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How to convert intellectual property to a source of the profits

Dec. 5, 2019

The subject matters of intellectual property are a result of the creative, intellectual labour of a person. It is logical to assume that the subject, whose reasoning and efforts have led to such a result, wants to gain tangible benefits in some way by applying it.

The first step on the way to gain the profits from the use of intellectual property is definitely ensuring an appropriate regime of the legal protection.

If this is a subject matter that falls within the copyright or the related rights, namely: a book, an audiovisual work, a song, etc., then the protection of the property and non-property rights of the author arises automatically since the moment of the creation of the work and its expression in an objective form. The disputes on proving authorship arise quite often, so the most correct solution will be depositing a copy in order to verify the rights of the creator of the subject matter and establishing the date of the creation of the work, which is in fact a priority date of the author's rights.

In the case of the patent industry – in order to recognize the rights to the result of the creative work, it must be registered with Rospatent. In this case, an invention, an industrial design, a trademark or other subject matter must contain certain features. The compliance with such conditions of patentability is checked during carrying out a state examination. In the case of a positive decision of the office, the holder of the result of the intellectual activity obtains a patent certifying his exclusive and non-property rights to the claimed subject matter.

In general, ensuring the appropriate regime of the legal protection in respect of the result of the intellectual activity is important due at least to two significant reasons: firstly, the right holder will be able thereby to prove the authenticity of its powers to potential investors and other persons.  Secondly, the legal holder of intellectual property is entitled to prohibit other persons to use the subject matter hold by him, and in the case of an illegal use, to apply to the court with a request to defend the violated interests and to recover the damages caused.

At the second step, it is necessary to determine the way, by which it is possible to gain the profits from the subject matter of intellectual property. It is permissible to distinguish the following kinds of gaining benefit from the use of the subject matters of intellectual property:

  • Gaining the profits directly. Income is achieved directly from the operation of the subject matter itself: revenue from the sale of literary works, movie screenings, performing songs by artists at concerts, etc. The holder of the result of the creative activity may get a systematic income, which depends on the popularity of the work created.
    A striking example of gaining the profits from the use of audiovisual works is the fairly popular in the modern world monetization of video on a YouTube channel. Some person makes a video clip with a desirable content, but at the same time it is acceptable from a moral and ethical point of view, and then he puts it at his YouTube channel. Then the application for participating in a partner program of the server is filed. As soon as the videos become popular, the author can get the income: from advertising, which will be included before or during the video; as a result of the sale of the souvenir products associated with the author of the videos or from the payment for the right to view, in the case if the subscription to the channel becomes paid.
    Another variant is to get a lump sum payment as a result of the sale of the rights to the subject matter under an agreement on the alienation of the rights in favor of another person, as a rule a production center engaged in the promotion of performers or a film company making various films.
  • The income from granting the right to the temporary use of the subject matters of intellectual property and the means of individualization to third parties. In accordance with the current legislation of the Russian Federation, the right holder of the exclusive rights may transfer to other persons the right to use the subject matter under a license agreement. The license agreements are most popular in the field of the trademarks, copyrights and related rights. The transfer of the rights to the use of the trademark as a part of the company brand is also governed by the norms regarding a commercial concession agreement, sometimes referred to as franchising. The main difference between the license agreement and the commercial concession agreement is in the scope and range of the rights granted: in the latter case, the right holder transfers the legal powers to the use of a set of the rights, which, in addition to the rights to the trademarks, also includes the rights to other subject matters of intellectual property. One of the most striking examples of gaining the profits from the commercial concession can be the history of KFC, which grants the rights to the use of the own brand under the franchise agreement to other persons. Thus, the company expands the coverage of the territory, increases the popularity of the enterprise and gets the profits from the use of the intangible assets of the enterprise.
  • Gaining the profits from the use of intellectual property as a part of a complex subject matter. An example can be the use of the furniture design protected by the patent for the industrial design. The consumer acquires a product, in our case the furniture, in the creation of which, several results of the creative labour are used: the industrial design (expressed in the product design), the invention (this can be the springs being unique in their characteristics in the cushions of the furniture), etc.

When using a number of the subject matters of intellectual property, it is quite difficult to determine an amount of the income got from the application of each solution separately. Therefore, the vast majority of the manufacturing companies acquire from the right holder of the invention of interest to them the exclusive rights in full under the agreement on the alienation. Thus, regarding an individual, the point can be about a one-off benefit.

  • Gaining the profits by attracting consumers through the use of the means of individualization as a part of the company brand. In this case, the point is about the use of the trademarks, the places of origin of the products and other means of individualization. Despite the fact that the subject matters are created ultimately by a person or a group of persons, there is no indication of the authorship in the certificates for the trademarks. And the legal regime stipulates a possibility of holding the rights exclusively in respect of the legal entities.

Despite the fact that the income from the use of these subject matters of intellectual property is very difficult to calculate, the experience of the large companies and the international holdings indicates to a direct relationship between the volume of revenue and the popularity of a particular means of individualization. For this reason, having noticed a decline in the popularity in respect of their products, many companies carry out the so-called rebranding, which consists in changing the colour, graphic or a word content of the designation. For example, during the whole history of the company, the world-famous brand Coca Cola has carried out rebranding more than 11 times starting since 1886.

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Author of article

Olga Plyasunova

Olga Plyasunova

Head of Department / Trademark Attorney