[DCJ]

The proposed model for licensing and CRM agreements centres around the formation of mutually beneficial partnerships between Cancer Council and prospective firms. In introducing an approach for assessing partnership proposals, this model seeks to address two main issues. Firstly, it provides Cancer Council with a means to obtain a significant amount of royalty revenue to fund research and community-based projects. Additionally, this model ensures that Cancer Council’s widely recognised brand and reputation is preserved.

The proposed model involves three distinct stages:

The first stage in the model incorporates an assessment of a firm’s financial position which will determine the firm’s ability to meet its financial obligations in a timely manner. In particular, emphasis will be placed on comparisons between the firm’s current financial position with industry averages and historical data. Additionally, there will be an evaluation of more qualitative factors. Cancer Council will focus on analysing the firm’s business strategy and corporate governance. This two-fold examination will ensure that a firm will continue to be financially stable, particularly during economic downturns, and that its sense of social and corporate responsibility is in line with Cancer Council’s expectations.

The second stage focuses on a firm’s product quality. This incorporates an evaluation of the product against relevant industry standards. An analysis of customer feedback is also undertaken to determine the quality and reputation of a product. This stage is vital as the type of product Cancer Council endorses is fundamental to Cancer Council’s brand image and reputation.
The final stage involves the formation of the contract. The contract will specify the method in which royalties are calculated and list necessary contract provisions. For licensing agreements, royalty rates will be objectively assessed for each different licensee. First, royalties will be calculated using a progressive system to both increase total revenue and provide a fairer option. Second, royalties will be reduced for timely payments which will form the basis of long term partnerships and hence, a continual revenue stream. For CRM agreements, royalties will be a fixed 20% of operating margins for all associated products. This system accounts for the shorter term of and increased demand for CRM agreements.

Contract provisions will act to provide assurance to Cancer Council of royalty payments. Significant inclusions are the requirement of a letter of credit and additional disclosures to determine a firm’s corporate responsibility. Yearly audits are also required to monitor a partner’s financial position.