Tooltip TextEtisalat International was reported to have terminated its management agreement with Etisalat Nigeria. All UAE shareholders of Etisalat Nigeria have exited the company and have left the board and management. It was further reported that Etisalat International had given Etisalat Nigeria 3 (three) weeks to use the Etisalat Brand before phasing it out.
Without debating the propriety or otherwise of such actions, we shall attempt to examine the Intellectual Property/Branding Dimension of Etisalat International’s alleged exit from the Joint Venture that may have been incorporated as Etisalat Nigeria.
Telecoms Intellectual Property
The basic types of Intellectual property prevalent in the Telecoms sector are the following; Patents, Trademarks, Copyrights, Trade Secrets and others like branding, Know-How, Know – Who and Professional Credentials & Credibility.
In protecting innovation, a key benefit of an intellectual property system is that a contractual right is only enforceable against the person who entered into contract with you; while a property right is enforceable against the whole world! Reports have however shown a strong correlation between the presence of intellectual property in Telecoms companies, especially tower companies, and their profitability.
What does IP have to do with Telecoms?
A patent is a document issued, upon application by a government office (or a regional office acting for several countries), which describes an invention and creates a legal situation in which the patented invention can normally only be exploited (manufactured, used, sold, imported) with the authorization of the owner of the patent. Patents cover things like chip design, circuitry design, handsets, telecoms mast, base station equipment and fiber optic cables.
Three telecoms giants from China and the United States led international patent filing activity via WIPO in 2014, a fifth consecutive record-breaking year amid overall growth in the Organization’s global intellectual property services. Huawei Technologies Co., Ltd. of China, led the pack with 3,442 published PCT applications, overtook Panasonic Corp. of Japan as the largest applicant in 2014. U.S.-based Qualcomm Inc. was the second largest applicant in 2014, with 2,409 published applications, while China’s ZTE Corp. took third place with 2,179 PCT applications.
Why Nigerian Telecoms companies are yet to fall in love with Patents …
They are so busy making money selling airtime and other Telecoms services (i.e. commodity trade) that no one thinks that there is a need to innovate; there is enough money to go around so why bother. Well… because with IP there will be lots more to keep.
A “trade secret” is defined as any product, operating formula, pattern, device or other compilation of information which is used in a business, which gets its economic value from being kept secret, and gives the business a competitive advantage. The Telecoms industry depends heavily on trade secret protection. The duration of trade secret protection is potentially perpetual, as it continues as long as you can keep your “trade secret” secret!
Commercialisation of Patents and Trade Secret
Patents are public documents which disclose information about the invention (technology) in exchange for state protection, which is the exact opposite of trade secret protection. However trade secrets are licensed along with patent rights, in what is called a “hybrid” license.
Copyright exists in a work on the basis of originality and fixation. Copyright protection is particularly important to the Telecoms industry in the protection of software, databases and maps.
Interestingly Telecoms companies have had to defend themselves in copyright infringement suits instituted by players in Nigeria’s music industry.
The first signal in any great telecoms company is a good name. It should be registered as a trademark.
IP issues in the exit of Etisalat International from Etisalat Nigeria
The 3 (three) weeks’ notice allegedly given to Etisalat Nigeria by Etisalat International to stop using the “Etisalat Brand Name” seem to highlight the need for Nigerian, International and Indigenous Telecoms companies to pay attention to the Intellectual Property involved in Telecoms transactions. IP though invisible cannot be wished away.
Telecoms is intensely technology driven and this technology is protected by patents and other IP owned by companies who either directly participate in Telecoms projects or license out their IP including trademarks and patents to others to use for a hefty fee.
At the onset of a joint venture the members of a JV contribute resources to make the JV successful, some members usually have Intellectual Property that they have developed, own or license and which they ostensibly intend to contribute to the joint venture…
IP in Joint Ventures: Brass LNG project-IP
ConocoPhillips’ was reported to have pulled out of the Brass LNg project, ConocoPhillips’ owned the liquefaction IP that the Brass LNG project was going to use. ConocoPhillips’ exit triggered off a set back as the other joint venture partners had not considered the legal issues in IP in LNG JVs. The seemingly endless delays in signing the Final Investment Decision on the Brass LNG project seem to highlight the need for Nigeria, International and Indigenous Oil and Gas companies to pay attention to the Intellectual Property involved in Oil and Gas transactions.
IP in Joint Ventures: Etisalat Nigeria Joint Venture IP
Once again a party owning IP critical to a joint venture has allegedly pulled out of the joint venture… Etisalat International has pulled out of Etisalat Nigeria and has allegedly asked Etisalat Nigeria to stop using its brand name in 3 (three) weeks.
Intellectual Property in TELECOMS Joint Ventures becomes a valuable asset to the Telecoms companies involved in a TELECOMS-Joint Venture when the parties are aware of the potential issues related to Intellectual Property and its value. It is even more valuable when it is registered and steps are taken to prevent competitors from accessing and using it for free, more value is derived when the owner of such Intellectual Property actively seeks to monetize his intellectual assets by working with companies willing to use his TELECOMS-Intellectual Assets for a fee in exchange for a license…
Some Questions arise…
Should the clause governing the use of Joint IP be crafted to survive premature termination by a member? How should IP contributed by different members be managed when a JV is terminated or a member pulls out? Is the party exiting the JV under obligation to grant a favourable license to its IP to the JV on exit? Is there a mechanism to gather royalties for IP licensed by a former JV member? If the exiting party gives unfavourable conditions to license its JV, what should the JV do? Is the exiting party under obligation to exit the JV in a timely manner? Are there provisions for compulsory licenses? Do they apply? Is a reactive or proactive strategy preferable?
Joint or Individual Ownership of JV-IP?
There is a clear need to clearly identify what intellectual property the members of a JV own, what they intend to share, license, contribute to the joint venture and under what terms?
Who owns Improvements on JV-IPs?
The members of a JV need to envisage possible improvements and then agree on who will own improvements to prior intellectual property and fresh intellectual property that emerges while the joint venture is on, who will protect that intellectual property and how it will be shared among the members of a JV if the member owning the IP leaves.
IP Management When JV is Terminated or a Member(s) Pulls Out
This is a key issue that should be addressed at the formation of the JV and not when a member owning crucial TELECOMS-IP pulls out leaving the other members at the risk of having to sign a harsh license agreement with a former member, or worse still the TELECOMS-IP owning member, may partially pull out making it difficult for a new entity to enter the JV, in this particular instance the Brand owner has pulled out and given the local entity a period within which to stop using the Brand name… To resolve the current impasse shall we explore the possibility of compulsory licenses? Should the parties have negotiated a specific license agreement or a timeframe within which the other JV members will be allowed to use the brand name?
The Telecoms industry has been described as a “knowledge industry” because of new technologies such as internet of things, smartphones equipped with biometric fingerprint readers, 5G networks and smartphones with onboard neural network machine learning capabilities. Cutting edge technologies coupled with Supercomputers have taken their place with the industry developing a big interest in Intellectual Property. Commercialisation of intellectual property needs careful analysis of a number of factors to pick the best strategy. I.P. may be licensed, sold or even joint ventured.
Perhaps this recent experience will nudge banks, telecoms industries and other stakeholders to seek proper counsel on the IP dimension to telecoms transaction and the telecoms industry in general. Let’s talk at your convenience!
Olufola Wusu is a Commercial, Oil and Gas and I.P. Lawyer based in Lagos
Olufola Wusu Esq. © 2017
Olufola Wusu is noted for his “dynamic practice” and “commercial acumen”. He is praised for his “first-rate skills” in assisting clients…