Phase 3 Fundamentals of a Feasibility Study

Table of Contents
Fundamentals of a Feasibility Study......................................................................................... 4 WHAT IS A FEASIBILITY STUDY AND WHY DO YOU NEED ONE? ............................................... 4 WHAT IS THE DIFFERENCE BETWEEN A FEASIBILITY STUDY AND A BUSINESS PLAN?.............. 4 THE LIFE CYCLE OF A BUSINESS ...................................................................................... 4 KEYS TO BUSINESS SUCCESS .......................................................................................... 5 KEYS TO BUSINESS FAILURES ......................................................................................... 6 IDEA ASSESSMENT......................................................................................................... 8 What Business are we in? Choosing a Strategic Position ..................................................... 10 Components of Feasibility Study........................................................................................ 11 MARKET FEASIBILITY.................................................................................................... 11 The Industry Description ............................................................................................... 11 MARKET POTENTIAL ........................................................................................................ 13 What is marketing?....................................................................................................... 14 Marketing Plans............................................................................................................ 14 Market Research .......................................................................................................... 15 Research Process ......................................................................................................... 15 Marketing Concepts ...................................................................................................... 17 Module 3.2 - Developing Sales Forecast.............................................................................. 20 ESTIMATING MARKET POTENTIAL ................................................................................... 20 CREATING A PRICE STRATEGY ....................................................................................... 24 SETTING THE PRICE ..................................................................................................... 24 BREAKEVEN ANALYSIS .................................................................................................. 25 PRICING OBJECTIVES ................................................................................................... 26 Module 3.3 Technical Feasibility .................................................................................... 28 Site Location................................................................................................................ 28 Production Assessment ................................................................................................. 29 Module 3.4 Financial Feasibility ..................................................................................... 30 Total Capital Requirements ............................................................................................ 30 Types of Credit ............................................................................................................ 30 Financial Institution Financing ........................................................................................ 31 Evaluating Financing Options ......................................................................................... 32 Loan Security Agreements ............................................................................................. 33 Types of Loan Security Agreements ................................................................................ 33 Postponement of a Claim ............................................................................................... 33 Determine the Start-up Financial Requirements ................................................................ 34 One-time Expenses....................................................................................................... 34 Operating Expenses ...................................................................................................... 34 Sensitivity Analysis ....................................................................................................... 36 Module 3.5 Developing Projected Financial Statements ..................................................... 38 PROJECTED BALANCE SHEET ......................................................................................... 38 PROJECTED PROFORMA INCOME STATEMENT ................................................................... 39 FORECASTING CASH FLOW............................................................................................ 40 Module 3.6 - Establishing Criteria to Proceed or Abandon a Business Idea ............................... 43 THE IDEA .................................................................................................................... 43 MANAGEMENT CAPABILITIES ......................................................................................... 43 TECHNICAL REALITIES .................................................................................................. 44 MARKET REALITIES ...................................................................................................... 44 COST AND FINANCIAL REALITIES ................................................................................... 45 RISK REALITIES ........................................................................................................... 45 Venture Opportunity Screening Exercises (VOSE).............................................................. 46

Exercises Module 3.......................................................................................................... 49 Case Study 1.................................................................................................................. 51 Part 1: The Financial Case Study of Farmer Cooperative Inc. .............................................. 51 References ..................................................................................................................... 58 Sample Templates........................................................................................................... 60 Client Name: .................................................................................................................. 60 Key Responsibilities ......................................................................................................... 61 Signature: ........................................................................................................................ 61 Change Request ........................................................................................................... 62 Project Status Report .................................................................................................... 63 Project Name ............................................................................................................... 63 Client Sign Off ............................................................................................................. 66 Project Budget Sheet .................................................................................................... 67 Sample invite to submit a proposal ................................................................................. 68 Proposal Closing Date/Time: Sample Agreement............................................................. 68 Sample Agreement ....................................................................................................... 69 Analysis of major competitors ........................................................................................ 74

Fundamentals of a Feasibility Study

WHAT IS A FEASIBILITY STUDY AND WHY DO YOU NEED ONE?
Taking an idea from concept to viable cooperative takes many steps. None more valuable or important than the feasibility study. In the section you will learn the key concepts to allow you to formulate the idea and subject it to rigorous analysis to identify opportunities and challenges that will make the cooperative successful. A feasibility study should provide a comprehensive analysis and evaluation of the market, operational, technical, managerial and financial aspects of your business concept or opportunity. A comprehensive study can then evolve into the market-driven strategic plan that is the road map for all subsequent decisions. A feasibility study provides cooperative project committees with an understanding of the viability of a business concept.

Critical Thinking

A viable business concept must: create or meet a consumers need, provide a competitive advantage over a competitors product or service, provide superior delivery characteristics and provide a rate of return on investment that is acceptable to the investor (s). When the feasibility study is completed, the steering committee first needs to consider its comprehensiveness and accuracy, rather than immediately focus on its recommendations. It is appropriate to challenge and question the assumptions and conclusions, and not accept the recommendations at face value.

WHAT IS THE DIFFERENCE BETWEEN A FEASIBILITY STUDY AND A BUSINESS PLAN? A feasibility study is not a business plan. Rather, it provides an assessment of the viability of the business under consideration The business plan focuses on what steps are required to be completed if it is decided to go ahead with the proposed business launch. The feasibility study, however, identifies and analyzes several product or service alternatives and recommends the best business model. THE LIFE CYCLE OF A BUSINESS The life cycle of a business refers to the key stages (start up, growth, maturity and decline) that occur over the life of a business. Each stage has its own unique challenges and opportunities that must be taken into consideration. The business plan should describe a specific strategy for how to deal effectively with each stage. The following provides a description of the four main stages of a business life cycle: 1. Start Up In the start-up phase, the product and demand for it is under development. Sales are generally low, and earnings may even be negative. Competition may slowly encroach on earnings during this stage, as other businesses become aware of the market potential. At this stage, demand for the new product or service must be created, requiring intensive marketing

campaigns and promotions. There is risk at this stage. Will consumers accept the product or service being offered at the price required? 2. Growth Stage In the growth stage, there are increasing sales as the business grows into new markets, and costs fall due to economies of scale, allowing profitability to increase. Within this stage, marketing risk decreases as consumer acceptance and consumer brand loyalty increases. The risk in the growth stage is related to the inevitable increase in competition from new entrants. 3. Maturity In this stage, businesses in the industry are becoming more efficient. Those who are more efficient earn a competitive advantage over those who are not. At this stage, however, competition and/or alternative product promotion can be aggressive. The risk in this stage is that increased competition may result in slowing growth rates Decline In the stage of decline, the market has become saturated, the technology changes or consumer tastes have moved on. Sales volume declines if the product or service has not kept up with those changes, or if the industry has moved on to the next thing. Companies in this position may sell production assets that are no longer required, move to areas that offer reduced facility and/or labour costs, withdraw from that market, or merge with other companies. KEYS TO BUSINESS SUCCESS A great business idea is not enough. For a cooperative to turn a great idea into a viable business, a sound business model must be in place. 1.) A sound business model drives the business to: Management - build an experienced management team with a broad range of skills, and seek collaborative decision making that uses all those skills. Operations Management create a high-quality product or service, at a price point where profit can be sustained Generate Sales offer products or services that consumers will purchase at a price that allow the business to be viable. Record a Profit allows for pricing and delivery cost to allow the business to be profitable, even when the per-unit price decreases. Service Debt provide for a way to compensate the capital providers for the businesss use of the capital. Regardless of the source, the owners of the capital will want a return on their investment in the business. Provide Residual Income allow for the business to generate residual income, which is the amount of profit that remains once all investment costs have been removed. These are the funds to be retained in the business for future growth, or returned to the member through patronage dividends. Financial Practices allows for a solid financial planning function and a good understanding of critical financial measures and indicators. It must also have the capacity to understand what the financial statements are showing, including important financial ratios

Critical Thinking

For many cooperative steering committees, cooperative investors and financial institutions reviewing a feasibility plan, the management team is the most important component of the plan. An effective management team should have skills in the following areas: Marketing Financial management and finance Operations management and appropriate technology management (depending on the industry) People management Successful experience in the businesss core industry and markets

KEYS TO BUSINESS FAILURES New businesses are constantly coming into the market, providing every imaginable product, service or good. Some firms survive, others grow, and substantial numbers of new firms fail. Information provided by Statistics Canada reveals that that it is not the absence of sophisticated business strategies that leads many young firms to fail, but rather skill deficiencies in core areas, specifically those related to management and financing. Figure 1 (source Statistics Canada Falling Concerns: Business Bankruptcies in Canada 61-525-XIE)

E x t e r n a l F a c t o r s C o n t r ib u t i n g t o B a n k r u p t c i e s
L a b o u r o r in d u s t ria l R e la t io n s L e g is la t io n E m p l o y e e F r a u d / T h e ft F u n d a m e n t a l C h a n g e in t h e T e c h n o lo g y U n fo r e s e e n C i r c u m s t a n c e s S u p p l i e r D i ffi c u l t i e s F u n d a m e n t a l C h a n g e in t h e M a rk e t G o ve r n m e n t R e g u l a t i o n s C u s t o m e r D i ffi c u l t i e s C o m p e t it io n C o m p e t it io n

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E x tr e m e S c o r e ( % )

Figure 2 (source Statistics Canada Falling Concerns: Business Bankruptcies in Canada 61-525-XIE)

I n te r n a l F a c to r s C o n tr i b u ti n g to B a n k r u p tc i e s H u m a n R e s o u rc e C a p a b i li t ie s In n o va t io n S t ra t e g y P ro d u c t i o n a n d O p e ra t i o n s M a rk e t i n g C a p a b i li t ie s F in a n c ia l M a n a g e m e n t G e n e ra l M a n a g e m e n t 0 10 20 30 40 50 60 70 80

E x tr e m e S c o r e (% )

IDEA ASSESSMENT Great business ideas can come from many sources, but generally they are a result of creative thinking that reflects new insights into an existing product or service. Every great business idea provides an opportunity to create economic value for the business. The idea must meet or create a customer need, provide a competitive advantage, allow for appropriate time-to-market, and provide a reasonable return to investors. A useful tool to provide an assessment of a business idea is a SWOT analysis created by the Boston Consulting Group. A SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities and Threats that prevail at a particular time, for a project or business venture. Internal factors The strengths and weaknesses internal to the organization. o o Strengths: attributes of the organization that is helpful to achieving the objective. Weaknesses: attributes of the organization that is harmful to achieving the objective.

External factors The opportunities and threats presented by the external environment to the organization o o Opportunities: external conditions those are helpful to achieving the objective. Threats: external conditions which could do damage to the business's performance or work against achieving the objective.

Within an organization, features that may represent strengths with respect to one objective may be weaknesses for another objective. The factors may include personnel, finance, manufacturing capabilities, and so on. External factors may include macroeconomic matters, technological change, legislation, and sociocultural changes, as well as changes in the marketplace or competitive position. The results of a SWOT are often presented in the form of a matrix. The next steps in planning for achievement of the selected objective can follow from whatever is revealed in the SWOT. The plan needs to show how the business will use its strengths, mitigate or backfill its weaknesses, seize opportunities and defuse or dodge threats. A SWOT analysis is just one method of analysis, and has its own weaknesses. For example, it may tend to persuade companies to compile lists, rather than think about what is actually important in achieving objectives. It may also present the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats. It is prudent not to prematurely eliminate any candidate SWOT entry. The importance of each item generated will be revealed by the value of the strategies it generates. A SWOT item that produces valuable strategies is important. A SWOT item that generates no strategies is not important. Guidelines for of completing a SWOT Analysis Be as specific as possible. Avoid any grey areas or generalities. Describe internal factors in terms of the competition: as superior, better than, equal to or worse than your competition. Be as realistic as possible regarding your strengths and weaknesses. Always be Objective and Keep the SWOT analysis as simple as possible, but include any and all relevant issues.

One of the points of doing a SWOT analysis is that it helps to generate an appropriate and open conversation among the group, about the reality of the situation. A realistic assessment increases the opportunity to create an effective plan. Try to use the SWOT to generate that conversation. SWOT Analysis for Initial Business Idea or Feasibility of the Business Idea
Supportive to the Objective Strengths A ttrib te o th org izatio u s f e an n H i g h 1.) 2.) 3.) 4.) 5.) 1.) L o w 2.) 3.) 4.) 5.) Opportunities H i g h 1.) 2.) 3.) 4.) 5.) 1.) L o w 2.) 3.) 4.) 5.) Harmful to the Objective Weaknesses 1.) 2.) 3.) 4.) 5.) 1.) 2.) 3.) 4.) 5.) Threats 1.) 2.) 3.) 4.) 5.) 1.) 2.) 3.) 4.) 5.)

Internal Exte rnal

At the bare minimum, a SWOT analysis should consider the following: Potential Strengths or Weaknesses: 1.) 2.) 3.) 4.) 5.) 6.) Customer Need New Product Intellectual Property Rights Low-cost Product High-quality Product Expertise and Capacity in the Business

Potential Opportunities or Threats 1.) Existing Competition 2.) Market Size and Scope 3.) New Technologies 4.) Alternative Products 5.) Market Share Potential

A ttribu tes of the En vironm ent

What Business are we in? Choosing a Strategic Position In every industry, there are a number of strategic positions that companies can occupy. For example Chevrolet has produced mid-priced cars for the North American market, while Ferrari produces very expensive cars for the world market. Both companies have been successful within the market they have chosen to occupy. The question is not what the strategy is, but whether the company has one strategic position that it can claim as its own. The strategic position is defined by the answers to the following questions: 1.) Who is my target customer? 2.) What products or services will we offer to those customers? 3.) How will we provide the products or services? (delivery choices, pricing, terms)

Critical Thinking

Defining a strategic position is done by identifying what products and services the business will offer, and which will not be offered. It is the act of choosing a distinctive strategy that will make the business successful. What business are we in? is really a key question. The cooperatives steering committee can benefit from identifying and questioning assumptions and beliefs about what it intends to offer, and who the customers really are. Many businesses, in changing times, have proceeded in the belief that they were in a certain business, and found out they were really in another. The strategy must bridge the gap between what the customer wants and what the company does. Businesses must make this connection and the strategy helps to determine what the company spends its time doing. Each activity in a company must lead to or support the appropriate delivery of the product or service to the customer. Internally, each activity in a business affects all the other activities.

Components of Feasibility Study

The components of feasibility are outlined in this section to provide a cooperative with a guide when developing a study or have received a completed study from a consultant. In order for a business to succeed the feasibility study is the first step to creating a viable business entity. MARKET FEASIBILITY Market feasibility identifies whether the product or service is viable within the competitive environment of the industry or marketplace. The study needs to identify and assess individual opportunities, and provide rationalization to proceed with that opportunity, or assess other alternatives. The study needs to include the total market potential and incorporate customer opinions regarding the particular service or product. The Industry Description The industry description examines the industry or market segment and provides an assessment of its potential size and scope. The industry description should determine if the industry or market segment is stable, expanding or contracting, and what part of the industry life cycle it occupies. The description should also discuss the industrys primary purpose, market served, scope in terms of annual sales, range of products and services, customer groups and major competitors. The history of the industry, how it changed and grown (or contracted) over time is also helpful. Changes in consumer demand, products and services, delivery and distribution models should be considered. Here are some of the concepts that an industry description will help with: 1. Industry Competitiveness Traditionally, competition between two or more businesses drives profits lower. A highly concentrated industry or market segment is one in which market share is held by the few largest companies. When a very few companies hold, the vast majority of market share, there may be very little actual competition and the market may appear closer to a monopoly. An industry or market segment is considered to have low concentration when many companies own a small share of the market. An industry with very low concentration industry is considered to be fragmented, and as such can be highly competitive. The amount of competition within an industry or market segment is influenced by the following: Large number of businesses This increases competition as many companies compete for a limited number of consumers and inputs. Low market growth This result in firms having to struggle for a slowly growing market share. High fixed costs When an industry has high fixed costs (the cost of getting into and staying in the business), then players need to look for efficiencies in the size of their operation to achieve economies of scale and increase their potential profit. Perishable goods These are required to be sold quickly, and cannot be inventoried for long. This may lead to price cutting and other competitive dynamics, as businesses may need to unload large volumes of the same product around the same time. Limited exchange costs This has to do with the cost to the customer of exchanging or switching products or services. Industry or market segment consolidation cycles If competition increases to a point where there are so many suppliers that supply starts to exceed demand, some businesses will fail and the industry will consolidate to the point where the supply meets demand.

2. Barriers to Entry In theory, given a supply of capital, businesses should be able to enter an industry or market segment without barriers. In reality, this is seldom the case. There are a number of factors that restrict the ability of new businesses to enter and start operating in a particular industry. The ease with which someone else can enter a market determines the likelihood that a business will face new competitors. The easier it is to enter the industry or market, the faster profits will be eroded by competition. On the other hand, the harder it is for new entrants to appear, the longer the competitive advantage lasts. Mature businesses have often developed greater operational efficiencies because they faced the pressure of competition and found ways to dig in and remain viable. The ease of entry into an industry or market segment depends upon two factors: how high are the barriers to entry in that industry, and how existing players react to new entrants. Existing competitors are most likely to react strongly against new entrants when there is a history of such behaviour, when the existing competitors have invested substantial resources, and when the industry is characterized by slow growth. In other words, the more that existing businesses have invested in the game, and the less there is to go around, the more likely they are to react strongly against newer players.

In Michael E. Porters book Competitive Strategy Techniques for Analyzing Industries and Competitors, - Simon & Schuster - 1980 six major barriers to market entry are identified: Barriers to Market Entry 1. Economies of scale. Economies of scale occur when the unit cost of a product declines as production volume increases. When existing competitors in an industry have achieved economies of scale, new entrants face a barrier because they must either compete on a large scale right away, or accept a cost disadvantage in order to compete on a smaller scale. 2. Product differentiation. In many markets and industries, established competitors have gained customer loyalty and brand identification through their long-standing advertising and customer service efforts. This creates a barrier to market entry by forcing new entrants to spend time and money to differentiate their products in the marketplace and overcome these loyalties. 3. Capital requirements. Another type of barrier to market entry occurs when new entrants are required to invest large financial resources in order to compete in an industry. For example, certain industries may require capital investments in inventories or production facilities. Capital requirements form a particularly strong barrier when the capital is required for risky investments like research and development. 4. Switching costs. A switching cost refers to a one-time cost that is incurred by a buyer as a result of switching from one supplier's product to another's. Some examples of switching costs for a business customer include re-training employees, purchasing support equipment, enlisting technical assistance and redesigning products.

1. Access to channels of distribution. In many industries, established competitors control the logical channels of distribution through long-standing relationships. In order to persuade distribution channels to accept a new product, new entrants often must provide incentives in the form of price discounts, promotions, and cooperative advertising. Such expenditures act as a barrier by reducing the profitability for new entrants. 2. Government policy. In industries that are highly regulated, government policies can limit or prevent new competitors from entering industries, through licensing requirements, limits on access to raw materials, pollution standards, product testing regulations or other compliance issues. Established competitors also have a number of other cost advantages that act as barriers to market entry when they cannot be duplicated by new entrants, such as proprietary technology, favourable locations, government subsidies, good access to raw materials and experience and learning curves. 3. Analysis of major competitors A competitor analysis is an essential component of cooperative strategy. The competitor analysis is an assessment of the strengths and weaknesses of current and potential competitors. First, it identifies opportunities (any strategic weaknesses in rivals) and threats. Second, competitor profiling will allow the business to anticipate how competitors might respond to new entrants. Third, this knowledge will allow the business to consider strategies to respond to competitor behaviours. A competitor analysis should include: An understanding of a key competitors vision, mission and objectives, allowing a new business to consider how its own guiding statements differ. Identification of product or market segment strengths and weakness, to enable the new business to consider new and innovative products; A determination of the size, configuration and operations of the competitor, which will allow new business owners to create realistic business projections based on appropriately priced products; An analysis of how competitors use their distribution channels and direct sales activities; A listing of the competitive payment terms and discounts, in order to make negotiating similar conditions simple; and A sampling of the competitors marketing communications, which will allow a new business to create their own marketing communication plan to differentiate themselves.

A common technique is to create detailed profiles on each of your major competitors. These profiles give an in-depth description of the competitor's background, finances, products, markets, facilities, personnel and strategies.

MARKET POTENTIAL

Market Potential is essential in determining the total sales for a given market. The analysis must provide a determination if the market is large enough to sustain the business entry in light of the competitive market conditions. The cooperative will require detail information providing specific information to be able to make an informed decision to proceed or abandon the business idea.

What is marketing? Marketing is described by the American Marketing Association as an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketing management is a process of setting marketing goals for an organization (considering internal resources and market opportunities), the planning and execution of activities to meet these goals, and measuring progress toward their achievement. Marketing is based on the importance of customers to a business and has two important principles: All company policies and activities should be directed toward satisfying customer needs; and Profitable sales volume is more important than maximum sales volume. To best use these principles, a small business should: Determine the needs of their customers through market research; Analyze their competitive advantages to develop a market strategy; Select specific markets to serve by target marketing; and Determine how to satisfy customer needs by identifying a market mix

Critical Thinking

Marketing Plans The key component of a business plan is the marketing plan. A good marketing plan summarizes the who, what, where, when, and how much questions of company marketing and sales activities for the planning year: Who are our target buyers? What sources of uniqueness or positioning in the market do we have? Where will we implement our marketing spending plans? When will marketing spending plans occur? How much sales, spending, and profits will we achieve?

The financial projections contained in your business plan are based on the assumptions contained in your marketing plan. It is the marketing plan that details when expenditures will be made, what level of sales will be achieved, and how and when advertising and promotional expenditures will be made. Here are the major elements of a marketing plan: Situation Analysis - describes the total marketing environment in which the company competes and the status of company products and distribution channels. Opportunity and Issue Analysis - analyzes the major external opportunities and threats to the company and the internal strengths and weaknesses of the company, along with a discussion of key issues facing the company. Goals and Objectives - outlines major company goals and the marketing and financial objectives. Marketing strategy - provides the company's marketing strategy statement, summarizing the key target buyer description, competitive market segments the company will compete in, the unique positioning of the company and its products compared to the competition, the reasons why it is unique or compelling to buyers, price strategy versus the competition,

marketing spending strategy with advertising and promotion, and possible Research and development and market research expenditure strategies. Sales and Marketing Plan - outlines each specific marketing event or action plan to increase sales. For example, it may contain a summary of quarterly promotion and advertising plans, with spending, timing, and share or shipment goals for each program.

Market Research Market Research is the function that links the businesses products or services with the consumer. Market research is the systematic gathering, recording, and analyzing of data about your market. This information is used to identify and define market opportunities and threats; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of the market dynamics. Market research specifies the information required to address these issues, and communicates the findings and their implications.

Market research asks the following questions: Who are my customers and potential customers? What kind of people are they? Where do they live? Can and will they buy? Am I offering the kinds of goods or services they want at the best place, at the best time, and in the right amounts? Are my prices consistent with what buyers view as the product's value? Are my promotional programs working? What do customers think of my business? How does my business compare with those of my competitors? Market research focuses and organizes marketing information. It ensures that such information is timely and permits businesses to: Reduce business risk Spot current and upcoming problems in the current market Identify sales opportunities Develop plans of action Research Process Businesses may conduct market research at varying degrees of complexity or frequency. For example, a business might use a simple questionnaire to determine the demand in a small market, or may hire a professional market research firm to conduct research to assist them in developing a marketing strategy to launch a new product. Larger firms may have their own specialists on staff. Regardless of the simplicity or complexity of your market research project, the Small Business Association of America believes that the following seven market research steps must be completed to provide accurate information: Step One: Define Marketing Problems and Opportunities The market research process begins with identifying and defining the problems and opportunities that exist for your business, such as:

Launching a new product or service Low awareness of your company and its products or services Low uptake of your company's products or services (the market is familiar with your company, but still is not doing business with you) A poor company image and reputation Problems with distribution; your goods and services are not reaching the buying public in a timely manner

Step Two: Set Objectives, Budget, and Timetables Objective: With a marketing problem or opportunity defined, the next step is to set objectives for your market research operations. Budget: How much money are you willing to invest in your market research? How much can you afford? Your market research budget is a portion of your overall marketing budget. If you are planning on launching a new product or business, market research should account for as much as 10 per cent of your expected gross sales. Timetables: Prepare a detailed, realistic timeframe to complete all steps of the market research process. If your business operates in cycles, establish target dates that will allow the best accessibility to your market. Step Three: Select Research Types, Methods, and Techniques There are two types of research: primary research (original information gathered for a specific purpose) and secondary research (information that already exists somewhere but needs to be interpreted for your use). Step Four: Design Research Instruments The most common research instrument is the questionnaire. Keep these tips in mind when designing your market research questionnaire. Keep it simple. Begin the survey with general questions and move towards more specific questions. Design a questionnaire that is graphically pleasing and easy to read. Remember to pre-test the questionnaire. Mix the form of the questions.

