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Leveraging IP Assets: Role of IP in Improving Enterprise Profitability
Leveraging IP Assets: Role of IP in Improving Enterprise Profitability
Leveraging IP Assets to improve profitability
Leveraging IP Assets to improve profitability
Patent: right to exclude
Patent: right to exclude
Patent: right to exclude
Patent: right to exclude
Licensing and concurrent IP rights
Licensing and concurrent IP rights
Exclusivity: Sole License
Exclusivity: Sole License
Exclusivity: Sole License
Exclusivity: Sole License
Exclusivity: Case study in increasing profitability by granting a sole
Exclusivity: Case study in increasing profitability by granting a sole
Fields of Application
Fields of Application
Fields of Application
Fields of Application
Fields of Application
Fields of Application
Territory
Territory
Leveraging IP Asset in a Strategic Alliance
Leveraging IP Asset in a Strategic Alliance
Strategic Alliances Combining IP Assets to create new IP
Strategic Alliances Combining IP Assets to create new IP
Strategic Alliances Combining IP Assets to create new IP
Strategic Alliances Combining IP Assets to create new IP
Strategic Business relationships that can be formed by leveraging
Strategic Business relationships that can be formed by leveraging
Franchising
Franchising
Merchandising
Merchandising
Case Study: ITL Corporation Pty Limited
Case Study: ITL Corporation Pty Limited
Companys name and business
Companys name and business
Company beginnings
Company beginnings
Identifying the need
Identifying the need
First product
First product
First trade mark
First trade mark
Licensing option
Licensing option
License manufacturing and sell products
License manufacturing and sell products
License manufacturing and sell products
License manufacturing and sell products
License manufacturing and sell products
License manufacturing and sell products
Other products
Other products
Other Products
Other Products
Evolution to Licensing in
Evolution to Licensing in
One IP Asset leveraging another
One IP Asset leveraging another
Patent and Trade Mark same product
Patent and Trade Mark same product
License Patent and Trade Mark together
License Patent and Trade Mark together
License Patent and Trade Mark together
License Patent and Trade Mark together
Case study: leveraging one IP Asset with another: Trade Secret and
Case study: leveraging one IP Asset with another: Trade Secret and
Case study: leveraging one IP Asset with another: Trade Secret and
Case study: leveraging one IP Asset with another: Trade Secret and
Case study: leveraging one IP Asset with another: Trade Secret and
Case study: leveraging one IP Asset with another: Trade Secret and
Leveraging occurs by grant of rights, not excluding
Leveraging occurs by grant of rights, not excluding
Importance of performance obligations in a license
Importance of performance obligations in a license
Types of Performance Obligations
Types of Performance Obligations
Obligations before the first sale
Obligations before the first sale
Commercialisation Milestones
Commercialisation Milestones
Obligations after the first sale
Obligations after the first sale
Conclusion
Conclusion

: Leveraging IP Assets: Role of IP in Improving Enterprise Profitability through Direct Exploitation, Licensing, Franchising, and or Merchandising, and Developing Other Types of Strategic Business Relationships: Case Studies. : Philip Mendes. : Leveraging IP Assets: Role of IP in Improving Enterprise Profitability through Direct Exploitation, Licensing, Franchising, and or Merchandising, and Developing Other Types of Strategic Business Relationships: Case Studies.ppt. zip-: 193 .

Leveraging IP Assets: Role of IP in Improving Enterprise Profitability through Direct Exploitation, Licensing, Franchising, and or Merchandising, and Developing Other Types of Strategic Business Relationships: Case Studies

Leveraging IP Assets: Role of IP in Improving Enterprise Profitability through Direct Exploitation, Licensing, Franchising, and or Merchandising, and Developing Other Types of Strategic Business Relationships: Case Studies.ppt
1 Leveraging IP Assets: Role of IP in Improving Enterprise Profitability

Leveraging IP Assets: Role of IP in Improving Enterprise Profitability

through Direct Exploitation, Licensing, Franchising, and / or Merchandising, and Developing Other Types of Strategic Business Relationships: Case Studies Shanghai 15 December 2004

I N N O V A T I O N L A W PHILIP MENDES BRADLEY THOMAS (ASSOC) Level 3, 380 Queen St Brisbane QLD, Australia Ph + 61 7 3211 9033 Fax + 61 7 3211 9025 Philip@innovationlaw.com.au Bradley@innovationlaw.com.au

