrictions.

However,….

CONSIDERATIONS II

Not every contractual provision valid under “EU” law would be necessarily recognized in foreign countries.

The granting clause may require specificity to a more-or-less extent. In keeping with this, the scope of the agreement could be interpreted broadly in favor of licensees unless limitations are express.

Representation and warranty clauses may be the subject to certain form of legal restrictions. The law may indeed impose obligations on the side of the licensor with the purpose to protect licensee.

Notice or marking provisions may be requisite in certain jurisdictions. Jurisdiction and applicable law may also be restricted under local regimes. The

foregoing limitations could include arbitration. The same could be true as to term and termination. Antitrust and competition rules sometimes vary from country to country. Confidentiality or non-disclosure clauses may not be an acceptable practice. Clauses not to compete may also not be valid. In franchising agreements the law may impose a burden on issues like the offering

of the franchise.

CONSIDERATIONS III

GENERAL CHALLENGES AND OPPOTUNITIES Protectionist policies Basic rather than applied research at universities Looking for more developed markets for sources of

innovation favourable to EU export of know-how Different experience and expertise among governoment

University and industry Taxation Antitrust provisions might be ignored Andean community restrictive regulation

SOURCES AND FURTHER LINKS:

• Commercialising Intelectual Property: Licence Agreements, http://iprhelpdesk.eu• Exchanging Value: Negotiating Technology Licencing Agreements, WIPO• Licence Agreements, UNICO• Licencing as a source of technology trade: A picture of Latin America, Luis Schmidt• Licencing in Latin America, http://www.mercosur-iprhelpdesk.eu/factsheet• Licencing IP, Intelectual Property Office UK• Patent and Technology Licencing in Latin America• Successful Technology Licencing, WIPO

CONTACT US:

www.mercosur-iprhelpdesk.euEmail: info@mercosur-iprhelpdesk.eu

Coordinating institution:Universidad de Alicante

E-03690 AlicanteESPAÑA

Tel: +34 965909718

© 2014 - A project funded by the European Commission Directorate-General Enterprise and Industry under the Competitiveness and Innovation Framework Programme (CIP) Disclaimer: The Mercosur IPR SME Helpdesk is a free service which provides practical, objective and factual information aimed to help European SMEs to understand business tools for developing IPR value and managing risk. The services are not of a legal or advisory nature and no responsibility is accepted for the results of any actions made on the basis of its services. Before taking specific actions in relation to IPR protection or enforcement all customers are advised to seek independent advice.