Step Five: Collect Data To help you obtain clear, unbiased and reliable results, collect the data under the direction of experienced researchers. Step Six: Organize and Analyze the Data Once your data has been collected, it needs to be cleaned. Cleaning research data involves editing, coding, and tabulating results. To make this step easier, start with a simply designed research instrument or questionnaire.

Step Seven: Present and Use Market Research Findings Once marketing information about your target market, competition and environment is collected and analyzed, present it in an organized manner for use by the business. Marketing Concepts 1. Commodities and Differentiated products Commodities and differentiated products are the two ends of the product spectrum. A product is a commodity when all units of production are identical, regardless of who produces them. A differentiated product can be easily distinguished from those of its competitors. On the continuum between commodities and differentiated products, there are many degrees and combinations. Commodities A commodity means that each unit of a commodity is exactly like every other unit. For example, every bushel of number 1 Canadian Red Spring Wheat 11.5 per cent protein can be substituted for every other bushel of number 1 Canadian Red Spring Wheat 11.5 per cent protein. Because the identity of each producers wheat does not have to be kept separate, the wheat from many farmers can be mixed together. This also means that the price for wheat on any given day, at any given location, is the same for all farmers. Commodities tend to be raw materials like corn, wheat, copper, crude oil, etc. Only commodities can be traded on futures markets because every unit is the same. Commodities are often inputs to other (finished) products. These finished products may in turn be differentiated ones. 2. Price Takers People that produce commodities are referred to as price takers. This means that an individual producer has no control over his/her price. On any day, the producer must take what the market offers. 3. Differentiated Products A companys product is a differentiated product if it is unique and cannot be substituted for a competitors product. If the product is different, the producer can make the case that it is better. If it is a better product, in the eyes of customers, and they are willing to pay more, then the company can charge a higher price for it. The customers can see a difference in value between it and a possible substitute. 4. Price Maker The producer of a differentiated product is said to be a price maker rather than a price taker. A price maker has some influence over price, but not as much as most people believe. Essentially, a producer of a differentiated product creates a separate market for that product, to the extent that they are able to do so through marketing activities and demand. 5. Perceptions Are Everything There is the false perception in agriculture that the emergence of niche markets provides for unlimited product differentiation. For example, the organic milk market niche offers you the opportunity to differentiate your milk from commodity milk. While it does allow you to differentiate your milk from commodity milk, your organic milk is not necessarily a differentiated product.

Producing organic milk puts you in a different (albeit smaller) commodity market. Your product is no different than any other organic producers milk. 6. The Value Added Differentiated Fallacy Differentiation only takes place when the product you produce is seen as different. So you need to convince organic milk purchasers that your organic milk is better than that of your competitors. One way of doing this is to create a brand for your product (e.g. Johnsons Better Organic Milk), and promote your brand to organic milk purchasers. 7. Target Marketing Target Marketing is the practice of directing the marketing effort at a specific market segment. A target market, or segment, on which a business may focus, is a group of potential buyers that the business believes will want to or do want to buy that product. Defining a target market is the process of pulling apart the potential market as a whole and defining and isolating the manageable, disparate units that will make up the segment. The process includes: 1.) Determining the unique characteristics of segments in the target market, then finding these segments in the larger market based on those characteristics. 2.) Checking to see whether any of the market segments are large enough, and have the buying power, to support the organization's product. If not, the organization must return to step one (or review its product to see if it is viable). 3.) Once it is clear how to find the desired target market, the business can develop its marketing strategy to reach it. 8. What is Branding? Branding is one of the most important factors influencing an item's success or failure in today's marketplace. A brand is a combination of name, words, symbols, design, reputation and association. It identifies a product and/or its company and differentiates it from competition. 9. Niche Marketing Niche marketing is marketing a product or service in a small portion of a market that is not being readily served by the mainstream product or service providers. These niches can be geographic areas, a specialty industry, a specific demographic or ethnic group, one gender, a specific interest group, or other special group of people. 10. Ethnic Marketing What is ethnicity? It is a multidimensional expression of identity that includes race, origin or ancestry, language and religion. It is influenced by immigration, blending and intermarriage, which very often influence the strength of ethnic identification. It is often associated with cultural practices, customs and beliefs and sometimes dress and eating habits. Ethnicity depends partly on selfidentification. Everyone chooses whether they want to identify with a particular ethnic group or not.

Critical Thinking

Identifying with more than one group is more and more common, as cultural mixing is increasingly on the rise.

Module 3.2 - Developing Sales Forecast

Sales forecasting is the process of organizing and analyzing information in a way that makes it possible for the business to estimate future sales. The forecast estimates the number of units of product or service a business will sell within a specified time period and at a given price. Sales forecasting is one of the most difficult portions of the feasibility study, but one of the most important. Sales forecasts for a start-up cooperative are inherently more difficult than forecasting for more mature cooperatives. Nevertheless, an educated estimate, based on market data collected in a systematic fashion, is extremely important to investors and financial institutions considering supplying capital to the cooperative.

The true value in making a forecast is that it forces us to look at the future objectively. It will also help establish policies so that the business can easily monitor prices and operating costs to maximize profits, and make the business aware of problems before they become major.

Companies that use accurate sales forecasting processes realize important benefits such as: 1. Detailed consumer pattern information; 2. Identification of sales patterns or trends (seasonality); 3. Knowledge of the production process 4. Planned production and capacity; and 5. Inventory control, manageable overhead costs. The combination of these benefits may result in: Increased revenue; Increased customer retention; Decreased costs; Increased efficiency; and Increased profitability. For sales forecasting to be valuable to your business, it must not be treated as an isolated exercise. Rather, it must be integrated into all facets of your organization. ESTIMATING MARKET POTENTIAL An estimate of market potential reveals whether a market is sufficient to support the size and scope of the business being contemplated. The market potential provides information for sales forecasting, which in turns helps determine the overall feasibility of the business idea. The market potential estimate generally provides the upper end of the potential market, expressed in either units or sales. It is reasonable to assume that with appropriate marketing techniques and competitive pricing, the business can occupy a portion of the overall potential market. Steps in Estimating Market Potential: 1.) Define your target market and market segments; 2.) Define the geographic boundaries of the market; 3.) Assume an average selling price (from the competitive analysis) ; and 4.) Determine the average annual consumption. Consumption rates or usage rates can be estimated by researching through trade association materials, reference guides found in many libraries (such as the Business Directory, Trade and

Professional Association of Canada), and the National Reference Book. Once this information has been estimated, the following formula can derive an estimated market potential. Estimated Market Potential: MP = N x P x Q, where: MP = Market Potential N = Number of Possible Buyers P = Average Selling Price Q = Average Annual Consumption Rate Remember, the better the estimates that go into the formula, the better the estimate of the potential market. Trade Area Analysis is a means of evaluating the potential retail sales for a specific operation using a standard formula: Estimated Sales for a Trade Area: ES = ES = P = EXP= PS = TMS= MS = P x EXP x (PS/TMS) x MS, where Estimated Sales Market Area Population Average Expenditures for Retail Outlet Category Proposed Store Space Total Market Selling Space Estimated Market Share

Example A Feasibility Analysis for a Locally Owned Cooperative Hardware Store in Anytown, Manitoba. Step 1: Calculate Market Potential (example only) 1. Market Area Population (P). The market area is the population of Anytown plus the surrounding area. This region includes the towns within a 50 km radius of Anytown. The population of this market area is approximately 16,500. (Source Anytown Community Profile, 2006 edition - Statistics Canada) 2. Sales for the Market Area (EXP). The per capita annual sales for hardware stores at a retail outlet in the market area will be determined by accessing the following sources: 1.) the wholesale company that will provide statistics on average hardware expenditures based on other locally owned cooperative hardware stores in similarly sized communities. 2.) if this information is not available, find the per capita sales by taking Canadian or provincial hardware sales, divided by the respective population. This information is available from Statistics Canada. Hardware Sales (2006) = Per Capita Sales Population of Canada (2006) $8,219,353,200 = $260 31,612,897 Once the per capita sales have been determined, this number can be applied to the market area population.

Anytown

= Population x Per Capita Sales = 9,200 x $260 = $2,292,000

Surrounding Area

= Population x Per Capita Sales = 6,700 x $260 = $1,742,000

Thirty-eight per cent of the surrounding area purchased hardware items in Anytown, multiply this figure by 0.38: Surrounding Area = $1,742,000 x 0.38 = $661,960 Total Market Potential = $2,292,000 + $661,960 = $2,953,960 3. Adjustments. Typical adjustments might include updating secondary information regarding population and purchases by applying past trends. Step 2: Calculate Market Share (MS) 1.) Estimate the selling space in the market. There is one other hardware store in Anytown with a size of 3,000 square metres. 2.) Size of proposed store. The size of the proposed hardware store is 4,500 square metres. 3.) Calculation of market share. Percentage share of the market: Proposed Store Selling Space = Total Selling Space 4,500 m = 60%

3,000 m + 4,500 m

4.) Adjustments. The percentage of the market share would probably have to be decreased, because the proposed hardware retailer is new and would not have built up the customers or the reputation of an existing store. Based on the above factors, market share has been adjusted by 10 per cent to 50 per cent. 5.) Multiple Market Share x Market Potential = Estimated Market Share $2,953,960 x 50% = $1,476,690

Step 3: Calculation of Net Income and Cash Flow

Amount Sales Less: Cost of Goods Sold Gross margin Management Salary Employee Salary Rental of Building Utilities Accounting, Taxes Advertising Insurance & Licenses Repairs & Maintenance Office Supplies Bad Debts Depreciation Attachment 2 Interest Charges Bank/Credit Union Charges Total Expenses Net Income before Income Taxes $1,476,690 $959,850 $516,840 $65,000 $200,000 $75,000 $18,000 $8,000 $18,000 $6,000 $3,500 $6,000 $5,000 $25,600 $16,800 $1,500 $462,400 $54,400 Percent of Sales 100.00% 65.00% 35.00% 14.06% 43.25% 16.22% 3.89% 1.79% 3.89% 1.30% 0.76% 1.30% 1.08% 5.54% 3.63% 0.32%
From Stats Canada (average salary cost) Stats Canada operating results for Hardware Stores Primary Research provided by owners of building Primary Research provided by owners Stats Canada operating results for Hardware Stores Stats Canada operating results for Hardware Stores Primary Research confirmed by Insurance Agencies Stats Canada operating results for Hardware Stores Stats Canada operating results for Hardware Stores Stats Canada operating results for Hardware Stores Depreciation Schedule Schedule 3 Interest Charges Primary Research Bank/Credit Union Posted Charges

Source of Information
From calculation above From wholesale supplier

Attachment 1 Obtained from Stats Canada operating results for Hardware Stores Employee Salaries 3 Full Time Sales Persons 1 Full Time Accountant 1 Full Time Cashier 1 Part Time Cashier Total $105,000 $50,000 $35,000 $10,000 $200,000

Attachment 2 Depreciation Expense Equipment Cost = $128,500 Capital Cost Allowance (CCA) = 20% (provided by Revenue Canada) Year 2009 2010 2011 2012 2013 Un-depreciated Amount $128,000 $102,400 $81,920 $65,536 $49,152 CCA 20% 20% 20% 20% 20% Depreciation $25,600 $20,480 $16,384 $13,107 $10,486

Attachment 3 Interest Expense Amount Borrowed ................... $210,000 Interest Rate....................................8% Interest Costs ........................... $16,800 CREATING A PRICE STRATEGY The price of the product may need to support a high-cost manufacturing process, or exclusive distribution system, or extensive advertising. On the other hand, pricing adjustments can compensate for a lower quality product, less effective promotions, or erratic merchandising efforts by distributors. Creating an effective pricing strategy should accomplish four goals: 1.) Provide a rate of return to the business that is acceptable to the cooperative. (e.g. generate profit); 2.) Take into consideration consumers demand at the price that is set; 3.) Take into consideration the image or branding of the product or service; and 4.) Take into consideration quality of the product, the type of distribution channels, and the quality of promotion. SETTING THE PRICE Many start-up businesses that are looking at setting the price for a product or service ask the question, What price should I charge? However, in creating a pricing strategy, a more customerfocused question to ask is, What is the value to the customer of the product or service and other intangibles provided by the business?

Total revenue is influenced by two considerations: sales volume and price. Price influences sales volume. People make purchase decisions partly on price. Thus even a small change in the price of the product or service can affect sales, and change the amount of total revenue. In order for a business to survive in the long term, the pricing must cover the total cost of operating the business, plus a rate of return to the cooperative. Total cost has three components: 1.) The cost of goods sold: includes the direct expenses attributable to the production of the goods sold by the business. This amount includes the cost of materials used in creating the goods or services, along with the direct labour costs used to produce them. 2.) The selling costs: includes indirect expenses such as distribution costs and sales force costs. 3.) Overhead costs: includes storage expenses, premises, utilities, salaries, taxes, etc. There are two main types of expenses: fixed expenses and variable expenses. Each type of expense acts differently when the product or service is sold. Understanding the behaviour of the different kinds of expenses can help the business minimize pricing mistakes. Fixed Expenses are those expenses that do not change over time or as production changes. Assuming the same number of employees and the same premises, salaries, rent, taxes, insurance, heating and lighting are relatively fixed. Fixed expenses can also be called indirect expenses, as they are not directly associated with the final product. Fixed costs are those that have to be paid even if the company is not producing any goods. Variable Expenses are those expenses that change as production changes. Examples can include raw materials or electricity. . Variable expenses can also be called direct expenses, as they are directly associated with production. BREAKEVEN ANALYSIS Breakeven Analysis compares alternative income and expense estimates to determine the suitability of each price. It can also be used to analyze the potential profitability of a capital investment for a sales-based business. The breakeven point for a product is the point where total revenue received equals the total costs associated with the sale of the product. To provide a complete analysis, the breakeven analysis should include two sections: first one to analyze the income/expense relationship, and the second to incorporate actual forecasts into the analysis. As a result, if the product can be sold in a larger quantity than that which occurs at the breakeven point, then the business should make a profit otherwise below this point, it will be a loss.

Breakeven quantity is calculated by: Breakeven Calculation Breakeven Point (in units) = = And Breakeven Point (in dollars) = Total Fixed Costs Variable Costs per Unit 1 Selling Price Per Unit Total Fixed Costs Per Unit Contribution to Fixed Costs Total Fixed Costs Price Per Unit Variable Costs Per Unit

A company produces widgets from a rented retail store. The annual fixed costs are $80,000. The company sells each the widget for $0.75 and the variable cost of each widget is $0.50. The breakeven point in sales and dollars is: BP Units BP $ TFC P-VC TFC 1 VC P = = = $80,000 0.75 0.50 $80,000 1 .50 .75 = = = = 80,000 0.25 80,000 1 .67 = = = 320,000 $80,000 .33

= $242,424 of revenue for the company to breakeven PRICING OBJECTIVES In order to establish the price of a product or service the business must establish its pricing objectives. Pricing objectives create clear concise direction of the price of the service or product. The following steps should be considered within the pricing objectives: 1.) What is the target revenue of the company? 2.) What are the objectives of the company branding? 3.) Will consumers respond to the companys price objectives? Some pricing objectives could be: Increase market share Increase sales volume (quantity) Increase dollar sales Increase store traffic Maximize long-run profit Maximize short-run profit Match competitors prices Obtain a target rate of return on investment (ROI) Obtain a target rate of return on sales Company growth Encourage marginal firms to leave the industry Survival Obtain or maintain loyalty Increase distributors marketing of product or service Enhance the image of the firm, brand, or product Create interest in a product/service Discourage competitors from cutting prices

Maintain price leadership Discourage new business entering the industry Social, ethical, or ideological objectives

Enhance viability of the product or service

Critical Thinking

From a revenue standpoint, the price of the product or service should be the maximum consumers are willing to pay. In reality, a good pricing strategy would be a balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price beyond which the organization experiences a no-demand situation).

A number of common pricing strategies are listed below. Penetration Pricing Skimming Pricing Follow-the-Leader Pricing Prestige Pricing Variable Pricing Flexible Pricing Price Lining

Module 3.3 Technical Feasibility

The technical feasibility study involves questions such as whether the technology needed for the proposed business exists yet, how difficult it will be to build, and what is the experience level of the firm supplying the technology. The reason for asking these questions is to determine the level of technology cost and risk that a business may be looking at. The assessment is based on defined technology requirements in terms of input, processes, output, programs and procedures. The assessment can be defined in terms of the amount of productivity, frequency that the machinery or equipment must be updated, etc. This assessment will either qualify the technology or identify possible inadequacies that will have to be addressed. The technical feasibility study should also determine the availability of a qualified labour force. For cooperatives requiring production facilities, it is this stage of business development that will generally absorb the majority of the investment capital. Therefore, from a capital investment perspective, the technical feasibility study must be conducted with all the diligence and appropriate skills necessary to address the requisite issues. Where production facilities are involved, the technical feasibility reports address the suitability of the selected site for the intended use, including an environmental impact analysis. The report must be based upon verifiable data and contain sufficient information and analysis to determine the technical feasibility of being able to produce product at the rate assumed by the financial projections. The report must also identify any constraints or limitations in these financial projections and any other facility or design-related factors which might affect the success of the enterprise. The report needs to identify and estimate operating and development costs, specify the level of accuracy of these estimates and the assumptions on which they are based. For the purpose of the technical feasibility reports, the project engineer or architect must be an independent third party.

Site Location The analysis of a possible new location should quantify any geographical competitive advantage. While project drivers, measures of success and project parameters will vary by company, industry and facility, the underlying approach to choosing a location is consistent. Greg Brown and Alison McMahon, of Deloitte & Touche Fantus, advise A successful strategy defines critical issues and objectives prior to discussing specific locations. Possible objectives for a new facility include achieving operating efficiencies, expanding or reducing capacity, reducing costs or improving labour draw. The cooperative should define the geographic search area and the size and scope of a project. In addition, prior to the site selection process the following questions should be asked: What is the fundamental purpose of establishing the new facility? What objectives should be considered and why? How do these objectives affect organizational initiatives? What industry trends and internal imperatives need to be considered in the decision?

A useful tool in deciding on a suitable site is to quantify individual sites based on a scoring system. You may use words like adequate and unsatisfactory to evaluate the site. You may also use a numbering system (i.e., 1 for least satisfactory and 5 for most satisfactory) and total the score for the site. Evaluate each site according to this scoring system by totaling the scores for each site and comparing them. This will provide the business with a simple method of comparing sites.

Production Assessment The objective of the technical feasibility assessment is to determine whether the technology being considered for the proposed project is suitable for the desired quantity and quality of product that the cooperative wants to produce. The feasibility assessment of the operations and production technologies is conducted by laying out the physical production process from the point of receiving the input to packaging, transfer to storage, warehousing and/or delivery.

This segment of the research must also consider the physical layout of equipment and how it impacts operational efficiency. Additionally, scalability of the equipment and associated technologies must also be assessed, to ensure that is not locked into a scale, but instead can take advantage of future success and expand. The report should includes advantages and disadvantages in the technologies from different perspectives: number of employees and skill level required to effectively operate equipment, utility services requirements, maintenance routines, shut down protocols, etc. In addition, the study should provide a clear foundation for the economic assessment of alternative technical solutions and their operational requirements for the project. The technical efficiencies of the alternative technologies should be weighed against their economic efficiencies, to determine their overall effectiveness in the projects feasibility. The best sources of the economic data for the assessment of technologies and operations are suppliers. Such primary data can be collected by providing a detailed description of the product being considered to potential technical suppliers in a Request for Quote (RFQ) offer. The principal advantage of using an RFQ is to improve your knowledge about alternative solutions, of which you may be unaware, should you only work with one supplier.

Module 3.4 Financial Feasibility

The purpose of a financial feasibility study is to determine and evaluate the business concepts ability to generate sufficient income to pay debt and reinvest in the business. The financial plan should identify any performance bonds included in the project construction, technology guarantees, the financing plan, the level and type of insurance coverage that will be needed, and any lines of credit and standby financing requirements. Total Capital Requirements Debt Financing is the process of raising money for working capital or capital expenditures by selling bonds, bills or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid. Equity Financing is the process of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. Equity Financing in a Cooperative Environment Equity capital is created by selling membership and special investment shares in the cooperative. The cooperative may also plan to issue investment shares to non-members. Types of Credit There are two types of credit: consumer credit (granted by retailers to consumers who purchase consumer goods for consumption) and trade credit (when one firm provides goods or services to a customer with an agreement to bill them later, or receive a shipment or service from a supplier under an agreement to pay them later). Consumer Credit can be charge accounts, installment accounts, and revolving charge accounts. Charge Accounts allow consumers to obtain a product immediately. Payment is due at time of billing. Installment Accounts the practice of lending one lump sum that is paid back gradually through periodic payments by the borrower. Revolving Accounts Revolving credit is a line of credit that is replenished to its maximum amount when you pay it off. Credit Cards entitle the holder to buy goods and services based on the holder's promise to pay for these goods and services at a later date. Trade Credit exists when one firm provides goods or services to a customer with an agreement to bill them later, or receive a shipment or service from a supplier under an agreement to pay them later. Trade credit can be viewed as an essential element of capitalization in an operating business because it can reduce the required capital investment to operate the business if it is managed properly. The business sell the goods subject to specific repayment period, such as 2/10, net 30. This means that a two per cent discount is given by the seller if the buyer pays within 10 days of the invoice date. Failure to take this discount makes the full payment of the invoice amount due in 30 days.

Financial Institution Financing Seed and Start-up Capital Seed and start-up capital refers to the financing sources of available during the development and start-up stage of a businesss life cycle. Seed and start-up capital in small businesses could include the business owners physical and financial assets, family and friends, and business angels or angel investors. Larger business may utilize venture capitalists, who specialize in investing in start-up companies. In the first round of financing, the definition widens to encompass venture capitalists, commercial financial institutions and government assistance. During the survival stage, financing often comes from suppliers, customers, venture capitalists and operations. Business Angels are individuals or companies willing to invest in start-up companies for a share in any financial rewards. Angels are difficult to find; generally angel investors are networked with accountants and lawyers, and usually need an introduction or recommendation from one of these before they become interested in a business opportunity. Venture Capitalists are a type of private equity capital typically provided to early-stage, highpotential, growth companies in the interest of generating a return on investment. Venture capital investments are generally made as cash, in exchange for shares in the invested company. Commercial Financial Institutions typically provide loans to start-up companies, usually only after two to three years of operating history. Commercial financial institutions usually provide only capital in the survival stage in the form of operating loans. Typically, commercial financial institutions will only provide long-term financing to established businesses. Table 7 shows the types and sources of financing used during the beginning life cycles of a business Life Cycle Stage Type of Financing Major Sources of Financing Development Stage Seed/Start-up Financing Venture Capitalists Member Pockets Government Assistance Business Owners Assets Friends & Family Member Pockets Angel Investors Business Owners Assets Venture Capitalists Government Assistance Business Operations Member Pockets Venture Capitalists Suppliers & Customers Government Assistance Commercial Financial Institutions Business Operations Suppliers & Customers Commercial Financial Institutions

Start-up Stage

Start-up Financing

Survival Stage

First Round Financing

Growth Stage

Second Round Financing Mezzanine Financing Liquidity Stage Financing Issuing Shares

Investment Banks Members Maturity Commercial Financial Institutions Issuing Shares Business Operations Commercial Operations Member Pockets

Investment Financing is the traditional purview of investment banks, which help businesses to raise funds in the capital markets and advise on mergers and acquisitions. Aging of Accounts Receivable is the process of categorizing each account receivable by the number of days it has been outstanding. Scheduled review of the aged accounts receivable listing allows a business to identify collection trends create a plan of action to eliminate the problem accounts. Financial Institution Financing is the most common source of funds for a business. There are three basic types of financing provided by financial institutions: 1.) Operating Loans or Lines of Credit a short-term loan to cover the businesss peak working capital requirements. Operating loans provide a predetermined amount of credit for day-to-day expenses such as accounts receivables, inventory, etc. An operating loan is intended to supplement the businesss own working capital. An operating loan can also provide much-needed capital in the event of unexpected cash flow interruptions. 2.) Term Loans typically, term loans are for fixed assets such as machinery, vehicles and commercial buildings. They usually have to be repaid in two to ten years, which is related to the lifespan of the asset being financed. Term loans can have fixed interest rates or variable interest rates. Note: Both operating loans and term loans are demand loans, so the financial institution can demand repayment of the loan at any time. 3.) Mortgages are loans made using real estate as collateral to secure repayment. A commercial mortgage is similar to a residential mortgage, except the collateral is a commercial building or other business real estate, not residential property. The Canada Small Business Financing Program seeks to increase the availability of loans for establishing, expanding, modernizing and improving small businesses. It does this by encouraging financial institutions to make their financing available to small businesses. Under the program, a business must apply for a loan at a financial institution (bank, credit union or caisse populaire) of its choice. Under the Canada Small Business Financing Act, the program can assist businesses in obtaining term loans of up to $250,000 to help finance fixed asset needs. Business Development Bank of Canada is a crown corporation financial institution wholly owned by the Government of Canada. BDC delivers financial and consulting services to Canadian small business, with a particular focus on technology and exporting. BDC offers a higher percentage of long-term financing on your fixed and intangible assets, and financing flexibility that allows you to manage day-to-day operations. Evaluating Financing Options When evaluating financing options it is wise to shop around and compare options and terms. This includes: Interest rates; Transaction fees of loan and deposits; Prepayment terms;

Flexible repayment terms; Security and personal guarantees; Quality of all overall service provided by the institution; Expected processing time; and Does the financial institution have knowledge of the industry being financed?