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2 Leveraging IP Assets to improve profitability

Leveraging IP Assets to improve profitability

What does leveraging IP assets mean ? use IP Assets, to build business relationships and opportunities in that way achieving more with an IP Asset than if you didnt have the relationship and in turn, to improve a business profitability Outline: Looking closer at an IP Assets owner right to exclude others Looking at ways for sharing IP Assets and how taking an inclusive approach can improve profitability Emphasis on Case Studies: some of the imaginative ways that IP Assets have been leveraged to create new business relationships and increased profitability

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3 Patent: right to exclude

Patent: right to exclude

Patent confers upon its owner the right to exclude others from exploiting the invention the subject of the patent The perspective of a patent owner, consistent with that idea, is that a patent has to be closely guarded, with the owner being alert to others who may be infringing it, and who must be prevented from doing so That is a very simple use of the rights conferred by a patent Patent owners often focus on their patent As barriers to entry, as tools to exclude others Rather than as tools for strategic alliances and increased profitability

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4 Patent: right to exclude

Patent: right to exclude

proactive inclusion

Patent owner sees the right to exclude as a means of recouping what may have been years of speculative investment A patent owner has that right to exclude But it is a right which sometimes may result in a patents economic benefits not being maximised A patent may be used to exclude others, but it can also be used as a tool to form strategic alliances, take advantage of new opportunities, and in that way maximise profitability Recouping the speculative investment on the patent may in fact be slowed down by the right to exclude. It might be recouped faster through using IP assets as tools for new opportunities An IP asset can be leveraged to partner with other businesses in a strategic way to create new business opportunities

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5 Licensing and concurrent IP rights

Licensing and concurrent IP rights

Licensing IP is a tool An owner of an IP asset may grant to another person rights to use the owners IP An owner of IP may do so consistently with retaining their own exploitation rights How? By the use of tools that permit concurrent exercise of IP rights Sole Licenses a shade of exclusivity Field of Application restrictions Territory restrictions

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6 Exclusivity: Sole License

Exclusivity: Sole License

Exclusivity:

Exclusive

Sole

Non Exclusive

One Exploiter the licensee

Two Exploiters owner and the licensee

Numerous Exploiters owner and numerous ees

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7 Exclusivity: Sole License

Exclusivity: Sole License

A mechanism for concurrent rights to a patent Owner may exploit rights, and at the same time grant exploitation rights to a licensee: a sole license Two persons in the market exploiting the same patent as competitors Why would a patent owner with the right to exclude others grant a license to a person that would be its competitor ? Surely that will decrease profitability, not increase it ! Doesnt that defeat the purpose of having the right to exclude others granted by a patent ? Yes, but not necessarily always

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8 Exclusivity: Case study in increasing profitability by granting a sole

Exclusivity: Case study in increasing profitability by granting a sole

license

Technology developed by testing laboratory Company A in Australia Company A had clients globally But its global clients amounted to less than 1% of the global market place Did not have a global marketing network and did not want to preferring to remain boutique Company B in Europe A competitor to Company A But a significantly larger company, with a significantly larger share of the global market place Had the resources to market widely, globally, and maximise the use of the technology Choices: Exclude all others from the technology and make minimal financial returns License a competitor with greater capability and maximise financial returns

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9 Fields of Application

Fields of Application

Some technologies lend themselves to different uses. These are called fields. field of science particular application industry by industry Some licensees have expertise / marketing networks in some fields but not all. Would you exclude others from exploiting your patent in all fields, even those fields, applications, industries outside your own capability to service ?

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10 Fields of Application

Fields of Application

New formulation for scratch resistant plastic Possible fields: Exterior pipes plumbing industry Spectacles optics industry Furniture moulding industry Bottles for consumer products injection moulding industry Car parts and trim motor vehicle industry Boat trim boating industry

Would you keep all fields to yourself and exclude others, even if you had no capability other than in one field only ? No, you would license out remaining fields Would you license optics industry applications to a plumbing manufacturer ? Would you license motor vehicle applications to an optics manufacturer ?

