In my previous article, I showed you some of the unique aspects of master data when used with SAP CRM-Intellectual Property Management (IPM), including intellectual property (IP) master data records, Rights Dimensions, and how to perform Rights Availability Analysis. SAP CRM’s IPM functions help carry out the various processes of intellectual property management including the maintenance, management, buying, and selling of rights by using and building on many of the standard components of SAP CRM, such as the product master, the One Order Framework, and CRM Billing. They come standard with SAP CRM and can be applied to any industry that deals with the buying and selling of intellectual property rights.

In this article, I show you the structure of a license sales contract, which in SAP CRM-IPM functions as both a standard sales contract and a sales order. You will see how the SAP system handles important facets of intellectual property management, including rights, royalties, and advances. I also introduce two new features that were added to the license sales contract beginning with SAP CRM 7.0 enhancement package 1.

The License Sales Contract

A license sales contract gives an overview of the rights owned by an organization, and controls the transfer of rights to licensees in exchange for fixed or variable license fees. The license sales contract is based on the CRM One Order Framework, and is in many ways a combination of a standard sales contract and a sales order. A license sales contract behaves as a sales contract that acts as a price agreement. It also behaves as a sales order that confirms the products that are ordered. Table 1 shows some of the key differences among a license sales contract, a standard sales contract, and a sales order.

Table 1

Key differences between a license sales contract, a standard sales contract, and a sales order

I will now discuss the structure of a license sales contract through an example that illustrates its various components, while also highlighting the key configuration settings that help realize this.

Contract Header

The standard transaction type IPMV represents the license sales contract. As with all One Order transactions, this transaction also contains all the standard components of a One Order Header, including Partners, Sales Area, Text, Dates, and Actions. You can access the IPM License Sales Contract in the SAP CRM WebUI by using the Business Role IPMRIGHTSMAN and clicking the navigational links License Sales > Sales Contract.

In the example shown in Figure 1, a contract to sell the rights of two season-level IPs to the licensee Test Licensee is being made out. The header consists of an overview screen that contains the IPM tree that lists all the IPs being sold in a hierarchical fashion. SAP provides the flexibility to sell IPs at any level (e.g., series, season, episode). In this example, I show this functionality to be selling rights to the season-level IP Test Series 1 – Season 1, and to episode-level IPs Series 1 – Season 2 – Episode 1 and Series 1 – Season 2 – Episode 2. The SAP system provides an Expand IP functionality that you can use to explode a higher-level IP (i.e., a season-level IP) to its underlying part relationship IPs (episode-level IPs).

Figure 1

License sales contract: header overview screen showing the IPM tree

Contract Line Items

Line items in a license sales contract are represented as IP scopes of types Rights, Royalties, and Advance Group (Figure 2). Rights to an IP can be sold multiple times within a single contract, as long as the rights that are being sold do not overlap (i.e., they do not collide) based on a combination of the attributes Validity Period, Exclusivity, Market, Territory, and Language. This means you can have multiple scopes of any scope type under a given IP (Figure 3). Each scope type has unique characteristics that are controlled based on their respective item category settings, as discussed below. Additionally, all scope types contain standard information such partners, text, dates, and status.

Figure 2

Different scope types under a given IP

Figure 3

IP with multiple rights scopes

Rights Scopes

Rights scopes are used to represent the rights that are being sold. In a rights scope, the key information that is specified is the validity period and the exclusivity of the sale, and the combination of rights being sold (e.g., TV – USA – English or TV – USA – Spanish). As previously mentioned, you can have multiple rights scopes under a given IP, as long as the rights do not collide. Thus in Figure 4, there is a rights scope for Test Series 1 – Season 1 that gives the licensee the right to broadcast the series in the United States from January 1, 2010, to December 31, 2011, in Spanish and English. In Figure 5, the licensee has acquired rights to broadcast the same series, but for the year 2012, and in Canada. While the rights are for the same product, the difference in their rights is such that they do not broadcast at the same time in the same market, and thus both remain exclusive.