Loan Security Agreements Loan security agreements document giving a lender a security interest in assets or property pledged as collateral. The security agreement may cover liens in intangible property such as accounts receivable, or a lien, in which the lender holds the collateral (for example: stock certificates) until the loan is fully paid. In some loans, the security agreement is also the financing statement filed with a public records office, if it has the signatures of both borrower and lender. Types of Loan Security Agreements Promissory Note A promissory note is a written promise to pay a specified sum of money to the lender either on demand or on a specified date. Real Property Mortgage The real property mortgage is a loan (mortgage) whose proceeds are applied to the purchase or refinance of land and buildings. A charge against the title is registered with the Province. Chattel Mortgage The chattel mortgage is a mortgage on specific assets other than land and buildings. A lien charge against the title is registered with the Province. Pledge The pledge is an agreement similar to the chattel mortgage, except in that possession is transferred to the lender but title remains with the borrower, e.g., your stocks and bonds held by the bank. Floating Charge The floating charge is an agreement which designates that all the remaining assets in debenture the business, not already mortgaged as security for other debts, will be taken as the security for the new debt. The title remains with the business but the debenture is registered with the Province. Personal Guarantee This agreement says the business owners will agree that if the limited company is unable to repay the loan, the business owners will do so personally. If this is in addition to other securities, the business owners would be wise to try to negotiate a limited guarantee to cover the shortfall in the security for the loan.

Postponement of a Claim The Postponement of a Claim allows the lender to ask for assurance that the company will not repay the shareholders until the secured lenders have been repaid in full.

Determine the Start-up Financial Requirements Accurately estimating how much capital the business will need is crucial to success. To determine the business start-up costs, you must identify all the expenses that your business will incur during its start-up phase. One-time Expenses One-time expenses are the expenses that must be made before the start of the business. The expenses include both capital expenditures and soft expenses. Capital expenditures can include the purchase of signage, fixtures and equipment, beginning inventory or office supplies. Soft expenses are such items as prepaid utility bills or deposits, advertising and promotion that must be paid prior to the opening of the business, etc. A realistic start-up budget should only include those things that are necessary to start the business. These essential expenses can then be divided into two separate categories: fixed and variable. Fixed expenses include rent, utilities, administrative costs, and insurance costs. Variable expenses include inventory, shipping and packaging costs, sales commissions, and other costs associated with the direct sale of a product or service. Operating Expenses Operating expenses are salaries and wages, rent and normal operating expenses that must be paid until the business turns a profit. Many business take months or even years before showing a sustainable profit margin. The cash flow projections will provide a guide as to when the business will generate sufficient operating income to routinely pay operating expenses but, as a rule, a small business should have sufficient funds to cover a minimum of three months operating expenses and a larger business should have funds available to cover operating expenses for one year.

Estimated Start-up Requirements Anytown Cooperative Hardware Store Estimated Monthly Expenses
Item Monthly Expense Number of Months of Cash Required to Cover Expenses Estimated Requirement to Start Cooperative

Management Salary Employee Salary Employee Benefits Building Rental Utilities Accounting & Taxes Advertising Insurance & Licenses Repairs & Maintenance Office Supplies Bad Debts Depreciation Interest Charges Bank/Credit Union Charges

$5,417.00 $16,667.00 $1,167.00 $6,250.00 $1,500.00 $667.00 $1,500.00 $500.00 $292 $500.00 $417.00 0.00 $1,400.00 $125.00

3 3 3 3 3 3 3 3 3 3 3 3 3 3

$16,251.00 $50,001.00 $3,501.00 $18,750.00 $4,500.00 $2,001.00 $4,500.00 $1,500.00 $876.00 $1,500.00 $1,251.00 0.00 $4,200.00 $375.00 $109,206.00 Cash Required to Start Cooperative

Total Amount of Capital Required to Cover Expenses One Time Start-up Expenses Capital Costs Fixtures & Equipment Starting Inventory Soft Costs Prepaid Utilities & Fees Legal & Professional Fees Licenses & Permits Advertising & Promotion Misc Cash Total One Time Cash Requirements

$185,000.00 $350,000.00

$7,500.00 $2,500.00 $3,500.00 $3,000.00 $4,500.00 $556,000.00

Total Estimated Cash Required to Start Cooperative

$665,206

Sensitivity Analysis A sensitivity analysis enables the business owner to see a true picture of the potential for gain and loss. In essence, the sensitivity analysis compares potential income statements for best- and worstcase scenarios. A sensitivity analysis considers what if? scenarios. What happens to a businesss cash position, for example, if sales fall by 10 per cent? What happens if the businesss main supplier increases raw material prices by 12 per cent? A sensitivity analysis is particularly used by financial institutions when considering propositions for a loan. If the business is particularly susceptible to small changes, then the business probably does not have business model that yields a sufficiently large profit margin. Thus it is less likely to receive requested credit.

Critical Thinking

A sensitivity analysis can help businesses in making decisions. The business may want to consider, for example, the effect of increased raw material, labour or overhead costs; of reducing prices, with constant volumes, to counteract competitors; or reducing volumes, with constant prices, due to over-optimistic forecasts. Including a sensitivity analysis in the business feasibility plan will demonstrate that the business has thought about some of the potential risks and how they may be avoided.

CASH FLOW BUDGET WORKSHEET SENSITIVITY ANALYSIS (ASSUMES 5% CHANGE IN RECEIPTS AND DISBURSEMENTS) Pessimistic Expected Cash Flow Cash Flow Beginning Cash Balance Cash Inflows (Income): Accts. Rec. Collections Loan Proceeds Sales & Receipts Total Cash Inflows Available Cash Balance Cash Outflows (Expenses): Advertising Bank Service Charges Contingencies Credit Card Fees Delivery Charges Deposits Dues & Subscriptions Health Insurance Insurance Interest Inventory Purchases Licenses & Permits Miscellaneous Office Payroll Payroll Taxes Professional Fees Rent or Lease Repairs & Maintenance Sales tax Services Signs Supplies Taxes & Licenses Utilities & Telephone Other: Subtotal Other Cash Out Flows: Capital Purchases Building Construction Decorating Fixtures & Equipment $450,000 $0 $52,500 $19,425 $50,000 $18,500 $450,000 $450,000 $0 $47,500 $17,575 $20,843 $5,985 $10,500 $525 $13,125 $5,250 $3,675 $131 $7,875 $18,375 $325,500 $1,575 $5,250 $7,875 $194,250 $5,250 $1,575 $151,200 $13,125 $85,313 $2,625 $5,250 $15,750 $5,250 $13,125 $4,725 $923,921 $19,850 $5,700 $10,000 $500 $12,500 $5,000 $3,500 $125 $7,500 $17,500 $310,000 $1,500 $5,000 $7,500 $185,000 $5,000 $1,500 $144,000 $12,500 $81,250 $2,500 $5,000 $15,000 $5,000 $12,500 $4,500 $879,925 $18,858 $5,415 $9,500 $475 $11,875 $4,750 $3,325 $119 $7,125 $16,625 $294,500 $1,425 $4,750 $7,125 $175,750 $4,750 $1,425 $136,800 $11,875 $77,188 $2,375 $4,750 $14,250 $4,750 $11,875 $4,275 $835,929 $118,750 $522,500 $752,875 $1,394,125 $1,394,125 $125,000 $550,000 $792,500 $1,472,500 $1,522,500 $131,250 $577,500 $832,125 $1,540,875 $1,540,875 $0 $50,000

Optimistic Cash Flow $0

Install Fixtures & Equip. Remodeling Lease Payments Loan Principal Owner's Draw Subtotal Total Cash Outflows Ending Cash Balance

$5,250 $0 $0 $44,625 $89,250 $661,050 $1,584,971 ($190,846)

$5,000

$42,500 $85,000 $651,000 $1,530,925 ($8,425)

$4,750 $0 $0 $40,375 $80,750 $640,950 $1,476,879 $63,996

Module 3.5 Developing Projected Financial Statements

In Ralph Estes's Dictionary of Accounting (MIT, Cambridge, 1981, p. 105), a projected financial statement is defined as "a financial statement prepared on the basis of some assumed events and transactions that have not yet occurred." A projected financial statement attempts to predict the future. Projected statements can identify opportunities and/or obstacles which the business will need to take into consideration. The statements can also examine alternatives and possibilities prior to expending capital. PROJECTED BALANCE SHEET The balance sheet is a snapshot taken at a moment in time. The information presented is cumulative, in that it summarizes, for that moment in time, the net effect of all financial activity since the business began. Usually a balance sheet is produced at the end of a reporting period. In the balance sheet, the business can easily see the relationship between debt (liabilities) and equity. The balance sheet presents a detailed listing of what a business owns, what it owes and its net worth, at a specific point in time. It is a stock measure of the business's financial condition. The basic equation of the balance sheet is: Assets = Liabilities + Equity

Anytown Cooperative Hardware Store Fiscal Year Ended Dec 31, 2009 Balance Sheet
Assets Current Assets Cash and Deposits Accounts Receivables Inventory Prepaid Expenses Total Current Assets Capital/Fixed Assets Investments Land Buildings Other Capital/Fixed Assets Total Capital/Fixed Assets 2009 $15,000 $125,000 $80,000 $5,000 $225,500 $75,000 $500,000 $450,000 $50,000 $1,075,000 $1,300,000 2010 $12,000 $112,000 $75,000 $4,200 $203,450 $75,000 $500,000 $475,000 $55,000 $1,105,000 $1,308,450

Total Assets Liabilities

Current Liabilities Accounts Payable Taxes Payable Long Term Debt Mortgage Total Liabilities Member Equity General Reserve Membership Shares Retained Earnings Total Member Equity Total Liabilities and Member Equity

$45,000 $5,000 $325,000 $375,000 $50,500 $525,000 $400,000 $975,000 $1,300,500

$38,500 $3,850 $365,000 $365,000 $50,000 $525,000 $368,450 $943,450 $1,308,450

Current Asset: is an asset on the balance sheet which is expected to be sold or otherwise used up in the near future, usually within one year, or one business cycle. Current assets include cash, cash equivalents, accounts receivable, inventory, the portion of prepaid accounts which will be used within a year, and short-term investments. Fixed asset: is comprised of property, plant and equipment, or property which cannot easily be converted into cash. In most cases, only tangible assets are referred to as fixed. These are items of value which the cooperative has bought and will use for an extended period of time. Current Liabilities: are considered liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle, whichever period is longer. For example accounts payable for goods, services or supplies that were purchased for use in the operation of the business, and are payable within a normal period of time, would be current liabilities Long Term Liabilities: are a type of debt. Bonds, mortgages and loans that are payable over a term exceeding one year would be long term liabilities. Member Equity: is the capital invested in the organization by cooperative members Retained earnings: is the portion of net income which is retained by the corporation rather than distributed to its owners as dividends. PROJECTED PROFORMA INCOME STATEMENT Pro Forma income statements are used to generate projected financial statements, which provide an estimate of the income, expenses, assets and liabilities of operating a business throughout the year. Financial institutions generally demand the pro forma statements when considering a loan request. The first step in creating projected financial statements is the pro forma income statement. The statement shows all sales revenues, cost of goods sold, losses, operating expenses, taxes and depreciation on property, plant and equipment. The formula to calculate income and expenses is simple: Revenue Expenses = Net Profit before Taxes The purpose of the income statement is to show the management team and the members of the cooperative whether the business is expected to make or lose money during the period in question. The information needed to complete a pro forma income statement includes the following: 1.) The projected sales volume for the year 2.) The expected expense of producing or purchasing the product or service (cost of goods sold) 3.) The amount of fixed operating expenses, such as insurance, utilities, rent, interest costs, and other such items, for the year. 4.) The variable operating expenses such as wages and benefits, advertising and transportation. 5.) The anticipated net operating profit or loss. Net sales are the amount of gross sales reduced by customer discounts, returns, freight out and allowances. Cost of Goods Sold is defined as the direct expenses incurred in the production of the goods or services sold by the business. This is the materials cost incurred in creating the goods, together with the direct labour costs used to produce them.

Total Cost has three components: 1.) The Cost of Goods Sold: This includes the direct expenses attributable to the production of the goods sold by the business. It includes the materials cost used in creating the goods, along with the direct labour costs used to produce them. 2.) The selling costs: this includes indirect expenses such as distribution costs and sales force costs. 3.) Overhead costs: this includes storage expenses, utilities, salaries, taxes, and other items. Net sales less net operating profit or loss will create the estimated gross margin or gross profit. Gross profit is one of the most important measures of a business. The larger the gross profit margin, the greater the cushion for covering all other business expenses, while being able to provide a sufficient return to the cooperative. Figure 3
Sample Pro Forma Income Statement Anytown Pharmacy Net Sales Less: Costs of Goods Sold Beginning Inventory Plus: Net Purchases Less: Ending Inventory Cost of Goods Sold Gross Margin Operating Expenses Net Profit (Loss) before Income Tax $792,500 $125,000 $310,000 $205,000 $230,000 $562,500 $569,925 ($7,425)

It is important to note that different types of companies have much different inventory requirements, costs of goods sold and/or operating expenses. Service industries, for example, typically do not hold an inventory of goods for sale. Manufacturing companies, on the other hand, may hold many different types and quantities of inventory.. The appropriate level of inventory for each type of business should be determined and reflected in the projected net sales. The operating expenses should be broken down to show each major type of expense, as a percentage of overall operating expenses. This provides an estimate of where the business will be spending the majority of the operating budget. The projection not only serves as a planning tool, outlining the requirements of the business, but it can also be used as a benchmark to and monitor the actual performance of the business in the early stages. FORECASTING CASH FLOW The next step in the projected financial statement preparation is to prepare a projected cash flow. The projected cash flow financial statement assesses the financial feasibility of the business: how well it will be able to control its day to day financial affairs. The cash flow statement traces the flow of funds (or working capital) into and out of your business for the year. A cash flow statement is used to assess the timing, amount and predictability of future cash flows and is used as the basis for budgeting. You can use a cash flow statement to answer the questions, "Where did the money come from?" and "Where did it go? The cash flow statement measures only the cash inflow and outflow of the business. Non-cash accounting entries that show up on the income statement such as depreciation, amortization and the acquisition or disposal of assets are not included in the cash flow.

The cash flow is used by the financial institution to evaluate the firm's ability to generate cash to repay its debt, buy equipment or expand the business. There are three sections to the cash flow statement: 1. Operating Activities 2. Investment Activities 3. Financing Activities Net cash flow starts with the net income amount, makes adjustments for all non-cash items, then adjusts for all cash-based transactions. Only actual cash items remain, because the point is to forecast the effect on the companys actual cash position at various points in time. An increase in an asset account is subtracted from net income, and an increase in a liability account is added back to net income. This method converts accrual-basis net income (or loss) into cash flow by using a series of additions and deductions. Operating activities (all transactions and events that normally enter into the determination of operating income) include cash receipts from selling goods or providing services, as well as income from items such as interest and dividends. Operating activities also include cash payments such as inventory, payroll, taxes, interest, utilities, and rent. The net amount of cash provided (or used) by operating activities is the key figure on a statement of cash flows. The following formula determines the cash flow from operations: (+) (+) Cash received from customers Other operating Receipts = Total Cash Receipts from Operations (A) (-) Cash Paid to Suppliers (-) Cash Paid to Employees (-) Interest Paid (-) Taxes Paid (-) Other Cash Payments (=) Total Cash Payments from Operations (B) Total Net Cash Provided by Operations = (A) + (B)

The following formula determines the cash flow from investments: (+) Cash Proceeds from sale of assets (+) Sale of investments in equity securities of other entities or debt securities (other than cash equivalents) (+) Collection of principal on loans made to other entities (-) Cash Disbursements for the purchase of land/building or equipment (-) Loans to other entities (-) Purchase of equity securities of other entities or debt securities (other than cash equivalents) (=) Total Net Cash Investment The following formula determines the cash flow from financing: (+) Cash received from financial institutions (+) Proceeds of issuing stock (+) Capital contributions by owners (=) Total cash received from financing (A) (-) Repayment of principal on loans (-) Dividends paid to shareholders (-) Cash withdrawals by owners (=) Total cash payments for financing (B) Total Cash Payments Provided by Financing (A) + (B)

Proforma Projected Cash Flow Statement 12 Month Cash Flow Projections January $4,500 $1,250 $2,200 $2,100 $2,450 $2,325 $2,100 $2,435 $2,755 $2,805 $2,950 $3,410 $26,780 $0 $0 $0 $0 $0 $0 $4,500 $6,790 $7,950 $9,675 $10,990 $15,075 $14,225 $15,440 $15,545 $13,600 $12,895 $15,910 $142,595 $0 $0 $1,250 $250 $450 $125 $3,500 $750 $250 $1,500 $585 $1,500 $750 $1,360 $667 $200 $1,250 $9,187 -$4,687 $20,000 $15,313 $0 $15,313 $11,168 $5,902 $3,077 $0 $0 $0 $0 $2,942 $11,168 $5,902 $3,077 $2,942 $15,313 $11,168 $5,902 $3,077 -$4,145 -$5,266 -$2,825 -$136 $2,369 $2,942 $5,311 $0 $5,311 $10,935 $13,216 $12,500 $11,126 $12,706 $1,330 $1,140 $1,095 $1,745 $400 $1,345 $11,796 $2,429 $5,311 $7,740 $0 $7,740 $1,550 $12,158 $3,282 $7,740 $11,021 $0 $11,021 $658 $648 $639 $630 $620 $611 $1,370 $1,379 $1,388 $1,397 $1,406 $1,416 $1,425 $601 $1,435 $592 $200 $1,785 $12,608 $2,937 $11,021 $13,959 $0 $13,959 $1,200 $11,569 $2,031 $13,959 $15,990 $0 $15,990 $15,661 $19,326 $1,445 $13,223 -$328 $15,990 $15,661 $1,444 $582 $1,454 $573 $1,464 $563 $100 $1,475 $12,245 $3,665 $15,661 $19,326 $883 $1,034 $1,258 $1,429 $1,960 $1,849 $2,007 $2,021 $1,768 $250 $250 $250 $250 $250 $250 $250 $750 $750 $750 $750 $750 $750 $750 $750 $250 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $3,500 $125 $125 $125 $125 $125 $125 $125 $125 $450 $450 $450 $450 $450 $450 $450 $450 $450 $125 $3,500 $750 $250 $250 $250 $250 $250 $250 $250 $250 $250 $250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $1,250 $250 $450 $125 $3,500 $750 $250 $1,500 $1,676 $2,068 $1,250 $250 $450 $125 $3,500 $750 $250 $15,000 $3,000 $5,400 $1,500 $42,000 $9,000 $3,000 $3,000 $18,537 $1,500 $750 $0 $16,938 $7,384 $900 $15,360 $143,269 -$674 $19,326 $20,000 $0 -$674 $5,540 $5,750 $7,575 $8,540 $12,750 $12,125 $13,005 $12,790 $10,795 $9,945 $12,500 $115,815 February March April May June July August September October November December Yearly Total

Sales

Accounts Receivable

New Term Borrowing

Capital Sales

Cash Contributions

Investment Income

Other Income

Total Cash Inflow

Rent

Telephone

Hydro

Transportation costs

Wages and Salaries

Advertising & Promotion

Office Supplies

Legal & Accounting

Taxes

Licenses

Insurance

Inventory

Principal Payments

Interest

Other Cash Expenses

Accounts Payable

Total Cash Outflow

Net Cash Flow

(+) Beginning Cash Balance

(=) Cash Position for the Period

(+) Interest on Operating Loan

(=) Ending Cash Position

Module 3.6 - Establishing Criteria to Proceed or Abandon a Business Idea

At each stage by having pre-established minimum acceptable" criteria makes the decision-making activity easier. Either the business idea or project meets the minimum criteria or it does not. If it does not, then you can make a decision to abandon the idea in its current form. If the idea or project meets or exceeds the criteria, you can proceed to analyze the next stage. This is where the ability to remain focused and objective is very important. If a maybe enters the decision, then it is likely that goal or the information is not defined well enough. It may be necessary at this point to redefine the goals and start again, seek more information on a specific point, or to do the activity more thoroughly. THE IDEA Every idea has some merit and some drawbacks. Out of 100 ideas or more, there may be one or two real opportunities. Superior business ideas that have potential to become opportunities have 5 basic anchors: They create or add significant value to a customer or end user. They do so by solving a significant problem, or meeting a significant want or need, for which someone is willing to pay a premium. They have a strong market, profit margin. They are a good fit with the founders and management team. They have strong risk/reward proposition. Does the idea appear to meet my goals? What factors could prevent it from being successful? Are the team members (or my family and I) prepared to make the sacrifices necessary to make this project work?

At this stage, the team will concentrate mostly on the obvious benefits and limitations:

It is difficult to remain totally objective through this stage. A healthy level of skepticism is required to allow the group to discover the warning signs and pitfalls that lie in wait to sabotage any good idea. Criteria considerations: Are the benefits from this idea sufficient to justify the cost as measured in terms of finance, personal stress and family sacrifice? What is the balance of benefits to cost that we are willing to tolerate?

MANAGEMENT CAPABILITIES Management experts agree that the most important factor for success by far in any business is the management team that makes the decisions, yet it is the factor most often overlooked in determining the feasibility of a venture. Criteria considerations: What specific skills does the business need to develop or hire?

At what point does the lack of available skills become an obstacle?

TECHNICAL REALITIES An assessment of the idea must consider the question, Can it be done? This question must be answered to determine whether the business has the capability of producing the product and taking it to the marketplace. Specific questions might include: Do we have access to the required raw materials? What technology, equipment and processes are required? Do we understand the required technology, equipment and processes? Does it appear that the production system is workable and affordable?

Criteria considerations: How much time can I devote to this project at the expense of my other enterprises? How much change am I prepared to make to accommodate this project? At what point do I decide it is not worth the effort? MARKET REALITIES The success of any venture depends on the ability to get the right product into the right marketplace at the right time, and with the right price. The marketing world is littered with failed products that could have been successful if the formula for their offering had been different. Effective market research is the most important activity that an entrepreneur can undertake to reduce risk. Key areas to research: Features and benefits of the product or service (Are the features we want to offer actually benefits for the potential customers?); Target market (Who is most likely to buy?); Distribution options (What is the best way to reach the target buyers?); Market demand (How many possible buyers are there, at what volume and price?); Competition (What products and companies compete in this market?); Trends (What is the expected life of the product?); Expected price (What are the potential highest, lowest and most often prices?); and Expected sales (What volume and market conditions can we expect?). It is important to understand that customers rule the marketplace. They alone determine whether the product will sell in sufficient numbers and price to be viable. Market research can reveal the probability of product success.

Critical Thinking

Criteria Considerations: Is there demand? Is there enough demand to drive enough profit to be sustainable? What are the minimum values on sales volume and price needed to be viable? Is the potential for initial sales, and growth in sales, adequate? Is this product the best option available to us?

