Friday, October 30, 2009

IPR in the IPL

In the Indian Premier League (IPL), the player gets to choose between two types of contracts. In one, the Board for Control of Cricket in India (BCCI) guarantees a fixed amount to the player; if the auction proceeds are higher, BCCI keeps the excess. In the other, the player keeps the auction price.

In the player auctions, Dhoni and Andrew Symonds ($1.5 Mn and $1.35 Mn respectively) emerged with the highest bids. Shane Warne got a bid of US$450,000 sign-on fee for the first season. It seemed high considering that he was in the evening of his test and ODI career. However, he was not the highest paid, even in his team -- Yusuf Pathan got $475,000. In the event, Warne and Pathan both justified the price paid by the franchisees, with Warne leading his team to a victory in the 1st IPL, with very few other big names.

BCCI is the IPL Franchisor; each team is a franchisee of the BCCI. BCCI licenses the players to play for the franchisees, based on winners at auctions. However, it is acknowledged that the player is himself a brand, and can be used by the BCCI in relation to the IPL matches. As a consequence, the players retain with themselves the right to decide about brand endorsements of their name and image. The players are bound to a team by a  3-year contract, but teams can trade players after 1 year.

BCCI has four IPR-related revenue streams (because it has applied for registering IPL wordmark and the logo as trademarks):
(a)  revenue from sale of franchise rights,
(b) bids from franchisees for ownership of a  team,
(c) title rights and (the most lucrative)
(d) media rights.

Franchisees get 72% of the media rights revenues while 8% goes in form of prize money, and 20% is retained by IPL, in year 1. The franchisees' share declines to 60% over 5 years.
The eight franchisees will receive 80 per cent of the media rights in the first year, 70 per cent in the second, 65 per cent in the third, 60 per cent in the fourth and 50 per cent for the remaining six years.

Total media rights are expected to earn BCCI $1.026Bn or Rs.8,700 crores in 10 years for telecast rights sold to Sony/ World Sports Group consortium. They in turn sold telecast rights on a geographical basis to 7 different networks in year one, which has swollen to 13 different networks by IPL 3, at mostly undisclosed prices.

In the first auction in Jan 2008, the base price for 8 franchises was set at $400 Mn but fetched almost $724 Mn. Teams also pay 10% of the bid amount every year to IPL every year for expenses. Each franchise is, in addition, expected to spend $3-4 Mn on advertising and promotions, and pay for stadium contracts for 7 matches every year at Rs.25 Lakhs per match on an average.

The title sponsorship was bagged by DLF Universal paying Rs.200 crores for 5 years (Rs.40 crores per year) in another open bid process. Pepsi is the tournament's Official Beverage paying, USD12.5 Mn for 5 years (everything official about it, for a change). Kingfisher Airlines got the IPL Umpire Partners with right to advertise on umpires' clothes, and 3rd umpire decision sponsorship for 5 years at Rs.106 crores.

PS: This post has been updated on Nov 6, 2009 and also on 26 March, 2010.

Thursday, October 29, 2009

Social Networks and the "right of publicity"


While controversies on the "right to publicity" for celebrities is well-known, the Internet is creating new problems - about the "right to publicity" of non-celebrities.

In February this year, Facebook changed its Terms of Service and claimed ownership of all content on its website - even if the user closed his/her account. They had to contend with a flurry of objections and tens of thousands of people closed their accounts. Within a few days, Facebook was forced to roll back to its old terms of service.

An American couple who posted their Christmas card on a social networking site ( found months later that a grocery in Prague had used the photograph on advertisements without seeking their permission! 

In my own case, we got a blown up family colour photograph printed and laminated. As the first lamination was defective, we rejected it,  and got another printout laminated. The store owner put the rejected laminated photograph in his store window - and we came to know of it when several people whom we know asked us whether we were advertising and endorsing the shop! 

In this case, we did not really object.  However, if this had happened in the US, we would have been entitled to sue the shop owner for violation of our "right to publicity", a doctrine well enshrined by a large body of case law involving celebrities as well as non-celebrities. Celebrities who have won right to publicity cases include Woody Allen, Bette Midler and Jacqueline Onassis. In some of these cases, like Onassis' and Midler's cases, the offence was not using their photographs or audio, but using look-alikes and sound-alikes. 

Wednesday, October 28, 2009

Value of Intangibles as % of Market Capitalisation Crashes in 2008

An article in Issue 34 of the IAM Magazine carries this sobering observation. 

