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Santa Claus lives off licensing revenue and three other fabulous notions about IP rights for entrepreneurs

22.12.2020
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The North Pole houses a business that relies heavily on non-disclosure agreements, partnerships, subcontracting chains, and licensing. This globally operating red-suited entrepreneur takes advantage of a slew of IP rights to keep the coveted brand and the fruits of ideas in his own hands. IP lawyer Sanna Häikiö explains how IP rights help everyone, whether the entrepreneur is a regular person or a mythical figure.

Sanna Häikiö_Counsel_IP and Technology Law_Kolster

1. When innovations are created in the elf workshop – help may be needed for IP strategy, financing and business exit

Like all companies that own and manage intellectual property rights, the fictional Real Santa Ltd needs an IP strategy that supports its business strategy. It determines, for instance, how and why your intellectual property should be managed and protected, or how the IPR portfolio should be developed for future plans. 

One integral part of the IP strategy is taking care of the company’s trade secrets. From the early stages of business, it is a good idea to think about how to protect the company’s confidential information so that it is not leaked to competitors. Have the elves at the North Pole been committed to maintaining secrecy with a confidentiality clause in the employment contract, or does Real Santa Ltd use separate non-disclosure agreements? Not to mention that data protection, GDPR, and information security issues must be taken care of to a T when managing databases containing the personal data, addresses and behavioural assessments of all the children in the world. Both the disclosure of confidential information and access to confidential information should be kept to a minimum. Sometimes keeping an invention secret may even be more appropriate than protecting it with a patent or other type of IP protection. 

Intellectual capital at the North Pole includes, for example, the inventions made by elves when developing innovative presents and any associated know-how, copyright-protected works created in the elf workshop, or things such as the appearance of gifts and packages – as well as of course Mrs. Claus’ porridge and cooking recipes. 

A code of practice for employee inventions is useful for all companies where new innovations are created. In addition to the Act on the Right in Employee Inventions, it determines how and to what extent the proprietary rights to inventions associated with the innovations developed in the elf workshop are transferred to the employer, and how much is paid to the inventor as compensation.

If Real Santa Ltd also uses subcontractors operating outside an employment relationship in the manufacture of presents, the cooperation and supply agreements as well as subcontracting chains must be in order. Comprehensive agreements ensure that IP rights are transferred to Santa to an appropriate extent. When the ownership of rights is in the right hands, the added value from products can be increased not only in one’s own business but also through the licensing of rights, for example. 

If Real Santa Ltd wants to apply for external financing or later even sell its business, the company must be kept fit for sale. This requires precision in the handling of paperwork. The value of IP assets matters in the valuation of the company. Potential buyers usually conduct a so-called due diligence check, meaning a careful review of the target company. Key intellectual property rights should be owned by the company. Similarly, licensing agreements for rights must be in order so that business is not interrupted due to a missing licence, for example. It is also important that the company has not bound itself too tightly to the licensing agreements it has granted. For Real Santa Ltd, this could mean, for instance, that the value of the company would suffer significantly if the buyer did not receive the rights to the whole world in connection with the acquisition.

2. Santa’s licensing revenue may be impressive, but the IPR portfolio must be properly maintained as well

The business model is an important starting point for assessing what are the most essential elements of the IP strategy. Does Real Santa Ltd itself manufacture all the presents it takes to children around the world, or to what extent has manufacturing been outsourced and subcontracted? If products originally developed by others are manufactured in the in-house workshop at the North Pole, Santa must obtain the appropriate licences for the manufacture and distribution of protected products and technologies, as well as for the use of brands. The protection strategy for new products and brands created in the in-house workshop, on the other hand, should be planned carefully in advance, especially as Santa’s market area covers the whole world.

The same also applies the other way around: if Santa has been able to protect his brand and business and has ‘taken over Christmas’, he can grant others rights to use his trademarks, patents, designs, and more, subject to a fee. If there is only one real Santa Claus, many companies are already using property belonging to Santa, such as the character or specific shade of red, in their products or advertising. It is therefore probable that Real Santa Ltd’s actual turnover consists to a very large extent of licensing revenue.

Santa’s IPR portfolio should include as many different intellectual property rights as possible, such as patents, trademarks, copyrights, design rights, or domain names. They give Santa a competitive advantage with an exclusive right to prohibit others from using, manufacturing or importing similar products or services to the extent of the scopes of protection. 

However, it is not enough to accumulate intellectual property rights in the portfolio. In order to maximize the benefits of the portfolio, it must be diligently monitored, updated, and maintained. Even when not talking about centuries-old and internationally known traditions, rights must be upheld so that they can be defended in the future as well.

3. Is Santa’s brand protected – can you act as a copycat Santa?

One of the most important aspects of Santa’s IP strategy is protecting his own brand, and in that, a trademark is an invaluable aid. Trademarks are granted on a region-specific basis. EU trademark registration means that products or services that take advantage of a trademark already registered by someone else for similar products or services may not be imported or sold within the European Union. Inadequate protection of your company can impose significant barriers to business, and even prevent it completely. That is why you should apply for a trademark in good time. 

The challenge is that a trademark registration must be distinctive. For instance, you cannot trademark the word ‘apple’ for the fruit, but you can for computers (Apple). So the words Christmas or Santa Claus alone may not pass muster for the trademark register as identifiers of Christmas-themed products and services, even if no one has registered them yet.

As with other IP rights, the use of valid trademarks can and should be monitored. If Santa’s brand were well protected, he could intervene in the activities of copycats posing as Santa Claus for money, for example. It is also possible for Real Santa Ltd to grant the copycat Santas rights to use its trademark, in which case the parties agree on the framework within which the copycats may operate and to what extent they can utilise the Santa Claus brand and trademark. 

Because elves hear and see everything, Real Santa Ltd can rely not only on search engine monitoring, but also on oral reports about the use of an infringing trademark. In that case, however, Santa must train his staff to monitor trademark infringements – alongside keeping track of nice children. If the elves’ resources alone are not enough, Santa can also acquire assistance for enforcing his IP rights from an external service provider.  

Santa’s ultimate goal, however, is to spread good Christmas cheer. That is why he has not wanted to intervene in positive activities that bring joy to the children of the world, even if they violate his exclusive rights, but rather has chosen to offer his brand to be used quite freely. Money is not always the most important thing. Merry Christmas!

Kolster’s experts are happy to help with Santa activities or other tasks! 

Contact us

Sanna Häikiö
Associate Partner, Counsel, IP & Technology Law
sanna.haikio@kolster.com
+358 40 532 2511

SANTA’S TIPS:

For the elf workshop and other companies where new innovations are developed alongside work

When you are in the same situation as Santa, who is considering acquiring the logistics operations of Jack Frost to accelerate global growth

When you do not have an army of elves at your disposal to monitor IP infringements

When you want to make sure, like Santa, that copycats do not ruin your brand

When you create a more stylish elf hat design or a new look for your porridge ladle, protect the design

Whether you developed a new gift wrapping method or sleigh model, make sure that competitors are not getting their hands on it

What elves and employees have in common is loyalty, but you should still protect essential trade secrets

When the North Pole is not enough! Apply for an innovation voucher to support international expansion

Help for hectic everyday life where your own resources cannot stretch outside the elf workshop

Planning to acquire new sleighs, increase the number of elves, or boost present production? You will achieve future goals through systematic planning

When, like Santa, you want to own your rights forever

Whether your employee is an elf or a regular person, make sure that ideas worth developing are not wasted

A 20-year protection period is a blink of an eye in an age-old institution, but for others, a patent is a major advantage