COST AND FINANCIAL REALITIES As each of the previous analyses has been conducted, the anticipated costs and expected returns have been transferred to a ledger. From this ledger, three statements can be generated: 1. Pro Forma (Projected) Income and Expense Statement 2. Projected Cash Flow Statement 3. Opening Balance Sheet These statements are essential to creating a solid business case to justify the proposed venture. In the original goals, a target for return on investment (ROI) might have been stated. It is possible to calculate a projected ROI. Your team is seeking answers to the following questions: Does the profit level meet or exceed our goals? Is the cost of establishment even within our range of financial options? Overall, will this proposal provide sufficient return on investment?

Criteria considerations: Is the cost of sales acceptable relative to the likely product price? Might the venture meet or exceed the profit goals? Does the expected return meet or exceed the minimum acceptable level? RISK REALITIES Investments are made in the expectation of a return to the investor. In general, the greater the return expected, the more willing an investor will be to invest. People vary in their ability and their willingness to take risks. The ability varies with the extent of the required investment, and the wealth or asset value of the investor. The willingness varies with the amount of those assets that the investor or group of investors is willing to place at risk. These risks may be financial or social. In either case, they can have a significant effect on the project team and their families. Managing risk is a function of controlling the factors that contribute to possible losses against the investment. A feasibility analysis is a risk-management tool, because it helps the business identify the risk factors involved in the project. Other risk management tools are those practices that contribute to consistent quality and safety of the product being sold or that contribute to a low unit cost of production. The feasibility analyst might ask the following questions: What can go wrong with this project? Is there a way to prevent any of these from happening? What is the probability that any of these factors will go wrong? What is the probability that two or more of these will go wrong? Can the effect of these risks be reduced through insurance, and at what cost? How able and willing is the business to assume these risks?

Risk control is the adoption of systems that minimize the likelihood and the effect of a negative occurrence. Quality control and safety programs reduce the risk of injury or harm to customers Production efficiencies provide a competitive advantage through low cost of production

Thorough market research provides an improved chance of marketplace success Accurate cost estimates improve the accuracy of estimating profit and return

General insurance agents carry insurance programs covering many kinds of business risks. These come at a significant cost to the business, so if more factors can be controlled through management and production, the cost of production will be lower. Criteria Considerations: Do the risks involved in this venture exceed the benefits that I hope to gain? What specific risks does the business need to avoid or control? Is the cost of risk abatement through prevention and insurance affordable? What is the maximum amount of risk that the business is willing to take?

Venture Opportunity Screening Exercises (VOSE) The venture creation process requires performance of due diligence. The components of these exercises are used to channel your thought and data collection efforts toward creating the foundation for development of the complete Business Plan. Allow for a dynamic processing of each component and thereby the shaping of the opportunity and a plan to execute it. It is OK to be initially broad in your perspective and then become more focused in later iterations. At the end of the VOSE exercise, you should have a clear idea of the relative attractiveness of your opportunity. However, it is rarely simply cut and dried. Mostly, there will be considerable uncertainty and numerous unknowns and risks. Completing this exercise can, however, help you understand those uncertainties and risks as you make a decision about the business idea. The Venture Opportunity Profile Fill in this profile for each cooperative opportunity. Indicate for each criterion where the opportunity is located on the value continuum from low to high. Once you have evaluated the idea according to each of the criteria, you can determine its total score for each of the major categories.

Criterion Industry & Market Market: Customer Base Use Benefits Value Added Product Life Customer Reliance on Product/Service Competition Market Size Potential Venture Growth Rate Market Share (year three) Market Capacity Cost Structure Entry Barriers Economics: Gross Margins Profits after Tax Return on Investment Capital Requirements Sales Growth Time to Breakeven Risk Variability of Cash Flow Member Investment Attraction Capital Availability Competitive Advantage Issues: Fixed & Variable Costs Control over costs, prices and distribution

Low Value Opportunity

High Value Opportunity

1 1 1 1 1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4 4 4 4 4

5 5 5 5 5 5 5 5 5 5 5 5

6 6 6 6 6 6 6 6 6 6 6 6

7 7 7 7 7 7 7 7 7 7 7 7

8 8 8 8 8 8 8 8 8 8 8 8

9 9 9 9 9 9 9 9 9 9 9 9

10 10 10 10 10 10 10 10 10 10 10 10 /120 10 10 10 10 10 10 10 10 10 10 /100

Total Score 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 6 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9

Total Score

1 1

2 2

3 3

4 4

5 5

6 6

7 7

8 8

9 9

10 10

Total Score Management Team: Entrepreneurial Team Industry & Technical Experience Integrity Intellectual Honesty Staff Capability Strategic Differentiation: Degree of Fit Team Timing Technology Flexibility Opportunity Orientation Pricing Distribution Channels Room for Error 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 10 10 10 10 10 10 10 10 10 1 1 1 1 1 2 2 2 2 2 3 3 3 3 3 4 4 4 4 4 5 5 5 5 5 6 6 6 6 6 7 7 7 7 7 8 8 8 8 8 9 9 9 9 9 10 10 10 10 10

/20

Total Score

/50

Total Score

/90

Total Aggregate Score /

Exercises Module 3
1. What is the purpose of a feasibility study? The purpose of a feasibility study is to provide a comprehensive analysis and evaluation of the market, operational, technical and financial aspects of your business concept opportunity. 2. What is the aim of a SWOT analysis? The aim of any SWOT is to identify the key internal and external factors that are important to achieving the objective. 3.) The strategic position answers what 3 questions? Who is the target market? What products or services should the business offer to its customers? How will the product or service be provided?

4.) What does the market feasibility study determine? The marketing feasibility study determines if the product or service is viable within the competitive environment of the industry or market place. 5.) What are the 6 major barriers of entry into an industry or market segment? Economies of scale Product differentiation Capital requirements Switching Costs Access to channels of distribution Government Policy

6.) A competitor analysis should include what 6 items? 1.) An understanding of the competitors vision, mission and objectives, allowing a new business to develop their own; 2.) Identification of product or market segment strengths and weakness to enable the new business to create new and innovative products; 3.) A determination of the size, configuration and operations of the competitors business, which will allow new business owners to create realistic business projections based on appropriate priced products; 4.) An analysis providing insight into distribution channels and direct sales intelligence; 5.) A listing of the competitive payment terms and discounts in order to make negotiating similar conditions simple; and 6.) A sampling of the competitors marketing communications, which will allow a new business to exploit information and create their own marketing communication plan. 7.) What is market research? Market research is the function that links the business products and services with the consumer. 8.) The emergence of Niche markets provides for product differentiation? True False

9.) Target market segmentation process includes: Determining the characteristics of the segment. Checking to see if the segment is large enough to support the product. Once a target market is chosen the organization can develop its marketing strategy

10.) What are the four beneficial reasons for branding? Differentiation Conveys value Builds brand loyalty Builds price

11.) Why do we need a sales forecast? The forecast predicts the number of units of a product or service a cooperative will sell within a specified time period and at a given price. 12.) What is the purpose of estimating market potential? Estimating the market potential determines if the market is sufficient to support the size and scope of the business being contemplated. 13.) Total revenue is influenced upon what two considerations? Sales Volume Price 14.) What is the breakeven point? The breakeven point for a product is the point where total revenue equals the total costs associated with the sale of the product. 15.) What is the purpose of a Technical Feasibility study? The technical feasibility study answers the questions of: Does the technology exist How difficult is it to build Whether the firm supplying the technology has experience using the technology 16.) Academics often believe that location decisions for a new plant are based on a consideration of cost advantage. True False 17.) What is the purpose of a financial feasibility study? The purpose of a financial feasibility study is to determine a evaluate business concepts ability to generate sufficient income to pay debt and invest in the business. 18.) What is start up or seed capital? Start up or seed capital refers to the financing sources of available during the development and start up phase of a business cycle. 19.) What are the 3 basic types of financing? Operating loans or lines of credit Term loans Mortgages 20.) What is the purpose of the cash flow statement? The cash flow statement traces the flow of funds (or working capital) into and out of your business for the year. A cash flow assesses the timing, amount and predictability of future cash flows and is the basis for budgeting.

Case Study 1
Part 1: The Financial Case Study of Farmer Cooperative Inc. You have recently agreed to sit on the steering committee for a new local cooperative. The cooperative is to be a full service retailer of fuel, fertilizer and chemicals that is expected to compete with all the players in the market. The business will consist of a bulk fuel depot, with fuel delivery trucks, fertilizer handling facility and storage sheds, chemical storage sheds and a main plant office. The idea is the Brain child of a coffee shop group of producers who are frustrated with the price of key inputs on there own farms. Consideration has been given to a cooperative model to allow the profits to flow back to the members. The group of producers held a membership prospective meeting 4 months ago and was able to raise the funds to have a qualified consultant conduct a detailed feasibility study to consider all aspects of the potential business. Now you have been asked to review the 2nd and 3 year balance sheets, income statements and statements of cash flows from the feasibility study. The consultant has included comparative data from common sized cooperatives retailing similar products. You are expected to make a formal recommendations to the steering committee as to if the projections are realistic and achievable. The capital cost in year one is estimated at $22.5 million. By year 3 the cooperative is to have raised $22.287 million in Equity certificates, and have borrowed $10.677 million to fund operations. You Report to the Steering Committee should include: 1.) Analysis of the Balance Sheet 2.) Analysis of the Income Statement 3.) Analysis of the Statement of Change 4.) Compare year 2 & 3 with Common Size Operations 5.) Recommendations to Proceed or Abandon

Table 1 Farmer Cooperatives balance sheet for years ended Dec 31, 2009 and 2010 2010 Assets Current Assets Cash and equivalents Accounts receivable Inventories Other current assets Total Current Assets Investments Bank for Cooperatives Other cooperatives Other businesses Other investments Total Investments Net plant, property & equipment Other assets Total Assets Liabilities and Members Equity Current Liabilities Current portion long-term debt Seasonal notes and loans Trade accounts payable Cash payments to members Patron and pool liabilities Other current liabilities Total Current Liabilities Long Term Debt Other non-current liabilities Minority Interests Members Equity Allocated Preferred stock Common stock Equity certificates Unallocated equity Total Member Equity Total Liabilities and Equity 113 12,092 21,825 333 34,364 3,679 505 0 0 4,184 22,424 312 61,283 2009 7 13,511 20,805 274 34,596 3,225 443 0 0 3,668 19,086 301 57,652

1,246 8 20,389 2,477 0 2,001 26,091 10,677 0 0 288 89 22,387 1,751 24,515 61,283

1,783 9,188 13,234 738 0 1,054 25,998 9,927 0 0 320 90 19,589 1,728 21,727 57,652

Table 2 Farmer Cooperatives operating statement for years ended Dec 31, 2009 and 2010 2010 Revenues Fert/Chem Sales Fuel sales Total Sales Cost of sales Gross Margin Other operating revenues Total Operating Revenue Expenses: General and administrative Operating Net Operating Income Other Revenues (expenses): Patronage refunds received Interest income Other income Interest expense Other expenses Net Income, Continuing Operations Other margin interests Discontinued operations Extraordinary items Net Income Before Taxes Taxes Net Income to be Distributed 73,513 46,710 120,223 98,474 21,749 0 21,749 11,850 2,759 7,139 483 162 31 (1,493) 0 6,322 0 0 0 6,322 8 6,314 2009 76,700 46,053 122,753 106,057 16,695 0 16,695 10,263 2,836 3,596 348 120 107 (2,095) 0 2,076 0 0 0 2,076 35 2,041

Table 3 Farmer Cooperatives statement of cash flows for years ended Dec 31, 2009 and 2010
Adjustments to reconcile net margins to net cash flows from operating activities 2010 2009 Dollars Net Margins From Operations Depreciation and amortization Deferred taxes Loss (gain) from asset disposal Loss (gain) from investment disposal Patronage refunds received (non cash) Other cash adjustments Other non-cash operating adjustments Cash From Operating Activities Cash Provided (used) by Changes in Assets and Liabilities Receivables Inventories Other current assets Accounts pay Due patrons Other current liabilities Other assets and liabilities Net Cash Flow Operating Activities Cash Flows from Investing Activities: Purchases property, plant and equipment Proceeds sale or disposal PP&E Purchases, equity in cooperatives Redemptions equity in cooperatives Change in other investing activities Net Cash Flow Investing Activities Cash Flow from Financing Activities Net change in short-term liabilities Long Term bank debt Proceeds (Payments) Capital lease payments Stock transactions Proceeds (redemptions) Per-unit capital retains Equity certificates issues Equity certificates redeemed Cash patronage refunds Stock dividends Other financing adjustments Net Cash Flow from Financing Activities Net Change Cash and Equivalents Cash at beginning of year Cash at end of year Supplemental Information Interest paid Income taxes paid 6,315 2,759 0 7 0 (232) 0 0 8,848 1,419 (1,022) (59) 7,124 0 946 0 17,256 (6,113) 9 (284) 0 (9) (6,396) 0 40,964 (49,930) 0 3 (36) 0 0 0 (1,732) (22) 0 (10,753) 106 7 113 1,697 26 2,041 2,836 0 (74) 0 (221) 0 0 4,582 89 7,345 88 (4,188) 0 81 0 7,997 (4,162) 76 (1) 11 131 3,946 0 47,848 (49,858) 0 1 (7) 0 0 0 (2,007) (28) 0 (4,051) 0 7 7 2,056 (5)

Table 4 Farmer Cooperatives statement of changes in allocated patronage refunds and capital reserve for years ended Dec 31, 2009 and 2010 Unallocated Equity Allocated Equity Dollars 1,567 19,701 2,041 (1,922) 1,922 71 (71) (29) (738) (1,225) 19,589 6,253 16

Balance Dec 31, 1999 Net Margins Net Margins Allocated to Patrons Transfer 7% Dividend on Stock Patronage Distribution paid in cash 40 percent 2000 Patronage Refund Allocated Patronage Revolvement Balance Dec 31, 2000 Net Margins Net Margins Allocated to Patrons Transfer 7% Dividend on Stock Patronage Distribution paid in cash 40 percent 2000 Patronage Refund Allocated Patronage Revolvement Balance Dec 31, 2001

1,728 6,314 (6,253) (16) (22)

1,752

(2,477) (993) 22,387

Table 5 Farmer Cooperatives common size balance sheet for years ended Dec 31, 2009 and 2010 2010 Assets Current Assets Cash and equivalents Accounts receivable Inventories Other current assets Total Current Assets Investments Bank for Cooperatives Other cooperatives Other businesses Other investments Total Investments Net plant, property & equipment Other assets Total Assets Liabilities and Members Equity Current liabilities Current portion long-term debt Seasonal notes and loans Total short-term liabilities Trade accounts payable Cash payments to members Patron and pool liabilities Other current liabilities Total Current Liabilities Long term debt Other non-current liabilities Minority Interests Members Equity Allocated Preferred stock Common stock Equity certificates Unallocated equity Total Member Equity Total Liabilities and Equity Farmers 2009 2010 Percent 0.0 23.4 36.1 0.5 60.0 5.6 0.8 0.0 0.0 6.4 33.1 0.5 100.00 Farmers 2009

0.2 19.7 35.6 0.5 56.1 6.0 0.8 0.0 0.0 6.8 36.6 0.5 100.0

2.0 0.0 2.0 33.2 4.0 0.0 3.3 42.6 17.4 0.0 0.0

3.1 15.9 19.0 23.0 1.3 0.0 1.8 45.1 17.2 0.0 0.0

0.5 0.1 36.5 2.9 40.0 100.0

0.6 0.2 34.0 3.0 37.7 100.0

Table 6 Farmer Cooperatives common size operating statement for years ended Dec 31, 2009 and 2010 2010 Percent Revenues Marketing Sales Farm supply sales Total Sales Cost of sales Gross Margin Other operating revenues Total Operating Revenue Expenses: General and administrative Operating Net Operating Income Other Revenues (expenses): Patronage refunds received Interest income Other income Interest expense Other expenses Net Income, Continuing Operations Other margin interests Discontinued operations Extraordinary items Net Income Before Taxes Taxes Net Income to be Distributed 61.1 38.9 100.0 81.9 18.1 0.0 18.1 Farmers 2010 2009 62.5 37.5 100.0 86.4 13.6 0.0 13.6 Farmers 2009

9.9 2.3 5.9

8.4 2.3 2.9

0.4 0.1 0.0 (1.2) 0.0 5.3 0.0 0.0 0.0 5.3 0.0 5.3

0.3 0.14 0.1 (1.7) 0.0 1.7 0.0 0.0 0.0 1.7 0.0 1.7

References
Competitive Strategy: Techniques for Analyzing Industries and Competitors, Michael E. Porter (http://www.enotes.com/small-business-encyclopedia/barriers-market-entry) access on March 16, 2009. Agricultural Marketing Resource Center (AgMRC) 1111 NSRIC, Iowa State University, Ames, IA,(http://www.agmrc.org/business_development/starting_a_business/marketbusiness_assessment/articles/fea sibility_study_outline.cfm) March 16, 2009 US Small Business Administration 409 3rd Street, SW Washington, DC 20416 (http://www.sba.gov/smallbusinessplanner/manage/marketandprice/SERV-MARKETRESEARCH.html) March 16, 2009 The American Marketing Association 311 S. Wacker Drive, Suite 5800 Chicago, IL 60606 (http://www.marketingpower.com/ResourceLibrary/Pages/default.aspx) March 16, 2009 Wikipedia (http://en.wikipedia.org/wiki/Target_marketing) March 16, 2009 Agricultural Marketing Resource Center (AgMRC) 1111 NSRIC, Iowa State University, Ames, IA,(http://www.google.com/search?q=(http%3a%2f%2fwww.agmrc.org%2fbusiness_development%2foperatin g_a_business%2fmarketing%2farticles%2fbuilding_your_brand.cfm) Texas A & M University Extension Niche marketing is targeting a product to a small portion of a market. (http://trmep.tamu.edu/cg/overheads/rm1-2oh.pdf) March 20, 2009 Canadian Marketing Association, 1 Concorde Gate, Suite 607 Don Mills, ON, (http://www.thecma.org/?WCE=C=47%7CK=225162) - March 16, 2009 Wikipedia (http://www.google.com/search?q=Retrieved+from+%22http%3a%2f%2fen.wikipedia.org%2fwiki%2fPricing_ objectives%22) Department of Agricultural Economics - Agricultural Marketing Resource Center Kansas State University Vincent Amanor-Boadu, PhD - Assessing the Feasibility of Business Propositions (http://www.agecon.ksu.edu/accc/kcdc/PDF%20Files/Feasibility%20Reports.pdf) Oklahoma Cooperative Extension Service - Division of Agricultural Sciences and Natural Resources http://osuextra.okstate.edu/pdfs/FAPC-112web.pdf March 20, 2009 Business Facilities (http://www.businessfacilities.com/about.php) March 20, 2009 Federal Government Financial Assistance (http://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/home) March 20, 2009 Good, Walter S. 1997. Building a Dream: Canadian Guide to Starting Your Own Business. Third Edition. Toronto. McGraw-Hill Ryerson Limited. Kerr, Margaret and JoAnn Kurtz. 2006. Canadian Small Business Kit for Dummies. Second Edition. Mississauga. John Wily & Sons Canada, Ltd. Leach, J. Chris and Ronald W. Melicher. 2009. Entrepreneurial Finance. Mason OH. South-Western Cengage Learning. Longenecker, Donlevy, Calvert, Moore, Petty, 2007: Small Business Management. Third Canadian Edition. Thompson & Nelson. James W. Taylor . 1997. Marketing Planning A Step by Step Guide. Prentice Hall Inc.

Boston Consulting Group - http://www.bcg.com/ Federal Government

Sample Templates
Project Plan Client Name: Project Title: Date: Project Number: Project Plan Version: Sponsor Name:

Project Manager: Project Mission:

Project Objective/Description/Scope: Objectives: Scope: Scope: Whats In :

Scope Whats outside the boundaries of this project the project excludes the development/analysis of the following items: o o o o o Key Deliverables Acceptor Acceptance /Signoff Date

1. 2. 3. 4. 5. Major Milestones Schedule Date

Key Strategies:

Key Dependencies:

Name

Role

Key Responsibilities

Effort (days)

Budget Direct Costs: Indirect Costs: Total Costs: Constraints:

Assumptions:

Environment:

Affected Groups in the Client Organization:

High Impact Risks - Description

Trigger/Symptom

Mitigation Strategy

Acceptance: Sponsor Name: Title:

Signature: Date:

Change Request Project Name: Requestor Name: Project Manager: Project Sponsor: Reason for Change CR #: Request Date: Date Issued: Date Due: Prepared by: 1 01/01/07

01/01/07 01/01/07

Description of Change

Prepared by:

Budget Impact Ramifications (eg. schedule and staffing)

Prepared by: Prepared by:

PM Review: Notes: Name: Signature: Date: Sponsor Review: Notes: Name: Signature: Date: 01/01/07

01/01/07

Project Status Report Project Status Report Project Name For the reporting period starting Business Unit: Project Manager: Client: Project Description: Description: ending Sponsor: Project Resources:

Project Objectives(s):

Project Assessment

Previous (G =green, Y = yellow, R = red)

Current (G =green, Y= yellow, R = red)

Rationale (issues, changes)

Schedule Budget Staffing/Resources Milestones Sched. End Planned End

Key Issues / Decisions: ## Issue Description 1 2 Risk Management: Description of Risk

Date Raised

Assigned To

Action / Resolution

Date to Resolve

Status / Impact

Impact (HML)

Prob. (HML)

Status

Change Management: # Change Description 1 2 Accomplishments this Period

Date Submitted

Approved Y/N

Activities Planned for this Period not Completed:

Major Activities Planned for Next Period from -

To -

Comments:

Change Request Log Request Issue # Date

Description

Status

Request #

Issue Date

Description

Due Date

Client Sign Off Project Name Project Manager Date

Deliverables 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Budget

Schedule

Conditions of Sign Off

__________________________________ Project Manager Sign off ___________________________________ Sponsor / Client Sign off

_ Date _ Date

______________ ______________

Project Budget Sheet

- <Project name here> Schedule Costs Planned Hours (A) 0 0 0 0 0 0 0 0 0 0 Total Schedule Costs 0 Actual to date (B) 0 0 0 0 0 0 0 0 0 0 0 Schedule Variance (A-B) 0 0 0 0 0 0 0 0 0 0 0 Material Costs Material Description Supplier Est'd Cost Actual Costs Cost Variance Notes Rate (E) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Planned Cost (F) (A*E) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Actual Costs (G) (B*E) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Cost Variance (F-G) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Resource Description

Notes

$0.00 $0.00 $0.00 $0.00 $0.00 Total Material Costs Total Project Costs (Schedule + Material) $0.00 $0.00

$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Sample invite to submit a proposal A sample letter, in business format is shown: Name Address Address Date Supplier organization name Address Subject: Invitation to Submit a Proposal Dear ______: __________ requires professional _______ services. You are invited to submit a proposal for the provision of those services. A description of the services we require is attached in the form of a Request For Proposal. (Or: you may obtain a description of the services we require by contacting ______________. In order to submit your proposal, please consider: The work would begin on _____ and be completed by ______. Your written proposal is to be submitted by (date) .

Please include the following in your responses: 1. Your team credentials 2. References for similar work 3. A statement of your understanding of the work, including pricing components 4. Other items as defined by your organization Please submit responses to: Name Address Address Yours truly, Name of Signature

1.