It traces the growth of this metric from less than 20% in 1972 to hover between 60 and 70% for a decade and a half beginning 1995, to touch a high of 70% by end of 2007, only to see an abrupt about-turn in 2008 to touch 45%.  It also traces the several Accounting and Compliances relating to Intangibles from FAS 141 and 142 in 2001 and SARBOX 302, 404 and 409 in 2002 in the US and IAS 36 and 38 in 2003 and IFRS 3 in 2004 in Europe. These developments coincided with the period when this metric hovered around 70%. All these are projected as attempts to standardize the valuation of this pre-dominant part of the Balance Sheet that few knew much about. However, in hindsight, I cannot help but wonder: Could it be that these accounting standards and compliance developments fuelled boosted valuations and hence income figures?  This is fuelled by another article in the same Issue by Dr. Patrick Sullivan, one of the Gurus of Intellectual Asset Management where he observes: "Valuing IP is complex, with more than 50 different methods currently in use. Given the growing importance of IP to so many organisations, perhaps now is the time to re-think whether global valuation standards make sense".

The article that traces the value of Intangibles as % of M Cap employs a simple-to-understand definition of "reputation" as "the impression formed by stakeholders of how a company manages its intangible assets", and this reputation took a beating in 2008. It observes that financially, the values of most intangible assets are closely linked to one another like the stones in a Roman arch, so that collectively the intangible assets comprise an enterprise’s reputation value – the difference between market capitalisation and book value. The loss of any one key intangible asset, it observes, may destroy a disproportionate amount of reputation value.

Finally, the article ends with two sobering observations: 
  • Reputation restoration, including superior cash management, is the most promising path for creating enterprise value for the near term.
  • For many companies today, surviving the near term is an existential imperative.

Tuesday, October 27, 2009

The Strategic Value of the Traditional Knowledge Digital Library

In view of the sustained attempts by "bio-pirates" seeking to patent formulations of products already in the public domain, being based on traditional knowledge recorded in ancient texts, the exercise of creating and maintaining the TKDL is a salutary exercise in maintaining and making accessible "prior art" written and recorded in texts and languages not universally understood or accessible.  Access to such a database helps patent examiners filter out the meritorious claims from the non-meritorious, on grounds of existence of prior art.

India woke up to the importance of recording such knowledge embedded in ancient texts only when various agencies came together to selflessly fight against the patent granted to "Basmati-like" grains and lines, that would have effectively blocked export of basmati rice to US and other markets as being violative of a patent.

The success in the fights against patents for neem-based fungicides and for treatment of wounds using haldi (turmeric) showed the importance of such a database as a defensive bulwark against bio-piracy.

The benefits of such a database were seen recently when, in a matter of 3 weeks, the attempt by a Spanish company to patent in the EPO a cure for leucoderma based on melon seeds extract was rejected, citing prior art from the TKDL.

Even so, bio-piracy continues unabated. For example, L'Oreal has patented the use of kava, a cash crop grown in island countries like Fiji and Vanuatu and known to the natives for hundreds of years (there are over 100 varieties of kava growing there) for products that stimulate hair growth and reduce hair fall.

A similar concept, that of a "defensive patent entity" has been developed on terms analogous to the TKDL to provide "safe passage" for users of key patents and as a defense against "patent trolls". These entities basically license their patents very cheaply to ensure that benefit of the patents spreads widely. For example, India's CFTRI has patented several taditional snack foods including Traditional Indian Tamarind Toffee, which is most commonly recognised by us as the sweet served on Jet Airways flights.  The idea is to block any attempt at patenting that product, and thereby denying many cottage enterprises the right to make a living, generate employment and profit from selling their wares using traditional knowledge.

Wednesday, October 14, 2009

IPR takes centrestage in WTO dispute on cotton subsidies

The developed world is learning that the legal framework supporting and honouring the western IPR regime in a developing country cannot be taken for granted.
Brazil has been permitted by the WTO to retaliate against the injustice done to their cotton farmers by the generous subsidies doled out by the US to their cotton farmers, making it possible for them to undercut and underprice the cotton. And what form is this retaliation taking? Not new anti-dumping on US imports, or trade embargoes. 
Brazil has been permitted to allow their country's pharmaceutical companies to manufacture medicines in Brazil in deliberate violation of patents held by US companies. This one is a below-the-belt hit for the vibrant US pharma industry. Brazil is a huge market, and very lucrative too. All the lucre will disappear overnight in their Brazilian operations, if this were allowed.
This is very unfair, or very fair, depending on your point of view. 
For US companies, it will seem very unfair, because, for no fault of theirs, they are losing patent protection in a lucrative, large market (there aren't too many of those nowadays!). 
However, Brazil, and most of sub-Saharan Africa, which includes really poor countries like Chad, Mali, Liberia and Burkina Faso, will be cheering. They have cotton they cannot sell thanks to under-priced US cotton flooding international markets; they don't have factories that can add value to the cotton; and they have huge AIDS affected populations. Their cotton farmers and the AIDS patients will like the prospect of better times ahead.

Monday, October 12, 2009

Article on Geographical Indications in Business Line


Please see article on Geographical Indications authored by the Honorary Webmaster of, and blogger-in-chief on this blog, Mr. Rajesh Haldipur, in Business Line, a form of Intellectual Property Protection, published in the Opinion Section in the Issue dated 3rd October, 2009.