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11 Fields of Application

Fields of Application

Retain rights you want to exclude others from And leverage your IP by licensing out other fields of application to others, in that way maximising your own profitability

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12 Territory

Territory

The most familiar way to leverage an IP Asset Patent owner keeps a territory that it sells its products in licenses patent to licensees to sell in other territories that the owner cannot service Could be country by country states or other geographically distinct areas within a country Rather than excluding others from the IP Asset It is made available to strategic partners that exploit it, and pay a royalty

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13 Leveraging IP Asset in a Strategic Alliance

Leveraging IP Asset in a Strategic Alliance

A strategic alliance occurs where two or more companies align themselves to each other They may be competitors They might also be in entirely different industries But they combine their efforts or their resources for their mutual benefit They may even make their IP Assets available to each other Usually more than just a license a closer more intimate relationship than just a license They leverage their own IP Assets to form a partnership with another person that contributes its IP Assets, with a common objective of both benefiting from each others IP

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14 Strategic Alliances Combining IP Assets to create new IP

Strategic Alliances Combining IP Assets to create new IP

Company A is conducting R&D on a new formulation for a scratch resistant plastic for making plastic furniture Company B is be conducting R&D on a new formulation for a scratch resistant plastic for making motor vehicle trim Both have valuable IP in the area have patents They decide that collaborating together combining their resources combining the inventiveness of their staff may lead to developing a formulation that would suit them both

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15 Strategic Alliances Combining IP Assets to create new IP

Strategic Alliances Combining IP Assets to create new IP

They enter into a Collaboration and license agreement To collaborate and create New IP hat will be jointly owned Company A grants to Company B a license Of Company As patents Of Company As interest in the New joint IP In the field of motor vehicle trim and accessories Company B grants to Company A a license Of Company Bs patents Of Company Bs interest in the New joint IP In the field of furniture Both have leveraged their own IP assets To create New IP To obtain access to the IP of the other, and the new IP, in their own field of interest

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16 Strategic Business relationships that can be formed by leveraging

Strategic Business relationships that can be formed by leveraging

Licenses are at the heart of almost all strategic relationships where this leveraging of an IP Asset occurs License of a patent a trade mark A registered design Special types of licenses Franchising Merchandising

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17 Franchising

Franchising

A special type of license A bundle of IP rights and contractual rights Trade mark A business system or process (know how) Group purchasing power Group advertising power The bundled IP and contractual rights are licensed, or franchised, to a licensee, or franchisee The originator of the IP rights leverages those rights by creating business relationships with franchisees that pay franchise fees, or royalties

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18 Merchandising

Merchandising

Another special form of license Licensing Designs Characters (movies, cartoons) Copyright works (art, photograph etc) And allowing licensee to reproduce onto products, from clothes to childrens lunch boxes, back packs, and food containers Another form of leveraging an IP Asset by extracting maximum value by sharing its use with others

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19 Case Study: ITL Corporation Pty Limited

Case Study: ITL Corporation Pty Limited

An Australian Company Commenced operations in 1994 Seen it grow from the two founders with no other staff, to over 170 staff in four countries from no IP assets to 12 patent families Over 100 granted patents worldwide 11 Trademarks registered in over 25 countries From a company with no capital, to a company listed on a stock exchange in late 2003

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20 Companys name and business

Companys name and business

ITL stands for Innovation Technology Licensing ITLs name itself indicates that IP Assets are a major focus of its attention Its name suggests that licensing was its intended business model

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21 Company beginnings

Company beginnings

Joint Managing Directors Bill Mobbs (computer consultant) Jag Dillon (research scientist and then TGA (FDA) official) Both decided to undertake a Masters of Business Administration and met at University At the time were aged in early 30s They both decided that the business that the wanted to form needed to be niche global innovative protectable

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22 Identifying the need

Identifying the need

In 1993 - 1994 the risk of AIDS infection was receiving global attention, as was Hepatitis C infection Healthcare professionals (doctors, nurses, etc) were particularly concerned about the risk of accidental infection, given that they daily dealt with patients blood At about this time a retractable syringe entered the market The blood collection agencies (Red Cross and others) were particularly concerned about accidental needle stick injury to their staff ITL identified the need for a product into which blood collection needles could safely be contained, upon exit from the blood donor, in that way minimising the risk of needle stick injury

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23 First product

First product

They designed a vessel into which blood collection needles would retract In 1994 ITL applied for a utility patent or petty patent (in Australia now called an innovation patent) over their first product, the DonorCare Later converted to a standard patent Has a unique design Needle retracts into the vessel, protecting health care staff from the risk of needle stick injury