Title Page Request for Proposal Title of Project or Service Requested Contact Manager: Telephone: Fax: Email: Name # # name@company.com

Proposal Closing Date/Time:

Sample Agreement Source of this sample: AgMRC (Ag Marketing Resource Center) Iowa State University Mark J. Hanson Joe R. Thompson Joel J. Dahlgren Lindquist & Vennum, PLLP 4200 IDS Center, 80 S 8th Street, Minneapolis, MN 55402 This Consulting Agreement, dated effective _____________, 200___ (this Agreement), is made and entered into by and among ___________________ [name of the Company], a [state of incorporation and business structure] (the Company) and [name of consultant] (the Consultant). ARTICLE 1 - SCOPE OF WORK 1.1 Services - The Company has engaged Consultant to provide services in connection with the Companys [summary of the project or business of the Company]. Consultant will [summary of the services Consultant is to provide], and such other services as described at Exhibit A (collectively, the consulting services). 1.2 Time and Availability - Consultant will devote _______ hours per month in performing the services for the Company as stated herein. Consultant shall have discretion in selecting the dates and times it performs such consulting services throughout the month giving due regard to the needs of the Companys business., If the Company deems it necessary for the Consultant to provide more than ________ hours in any month, Consultant is not obligated to undertake such work until the Consultant and Company have agreed on a rate of compensation. [The time devoted can be hours per day, per week, or per year. The Company may also elect to pay a flat monthly fee regardless of hours, but the Company should be cautious of this approach.] 1.3 Confidentiality - In order for Consultant to perform the consulting services, it may be necessary for the Company to provide Consultant with Confidential Information (as defined below) regarding the Companys business and products. The Company will rely heavily upon Consultants integrity and prudent judgment to use this information only in the best interests of the Company. 1.4 Standard of Conduct - In rendering consulting services under this Agreement, Consultant shall conform to high professional standards of work and business ethics. Consultant shall not use time, materials, or equipment of the Company without the prior written consent of the Company. In no event shall Consultant take any action or accept any assistance or engage in any activity that would result in any university, governmental body, research institute or other person, entity or organization acquiring any rights of any nature in the results of work performed by or for the Company. 1.5 Outside Services - Consultant shall not use the service of any other person, entity or organization in the performance of Consultants duties without the prior written consent of an officer of the Company. Should the Company consent to the use by Consultant of the services of any other person, entity or organization, no information regarding the services to be performed under this Agreement shall be disclosed to that person, entity or organization until such person, entity or organization has executed an agreement to protect the confidentiality of the Companys Confidential Information (as defined below) and the Companys absolute and complete ownership of all right, title and interest in the work performed under this Agreement. 1.6 Reports - Consultant shall periodically provide the Company with written reports of his observations and conclusions regarding the consulting services. Upon the termination of this

Agreement, Consultant shall, upon the request of Company, prepare a final report of Consultants activities. ARTICLE 2 - INDEPENDENT CONTRACTOR 2.1 Independent Contractor - Consultant is an independent contractor and is not an employee, partner, or co-venturer of, or in any other service relationship with, the Company. The manner in which Consultants services are rendered shall be within Consultants sole control and discretion. Consultant is not authorized to speak for, represent, or obligate the Company in any manner without the prior express written authorization from an officer of the Company. 2.2 Taxes - Consultant shall be responsible for all taxes arising from compensation and other amounts paid under this Agreement, and shall be responsible for all payroll taxes and fringe benefits of Consultants employees. Neither federal, nor state, nor local income tax, nor payroll tax of any kind, shall be withheld or paid by the Company on behalf of Consultant or its employees. Consultant understands that it is responsible to pay, according to law, Consultants taxes and Consultant shall, when requested by the Company, properly document to the Company that any and all federal and state taxes have been paid. 2.3 Benefits - Consultant and Consultants employees will not be eligible for, and shall not participate in, any employee pension, health, welfare, or other fringe benefit plan, of the Company. No workers' compensation insurance shall be obtained by Company covering Consultant or Consultants employees. ARTICLE 3 - COMPENSATION FOR CONSULTING SERVICES 3.1 Compensation - The Company shall pay to Consultant $_________ per month for services rendered to the Company under this Agreement. The monthly compensation shall be paid on the first of the month following the month the services were provided. The monthly compensation shall be paid regardless of the number of consulting hours provided by Consultant in a particular month. [Another option is to pay hourly and require monthly time documentation. The monthly compensation would be reduced by the hourly rate for the number of hours less than the devoted hours.] 3.2 Reimbursement - The Company agrees to reimburse Consultant for all actual reasonable and necessary expenditures, which are directly related to the consulting services. These expenditures include, but are not limited to, expenses related to travel (i.e. airfare, hotel, temporary housing, meals, parking, taxis, mileage, etc.), telephone calls, and postal expenditure. Expenses incurred by Consultant will be reimbursed by the Company within 15 days of Consultants proper written request for reimbursement. ARTICLE 4 - TERM AND TERMINATION 4.1 Term - This Agreement shall be effective as of _________, 200__, and shall continue in full force and effect for ____ consecutive months. The Company and Consultant may negotiate to extend the term of this Agreement and the terms and conditions under which the relationship shall continue. 4.2 Termination - The Company may terminate this Agreement for Cause, after giving Consultant written notice of the reason. Cause means: (1) Consultant has breached the provisions of Article 5 or 7 of this Agreement in any respect, or materially breached any other provision of this Agreement and the breach continues for 30 days following receipt of a notice from the Company; (2) Consultant has committed fraud, misappropriation or embezzlement in connection with the Company s business; (3) Consultant has been convicted of a felony, or (4) Consultants use of narcotics, liquor or illicit drugs has a detrimental effect on the performance of her employment responsibilities, as determined by the Company. 4.3 Responsibility upon Termination - Any equipment provided by the Company to the

Consultant in connection with or furtherance of Consultants services under this Agreement, including, but not limited to, computers, laptops, and personal management tools, shall, immediately upon the termination of this Agreement, be returned to the Company. 4.4 Survival - The provisions of Articles 5, 6, 7 and 8 of this Agreement shall survive the termination of this Agreement and remain in full force and effect thereafter. ARTICLE 5 - CONFIDENTIAL INFORMATION 5.1 Obligation of Confidentiality - In performing consulting services under this Agreement, Consultant may be exposed to and will be required to use certain Confidential Information (as hereinafter defined) of the Company. Consultant agrees that Consultant will not and Consultants employees, agents or representatives will not, use, directly or indirectly, such Confidential Information for the benefit of any person, entity or organization other than the Company, or disclose such Confidential Information without the written authorization of the President of the Company, either during or after the term of this Agreement, for as long as such information retains the characteristics of Confidential Information. 5.2 Definition - Confidential Information means information, not generally known, and proprietary to the Company or to a third party for whom the Company is performing work, including, without limitation, information concerning any patents or trade secrets, confidential or secret designs, processes, formulae, source codes, plans, devices or material, research and development, proprietary software, analysis, techniques, materials or designs (whether or not patented or patentable), directly or indirectly useful in any aspect of the business of the Company, any vendor names, customer and supplier lists, databases, management systems and sales and marketing plans of the Company, any confidential secret development or research work of the Company, or any other confidential information or proprietary aspects of the business of the Company. All information which Consultant acquires or becomes acquainted with during the period of this Agreement, whether developed by Consultant or by others, which Consultant has a reasonable basis to believe to be Confidential Information, or which is treated by the Company as being Confidential Information, shall be presumed to be Confidential Information. 5.3 Property of the Company - Consultant agrees that all plans, manuals and specific materials developed by the Consultant on behalf of the Company in connection with services rendered under this Agreement, are and shall remain the exclusive property of the Company. Promptly upon the expiration or termination of this Agreement, or upon the request of the Company, Consultant shall return to the Company all documents and tangible items, including samples, provided to Consultant or created by Consultant for use in connection with services to be rendered hereunder, including without limitation all Confidential Information, together with all copies and abstracts thereof. ARTICLE 6 - RIGHTS AND DATA 6.1 Data - All drawings, models, designs, formulas, methods, documents and tangible items prepared for and submitted to the Company by Consultant in connection with the services rendered under this Agreement shall belong exclusively to the Company and shall be deemed to be works made for hire (the Deliverable Items). To the extent that any of the Deliverable Items may not, by operation of law, be works made for hire, Consultant hereby assigns to the Company the ownership of copyright or mask work in the Deliverable Items, and the Company shall have the right to obtain and hold in its own name any trademark, copyright, or mask work registration, and any other registrations and similar protection which may be available in the Deliverable Items. Consultant agrees to give the Company or its designees all assistance reasonably required to perfect such rights. ARTICLE 7 - CONFLICT OF INTEREST AND NON-SOLICITATION 7.1 Conflict of Interest - Consultant covenants and agrees not to consult or provide any services in any manner or capacity to a direct competitor of the Company during the duration of this

Agreement unless express written authorization to do so is given by the Companys President. A direct competitor of the Company for purposes of this Agreement is defined as any individual, partnership, corporation and/or other business entity that engages in the business of [define business substantially similar to what is provided at Section 1.1] within _____ miles of the [facility, headquarters, etc.]. 7.2 Non-Solicitation - Consultant covenants and agrees that during the term of this Agreement, Consultant will not, directly or indirectly, through an existing corporation, unincorporated business, affiliated party, successor employer, or otherwise, solicit, hire for employment or work with, on a part-time, consulting, advising or any other basis, other than on behalf of the Company any employee or independent contractor employed by the Company while Consultant is performing services for the Company. ARTICLE 8 - RIGHT TO INJUNCTIVE RELIEF Consultant acknowledges that the terms of Articles 5, 6, and 7 of this Agreement are reasonably necessary to protect the legitimate interests of the Company, are reasonable in scope and duration, and are not unduly restrictive. Consultant further acknowledges that a breach of any of the terms of Articles 5, 6, or 7 of this Agreement will render irreparable harm to the Company, and that a remedy at law for breach of the Agreement is inadequate, and that the Company shall therefore be entitled to seek any and all equitable relief, including, but not limited to, injunctive relief, and to any other remedy that may be available under any applicable law or agreement between the parties. Consultant acknowledges that an award of damages to the Company does not preclude a court from ordering injunctive relief. Both damages and injunctive relief shall be proper modes of relief and are not to be considered as alternative remedies. ARTICLE 9 - GENERAL PROVISIONS 9.1 Construction of Terms - If any provision of this Agreement is held unenforceable by a court of competent jurisdiction, that provision shall be severed and shall not affect the validity or enforceability of the remaining provisions. 9.2 Governing Law - This Agreement shall be governed by and construed in accordance with the internal laws (and not the laws of conflicts) of the State of [governing law]. 9.3 Complete Agreement - This Agreement constitutes the complete agreement and sets forth the entire understanding and agreement of the parties as to the subject matter of this Agreement and supersedes all prior discussions and understandings in respect to the subject of this Agreement, whether written or oral. 9.4 Dispute Resolution - If there is any dispute or controversy between the parties arising out of or relating to this Agreement, the parties agree that such dispute or controversy will be arbitrated in accordance with proceedings under American Arbitration Association rules, and such arbitration will be the exclusive dispute resolution method under this Agreement. The decision and award determined by such arbitration will be final and binding upon both parties. All costs and expenses, including reasonable attorneys fees and experts fees, of all parties incurred in any dispute which is determined and/or settled by arbitration pursuant to this Agreement will be borne by the party determined to be liable in respect of such dispute; provided, however, that if complete liability is not assessed against only one party, the parties will share the total costs in proportion to their respective amounts of liability so determined. Except where clearly prevented by the area in dispute, both parties agree to continue performing their respective obligations under this Agreement until the dispute is resolved. 9.5 Modification - No modification, termination or attempted waiver of this Agreement, or any provision thereof, shall be valid unless in writing signed by the party against whom the same is sought to be enforced. 9.6 Waiver of Breach - The waiver by a party of a breach of any provision of this Agreement by

the other party shall not operate or be construed as a waiver of any other or subsequent breach by the party in breach. 9.7 Successors and Assigns - This Agreement may not be assigned by either party without the prior written consent of the other party; provided, however, that the Agreement shall be assignable by the Company without Consultants consent in the event the Company is acquired by or merged into another corporation or business entity. The benefits and obligations of this Agreement shall be binding upon and inure to the parties hereto, their successors and assigns. 9.8 No Conflict - Consultant warrants that Consultant has not previously assumed any obligations inconsistent with those undertaken by Consultant under this Agreement. IN WITNESS WHEREOF, this Agreement is executed as of the date set forth above. [COMPANY] By: [CONSULTANT] By: Title: Title:

Analysis of major competitors The following table provides an outline of the types of questions that at minimum must be answered in an analysis of the major competitors in the industry being studied: Analysis of major competitors
Company #1 Company #2 Company #3 Company #4 Company #5

History of the Business Key Trends Key Historical Events Ownership Organizational Structure Corporate Governance Management Strengths Management Approach Number or Employees Abilities of Key Employees Compensation Benefits Business Locations/Facilities: Head Offices Production Plants Plant Capacities Utilization Rate Effective Age of the Plants Plant Efficiency Total Capital Investment Shipping Logistics Analysis of major competitors
Company #1 Company #2 Company #3 Company #4 Company #5

Product Mix by Plant Products/Services Brands Brand Loyalty Product Line Product Mix Quality Control Patents/Licenses Research & Development New Products Marketing Strategies Vision Mission Growth Plans

Acquisitions Strategy Marketing Customer Base Customer Loyalty Customer Growth Rate Market Segments Pricing Discounts Allowances Advertising/Promotion Budget Types of Advertising Distribution Distribution Channels Analysis of major competitors
Company #1 Company #2 Company #3 Company #4 Company #5

Company Alliances Geographic Market

Consider the Following Factors: 1.) Availability and Price of Raw Materials a. Raw material readily available at competitive price? (Historical price patterns & availability) b. Is suitable storage & handling facilities available 2.) Access to Markets a. Proximity of site to market? b. Proximity of site to disposal areas for biproducts? c. Is storage required? d. Does the site provide a competitive advantage over the competition? 3.) Labour Market a. How many employees are required on a shift basis? b. Are the labour skills required for the business (process/manufacturing) available in the area? c. Are the labour rates competitive with the competition? d. Who are the main competitors for labour? e. Is there reasonably priced housing/accommodations available for the labour force? f. Are their training courses available at public institutions? 4.) Utilities a. Availability of utilities - Is electrical service available? - What is the cost per kilowatt hour - Is the cost competitive with competitors cost? b. Is gas service available? - What is the cost per cubic foot? Is the cost competitive with competitors costs? c. Is water service available? - What is the cost of the water? - Is the cost competitive with competitors costs?

Location 1

Location 2

Location 3

Location 4

Location 5

Consider the Following Factors: - What is the cost of the water? - Is the cost competitive with competitors costs? - Is the water suitable for the manufacturing process? d. Is sewer system available? - Will the effluent have to be pretreated? e. Is the city/town/rural municipality willing to pay the utility improvement required? 5.) Zoning a. Is the area zoned for the type of development required? - Zoning regulations? - What is the length of time to have property zoned for development? - Will the community/neighbors accept the type of development/operation of the business required to be successful? b. Environmental Assessment - What level of environmental study will be required? - What is the cost of the environmental study? - Who pays for the environmental study? 6. Transportation a. Are the types of transportation required by the business available? (Highway/rail/inter cargo/air) - What are the costs to market? - Is their competition for transportation? - Will the city/town/rural municipality pay for infrastructure installation or upgrade? 7.) Site Characteristics a. Site Topography - Is the site topography suitable for the building improvements? - Are there physical encumbrances that will require additional cost?

Location 1

Location 2

Location 3

Location 4

Location 5

Consider the Following Factors: - Well drained soils? - What excavation will be required to prepare the site? 8.) What is the purchase price of the property? a. Will the site appreciate in value over time? b. Is the city/town/rural municipality willing to provide incentives to locate to their community? c. What are the property taxes? - Are the taxes competitive with other jurisdictions? - Will the city/town/rural municipality provide tax incentives 9.) What is the business climate? a. Local level? b. Provincial level?

Location 1

Location 2

Location 3

Location 4

Location 5

What is Intellectual Property?

Watch: Courtesy Swatch AG

What is Intellectual Property?

Table of Contents

Page

What is Intellectual Property?

What is a Patent?

What is a Trademark?

What is an Industrial Design?

12

What is a Geographical Indication?

15

What are Copyright and Related Rights?

18

What is the World Intellectual Property Organization?

22

What is Intellectual Property

Intellectual property refers to creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce. Intellectual property is divided into two categories: Industrial Property includes patents for inventions, trademarks, industrial designs and geographical indications. Copyright covers literary works (such as novels, poems and plays), films, music, artistic works (e.g., drawings, paintings, photographs and sculptures) and architectural design. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and broadcasters in their radio and television programs.

What is Intellectual Property?

What are intellectual property rights?

Intellectual property rights are like any other property right. They allow creators, or owners, of patents, trademarks or copyrighted works to benefit from their own work or investment in a creation. These rights are outlined in Article 27 of the Universal Declaration of Human Rights, which provides for the right to benefit from the protection of moral and material interests resulting from authorship of scientific, literary or artistic productions. The importance of intellectual property was first recognized in the Paris Convention for the Protection of Industrial Property (1883) and the Berne Convention for the Protection of Literary and Artistic Works (1886). Both treaties are administered by the World Intellectual Property Organization (WIPO).

Why promote and protect intellectual property?

There are several compelling reasons. First, the progress and well-being of humanity rest on its capacity to create and invent new works in the areas of technology and culture. Second, the legal protection of new creations encourages the commitment of additional resources for further innovation. Third, the promotion and protection of intellectual property spurs economic growth, creates new jobs and industries, and enhances the quality and enjoyment of life. An efficient and equitable intellectual property system can help all countries to realize intellectual propertys potential as a catalyst for economic development and social and cultural well-being. The intellectual property system helps strike a balance between the interests of innovators and the public interest, providing an environment in which creativity and invention can flourish, for the benefit of all.

How does the average person benefit?

Intellectual property rights reward creativity and human endeavor, which fuel the progress of humankind. Some examples: The multibillion dollar film, recording, publishing and software industries which bring pleasure to millions of people worldwide would not exist without copyright protection. Without the rewards provided by the patent system, researchers and inventors would have little incentive to continue producing better and more efficient products for consumers. Consumers would have no means to confidently buy products or services without reliable, international trademark protection and enforcement mechanisms to discourage counterfeiting and piracy.

What is a Patent?

What is a Patent?
A patent is an exclusive right granted for an invention a product or process that provides a new way of doing something, or that offers a new technical solution to a problem. A patent provides patent owners with protection for their inventions. Protection is granted for a limited period, generally 20 years.

Why are patents necessary?

Patents provide incentives to individuals by recognizing their creativity and offering the possibility of material reward for their marketable inventions. These incentives encourage innovation, which in turn enhances the quality of human life.

What kind of protection do patents offer?

Patent protection means an invention cannot be commercially made, used, distributed or sold without the patent owners consent. Patent rights are usually enforced in courts that, in most systems, hold the authority to stop patent infringement. Conversely, a court can also declare a patent invalid upon a successful challenge by a third party.

What rights do patent owners have?

A patent owner has the right to decide who may or may not use the patented invention for the period during which it is protected. Patent owners may give
5

permission to, or license, other parties to use their inventions on mutually agreed terms. Owners may also sell their invention rights to someone else, who then becomes the new owner of the patent. Once a patent expires, protection ends and the invention enters the public domain. This is also known as becoming off patent, meaning the owner no longer holds exclusive rights to the invention, and it becomes available for commercial exploitation by others.

the total body of technical knowledge in the world. This everincreasing body of public knowledge promotes further creativity and innovation. Patents therefore provide not only protection for their owners but also valuable information and inspiration for future generations of researchers and inventors.

How is a patent granted?

The first step in securing a patent is to file a patent application. The application generally contains the title of the invention, as well as an indication of its technical field. It must include the background and a description of the invention, in clear language and enough detail that an individual with an average understanding of the field could use or reproduce the invention. Such descriptions are usually accompanied by visual materials drawings, plans or diagrams that describe the invention in greater detail. The application also contains various claims, that is, information to help determine the extent of protection to be granted by the patent.

What role do patents play in everyday life?

Patented inventions have pervaded every aspect of human life, from electric lighting (patents held by Edison and Swan) and sewing machines (patents held by Howe and Singer), to magnetic resonance imaging (MRI) (patents held by Damadian) and the iPhone (patents held by Apple). In return for patent protection, all patent owners are obliged to publicly disclose information on their inventions in order to enrich

What kinds of inventions can be protected?

An invention must, in general, fulfill the following conditions to be protected by a patent. It must be of practical use; it must show an element of novelty, meaning some new characteristic that is not part of the body of existing knowledge in its particular technical field. That body of existing knowledge is called prior art. The invention must show an inventive step that could not be deduced by a person with average knowledge of the technical field. Its subject matter must be accepted as patentable under law. In many countries, scientific theories, mathematical methods, plant or animal varieties, discoveries of natural substances, commercial methods or methods of medical treatment (as opposed to medical products) are not generally patentable.

Who grants patents?

Patents are granted by national patent offices or by regional offices that carry out examination work for a group of countries for example, the European Patent Office (EPO) and the African Intellectual Property Organization (OAPI). Under such regional systems, an applicant requests protection for an invention in one or more countries, and each country decides whether to offer patent protection within its borders. The WIPO-administered Patent Cooperation Treaty (PCT) provides for the filing of a single international patent application that has the same effect as national applications filed in the designated countries. An applicant seeking protection may file one application and request protection in as many signatory states as needed.

What is a trademark?
A trademark is a distinctive sign that identifies certain goods or services produced or provided by an individual or a company. Its origin dates back to ancient times when craftsmen reproduced their signatures, or marks, on their artistic works or products of a functional or practical nature. Over the years, these marks have evolved into todays system of trademark registration and protection. The system helps consumers to identify and purchase a product or service based on whether its specific characteristics and quality as indicated by its unique trademark meet their needs.

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What is a trademark?

What do trademarks do?

Trademark protection ensures that the owners of marks have the exclusive right to use them to identify goods or services, or to authorize others to use them in return for payment. The period of protection varies, but a trademark can be renewed indefinitely upon payment of the corresponding fees. Trademark protection is legally enforced by courts that, in most systems, have the authority to stop trademark infringement. In a larger sense, trademarks promote initiative and enterprise worldwide by rewarding their owners with recognition and financial profit. Trademark protection also hinders the efforts of unfair competitors, such as counterfeiters, to use similar distinctive signs to market inferior or different products or services. The system enables people with skill and enterprise to produce and market goods and services in the fairest possible conditions, thereby facilitating international trade.

What kinds of trademarks can be registered?

Trademarks may be one or a combination of words, letters and numerals. They may consist of drawings, symbols or threedimensional signs, such as the shape and packaging of goods. In some countries, non-traditional marks may be registered for distinguishing features such as holograms, motion, color and non-visible signs (sound, smell or taste). In addition to identifying the commercial source of goods or services, several other trademark categories also exist. Collective marks are owned by an association whose members use them to indicate products with a certain level of quality and who agree to adhere to specific requirements set by the association. Such associations might represent, for example, accountants, engineers or architects. Certification marks are given for compliance with defined standards but are not confined to any membership.

They may be granted to anyone who can certify that their products meet certain established standards. Some examples of recognized certification are the internationally accepted ISO 9000 quality standards and Ecolabels for products with reduced environmental impact.

How is a trademark registered?

First, an application for registration of a trademark must be filed with the appropriate national or regional trademark office. The application must contain a clear reproduction of the sign filed for registration, including any colors, forms or three-dimensional features. It must also contain a list

of the goods or services to which the sign would apply. The sign must fulfill certain conditions in order to be protected as a trademark or other type of mark. It must be distinctive, so that consumers can distinguish it from trademarks identifying other products, as well as identify a particular product with it. It must neither mislead nor deceive customers nor violate public order or morality. Finally, the rights applied for cannot be the same as, or similar to, rights already granted to another trademark owner. This may be determined through search and examination by national offices, or by the opposition of third parties who claim to have similar or identical rights.

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How extensive is trademark protection?

Almost all countries in the world register and protect trademarks. Each national or regional office maintains a Register of Trademarks containing full application information on all registrations and renewals, which facilitates examination, search and potential opposition by third parties. The effects of the registration are, however, limited to the country (or, in the case of regional registration, countries) concerned.

To avoid the need to register separate applications with each national or regional office, WIPO administers an international registration system for trademarks. The system is governed by two treaties: the Madrid Agreement Concerning the International Registration of Marks and the Madrid Protocol. Persons with a link (be it through nationality, domicile or establishment) to a country party to one or both of these treaties may, on the basis of a registration or application with the trademark office of that country (or related region), obtain an international registration having effect in some or all of the other countries of the Madrid Union.

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What is an Industrial Design?

What is an Industrial Design?

An industrial design refers to the ornamental or aesthetic aspects of an article. A design may consist of three-dimensional features, such as the shape or surface of an article, or two-dimensional features, such as patterns, lines or color. Industrial designs are applied to a wide variety of industrial products and handicrafts: from technical and medical instruments to watches, jewelry and other luxury items; from house wares and electrical appliances to vehicles and architectural structures; from textile designs to leisure goods. To be protected under most national laws, an industrial design must be new or original and nonfunctional. This means that an industrial design is primarily of an aesthetic nature, and any technical features of the article to which it is applied are not protected by the design registration. However, those features could be protected by a patent.

Watch: Courtesy Swatch AG

Swiss Army Knife: courtesy Victorinox Ltd

Why protect industrial designs?