Figure 4

Rights Scope 1 with Rights Dimensions TV – USA – English and TV – USA – Spanish

Figure 5

Rights Scope 2 with Rights Dimensions TV – Canada – English and TV – Canada – Spanish

The item category for a rights scope is IVR1. Its settings are shown in Figure 6. Note that in addition to the standard item category settings, there are additional IPM-specific item category settings that you need to carry out to realize the IPM solution. Regarding the rights scope, the IPM-specific setting requires you to flag the item category IVR1 as being rights relevant by checking the Rghts Rel. check box (Figure 7). By doing so, you flag all such items as being representative of the rights being sold, thereby becoming relevant for collision checks when performing Rights Availability Analysis (discussed in part 1 of this article).

Figure 6

List of all key item categories relevant to a license sales contract

Figure 7

IPM-specific item category settings

Royalties Scopes

Royalties scopes are used to represent the fees that are being charged for the rights that are being sold as part of the rights scopes. You create royalties scopes once the rights scopes have been defined within the contract. You then link the royalties scopes to their respective rights scopes. SAP provides the flexibility to either link royalties scopes to rights scopes, or vice versa, and it also does not limit the number of scopes that you can link. A single royalties scope, for example, could encompass two rights scopes, depending on how the rights are sold, how the fees are charged and billed, and how revenue is recognized (Figure 8).

Figure 8

Two unique rights scopes assigned to a single royalties scope

Royalties scopes have several components, which are described in the sections below.

Rights for Distribution

Rights for distribution are used to represent rights that are relevant for revenue distribution. The purpose of the rights for distribution is different from the rights scope in that this data is used to define how revenue is distributed based on rights versus the actual rights that are being sold. A key difference between the rights for distribution and the rights scope is that you do not specify any exclusivity value or any options information in the rights for distribution. In the example described previously, I was selling TV – English and TV – Spanish rights in both US and Canada for a specific IP as part of two separate rights scopes. If I want to, I can charge fees for both as part of one royalties scope, and only recognize revenue from the US and not Canada (Figure 9).

Figure 9

Rights for distribution section of a royalties scope

Rates

You can charge either performance-based or flat fees. Based on that choice, the pricing is either condition based (Figure 10) or price agreement based with scales (Figure 11).

Figure 10

Flat fee royalties scope

Figure 11

Performance-based royalties scope

Billing

You can set up billing information in a license sales contract in the form of a single milestone (Figure 12), multiple installments (Figure 13), or settlement periods (Figure 14). These are all controlled based on the billing plan type associated with the item category of the royalties scope (Figure 15).

Figure 12

Single milestone

Figure 13

Multiple installments

Figure 14

Settlement periods (each having a billing date)

Figure 15

Example of billing plan type associated to contract item category

For billing plans that are installment based or settlement period based, you need to use the additional contract-based item categories IVB1/IVB3 or IVB2, respectively, to represent the Billing Request Items (BRIs) (Figure 6). These item categories are invoked based on the Plan Lines maintained in the Billing Plan type (Figure 15). Observe that the billing and distribution plan lines are specified in the Billing Plan type. These plan lines in turn invoke the item categories IVB2 and IVS1 (Figure 6).

Distribution

Based on the information maintained in the Rights for Distribution section of a royalties scope, you can copy the rights information to the Distribution section to allocate a revenue distribution percentage to each of the rights dimensions. For the example used above, based on the Rights Dimension values TV – USA – English and TV – USA – Spanish that are specified in the Rights for Distribution section, you allocate 75 percent of the revenue to TV – USA – English and 25 percent to TV – USA – Spanish, which then become the Revenue Distribution lines for this royalties scope (Figure 16).

Figure 16

Distribution overview screen indicating the rate allocations for revenue distribution

The revenue distribution lines are represented in the back end by item category IVS1, and are also defined as part of the Billing Plan type that is associated with the item category of the royalties scope. In other words, it is based on the Plan Lines defined in the Billing Plan type (Figure 15).

Miscellaneous Data

In addition to the above, various miscellaneous data is maintained on a royalties scope, including Status, Created By, Created On, Changed By, Changed On, Terms of Payment, Data Value Profile, Revenue Recognition Category, and Revenue Recognition Date.

Flat-Fee Royalties Scopes versus Performance-Based Royalties Scopes

Based on all the above characteristics, royalties scopes are further divided into flat-fee royalties scopes and performance-based royalties scopes, as shown in Table 2.

