Have you ever noticed that on a shelf crowded with look-alike products, it is the products that bear images of well-known characters and artistic creations that catch the eye? Strip cartoons (Astérix), actors (Charlie Chaplin), pop stars (Britney Spears), sports celebrities (Tiger Woods), famous paintings (Mona Lisa), buildings (Eiffel Tower) and statutes (Manneken Pis), and many other images appear on a whole range of products, such as t–shirts, toys, stationary items, coffee mugs, posters, cereals, canned foods, soft drinks, children’s ready meals, dairy products, confectionery, key chains, etc. This is known in legal jargon as merchandising of intellectual property (IP) rights. Note that in common business parlance, “merchandising” refers to a whole range of allied activities that improve access to and visibility of products, such as designing of shop layout, proper window displays, product groupings, etc. However, this article deals only with the merchandising of IP rights.
The merchandising of IP rights can be a lucrative addition to a business strategy. It is an important way to improve the visibility and appeal of products on display in retail outlets. However, successful merchandising attracts copiers and imitators, who produce counterfeit products. Skillful use of the tools of the IP system helps businesses relying on merchandising to prevent or deal effectively with such violations of IP rights.
Why consider merchandising?
Merchandising of IP rights can be a flourishing business for many enterprises, either to enter new domains of use of their existing IP assets (through licensing out); or to market and/or advertise their products and services by exploiting the popularity of other’s IP (through licensing in).
For enterprises that own IP assets, licensing out3 to potential merchandisers may provide them the following benefits:
- First of all, licensing out IP rights (such as brands, designs, or artworks) to other companies can generate lucrative license fees and royalties. It also allows a business to enter new product categories in a relatively risk-free and cost-effective way. Cadillac cars, for example, licensed its name for use on leather goods. Different companies paid 5 to 10% of wholesale selling price. Similarly, an artist could license the copyright in an artistic work to others to reproduce, sell and distribute his work on merchandised products.
- Merchandising is also an invaluable marketing tool, as it increases the merchandiser’s brand exposure, enhances the brand’s image, and leads it to new markets. For sport teams, for example, merchandising helps foster a sense of belonging amongst their fans, who feel proud to wear their team’s merchandised goods, such as t-shirts and caps.
- Merchandising may also be an effective tool to attract sponsorship for special events, as it strengthens the association between the sponsor’s brand and the event. It is common for organizers of football matches, art exhibitions, music concerts, benefit dinners, etc. to authorize sponsors to manufacture and sell merchandise that bears the event’s trademark or symbol.
Advantages for the licensee, on the other hand, include:
- Companies that manufacture low-priced mass goods, such as coffee mugs, candies or t-shirts, may make their products more eye-catching, glamorous, fun and attractive by using a well-known brand, famous character, artistic work, or other appealing element on them. Truly, breakfast cereals that feature Harry Potter have more purchasing power than those without any image.
- Companies that launch a new product on the market may advertise their product by associating it with a personality or fictional character in whose reflected light it will appear more attractive. Who wouldn’t be tempted to buy Nike tennis shoes if André Agassi praises them?
More information here.
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