Industrial designs are what make an article attractive and appealing; hence, they add to the commercial value of a product and increase its marketability. When an industrial design is protected, the owner the person or entity that has registered the design is assured an exclusive right and protection against unauthorized copying or imitation of the design by third parties. This helps to ensure a fair return on investment. An effective system of protection also benefits consumers and the public at large, by promoting fair competition and honest trade practices, encouraging creativity and promoting more aesthetically pleasing products. Protecting industrial designs helps to promote economic development by encouraging creativity in the industrial and manufacturing sectors, as well as in traditional arts and crafts. Designs contribute to the expansion of commercial activity and the export of national products.

Industrial designs can be relatively simple and inexpensive to develop and protect. They are reasonably accessible to small and medium-sized enterprises as well as to individual artists and craftsmakers, in both developed and developing countries.

How can industrial designs be protected?

In most countries, an industrial design must be registered in order to be protected under industrial design law. As a rule, to be registrable, the design must be new or original. Countries have varying definitions of such terms, as well as variations in the registration process itself. Generally, new means that no identical or very similar design is known to have previously existed. Once a design is registered, a registration certificate is issued. Following that, the term of protection granted is generally five years, with the possibility of further renewal, in most cases for a period of up to 15 years.

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Hardly any other subject matter within the realm of intellectual property is as difficult to categorize as industrial designs. And this has significant implications for the means and terms of its protection. Depending on the particular national law and the kind of design, an industrial design may also be protected as a work of applied art under copyright law, with a much longer term of protection than the standard 10 or 15 years under registered design law. In some countries, industrial design and copyright protection can exist concurrently. In other countries, they are mutually exclusive: once owners choose one kind of protection, they can no longer invoke the other. Under certain circumstances an industrial design may also be protectable under unfair competition law, although the conditions of protection and the rights and remedies available can differ significantly.

How extensive is industrial design protection?

Generally, industrial design protection is limited to the country in which protection is granted. The Hague Agreement Concerning the International Registration of Industrial Designs, a WIPOadministered treaty, offers a procedure for international registration of designs. Applicants can file a single international application either with WIPO or the national or regional office of a country party to the treaty. The design will then be protected in as many member countries of the treaty as the applicant designates.

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What is a Geographical Indication?

A geographical indication is a sign used on goods that have a specific geographical origin and possess qualities or a reputation due to that place of origin. Most commonly, a geographical indication consists of the name of the place of origin of the goods. Agricultural products typically have qualities that derive from their place of production and are influenced by specific local geographical factors, such as climate and soil. Whether a sign functions as a geographical indication is a matter of national law and consumer perception. Geographical indications may be used for a wide variety of agricultural products, such as, for example, Tuscany for olive oil produced in a specific area of Italy, or Roquefort for cheese produced in that region of France.

What is a Geographical Indication?

The use of geographical indications is not limited to agricultural products. They may also highlight specific qualities of a product that are due to human factors found in the products place of origin, such as specific manufacturing skills
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and traditions. The place of origin may be a village or town, a region or a country. An example of the latter is Switzerland or Swiss, perceived as a geographical indication in many countries for products made in Switzerland and, in particular, for watches.

Why do geographical indications need protection?

Geographical indications are understood by consumers to denote the origin and quality of products. Many of them have acquired valuable reputations which, if not adequately protected, may be misrepresented by commercial operators. False use of geographical indications by unauthorized parties, for example Darjeeling for tea that was not grown in the tea gardens of Darjeeling, is detrimental to consumers and legitimate producers. The former are deceived into believing they are buying a genuine product with specific qualities and characteristics, and the latter are deprived of valuable business and suffer damage to the established reputation of their products.

What is an appellation of origin?

An appellation of origin is a special kind of geographical indication used on products that have a specific quality exclusively or essentially due to the geographical environment in which the products are produced. The term geographical indication encompasses appellations of origin. Examples of appellations of origin that are protected in states party to the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration are Bordeaux for wine produced in the Bordeaux region of France, Prosciutto di Parma or Parma ham for ham produced in the Parma province of Italy or Habana for tobacco grown in the Havana region of Cuba.
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What is the difference between a geographical indication and a trademark?

A trademark is a sign used by a company to distinguish its goods and services from those produced by others. It gives its owner the right to prevent others from using

the trademark. A geographical indication guarantees to consumers that a product was produced in a certain place and has certain characteristics that are due to that place of production. It may be used by all producers who make products that share certain qualities in the place designated by a geographical indication.

What is a generic geographical indication?

If the name of a place is used to designate a particular type of product, rather than to indicate its place of origin, the term no longer functions as a geographical indication. For example, Dijon mustard, a kind of mustard that originated many years ago in the French town of Dijon, has, over time, come to denote mustard of that kind made in many places. Hence, Dijon mustard is now a generic indication and refers to a type of product, rather than a place.

national laws and under a wide range of concepts, such as laws against unfair competition, consumer protection laws, laws for the protection of certification marks or special laws for the protection of geographical indications or appellations of origin. In essence, unauthorized parties may not use geographical indications if such use is likely to mislead the public as to the true origin of the product. Applicable sanctions range from court injunctions preventing unauthorized use to the payment of damages and fines or, in serious cases, imprisonment.

What is WIPOs role in the protection of geographical indications?

WIPO administers a number of international agreements that deal partly or entirely with the protection of geographical indications (in particular, the Paris Convention and the Lisbon Agreement). WIPO meetings offer Member States and other interested parties the opportunity to explore new ways of enhancing the international protection of geographical indications.
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How are geographical indications protected?

Geographical indications are protected in accordance with

What are Copyright and Related Rights?

What are Copyright and Related Rights?

Copyright laws grant authors, artists and other creators protection for their literary and artistic creations, generally referred to as works. A closely associated field is related rights or rights related to copyright that encompass rights similar or identical to those of copyright, although sometimes more limited and of shorter duration. The beneficiaries of related rights are: performers (such as actors and musicians) in their performances; producers of phonograms (for example, compact discs) in their sound recordings; and broadcasting organizations in their radio and television programs. Works covered by copyright include, but are not limited to: novels, poems, plays, reference works, newspapers, advertisements, computer programs, databases, films, musical compositions, choreography, paintings, drawings, photographs, sculpture, architecture, maps and technical drawings.

What rights do copyright and related rights provide?

The creators of works protected by copyright, and their heirs and successors (generally referred to as right holders), have certain basic rights under copyright law. They hold the exclusive right to use or authorize others to use the work on agreed terms. The right holder(s) of a work can authorize or prohibit: its reproduction in all forms, including print form and sound recording; its public performance and communication to the public; its broadcasting; its translation into other languages; and its adaptation, such as from a novel to a screenplay for a film. Similar rights of, among others, fixation (recording) and reproduction are granted under related rights.

successful dissemination (for example, publications, sound recordings and films). Hence, creators often transfer these rights to companies better able to develop and market the works, in return for compensation in the form of payments and/or royalties (compensation based on a percentage of revenues generated by the work). The economic rights relating to copyright are of limited duration as provided for in the relevant WIPO treaties beginning with the creation and fixation of the work, and lasting for not less than 50 years after the creators death. National laws may establish longer terms of protection. This term of protection enables both creators and their heirs and successors to benefit financially for a reasonable period of time. Related rights enjoy shorter terms, normally 50 years after the performance, recording or broadcast has taken place. Copyright and the protection of performers also include moral rights, meaning the right to claim authorship of a work, and the right to oppose changes to the work that could harm the creators reputation.
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Many types of works protected under the laws of copyright and related rights require mass distribution, communication and financial investment for their

Rights provided for under copyright and related rights laws can be enforced by right holders through a variety of methods and fora, including civil action suits, administrative remedies and criminal prosecution. Injunctions, orders requiring destruction of infringing items, inspection orders, among others, are used to enforce these rights.

and also stimulates economic and social development.

How have copyright and related rights kept up with advances in technology?
The field of copyright and related rights has expanded enormously during the last several decades with the spectacular progress of technological development that has, in turn, yielded new ways of disseminating creations by such forms of communication as satellite broadcasting, compact discs and DVDs. Widespread dissemination of works via the Internet raises difficult questions concerning copyright and related rights in this global medium. WIPO is fully involved in the ongoing international debate to shape new standards for copyright protection in cyberspace. In that regard, the Organization administers the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT), known as the Internet Treaties. These treaties clarify international norms aimed at preventing unauthorized access to and use of creative works on the Internet.

What are the benefits of protecting copyright and related rights?

Copyright and related rights protection is an essential component in fostering human creativity and innovation. Giving authors, artists and creators incentives in the form of recognition and fair economic reward increases their activity and output and can also enhance the results. By ensuring the existence and enforceability of rights, individuals and companies can more easily invest in the creation, development and global dissemination of their works. This, in turn, helps to increase access to and enhance the enjoyment of culture, knowledge and entertainment the world over,
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How are copyright and related rights regulated?

Copyright and related rights protection is obtained automatically without the need for registration or other formalities. However, many countries provide for a national system of optional registration and deposit of works. These systems facilitate, for example, questions involving disputes over ownership or creation, financial transactions, sales, assignments and transfer of rights. Many authors and performers do not have the ability or means to pursue the legal and administrative enforcement of their copyright and related rights, especially given the increasingly global use of literary, music and performance rights. As a result, the establishment and enhancement of collective management organizations (CMOs), or societies, is a growing and necessary trend in many countries. These societies can provide their members with efficient administrative support and legal expertise in, for example, collecting, managing and disbursing

royalties gained from the national and international use of a work or performance. Certain rights of producers of sound recordings and broadcasting organizations are sometimes managed collectively as well.

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Watch: Courtesy Swatch AG

What is the World Intellectual Property Organization?

Established in 1970, the World Intellectual Property Organization (WIPO) is an international organization dedicated to helping ensure that the rights of creators and owners of intellectual property are protected worldwide, and that inventors and authors are therefore recognized and rewarded for their ingenuity. This international protection acts as a spur to human creativity, pushing back the limits of science and technology and enriching the world of literature and the arts. By providing a stable environment for marketing products protected by intellectual property, it also oils the wheels of international trade. WIPO works closely with its Member States and other constituents to ensure the intellectual property system remains a supple and adaptable tool for prosperity and well-being, crafted to help realize the full potential of created works for present and future generations.

What is the World Intellectual Property Organization?

How does WIPO promote the protection of intellectual property?

As part of the United Nations system of specialized agencies, WIPO serves as a forum for its Member States to establish and harmonize rules and practices for the protection of intellectual property rights. WIPO also services global registration systems for trademarks, industrial designs and appellations of origin, and a global filing system for patents. These systems are under regular review by WIPOs Member States and other stakeholders to determine how they can be improved to better serve the needs of users and potential users. Many industrialized nations have intellectual property protection systems that are centuries old. Among newer or developing countries, however, many are in the process of building up their patent, trademark and copyright legal frameworks and intellectual property systems. With the increasing globalization of trade and rapid changes in technological innovation, WIPO plays a key role

in helping these systems to evolve through treaty negotiation; legal and technical assistance; and training in various forms, including in the area of enforcement. WIPO works with its Member States to make available information on intellectual property and outreach tools for a range of audiences from the grassroots level through to the business sector and policymakers to ensure its benefits are well recognized, properly understood and accessible to all.

How is WIPO funded?

WIPO is a largely self-financed organization, generating more than 90 percent of its annual budget through its widely used international registration and filing systems, as well as through its publications and arbitration and mediation services. The remaining funds come from contributions by Member States.

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For more information contact the

World Intellectual Property Organization

Address:

34, chemin des Colombettes P.O. Box 18 CH-1211 Geneva 20 Switzerland

Telephone:

41 22 338 91 11
Fax:

41 22 733 54 28
e-mail:

wipo.mail@wipo.int

WIPO Publication No. 450(E)

ISBN 978-92-805-1555-0

Management of Intellectual Property Rights in India

R Saha Adviser, Department of Science and Technology and Director, Patent Facilitating Centre, Technology Information, Forecasting and Assessment Council, New Delhi

1.0 Introduction With the advent of the new knowledge economy, the old and some of the existing management constructs and approaches would have to change. The knowledge economy places a tag of urgency on understanding and managing knowledge based assets such as innovations and know-how. The time for grasping knowledge has become an important parameter for determining the success of an institution, enterprise, government and industry; the shorter the time better are the chances of success. Intellectual property rights (IPR) have become important in the face of changing trade environment which is characterized by the following features namely global competition, high innovation risks, short product cycle, need for rapid changes in technology, high investments in research and development (R&D), production and marketing and need for highly skilled human resources. Geographical barriers to trade among nations are collapsing due to globalisation, a system of multilateral trade and a new emerging economic order. It is therefore quite obvious that the complexities of global trade would be on the increase as more and more variables are introduced leading to uncertainties. Many products and technologies are simultaneously marketed and utilized in many countries. With the opening up of trade in goods and services intellectual property rights (IPR) have become more susceptible to infringement leading to inadequate return to the creators of knowledge. Developers of such products and technologies would like to ensure R&D costs and other costs associated with introduction of new products in the market are recovered and enough profits are generated for investing in R&D to keep up the R&D efforts. One expects that a large number of IP rights would be generated and protected all over the world including India in all areas of science and technology, software and business methods. More than any other technological area, drugs and pharmaceuticals match the above description most closely. Knowing that the cost of introducing a new drug into the market may cost a company anywhere between $ 300 million to $600 million along with all the associated risks at the developmental stage, no company will like to risk its intellectual property becoming a public property with out adequate returns. Creating, obtaining, protecting and managing intellectual property must become a corporate activity in the same manner as the raising of resources and funds. The knowledge revolution will demand a special pedestal for intellectual property and treatment in the overall decision- making process. It is also important to realize that each product is amalgamation of many different areas of science and technologies. In the face of the competition being experienced by the global community, many industries are joining hands for sharing their expertise in order to respond to market demands quickly and keeping the prices competitive. In order to maintain a continuous stream of new ideas and experimentations, public private partnership in R&D would need to be nurtured to arrive at a win-win situation. Therefore all publicly funded institutions and agencies will have to come to terms with the new ground realities and take positive steps to direct research suitably to generate more intellectual property rights, protect and manage them efficiently.

2.0 Intellectual Property Rights (IPR) Intellectual property rights as a collective term includes the following independent IP rights which can be collectively used for protecting different aspects of an inventive work for multiple protection:Patents Copyrights Trademarks Registered ( industrial) design Protection of IC layout design, Geographical indications, and Protection of undisclosed information

3.0 Nature of Intellectual Property Rights IPR are largely territorial rights except copyright, which is global in nature in the sense that it is immediately available in all the members of the Berne Convention. These rights are awarded by the State and are monopoly rights implying that no one can use these rights without the consent of the right holder. It is important to know that these rights have to be renewed from time to time for keeping them in force except in case of copyright and trade secrets. IPR have fixed term except trademark and geographical indications, which can have indefinite life provided these are renewed after a stipulated time specified in the law by paying official fees. Trade secrets also have an infinite life but they dont have to be renewed. IPR can be assigned, gifted, sold and licensed like any other property. Unlike other moveable and immoveable properties, these rights can be simultaneously held in many countries at the same time. IPR can be held only by legal entities i.e., who have the right to sell and purchase property. In other words an institution, which is not autonomous may not in a position to own an intellectual property. These rights especially, patents, copyrights, industrial designs, IC layout design and trade secrets are associated with something new or original and therefore, what is known in public domain cannot be protected through the rights mentioned above. Improvements and modifications made over known things can be protected. It would however, be possible to utilize geographical indications for protecting some agriculture and traditional products. 4.0 Patents A patent is an exclusive right granted by a country to the owner of an invention to make, use, manufacture and market the invention, provided the invention satisfies certain conditions stipulated in the law. Exclusive right implies that no one else can make, use, manufacture or market the invention without the consent of the patent holder. This right is available for a limited period of time. In spite of the ownership of the rights, the use or exploitation of the rights by the owner of the patent may not be possible due to other laws of the country which has awarded the patent. These laws may relate to health, safety, food, security etc. Further, existing patents in similar area may also come in the way. A patent in the law is a property right and hence, can be gifted, inherited, assigned, sold or licensed. As the right is conferred by the State, it can be revoked by the State under very special circumstances even if the patent has been sold or licensed or manufactured or marketed in the meantime. The patent right is territorial in nature and inventors/their assignees will have to file separate patent applications in countries of their

interest, along with necessary fees, for obtaining patents in those countries. A new chemical process or a drug molecule or an electronic circuit or a new surgical instrument or a vaccine is a patentable subject matter provided all the stipulations of the law are satisfied. 4.1 The Indian Patent Act1 The first Indian patent laws were first promulgated in 1856. These were modified from time to time. New patent laws were made after the independence in the form of the Indian Patent Act 1970. The Act has now been radically amended to become fully compliant with the provisions of TRIPS. The most recent amendment were made in 2005 which were preceded by the amendments in 2000 and 2003. While the process of bringing out amendments was going on, India became a member of the Paris Convention, Patent Cooperation Treaty and Budapest Treaty. The salient and important features of the amended Act are explained here. 4.2 Definition of invention A clear definition has now been provided for an invention, which makes it at par with definitions followed by most countries. Invention means a new product or process involving an inventive step and capable of industrial application. New invention means any invention or technology which has not been anticipated by publication in any document or used in the country or elsewhere in the world before the date of filing of patent application with complete specification i.e., the subject matter has not fallen in public domain or it does not form part of the state of the art. Inventive step means a feature of an invention that involves technical advance as compared to existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art. " capable of industrial application means that the invention is capable of being made or used in an industry" 4.2.1 Novelty An invention will be considered novel if it does not form a part of the global state of the art. Information appearing in magazines, technical journals, books, newspapers etc. constitute the state of the art. Oral description of the invention in a seminar/conference can also spoil novelty. Novelty is assessed in a global context. An invention will cease to be novel if it has been disclosed in the public through any type of publications anywhere in the world before filing a patent application in respect of the invention. Therefore it is advisable to file a patent application before publishing a paper if there is a slight chance that the invention may be patentable. Prior use of the invention in the country of interest before the filing date can also destroy the novelty. Novelty is determined through extensive literature and patent searches. It should be realized that patent search is essential and critical for ascertaining novelty as most of the information reported in patent documents does not get published anywhere else. For an invention to be novel, it need not be a major breakthrough. No invention is small or big. Modifications to the existing state of the art, process or product or both, can also be candidates for patents provided these were not

earlier known. In a chemical process, for example, use of new reactants, use of a catalyst, new process conditions can lead to a patentable invention.

4.2.2 Inventiveness (Non-obviousness) A patent application involves an inventive step if the proposed invention is not obvious to a person skilled in the art i.e., skilled in the subject matter of the patent application. The prior art should not point towards the invention implying that the practitioner of the subject matter could not have thought about the invention prior to filing of the patent application. Inventiveness cannot be decided on the material contained in unpublished patents. The complexity or the simplicity of an inventive step does not have any bearing on the grant of a patent. In other words a very simple invention can qualify for a patent. If there is an inventive step between the proposed patent and the prior art at that point of time, then an invention has taken place. A mere 'scintilla' of invention is sufficient to found a valid patent. It may be often difficult to establish the inventiveness, especially in the area of up coming knowledge areas. The reason is that it would depend a great deal on the interpretative skills of the inventor and these skills will really be a function of knowledge in the subject area. 4.2.3 Usefulness An invention must possess utility for the grant of patent. No valid patent can be granted for an invention devoid of utility. The patent specification should spell out various uses and manner of practicing them, even if considered obvious. If you are claiming a process, you need not describe the use of the compound produced thereby. Nevertheless it would be safer to do so. But if you claim a compound without spelling out its utility, you may be denied a patent. 4.3 Non patentable inventions An invention may satisfy the conditions of novelty, inventiveness and usefulness but it may not qualify for a patent under the following situations: (i) An invention which is frivolous or which claims anything obviously contrary to well established natural laws e.g. different types of perpetual motion machines. (ii) An invention whose intended use or exploitation would be contrary to public order or morality or which causes serious prejudice to human, animal or plant life or health or to the environment e.g., a process for making brown sugar will not be patented. (iii) The mere discovery of a scientific principal or formulation of an abstract theory e.g., Raman effect and Theory of Relativity cannot be patented. (iv) The mere discovery of a new form of a known substance which does not result in enhancement of the known efficacy of that substance or the mere discovery of any new property or new use of a known substance or the mere use of a known process, machine or apparatus unless such a known process results in a new product or employs at least one new reactant. For the purposes of this clause, salts, esters, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance unless they differ significantly in properties with regard to efficacy. (v) A substance obtained by a mere admixture resulting only aggregation of the properties of the components thereof or a process for producing such substance.

The mere arrangement or rearrangement or duplication of features of known devices each functioning independently of one another in a known way. If you put torch bulbs around an umbrella and operate them by a battery so that people could see you walking in rain when it is dark, then this arrangement is patentable as bulbs and the umbrella perform their functions independently. (vii) A method of agriculture or horticulture. For example, the method of terrace farming cannot be patented. (viii) Any process for medical, surgical, curative, prophylactic, diagnostic, therapeutic or other treatment of human beings, or any process for a similar treatment of animals to render them free of disease or to increase economic value or that of their products. For example, a new surgical technique for hand surgery for removing contractions is not patentable. (viii) Inventions relating to atomic energy; (ix) Discovery of any living thing or non-living substance occurring in nature; (x) Mathematical or business methods or a computer program per se or algorithms; (xi) Plants and animals in whole or any part thereof other than microorganisms but including seeds, varieties and species and essentially biological processes for production and propagation of plants and animals; (xii) A presentation of information; (xiii) Topography of integrated circuits; (xiv) A mere scheme or rule or method of performing mental act or method of playing games; (xv) An invention which, in effect, is traditional knowledge or which is aggregation or duplication of known component or components. Computer program per se as such has not been defined in the Act but would generally tend to mean that a computer program with out any utility would not be patentable. Protection of seeds and new plant varieties is covered under a different Act, which provides a protection for a period of 10 years. Similarly, topography of integrated circuits is protected through yet a different Act. 4.4 Term of the patent Term of the patent will be 20 years from the date of filing for all types of inventions. 4.5 Application In respect of patent applications filed, following aspects will have to be kept in mind: Claim or claims can now relate to single invention or group of inventions linked so as to form a single inventive concept Patent application will be published 18 months after the date of filing Applicant has to request for examination 12 months within publication or 48 months from date of application, whichever is later

(vi)

No person resident in India shall, except under the authority of a written permit sought in the manner prescribed and granted by or on behalf of the Controller, make or cause to be made any application outside India for the grant of a patent for an invention unless (a) an application for a patent for the same invention has been made in India, not less than six weeks before the

application outside India; and (b) either no direction has been given under the secrecy clause of the Act or all such directions have been revoked. 4.6 Provisional Specification A provisional specification is usually filed to establish priority of the invention in case the disclosed invention is only at a conceptual stage and a delay is expected in submitting full and specific description of the invention. Although, a patent application accompanied with provisional specification does not confer any legal patent rights to the applicants, it is, however, a very important document to establish the earliest ownership of an invention. The provisional specification is a permanent and independent scientific cum legal document and no amendment is allowed in this. No patent is granted on the basis of a provisional specification. It has to be a followed by a complete specification for obtaining a patent for the said invention. Complete specification must be submitted within 12 months of filing the provisional specification. This period can be extended by 3 months. It is not necessary to file an application with provisional specification before the complete specification. An application with complete specification can be filed right at the first instance. 4.7 Complete Specification It may be noted that a patent document is a techno-legal document and it has to be finalized in consultation with an attorney. Submission of complete specification is necessary to obtain a patent. Contents of a complete specification would include the following 1. 2. 3. 4. 5. 6. Title of the invention. Field to which the invention belongs . Background of the invention including prior art giving drawbacks of the known inventions & practices. Complete description of the invention along with experimental results. Drawings etc. essential for understanding the invention. Claims, which are statements, related to the invention on which legal proprietorship is being sought. Therefore the claims have to be drafted very carefully.