Table 2

Differences between a flat-fee royalties scope and a performance-based royalties scope

Advance Group Scopes

Advance groups are used to represent groups of advance line items (which can be of the types repayable, non-repayable, and minimum guarantee). These line items are used to capture advance fees that will be recouped against incoming usage-based fees (Figure 17). Advance scopes are always linked to performance-based royalties scopes to facilitate the recoupment process. In a way, advance scopes behave as flat fee scopes, where you specify a flat advance amount and bill that amount based on a milestone or installment billing plan. Once usage amounts are reported against the settlement periods on a performance-based royalties scope, they begin to be recouped against the advance amounts that have been billed on the associated advance scope.

An IP can have as many advance scopes as necessary, and each of them can be associated with more than one performance-based royalties scope within that IP. Another key characteristic of an advance scope is that it cannot be associated with a rights scope.

Figure 17

IPM tree indicating an advance group

Revisions

The term revisions refers to changes made to the license sales contract after its IPs are released. Revisions affect downstream financial processes such as billing and revenue recognition. The system prevents you from making such changes due to the possibility of triggering negative financial consequences.

SAP CRM-IPM provides a functionality called contract revision, which allows you to manually trigger a revision on any scope. Depending on the type of revision (discussed below), it either causes a complete reversal of all financials associated with a scope or allows a transfer of financials between objects (IPs).

When a contract revision is triggered on a scope, the system automatically sets the status of that scope to either Cancelled or another defined intermediate status, and creates a new scope of the same item category. The new scope has the status In Process and contains information copied from the original scope. You can then choose to make changes to the new scope without negatively affecting financials. This functionality also allows you to replace a given released IP with another IP, while retaining all crucial scope-level information.

The various types of contract revisions are:

• Complete revision: You repost already-paid values to another object
• Partial revision: You assign the un-recouped amount of an advance to another IP
• Delta revision: You end a scope and create a successor scope in a way that they count to the same scale basis

These revisions are basically set up as actions that are then associated with the relevant item categories, as indicated in Table 3.

Table 3

Action configuration settings for the different types of contract revisions

New Features with SAP CRM 7.0 Enhancement Package 1

As part of enhancement package 1, SAP released new features that specifically address some of the shortfalls of the previous version of the SAP CRM-IPM solution. These features help improve system performance and address various usability issues. Two key features are lean distribution and mass maintenance.

Lean Distribution

Large contracts that have numerous IPs and royalties scopes drastically reduce system performance, a fact that becomes evident even while trying to perform the simplest of navigational tasks in a license sales contract. This is because of the vast number of associated billing plan lines and revenue plan lines that are generated (typical of the media industry) for each scope. All these lines are stored in table CRMD_ORDRADM_I, along with the actual scope line items.

To partially mitigate this problem, SAP provided the lean distribution (LD) functionality as part of enhancement package 1. Lean distribution separates revenue plan lines from billing plan lines, and stores this information in a separate table called IPM_REVDIST, thereby reducing the load and improving the query time on table CRMD_ORDRADM_I.

To activate the LD functionality, you first need to flag the item category as being relevant for LD in the IPM-specific item category settings (Figure 18). Then you assign a new billing plan type that does not have any revenue distribution plan lines to this item category. SAP has provided a standard LD-relevant item category IVN1 for flat fee scopes. You can configure similar settings for other types of scopes as well.

Figure 18

Item category IVN1 flagged as being relevant for lean distribution (last column)

Mass Maintenance

To cater to the mass maintenance needs of the industries that use SAP CRM-IPM, SAP provided (as part of SAP CRM 7.0 enhancement package 1) an application that allows for the mass maintenance of IP master records (including relationships) and license sales contracts. With regard to license sales contracts, this application allows you to define various mass maintenance templates that users can then use on a day-to-day basis to update information within contracts, at various levels.

Akarsh Ravi

Akarsh Ravi is a manager at Capgemini US LLC with over eight years of experience implementing SAP CRM and SAP ECC solutions in the high-tech, manufacturing, and media and entertainment industries. His areas of expertise include SAP CRM sales, marketing, IPM, and cProjects; and he is a certified PMP and SAP CRM Sales professional.

You may contact the author at akarsh.ravi@capgemini.com.

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