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24 First trade mark

First trade mark

DonorCare was also the first trade mark DonorCare Trade Mark was sought at an early time ITL identified the need to achieve product recognition at an early date It needed its potential customers to be aware of its product, and to recognise ITLs products, over any competing product

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25 Licensing option

Licensing option

ITL considered for some years that its strategy would be to license out the patent Licensing held many attractions ITL could be a passive licensor Collect royalties apply its resources to developing new products

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26 License manufacturing and sell products

License manufacturing and sell products

But greater profitability was to be realised by selling product instead of licensing ITL decided to leverage its IP assets to Develop an alliance with an OEM manufacturer that manufactured product and sold only to ITL Develop an alliance with global purchasers of its products

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27 License manufacturing and sell products

License manufacturing and sell products

ITL

Manufacturer

Buyer

ITL accordingly decided to leverage its IP Assets by moving away from licensing, and instead licensing a contract manufacturer, and selling products

License to manufacture

Sell products back

Sell products

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28 License manufacturing and sell products

License manufacturing and sell products

By doing so Leveraged its IP Asset to build a capability it did not have Created a strategic relationship with a licensee who was licensed to manufacture only, and to exclusively supply all product to ITL, and to no one else Leveraged in a way that achieved more with the IP Asset, and more with that strategic relationship, than if that leveraging had not taken place, and there had been only a simple license.

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29 Other products

Other products

Platypus Similar to DonorCare, but designed specifically for AV Fistula Needle sets Also designed to prevent needle stick injury Key to its success has also been Patent protection (Niche, global, innovative, Protectable) Trade Mark Market recognition and loyalty

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30 Other Products

Other Products

Blade Guard Stitch cutter, reducing risk of injury Flipper Stripper Strips blood tubing Samplock Vacuum tube for blood collection Adopted the same strategy

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31 Evolution to Licensing in

Evolution to Licensing in

Having established own manufacturing facility, it has licensed in other peoples technology to add to its product range That is, has licensed in other peoples unique patents or designs to produce and sell Leuko Cart A portable cart for blood bags Baby Leuko Cart A smaller version Adopted the same strategy

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32 One IP Asset leveraging another

One IP Asset leveraging another

What does it mean to leverage one IP Asset with another ? You have one IP Asset You have a second IP Asset You leverage one IP Asset with another, and maximise the financial return, than if you had not done so

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33 Patent and Trade Mark same product

Patent and Trade Mark same product

Patent term will expire after 20 years from application date Trade mark will continue indefinitely, while registration fees are paid If directly exploiting a patent rely on patent to exclude others that may reverse engineer But in the meantime promote the trade mark for that product Generate customer loyalty for the product The patent may expire, but sales may continue, enjoying the competitive edge brought about by the continued trade mark and customer loyalty Leverage the patent to add value to the trade mark and improve profitability beyond the patent term

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34 License Patent and Trade Mark together

License Patent and Trade Mark together

The challenge: To do the same when licensing a patent Persuade licensee to also take a license of a trade mark, and require only that trade mark to be employed in the exploitation of the patented product Have two royalty rates: one in the patent license, the second royalty rate in the trade mark license Collect two royalties for the life of the patent After the patent expires continue to receive royalties pursuant to the trade mark license

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35 License Patent and Trade Mark together

License Patent and Trade Mark together

Most patent licensors do not leverage the value of their Patent IP Asset in this way A licensee will seek to persuade the licensor that the goodwill generated from the sale of the product should belong to the licensee Often that argument will succeed But a licensor that succeeds in leveraging one asset against the other in this way will earn royalties for a period well after the expiration of a patent It will be easier for a licensor to do so when licensing on a Territory by Territory basis. It will be easier in that case to require uniformity in trade marks across all Territories

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36 Case study: leveraging one IP Asset with another: Trade Secret and

Case study: leveraging one IP Asset with another: Trade Secret and

Trade Mark

Company A had a formulation for an nutrient additive to chicken feed that resulted in chickens producing eggs enriched with Omega 3 Omega 3 a fatty acid that helps prevent heart disease found in oily fish such as sardines etc found in relatively few foods Ironic that you eat a fatty product like an egg (10g of fat in the yolk) to be able to more readily access the Omega 3 fatty acid Challenge: The formulation was not patented, but was protected only by trade secrecy. It had been commercially used, so could not be patented Financial return sought on a long term basis, by reference to the price premium that would be charged by egg producers for Omega 3 eggs