4.8 Compulsory license Any time after three years from date of sealing of a patent, application for compulsory license can be made provided 1. reasonable requirements of public have not been met 2. patented invention is not available to public at a reasonably affordable price 3. patented invention is not worked in India

among other things, reasonable requirements of public are not satisfied if working of patented invention in India on a commercial scale is being prevented or hindered by importation of patented invention. Applicant's capability including risk taking, ability of the applicant to work the invention in public interest, nature of invention, time elapsed since sealing, measures taken by patentee to work the patent in India will be taken into account. In case of national emergency or other circumstances of extreme urgency or public non commercial use or an establishment of a ground of anti competitive practices adopted by the patentee, the above conditions will not apply. A patentee must disclose the invention in a patent document for anyone to practice it after the expiry of the patent or practice it with the consent of the patent holder during the life of the patent. 4.9 Patenting of microbiological inventions The Indian Patent Act has now a specific provision in regard to patenting of microorganisms and microbiological processes. It is now possible to get a patent for a microbiological process and also products emanating from such processes. As it is difficult to describe a microorganism on paper, a system of depositing strain of microorganisms in some recognized depositories was evolved way back in 1949 in USA. An international treaty called "Budapest Treaty" was signed in Budapest in 1973 and later on amended in 1980. India became a member of this Treaty, with effect from December 17, 2001. This is an international convention governing the recognition of deposits in officially approved culture collections for the purpose of patent applications in any country that is a party to this treaty. Because of the difficulties and virtual impossibility of reproducing a microorganism from a description of it in a patent specification, it is essential to deposit a strain in a culture collection centre for testing and examination by others. An inventor is required to deposit the strain of a microorganism in a recognized depository, which assigns a registration number to the deposited microorganism. This registration number needs to be quoted in the patent application dealing with the microorganism. Obviously a strain of microorganism is required to be deposited before filing a patent application. It may be observed that this mechanism obviates the need of describing a microorganism in the patent application. Further, samples of strains can be obtained from the depository for further working on the patent. There are many international depositories in different countries such as ATCC, DSM etc. which are recognized under the Budapest Treaty. The Institute of Microbial Technology(IMTEC), Chandigarh is the first Indian depository set up under the Budapest Treaty. 4.10 Mail box provision TRIPS requires that countries, not providing product patents in respect of pharmaceuticals and chemical inventions have to put in a mechanism for accepting product patent applications with effect from 1 January 1995. Such applications will only be examined for grant of patents, after suitable amendments in the national patent law have been made. This mechanism of accepting product patent applications is called the "mail box" mechanism. This system has been in force in India and now such applications are being taken up for examination. 4.11 Exclusive Marketing Right TRIPS requires that member countries of the WTO not having provision in their laws for granting product patents in respect of drugs and agrochemical, must introduce Exclusive Marketing Rights (EMR) for such products, if the following criteria are satisfied:

1.

2.

3. 4. 5.

A patent application covering the new drug or agrochemical should have been filed in any of the WTO member countries after 1 January 1995; A patent on the product should have been obtained in any of the member countries (which provides for product patents in drugs and agrochemical) after 1 January 1995; Marketing approvals for the product should have been obtained in any of the member countries; A patent application covering the product should have been filed after 1 January 1995 in the country where the EMR is sought; The applicant should apply seeking an EMR by making use of the prescribed form and paying requisite fee.

EMR is only a right for exclusive marketing of the product and is quite different from a patent right. It is valid up to a maximum period 5 years or until the time the product patent laws come into effect. The necessary amendment to: the Patents Act, 1970 came into force on 26 March 1999. The provision is applicable with retrospective effect from 1 January 1995. As per the 2005 amendments in the Patents Act, the provision of EMR is no longer required. However, These rights were awarded in India from time to time and there have been some litigations as well where the courts came up with quick decisions. 4.12 Timing for filing a patent application Filing of an application for a patent should be completed at the earliest possible date and should not be delayed. An application filed with provisional specification, disclosing the essence of the nature of the invention helps to register the priority by the applicant. Delay in filing an application may entail some risks like (i) other inventors might forestall the first inventor by applying for a patent for the said invention, and (ii) there may be either an inadvertent publication of the invention by the inventor himself/herself or by others independently of him/her. Publication of an invention in any form by the inventor before filing of a patent application would disqualify the invention to be patentable. Hence, inventors should not disclose their inventions before filing the patent application. The invention should be considered for publication after a patent application has been filed. Thus, it can be seen that there is no contradiction between publishing an inventive work and filing of patent application in respect of the invention. 5.0 Protecting new plant variety2 New plant varieties can now be protected in India under the New Plant Variety and Farmers Rights Protection Act in 2001. New plant varieties cannot be protected through patents. However, the Act has not become operational as subsidiary legislation is yet to be put in place. India has enacted the which, in addition to meeting the technical features of UPOV, provides rights to farmers to use the seeds from their own crops for planting the next crop. Further, there are provisions for benefit sharing with farmers, penalty for marketing spurious propagation material and protecting extant varieties. There is a provision for protecting extant variety and farmers varieties as well. The total period for protection is 10 years from the date of registration.

There are 5 main criteria to arrive at a decision whether a plant variety is really new or not. These are distinctiveness, uniformity, stability, novelty and denomination. The variety shall be deemed to be distinct if it is clearly distinct from any other variety whose existence is a matter of common knowledge at the time of filing of the application. The variety shall be deemed to be uniform if, subject to the variation that may be accepted from the particular features of its propagation, it is sufficiently uniform in its relevant characteristics. The variety shall be deemed to be stable if its relevant characteristics remain unchanged after repeated propagation or, in the case of a particular cycle of propagation at the end of each such cycle. The variety shall be deemed to be new if, at the date of filing of the application for breeders right, propagating or harvesting material of the variety has not been sold or otherwise disposed of to others, by or with the consent of the breeder for the purpose of exploitation of the variety. The variety shall be designated by a denomination, which will be its generic designation. The premise that the variety denomination must be its generic designation class for a requirement that 'denomination must enable the variety to be identified. 6.0 Copyrights3 Copyright is a right, which is available for creating an original literary or dramatic or musical or artistic work. Cinematographic films including sound track and video films and recordings on discs, tapes, perforated roll or other devices are covered by copyrights. Computer programs and software are covered under literary works and are protected in India under copyrights. The Copyright Act, 1957 as amended in 1983, 1984, 1992, 1994 and 1999 governs the copyright protection in India. The total term of protection for literary work is the authors life plus sixty years. For cinematographic films, records, photographs, posthumous publications, anonymous publication, works of government and international agencies the term is 60 years from the beginning of the calendar year following the year in which the work was published. For broadcasting, the term is 25 years from the beginning of the calendar year following the year in which the broadcast was made. Copyright gives protection for the expression of an idea and not for the idea itself. For example, many authors write textbooks on physics covering various aspects like mechanics, heat, optics etc. Even though these topics are covered in several books by different authors, each author will have a copyright on the book written by him / her, provided the book is not a copy of some other book published earlier. India is a member of the Berne Convention, an international treaty on copyright. Under this Convention, registration of copyright is not an essential requirement for protecting the right. It would, therefore, mean that the copyright on a work created in India would be automatically and simultaneously protected through copyright in all the member countries of the Berne Convention. The moment an original work is created, the creator starts enjoying the copyright. However, an undisputable record of the date on which a work was created must be kept. When a work is published with the authority of the copyright owner, a notice of copyright may be placed on publicly distributed copies. The use of copyright notice is optional for the protection of literary and artistic works. It is, however, a good idea to incorporate a copyright notice. As violation of copyright is a cognizable offence, the matter can be reported to a police station. It is advised that registration of copyright in India would help in establishing the ownership of the work. The registration can be done at the Office of the Registrar of Copyrights in New Delhi. It is also to be noted that the work is open for public inspection once the copyright is registered.

Computer program in the Copyright Act has been defined as a set of instructions expressed in words, codes, schemes or any other form, including a machine-readable medium, capable of causing a computer to perform a particular task or achieve a particular result. It is obvious that algorithms, source codes and object codes are covered in this definition. It is advisable to file a small extract of the computer program at the time of registration rather than the full program. It is important to know that the part of the program that is not being filed, would remain a trade secret of the owner but would have to be kept well guarded by the owner. It may be noted that computer programs will become important in the area of medicines when one talks about codification of DNA and gene sequencing. Generally, all copyrightable expressions embodied in a computer program, including screen displays, are protectable. However, unlike a computer program, which is a literary work, screen display is considered an artistic work and therefore cannot be registered through the same application as that covering the computer program. A separate application giving graphical representation of all copyrightable elements of the screen display is essential. In the digital era, copyright is assuming a new importance as many works transacted through networks such as databases, multi media work, music, information etc. are presently the subject matter of copyright. 6.1 Coverage provided by copyright (i) (ii) (iii) (iv) Literary, dramatic and musical work. Computer programs/software are covered within the definition of literary work. Artistic work Cinematographic films, which include sound track and video films. Recording on any disc, tape, perforated roll or other device.

6.2 Infringement of copyright Copyright gives the creator of the work the right to reproduce the work, make copies, translate, adapt, sell or give on hire and communicate the work to public. Any of these activities done without the consent of the author or his assignee is considered infringement of the copyright. There is a provision of fair use in the law, which allows copyrighted work to be used for teaching and research and development. In other words making one photocopy of a book for teaching students may not be considered an infringement, but making many photocopies for commercial purposes would be considered an infringement. There is one associated right with copyright, which is known as the moral right, which cannot be transferred and is not limited by the term. This right is enjoyed by the creator for avoiding obscene representation of his /her works. Following acts are considered infringement of copyrights:(a) In the case of literary, dramatic or musical work, not being a computer program----(i) to reproduce the work in any material form including the storing of it in any medium by electronic means;

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(ii) (iii) (iv) (v) (vi)

to issue copies of the work to the public not being copies already in circulation; to perform the work in public, or communicate it to the public; to make any cinematography film or sound recording in respect of the work; to make any translation of the work; to make any adaptation of the work; to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in Sub-clauses (i) to (vi);

(b) in the case of computer program (i) (ii) to do any acts specified in clauses (a); to sell or give on hire, or offer for sale or hire any copy of t he computer program, regardless of whether such copy has been sold or given on hire on earlier occasions;

(c ) in the case of an artistic work (i) (ii) (iii) (iv) (v) (vi) to reproduce the work in any material form including depiction in three dimensions of a two dimensional work or in two dimensions of a three dimensional work; to communicate the work to the public; to issue copies of the work to the public not being copies already in circulation; to include the work in any cinematography film . to make any adaptation of the work; to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in sub-clauses (i) to (vi);

(d) in the case of a cinematography film (i) (ii) to make a copy of the film including a photograph of. any image forming part thereof; to sell or give on hire or offer for sale or hire, any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions; to communicate the film to the public;

(iii)

(e) in the case of sound recording (i) (ii) to make any other sound recording embodying it; to sell or give on hire or offer for sale or hire, any copy of the ,sound recording, regardless of whether such copy has been sold or given on hire on earlier occasions; to communicate the sound recording to the public;

(iii)

11

Explanation :- For the purpose of this section, a copy which has been sold once shall be deemed to be a copy already in circulation. 6.3 Computer program A Computer includes any electronic or similar device having information processing capabilities. Computer program means a set of instructions expressed in words, codes, schemes or any other form, including a machine-readable medium, capable of causing a computer to perform a particular task or achieve a particular result. It is now possible to have copyrights both on object code and source code. Generally, all copyrightable expressions embodied in a computer program, including screen displays, are protectable. However, unlike a computer program, which is a literary work, screen displays are artistic work and cannot therefore be registered in the same application as that covering the computer program. A separate application giving graphic representation of all copyrightable elements of the screen display is necessary. In the case of a program made in the course of author's employment under a contract of service or apprenticeship, the employer shall, in the absence of any agreement to the contrary, be the first owner of the copyright. However, works created by third parties on commission do not automatically vest the copyright in the commissioning party. If the third party is an independent contractor, it is essential for the commissioning party to obtain the copyright through a written deed of assignment. It is a common misconception that the copyright automatically belongs to the commissioning party. Thus, it is only where the developer is an employee creating the work under a contract of service that the rights belong to the employer. 6.4 Transfer of copyright The owner of the copyright in an existing work or prospective owner of the copyright in a future work may assign to any person the copyright, either wholly or partially in the following manner. i. ii. iii. for the entire world or for a specific country or territory; or for the full term of copyright or part thereof ; or relating to all the rights comprising the copyright or only part of such rights.

6.3.1 Special provisions for computer programs

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Following tasks will not be considered infringement as they are legally allowed under the Indian laws:the doing of any act necessary to obtain information essential for operating inter-operability of an independently created computer program with other programs by a lawful possessor of a computer program provided that such information is not otherwise readily available;

(i)

(ii)

the observation, study or test of functioning of the computer program in order to determine the ideas and principles which underline any elements of the program while performing such acts necessary for the functions for which the computer program was supplied; the making of copies or adaptation of the computer program from a personally legally obtained copy for non-commercial personal use.

One of the important requirements of copyright is that the work / expression should be fixed in a tangible medium for copyright protection. Protection attaches automatically to an eligible work of authorship, the moment the work is sufficiently fixed. A work is fixed when it is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than a transitory duration. A work may be fixed in words, numbers, notes, sounds, pictures, or any other graphic or symbolic indicia; may be embodied in a physical object in written, printed, photographic, sculptural, punched, magnetic, or any other stable form; and may be capable of perception either directly or by means of any machine or device now known or later developed. Basically, the fixation of a work should allow perceiving, reproducing, or communicating the work either directly or thorough some machine. For instance, floppy disks, compact discs (CDs), CD-ROMs, optical disks, compact discs-interactive (CD-Is), digital tape, and other digital storage devices are all stable forms in which works may be fixed and from which works may be perceived, reproduced or communicated by means of a machine or device. A simultaneous fixation (or any other fixation) meets the requirements if its embodiment in a copy or phonogram record is "sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration. "Works are not sufficiently fixed if they are "purely evanescent or transient" in nature, "such as those projected briefly on a screen, shown electronically on a television or cathode ray tube, or captured momentarily in the 'memory' of a computer." Electronic network transmissions from one computer to another, such as e-mail, may only reside on each computer in RAM (random access memory), but that has been found to be sufficient fixation. 7.0 Industrial Design4 We see so many varieties and brands of the same product (e.g. car, television, personal computer, a piece of furniture etc.) in the market, which look quite different from each other. If the products have similar functional features or have comparable price tags, the eye appeal or visual design of a product determines the choice. Even if the similarities are not close, a person may decide to go for a more expensive item because that item has a better look or colour scheme. 13

What is being said is that the external design or colour scheme or ornamentation of a product plays a key role in determining the market acceptability of the product over other similar products. If you have a good design that gives you an advantage, then you must have a system to protect its features otherwise there would be wide scale imitation. Design as per the Indian Act means the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article - whether in two dimensional or three dimensional or in both forms - by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but it does not include any mode or principle of construction or anything which is in substance a mere mechanical device. In this context an article means any article of manufacture and any substance, artificial, or partly artificial and partly natural; and includes any part of an article capable of being made and sold separately. Stamps, labels, tokens, cards, etc cannot be considered an article for the purpose of registration of design because once the alleged design i.e., ornamentation is removed only a piece of paper, metal or like material remains and the article referred to ceases to exist. An article must have its existence independent of the designs applied to it. So, the design as applied to an article should be integral with the article itself. 7.1 The essential requirements for the registration of design 1. The design should be new or original, not previously published or used in any country before the date of application for registration. The novelty may reside in the application of a known shape or pattern to a new subject matter. However, if the design for which the application is made does not involve any real mental activity for conception, then registration may not be considered. 2. The design should relate to features of shape, configuration, pattern or ornamentation applied or applicable to an article. Thus, designs of industrial plans, layouts and installations are not registrable under the Act. 3. The design should be applied or applicable to any article by any industrial process. Normally, designs of artistic nature such as painting, sculptures and the like which are not produced in bulk by any industrial process are excluded from registration under the Act. 4. The features of the designs in the finished article should appeal to and are judged solely by the eye. This implies that the design must appear and should be visible on the finished article, for which it is meant. Thus, any design in the inside arrangement of a box, money purse or almirah may not be considered for showing such articles in the open state, as those articles are generally put in the market in the closed state. 5. Any mode or principle of construction or operation or any thing, which is in substance a mere mechanical device, would not be a registrable design. For instance, a key having its novelty only in the shape of its corrugation or bend at the portion intended to engage with levers inside the lock it is associated with, cannot be registered as a design under the Act. However, when any design suggests any mode or principle of construction or mechanical or other action of a mechanism, a suitable disclaimer in respect thereof is required to be inserted on its representation, provided there are other registrable features in the design. 6. The design should not include any trademark or property mark or artistic works.

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7. It should be significantly distinguishable from known designs or combination of known designs. 8. It should not comprise or contain scandalous or obscene matter. 7.2 Duration of the registration of a design The total term of a registered design is 15 years. Initially the right is granted for a period of 10 years, which can be extended, by another 5 years by making an application and by paying a fee of Rs. 2000/- to the Controller before the expiry of initial 10 years period. The proprietor of design may make the application for such extension even as soon as the design is registered. 7.3 Strategy for protection First to file rule is applicable for registrability of design. If two or more applications relating to an identical or a similar design are filed on different dates, the first application will be considered for registration of design. Therefore the application should be filed as soon as you are ready with the design. After publication in the official gazette on payment of the prescribed fee of Rs. 500/- all registered designs are open for public inspection. Therefore, it is advisable to inspect the register of designs to determine whether the design is new or not. There is yet another important provision for ensuring that the design is different from anything published any where in the world. This is quite a strict condition. There would be many designs, which are not protected, and these would not be part of any database maintained by design offices. An applicant has to take the responsibility of ensuring that he has done an extensive search and satisfied himself of the novelty of his design. However, in practice as the cost involved in filing and obtaining a design registration is not high, a design application is made if the stakes involved are not high and you have not copied any design. The application for registration of design can be filed by the applicant himself or through a professional person (i.e. patent agent, legal practitioner etc.). An agent residing in India has to be employed by the applicants not resident of India.

8.0 Trademarks5 A trademark is a distinctive sign, which identifies certain goods or services as those produced or provided by a specific person or enterprise. Trademarks may be one or combination of words, letters, and numerals. They may also consist of drawings, symbols, three dimensional signs such as shape and packaging of goods, or colours used as distinguishing feature. Collective marks are owned by an association whose members use them to identify themselves with a level of quality. Certification marks are given for compliance with defined standards. (Example ISO 9000.). A trademark provides to the owner of the mark by ensuring the exclusive right to use it to identify goods or services, or to authorize others to use it in return for some consideration (payment). Well-known trademark in relation to any goods or services, means a mark which has become so to the substantial segment of the public which uses such goods or receives such services that the use of such mark in relation to other goods or services would be likely to be

15

taken as indicating a connection in the course of trade or rendering of services between those goods or services and a person using the mark in relation to the first-mentioned goods or services. Enactment of the Indian Trademarks Act 1999 is a big step forward from the Trade and Merchandise Marks Act 1958 and the Trademark Act 1940. The newly enacted Act has some features not present in the 1958 Act and these are:1. 2. 3. 4. 5. 6. Registration of service marks, collective marks and certification trademarks. Increasing the period of registration and renewal from 7 years to 10 years. Allowing filing of single application for registration in more than one class. Enhanced punishment for offences related to trademarks. Exhaustive definitions for terms frequently used. Simplified procedure for registration of registered users and enlarged scope of permitted use. 7. Constitution of an Appellate Board for speedy disposal of appeals and rectification applications which at present lie before High Court. 8.1 Well-known trademarks and associated trademarks A well-known trademark in relation to any goods or services, means a mark which has become known to the substantial segment of the public that uses such goods or receives such services. Associated Trademarks are, in commercial terms, marks that resemble each other and are owned by the same owner, but are applied to the same type of goods or services. For example, a company dealing in readymade garments may use associated marks for shirts, trousers etc. means trademarks deemed to be, or required to be, registered as associated trademarks under this Act. 8.2 Service marks The Indian Act of 1958 did not have any reference to service marks. Service means service of any description that is made available to potential users and includes the provision of services in connection with the business of industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising. Marks used to represent such services are known as service marks. 8.3 Certification Trademarks and Collective Marks A certification trade mark means a guarantee mark which indicates that the goods to which it is applied are of a certain quality or are manufactured in a particular way or come from a certain region or use some specific material or maintain a certain level of accuracy. The goods must originate from a certain region rather from a particular trader. Certification marks are also applicable to services and the same parameters will have to be satisfied. Further these marks are registrable just like any other trademark. Agmark used in India for various food items is a kind of

16

certification mark although it is not registered as a certification mark; the concept of certification mark was not in vogue at the time of introduction of Agmark. A collective mark means a trademark distinguishing from those of others, the goods or services of members of an association of persons (not being a partnership within the meaning of the Indian Partnership Act, 1932), which is the proprietor of the mark. 8.4 Term of a registered trademark The initial registration of a trademark shall be for a period of ten years but may be renewed from time to time for an unlimited period by payment of the renewal fees. 9.0 Protection of Geographical Indications6 Indications which identify a good as originating in the territory of a member or a region or a locality in that territory, where a given quality reputation or other characteristics of the good is attributable to its geographical origin. The concept of identifying GI and protecting them is a new concept in India, perhaps in most developing countries, and has come to knowledge in these countries after they signed the TRIPS Agreement. It may be noted that properly protected GI will give protection in domestic and international market. Stipulations of TRIPS would be applicable to all the member countries. According to TRIPS, GI which is not or cease to be protected in its country of origin or which has fallen into disuse in that country cannot be protected. Homonymous GI for wines will get independent protection. Each state shall determine conditions under which homonymous indications will be differentiated from each other. Principles of national treatment and fair competition are applicable. TRIPS provide for seizure of goods bearing false indications of GI. TRIPS provide for refusal or invalidation of registration of a trademark containing a GI with respect to goods not originating in the territory indicated. The Geographical Indication of Goods (Registration and Protection) Act came into being in 2000. (The Act is not implemented at the time of writing the article as the rules have not been notified.) The term GI has been defined as "Geographical Indications", in relation to goods, means an indication which identifies such goods as agricultural goods, natural goods or manufactured goods as originating, or manufactured in the territory of a country, or a region or locality in that territory, where a given quality, reputation or other characteristics of such goods is essentially attributable to its geographical origin and in case where such goods are manufactured goods one of the activities of either the production or of processing or preparation of the goods concerned takes place in such territory, region or locality, as the case may be. 9.1 Applicants for GI's registration Any association of persons or producers or any organization or authority established by or under any law for the time being in force representing the interest of the producers of the concerned goods, who are desirous of registering geographical indication in relation to such goods shall apply in writing to the Registrar in such' form and in such manner and accompanied by such fees as may be prescribed for the registration of the geographical indication.

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9.2 Non-registrable geographical indications Geographical indications having following cannot be registered :

.the use of which would be likely to deceive or cause confusion or contrary to any law. .which comprises or contains scandalous or obscene matter or any matter likely to hurt religion susceptibility of any class or section of citizens of India. which would other wise be disentitled to protection in a court. .which are determined to be generic names or indications of goods and are, therefore, not or ceased to be protected in their country of origin or which have fallen into disuse in that Country. which, although literally true as to the territory, region or locality in which the goods originate, but falsely represent to the persons that the i goods originate in another territory, region or locality, as the case may be.

9.3 Punishment for falsifying GI A sentence of imprisonment for a term between six months to three years and a fine between fifty thousand rupees and two lakh rupees is provided in the Act. The court may reduce the punishment under special circumstances. 9.4 Term of GI protection The registration of a GI shall be for a period of ten years but may be renewed from time to time for an unlimited period by payment of the renewal fees. 10.0 Protection of Integrated Circuit Layout Design (IC)7 It provides protection for semiconductor IC layout designs. India has now in place Semiconductor Integrated Circuits Layout Design Act, 2000 to give protection to IC layout design. Layout design includes a layout of transistors and other circuitry elements and includes lead wires connecting such elements and expressed in any manner in a semiconductor IC. Semiconductor IC is a product having transistors and other circuitry elements, which are inseparably formed on a semiconductor material or an insulating material or inside the semiconductor material and designed to perform an electronic circuitry function. The term of the registration is 10 years from the date of filing. An IC layout design cannot be registered if it is 1.Not original 2. Commercially exploited anywhere in India or in a convention country; 3.Inherently not distinctive 4. Inherently not capable of being distinguishable from any other registered layout design.

