12 – Agreements & licensing

Background

Reacting to the increase in the threat of bird flu’, SARS and other airborne diseases the company CleanAir have developed a new range of filter masks. Instead of making people look like they have just walked out of an operating theatre, these masks are made in a range of flesh colours so that they are not conspicuous at a distance. The mask is also very small in size thanks to the special high performance filter medium which is included within the mask. They do not make the filter medium. It has to be bought in from another supplier. They have filed for the trademark “Mask-It” in the Benelux. They like the double meaning – the use of a mask and the fact that the mask colour masks the presence of the mask – a play on words they think is very attractive.

The problem

CleanAir wants to sell the idea to a variety of end users. For example, there are high risk places such as aeroplanes where passengers are seated close to each other for many hours. CleanAir would like the airlines to make use of their product exclusively and to supply them as standard on each flight.

In addition they want the product to be used in doctors’ waiting rooms. It has always seemed strange that persons who are ill are allowed to pass on a contagion to others when they are waiting to see the doctor.

Then there are cyclists who cycle through major cities where there is air pollution.
Another possibility is use in schools.
All these applications might require different marketing strategies.

The challenge

  • What form of agreement should CleanAir use with the supplier of the filter medium to maintain control over the supply of the filter and also to prevent competitors obtaining access to the same?
  • If the demand gets too large, should they invest in new plant or license the mask design and the trademark to other existing mask manufacturers or would this generate competitors and ruin the market? Would it dilute their trademark?
  • If they do go via other manufacturers what licensing agreement should they propose?
  • In trying to calculate a license fee what basis should they choose – how high should the royalty rate be? How does one calculate such a fee?

The solution

If these are the kind of problems that you have, please contact BIRD GOËN by email (ipadmin@birdgoen.com) and refer to “case study 12” to arrange for consultation.