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37 Case study: leveraging one IP Asset with another: Trade Secret and

Case study: leveraging one IP Asset with another: Trade Secret and

Trade Mark

Challenge: If a know how license was entered into, requiring royalty payments, its term would cease, and royalties would cease, as soon as the formulation entered the public domain As there were to be number of licensees of a know how license, by Territory, there was an increased possibility of the formulation entering the public domain, and even an incentive for the formulation to leak It was sought to get a reach through royalty based not on the quantity of nutrient added to feed, but based instead on the premium price for sales of Omega 3 enriched eggs

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38 Case study: leveraging one IP Asset with another: Trade Secret and

Case study: leveraging one IP Asset with another: Trade Secret and

Trade Mark

Strategy Grant a license to a feed producer to make nutrient and sell it to egg farmers but only those egg farmers that had entered into a trade mark license Grant trade mark licenses to egg farmers, in that way permitting them to buy the feed additive Farmers must use trade mark to promote any Omega 3 eggs, those eggs must meet certain specifications, and farmers must pay a royalty on Omega 3 eggs sold pursuant to the trade mark license for the agreed term, and its renewal Discourages possible leakage of the formulation Ensures royalties are connected to the trade mark license, which is likely to have a longer life than a know how license of a formulation Success in leveraging one IP Asset against another

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39 Leveraging occurs by grant of rights, not excluding

Leveraging occurs by grant of rights, not excluding

Leveraging IP assets as described occurs by licensing in all of forms Using an IP Asset, and instead of excluding others from its use, proactively going out and finding other users who will want to use that IP Asset But a word of caution: Leveraging by licensing occurs because a licensee does actually exploit the licensed rights If a license is exclusive, and the licensee does not actually exploit the licensed rights, no leveraging takes place at all A licensee may seek a license to in turn exclude others

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40 Importance of performance obligations in a license

Importance of performance obligations in a license

So often licenses are granted without consideration to performance obligations In the urge to do the deal, and in the desire not to put the relationship with the licensee under stress, performance obligations are ignored, or inadequately provided for What are performance obligations? Things the licensee must do in order to retain the license Things which if not done, can lead to the licensor being able to terminate the license, and find another licensee instead with which to more profitably leverage the IP Asset

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41 Types of Performance Obligations

Types of Performance Obligations

Two types of performance obligations Obligations before the first sale Obligations after the first sale

R & D

Product in Market

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Deal Signed

First Sale

End of Term

42 Obligations before the first sale

Obligations before the first sale

Licensor wants to know that the licensee Will continue R & D (if applicable) Will complete R & D (if applicable) Will expeditiously start and travel the regulatory pathway (if applicable) Not shelve the IP Commercialisation Milestones Milestones that a Licensee must achieve to continue to be licensed Not achieve milestone license is terminated

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43 Commercialisation Milestones

Commercialisation Milestones

Examples: If more research is needed to bring products to a market ready state, the completion of that research Produce a prototype Conduct a trial Complete construction of Pilot Plant Complete construction of Production Plant Obtain any regulatory approval Employ a person with particular expertise Grant a sub license to a partner in Key Market First sale anywhere in the world Dates by which these must be achieved Mechanisms for extension of time Termination if not achieved in any extended time

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44 Obligations after the first sale

Obligations after the first sale

Usually require minimum sales revenue / units sold Expressed as worldwide / or markets If failure in a market Exclusivity converts to non exclusivity Or termination In the market concerned, without affecting other markets Pharmas and biotech - none of that is acceptable Will be prepared to make minimum annual payments

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45 Conclusion

Conclusion

Identify IP Assets that lend themselves to leveraging for greater profitability Think of IP Assets as tools They are tools not necessarily to exclude others from They may be tools to share with others, and in that way maximising the profitability of the IP Asset Leveraging in this way is accomplished by licensing in all its forms But dont forget to include performance obligations in the license

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Leveraging IP Assets: Role of IP in Improving Enterprise Profitability through Direct Exploitation, Licensing, Franchising, and or Merchandising, and Developing Other Types of Strategic Business Relationships: Case Studies
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