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Note: Design not exploited commercially for more than 2 years from date of registration of application shall be treated as commercially exploited for the purpose of this Act. Reproducing, importing, selling, distributing the IC layout design for commercial purposes only constitutes infringement. A person when creates another layout design on the basis of scientific evaluation of a registered layout design shall not be causing any infringement. 11.0 Protection of undisclosed information The protected subject matter is information lawfully within the control of a natural person or legal person that is secret that has commercial value because it is secret and that has been subject to reasonable steps by the person lawfully in control of the information, to keep it secret. Secret is defined as secret in the sense that it is not , as a body or in the precise configuration and assembly of its components known among or readily accessible to persons within the circles that normally deal with the kind of information in question. Undisclosed information, generally known as trade secret / confidential information, includes formula, pattern, compilation, programme, device, method, technique or process. Protection of undisclosed information is least known to players of IPR and also least talked about, although it is perhaps the most important form of protection for industries, R&D institutions and other agencies dealing with IPRs. Protection of undisclosed information / trade secret is not really new to humanity; at every stage of development people have evolved methods to keep important information secret, commonly by restricting the knowledge to their family members. Laws relating to all forms of IPR are at different stages of implementation in India, but there is no separate and exclusive law for protecting undisclosed information / trade secret or confidential information. The Contract Act of 1872 would however cover many aspects of trade secrets. It is difficult to define the term in its entirety but, for an easy understanding, it may be said that a piece of undisclosed information or a trade secret can be as simple an item as a company's customer list or as complex as a formula for a product or a process. Broadly speaking, the term would encompass information, including a formula, pattern, compilation, program, device, method, technique or process that provides the owner with an advantage over his business competitors who do not know or use it and is of significance or importance to the business of the company holding the information. Expanding it further, it may include new product plans, product costing, best material to use, sources of materials, financial standing of the business, accounting information, employee records, credit rating of customers, production information, manufacturing methods and processes, business methods, blueprints, test data, research reports, professional pollsters, technical drawings and organisational structure, specifications, process manuals, written instructions for operating the process and analytical means to check and control the product and processes, details of workshop practice, technical training and personal visitation and inspection. On the software side it would include source code, the data file structure, the structure sequence and organisation of computer program. It may also include information relating to a patented invention not included in the patent specification, inventions capable of being patented but not patented, inventions incapable of being patented in a particular country because of the subject matter being excluded in the patent law of that country, inventions incapable of being patented by reason of lack of inventiveness, industrial designs capable of being registered but not registered, industrial designs having functional characteristics and skills, experience and craftsmanship of technicians. The information can be intangible and invisible as well and can take myriad forms, and therefore, any attempt to define it

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in an exhaustive manner would be practically meaningless. A trade secret is a valuable piece of information with the essential requirement that the information be treated as such, i.e. as a secret. The value of a trade secret resides in the fact that competitors or other interested parties do not have access to it. Therefore, a trade secret must be kept secret so that no one could, with out the consent of the owner, acquire it. Trade secrecy is basically a do-it-yourself form of protection. You do not register with the government to secure your trade secrets. The only way to acquire it with out the consent of the owner would be through devious or unlawful means. The owner has the exclusive right to use / exploit a trade secret as long as it remains a secret. As a result, theoretically speaking, the term of a trade secret could be indeterminate or infinite. It is said that the trade secret of Coca-Cola still has not entered the public domain despite the fact that the common ingredients of Coca-Cola are known. A chemical composition falling in this category need to be protected through a trade secret rather than patent which is a publicly known document. It is usually said that the term of the trade secret relating to a machine tool is only as long as the company keeps it internal secret. The moment the product is in the market, many people will know how to copy the product and the moment the product is copied the trade secret associated with the copied aspects will no longer remain valid and secret, hence the protection will be lost and the term of the protection will be over. By and large this would be true for design features but trade secret can be maintained about say, composition of materials used and the process conditions adopted for manufacturing. 12.0 Other related legislation India enacted the Biodiversity Act 2002 to ensure maintenance, sustenance and development of its biodiversity. The Act has specific provisions about ownership of intellectual property rights associated with exploitation of biodiversity. Industries have to have the prior informed consent of the National Biodiversity Authority before exploring the biodiversity in India. In the event of R&D based on exploitation of biodiversity and associated local knowledge, there is a provision for sharing of benefits of such work with the local community. No direct flow of funds is expected to the community. In stead the Union Government will reach the benefits through State Governments to the community. The other Act having its influence over other Acts related to IPR is the Information technology Act, 2000 which looks at the security aspect of material being transacted on internet. 13.0 Management of IPR in publicly funded institutions in India Aims of publicly funded institutions such as universities, colleges, autonomous bodies and public sector undertakings are multifaceted and are not purely driven by economic considerations but they are primarily driven by considerations of social obligations and political objectives and will of a nation. India has stuck to these aims since the independence. On one hand the above approach has helped us in creating a pool of highly educated population and also building an inherent strength in research and development and core competency in basic industries like steel, power, fertilizers etc. However on the other hand, an insulated system breeds complacency, which blunts the spirit of innovation and fire for being ahead of others. Globalization has taught us many new lessons by opening our eyes to the existing and forthcoming ground realities, which cannot be shunned away just because we do not happen to like them. These realities are going to stay. The likely impacts of globalization started becoming a part of our age old thought process and life style when India decided to become a member of the World Trade Organization. Since the beginning of 1990s new approaches started taking roots

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in respect of such institutions, especially related to their management and source of funding. It has been observed that educational and R&D institutions are being asked to generate their own funds and depend less and less on block grants by central or state governments. In respect of PSU the message has been to generate more and more revenue from the available resources. The Central Government was quick to understand the importance of innovations and new ideas for adjusting to new streams of paradigm shifts. The Government also realized that the journey is not going to be smooth, easy or straight forward in the absence of knowledge about new paradigms among scientists, technologists and policy makers. January 1, 1995 came and brought with it the full impact of WTO along with the Agreement of Trade Related Aspects of Intellectual Property Rights (TRIPS). The Indian system rose to the new challenge and through its many efforts have taken successful steps towards transition to a new culture by updating its existing laws, enacting new legislations, instituting new mechanisms for enabling creation of new intellectual property and its protection and even evolving novel methods and schemes to promote innovations at grass roots levels. Managing creativity within the innovation process is not easy. From providing initial impetus for new ideas and a means of collating and evaluating them through to determining the most appropriate exploitation strategy and selecting delivery partners, innovation is a process and can therefore be managed. 13.1 Indian S&T scenario8 The national expenditure on Research and Development (R&D) in India increased from Rs. 8913.61 crores in 1996-97 to Rs. 12901.54 crores in 1998-99. The projected R&D expenditure would reach a level of about Rs. 15090.22 crores in 1999-2000 and Rs. 17660.21 crores in 2000-2001. The share of the various sectors in the total R&D expenditure in 1998-99 was - Central Government including public sector industry contributed 67.5%, private sector 21.6%, State governments 8.0% and the higher education sector 2.9%. The R&D expenditure as a percentage of GNP was 0.81% as compared to 0.79% in 1990-91. Though in absolute terms the R&D expenditure has shown an increasing trend, the R&D expenditure as a percentage of GNP has hovered around 0.8%. The projected R&D expenditure as percentage of GNP in 1999-2000 and 2000-2001 are 0.87% and 0.94% respectively. It may be noted that in the coming years, the R&D expenses by the education sector is likely to go up as the academic institutions interact more and more with the industry and are thereby motivated to spend their own resources in R&D. As greater awareness about protecting intellectual property gets generated in industry and academics, contract research would necessarily be driven by the need to generate, protect and manage IPR. This trend will leverage more funds in R&D and improve the return from investment in R&D. The national R&D expenditure by objectives in 1998-99 was in the following areas in order of the share of the expenditure, agriculture forestry and fishing, defence, space, promotion of industrial development, development of health services, energy, general advancement of knowledge, transport and communication and environment. It may be noted that majority of funding for R&D comes from the Government and is carried out in publicly funded institutions. Therefore the role of the government in capacity building in management of IPR is fundamental and of utmost importance. 13.2 Capacity building

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Experts who have been involved in capacity building in different areas would agree that the exercise of capacity building is never monolithic in nature but a multidimensional and complex activity. No exercise at a national level can succeed if all or most players are not engaged in the activity. Intellectual Property Rights are often considered synonym of patents or at best patents, trademark and copyrights. This type of understanding or misunderstanding may be present elsewhere in the world. Sometimes people even use the word patent as a substitute for protect. Lets not forget that India is a big country and the task of spreading literacy is gigantic Dissemination of new knowledge is difficult and it cannot be disseminated in a day or two; hence one should be prepared to work with low success rates. At the same time the need to make efforts for spreading correct literacy in a short period of time cannot be overlooked. Awareness still remains an unfulfilled goal in spite of efforts made by so many agencies. There is a need to adopt different means such as contact programmes, print media, bulletins, internet, videos etc. Awareness by itself is of little use if the State does not create and provide suitable systems to enable scientists, technologists, industries and even the State to protect their rights. These means would be in terms of technical guidance, financial support, legal help and other facilitation steps. If you teach scientists that novelty is one of the key factors for getting a patent and do not supply them with adequate tools to determine if their inventions are novel or not, the awareness will have be of little value. Universities in India are very poor and their management systems are very old. Therefore, they need technical, financial and legal help to move ahead; someone has to hold their hands. Capacity building has to be multifaceted at the national level in order to move and remain ahead in the knowledge race. Academic institutions, R&D institutions, industries (goods and services), government departments and ministries (law making, regulating, providing funds and incentives for research etc) and other agencies, attorney firms, courts and NGOs need to be enabled and empowered for playing a constructive role in the process of capacity building. Policy frameworks are essential in the national context to give the right impetus to the activities already started and also provide a broad platform for taking up future activities. Many of these issues have been addressed and addressed quite successfully in the last ten years by different agencies of the government. While departments like Atomic Energy, Space and DRDO and agencies like CSIR have their in house system for looking after their needs of IPR, There was no agency in the country in 1995, which could cut across departments and agencies and become a national nodal point for information and advice on IPR. 13.3 Patent Facilitating Centre (PFC) The Department of Science and Technology set up the Patent Facilitating Centre at the Technology Information Forecasting and Assessment Council (TIFAC) in 1995 as a small initiative to address the need of awareness creation among scientists, helping them to protect their inventive and original work through IP laws and also act as a watch dog. The PFC came to be known for its capability to raise issues and bringing new information and knowledge about IPR in public domain. Starting with the revelation of the turmeric patent to the whole country, it brought to notice many other patents using some of our well known plants and traditional knowledge and, at times, claiming what is already known in India. The days of Dunkel Draft on WTO became a history with PFC putting IPR matters in public domain freely through its monthly IPR Bulletin since November 1995 (now it is available on the net). The readership of these bulletins is over 10000. These bulletins cover technical analysis of granted patents, case laws, current global issues, IPR laws of India and other countries, international treaties, analysis of patents tends, domestic and international news and many other items of interest to a wide variety of readers.

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The PFC has organized 305 IPR awareness workshops all over the country independently and also in association with Ministry of Small Scale Industries, Department of Atomic Energy, Department of Space and ICMR. In the process almost 35000 scientists, technologists and policy makers have been sensitized from about 500 universities, colleges and R&D institutions and 800 industries. The PFC has been organizing advanced level of training programmes with CII and attorney firms and also workshops cum retreat on topics such as public private partnership in IPR management. It would be pertinent to mention at this point that the Ministry of Human Resource Development (MHRD) has also been supporting workshops on IPR. Further, the MHRD has created 11 IPR chairs in various IITS and universities. The Ministry of Commerce and Industry has also been conducting many seminars and workshops on this topic for the last decade or so. As mentioned earlier, these efforts have to be supplemented with some hardcore products and processes to lead to logical conclusions/ output. Indian patent data was not available in a searchable digital form. People in the field realize that it is almost impossible to search for patents from the gazette. The PFC brought out Ekaswa A and Ekaswa B databases on the patent applications filed in India and the patent applications accepted by the Patent Office. These are available on the internet as well and are being used extensively by industries. Twenty Patent Information Centres (PIC) have been set up by the PFC in 20 States namely; Assam, Andhra Pradesh, Chattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Kerala, Madhya Pradesh, Manipur, Punjab, Rajasthan, Sikkim, Tamil Nadu, Tripura, Uttar Pradesh, Uttranchal and West Bengal. These PICs are helping scientists, technologists and policy makers in their respective States by creating awareness and extending help for protecting their inventions. Some States as a result of continuous discussions have filed applications for registration of some products as geographical indications; some are also in the pipeline. Two PICs, namely, Punjab and West Bengal, have also succeeded in introducing IPR courses in technical institutions; other PICs are working hard towards this goal. The PFC is the only window available in the country, which provides full technical, legal and financial support for inventions emanating from educational institutions, including schools and colleges, and government departments. It has so far filed 260 patent applications in India and other countries from about 55 universities / academic institutions and many of them have been granted. 13.4 Other centres / cells Many government departments, educational institutions and PSU have started their IPR cells. Prominent among the government departments / agencies are Department of Biotechnology, Ministry of Telecommunications and Information Technology, Indian Council of Medical Research, Indian Council of Agricultural Research, ISRO, Department of Atomic Energy, Defence Research and Development Organization and Indian Council of Forest Research. IITs at Delhi, Mumbai, Kharagpur and Roorkee have also set up their cells and evolved their IPR policies. Among the PSUs, Indian Oil Corporation and Bharat Heavy Electricals Ltd. are worth mentioning. Among private industries, there are many industries, which have started their own IPR cells and it may not be possible to list all of them here. There is no doubt that private industries have responded very well to the new IPR regime in terms of filing patent applications.

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13.5 First Policy Breakthrough9 Ministry of Science and Technology issued the guidelines "Instructions for Technology Transfer and Intellectual Property Rights" in March 2000, which would help in enhancing the motivation of scientists, research Institutions and universities in projects funded by the Department of Science and Technology, Department of Biotechnology, Department of Scientific and Industrial Research and Department of Ocean Development. The salient features of the guidelines are (1) Institutions shall be encouraged to seek protection of intellectual property rights in respect of the results of R&D. They may retain the ownership of such IPR. Here `Institutions' mean any technical, scientific or academic establishment where research is carried out through funding by the central and / or the state governments. (2) The Institutions shall take necessary steps to commercially exploit patents on exclusive or on non-exclusive basis. (3) The owner institution is permitted to retain the benefits and earnings generated out of the IPR. The institution may determine the share of inventor(s) and other persons from such actual earnings. However, such share shall be limited to one third of the actual earnings. (4) IPR generated through joint research by institution(s) and industrial concern(s) through joint efforts can be owned jointly by them or as may be mutually agreed to by them through a written agreement. The institution and industrial concern may transfer the technology to a third party for commercialisation on exclusive / non-exclusive basis. The third party, exclusively licensed to market the innovation in India, must manufacture the product in India. The joint owners may share the benefits and earnings arising out of commercial exploitation of the IPR. (5) The owner institution shall set apart not less than 25% of the revenue generated from IPR to create a Patent Facilitating Fund which shall be utilized by the institution for updating inventions, filing new patent applications and protecting IP rights against infringement, and for building competency in the area of IPR and related issues. (6) The Government shall have a royalty free license for the use of the Intellectual property for the purposes of the Government of India. This is a major departure in the approach and policy towards managing inventions in India by the Ministry of Science and Technology. In order to have a uniform policy of the government in this respect, it may be useful to have a suitable law in this regard. It is obvious that with more and more autonomy to research institutions in regard to IPR and technology transfer, these institutions, and the scientists working there, would have stronger motivation to invent products and processes, which are required by the market. 13.6 Innovations related incentives10

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An innovative industry in India can gain competitive advantage in the market if it develops the necessary expertise and skills in developing and manufacturing new products, which are patented. For example, the advantage of a three year excise duty exemption or exemption from Drugs Price Control Order may translate into reserves / income which may offset the cost towards R&D. In order to promote R&D and innovation in Indian industries, Government of India provides a number of fiscal incentives and support measures to industries. With increasing public private partnership in technology development through schemes of Technology Development Board, Drug and Pharmaceutical Board and NMILTI, the following incentives would be extremely useful in promoting the culture of innovation and intellectual property protection in industries and academic and R&D institutions. 1. Excise duty waiver on patented products All goods falling under the Schedule to the Central Excise Tariff 1985 are exempt from the excise duty for a period of 3 years from the date of commencement of commercial production provided such goods are manufactured by a wholly owned Indian company and such goods are designed and developed by such Indian company and the goods so designed are patented in any two countries outside India namely, USA, Japan and any country of the European Union. The manufacturer, before commencing commercial production must obtain a certificate from the Department of Scientific and Industrial Research for claiming the benefit. 2. Exemption from Drug Price Control Order Bulk drugs produced based on indigenous R&D are exempt from drug price control for a period of 5 years from the date of commencement of commercial production provided that they are produced from the basic stage by a process of manufacture developed by the unit through its own R&D efforts. In case of a drug, which has not been produced elsewhere, if developed and produced indigenously, it would be placed outside the price control order for a period of 10 years from the date of commencement of commercial production. In order to establish that a process or a product has been developed through indigenous R&D, novelty of the process or product would have to be ensured. In other words a patent would have to be necessarily obtained for claiming the benefit. 3. Weighted tax deduction on R&D expenditure Weighted tax deduction @ 150% on R&D expenditure is available to companies engaged in the business of biotechnology, or the business of manufacture or production of drugs, pharmaceuticals, electronic equipment, computers, telecommunication equipment, chemicals and manufacture of aircraft and helicopters. The expenditure on scientific research in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical trials of drugs, obtaining approval from the regulatory authority under any Central, State or provincial Act and the filing of a patent application in India. 4. Accelerated depreciation allowance Depreciation allowance at a higher rate is available in respect of plant and machinery installed for manufacturing goods based on indigenous technology developed in recognized inhouse R&D units, Government R&D institutions, national laboratories and Scientific and 25

Industrial Organizations (SIRO). The present rate of depreciation for plant and machinery is 40% as against 25% for other plants and machinery. 5. Tax holiday to R&D companies Tax holiday is available to approved companies engaged in scientific and industrial R&D activities on commercial lines for ten consecutive assessment years. This incentive is applicable to any commercial company that has its main objective and activities in the area of scientific and industrial R&D. This would be applicable to companies approved after March 31, 2000 but before April 1, 2003. 6. Income tax relief on R&D expenditure Under Section 35(1)(i) of the Income Tax Act 1961, the revenue expenditure on scientific research, by recognized R&D units, on activities related to the business of the company is allowed full deduction. Under Section 35(1)(iv) expenses of a capital nature could be deducted totally from the income of the year in which the expenses have been incurred. 7. Tax deduction for sponsoring research Section 35(2AA) of the IT Act 1961 provides for a weighted tax deduction of 125% for expenses on sponsoring research programmes at National laboratories functioning under ICAR, CSIR, ICMR, DRDO, Department of Biotechnology, Department of Atomic Energy, Department of Electronics; IIT and universities. 13.7 The Science and Technology Policy 200311 The Science and Technology Policy released in 2003 is upbeat on intellectual property rights and related issues. It focuses a great deal on the transformation of new ideas into commercial successes, which is considered vitally important to the nations ability to achieve high economic growth and global competitiveness. Accordingly, special emphasis will be given not only to R&D and the technological factors of innovations but also to the other equally important social, institutional and market factors. Value addition and creation of wealth through reassessment, redistribution and repositioning of our intellectual, capital and material resource will be achieved through effective use of science and technology. The Policy states that IPR has to be viewed, not as a self contained and distinct domain, but rather as an effective policy instrument that would be relevant to wide ranging socioeconomic, technological and political concepts. The generation and protection of competitive intellectual property from Indian R&D programmes will be encouraged and promoted. The process of globalization is leading to situations where collective knowledge of societies normally used for common good is converted to a proprietary knowledge for the commercial profit of a few. Action will be taken to protect our indigenous knowledge systems, primarily through national policies, supplemented by supportive international action. For this purpose, IPR systems, which specially protect scientific discoveries and technological innovations arising out of such traditional knowledge will be designed and implemented. Our legislation with regard to patents, copyrights and other forms of intellectual property rights will ensure that maximum incentives are provided for individual inventors, and to our scientific and technological community, to undertake large scale and rapid commercialization, at home and abroad. 26

The development of skills and competence to manage IPR and to leverage its influence will be given a major thrust. This area calls for significant technological insights and legal expertise and will be handled differently from the present, and with high priority. Efforts will be made to synergy between industry and scientific research by creating Autonomous Technology Transfer Organizations as associate organizations of universities and national laboratories to facilitate the transfer to industry, of the know how generated. The above action strategy has emerged from the following policy objectives: To encourage research and innovation in areas of relevance for the economy and the society, particularly by promoting close and productive interaction between private and public institutions in science and technology; To establish an intellectual property rights regime, which maximizes the incentives for the generation and protection of intellectual property by all types of inventors. The regime would also provide a strong, supportive and comprehensive policy environment for speedy and effective domestic commercialization of such inventions so as to be maximal in the public interest and to promote international science and technology cooperation towards achieving the goals of national development and security, and make it a key element of our international relations. The Policy objectives in regard to intellectual property rights were formulated with the overall perspective that knowledge has become a source of economic might and power. This has led to increased restrictions on sharing of knowledge, to new norms of intellectual property rights, and to global trade and technology control regimes. Scientific and technological developments today also have deep ethical, legal and social implications. There are deep concerns in society about these. The ongoing globalization and the intensely competitive environment have a significant impact on the production and service sectors. 13.8 Experience of Indian universities12, 13 Until 1995 the culture of protecting their inventive work through patents by universities and academic institutions was almost nonexistent. Efforts made by multiple agencies in the country have made some difference in the situation, which is obvious from the data and analysis that follow. The Table 1 below shows the filings of patent applications by the Indian academic institutions in India.

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Year

1995 1996 1997 1998 1999 2000 2001 2002 Table 1

Number of patent Number of patent Total number of applications filed by applications filed by patent applications academic institutes IITs and IISc other than IITs and IISc 4 31 35 11 18 29 23 15 38 16 34 50 30 32 62 36 42 78 33 63 96 33 46 79

The Table 2 shows the growth in filings in two blocks of four years; 1995-1998 and 1999-2002. Block period Applications filed Applications filed Percentage increase during 1995-1998 during 1999-2002 in number of applications filed Academic institutes 54 132 244 other than IITs and IISc IITs and IISc 98 183 187 Total 152 315 207 Table 2 It may be noted that out of 132 patent applications filed during 1999-2002 by institutions other than IITs and IISc, 53 applications (40% of the applications) were filed with full technical, legal and financial support of the PFC of TIFAC. 14.9 Epilogue A statement of purpose (SOP) is always helpful in fixing targets and goals because fulfilment of a purpose is satisfying. We have to have an SOP to develop a pool of well informed and trained human resource, deploy sufficient facilities (hardware and software) and, create and promote an enabling environment for generating, protecting and managing intellectual property for progress of science, technology and arts leading to growth of trade and industry and well being of the society. People say that Rome was not built in a day. Any physical process, including development, has to absorb some finite time before taking a shape. We have made a good start by rising to the occasion and putting in place some very useful systems and policies. It is the beginning and we have to go a long way!

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References 1. The Patents Act, 1970 as amended by Patents (Amendment) Act 2005, Commercial Law Publisher (India) Private Ltd., 2005 2. The Protection of Plant Varieties and Farmers Rights Act, 2001 along with Protection of Plant Varieties and Farmers Rights Rules 2003; Akalank Publications, New Delhi; 2003 3. The Copyright Act 1957 as amended up to 1999 along with Copyright Rules 1958 and International Copyright Order 1999; 2005 4. The Design Act 2000 along with Design Rules 2001; Universal Law Publishing Co. Ltd., New Delhi; 2004 5. The Trademarks Act 1999 along with trade Marks Rules 2002; Commercial Law Publisher (India) Private Ltd., 2004 6. The Geographical Indications of Goods (Registration and Protection) Act, 1999 along with Geographical Indications of Goods (Registration and Protection) Rules 2002; Universal Law Publishing Co. Ltd., New Delhi; 2004 7. The Semiconductor Integrated Circuits Layout Design Act 2000 along with Semiconductor Integrated Circuits Layout Design Rules 2001; Universal Law Publishing Co. Ltd., New Delhi; 2005. 8. R&D Statistics Department of Science and Technology, Government of India, May, 2002 9. Instructions for Technology Transfer and Intellectual Property Rights, Department of Science and Technology, March 2000 10. Research and Development in Industry: An Overview; Department of Scientific and Industrial Research, Government of India, 2002. 11. Science and Technology Policy 2003, Department of Science and Technology 12. IPR Bulletin, Vol.5, No 8, August 1999; Technology Information, Forecasting and Assessment Council 13. IPR Bulletin, Vol. 9, No. 10, October 2003; Technology Information, Forecasting and Assessment Council

(The views expressed above are those of the author and not of the organizations he is affiliated to.)

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