WeightWatchers 2002 Annual Report Download - page 12

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products), and for use only in Australia and New Zealand in certain additional food product categories
(including mayonnaise, frozen vegetables, canned fruits and canned vegetables). The food and beverage
related trademarks may be used by Heinz only on Heinz licensed products that have been specially
formulated to be compatible with our dietary principles. We have been granted a similar license by
WW Foods on all other food and beverage products.
There are certain food and beverage trademarks covering the Heinz core categories which, because
of local laws, could not be effectively transferred to WW Foods. These include trademarks registered in
multiple trademark classes, and certain other trademarks. We maintain legal ownership in these
trademarks and hold them in custody for the benefit of WW Foods. Heinz retains in its core categories
(as described in the paragraph above) an exclusive royalty-free license to use these food and beverage
trademarks that we hold in custody for WW Foods. We have undertaken to contribute any of these
custodial trademarks (or any portion covering food and beverage products) to WW Foods if WW
Foods determines that the transfer may be achieved under local law. Heinz pays us an annual fee of
$1.2 million until September 2004 in exchange for our serving as the custodian of the food and
beverage trademarks held for the benefit of WW Foods.
Other Marks
We maintain exclusive ownership of all service marks and trademarks other than food and
beverage trademarks and, except for the rights granted to WW Foods and to Heinz, we have the
exclusive right to use all these marks for any purpose, including their use as trademarks for all products
other than food and beverage products.
Program Standards, Program Information and Related Trademarks
We have exclusive control of the dietary principles to be followed in any eating or lifestyle regimen
to facilitate weight loss or weight control employed by the classroom business such as Winning Points.
We also maintain exclusive ownership of all program information, consisting of information and
know-how relating to any weight-loss program, terminology and trademarks or service marks used to
identify the programs or terminology. We granted an exclusive, worldwide, royalty-free license to WW
Foods, for sublicense to Heinz, in its core categories as described above, to use the terminology and the
related trademarks and service marks, and we provided WW Foods (and through it, Heinz) with access
to and a right to use this information as may be reasonably necessary to develop, manufacture or
market food and beverage products in accordance with our dietary principles. Heinz granted a
worldwide, royalty-free license to WW Foods to use improvements that Heinz may develop in the
course of its use of our dietary principles or weight-loss program, which WW Foods sublicensed in turn
to us.
Third Party Licenses
During the period that Heinz owned our company, it developed a number of food product lines
under the Weight Watchers brand, with hundreds of millions of dollars of retail sales, mostly in the
United States and in the United Kingdom. Heinz, however, did not actively license the Weight Watchers
brand to other food companies. For the period from our acquisition by Artal Luxembourg until
September 29, 2004, we have assigned to Heinz all licenses that we had previously granted to third
parties, and Heinz has retained all existing sublicenses granted by it to third parties for various food
products outside of Heinz’ core categories. Heinz still continues to receive royalty payments of over
$4 million per year from this existing portfolio of third-party licenses. Since May 3, 2001, we have been
managing these third party licenses on behalf of Heinz for a fee equal to 5% of the royalties from
these licenses. After September 29, 2004, these licenses will revert to us, although we have the right to
acquire them sooner, and the associated royalty payments will be payable to us in their entirety.
We have begun developing new licensing opportunities for our product categories with a number
of companies, including Heinz, and have hired a general manager to focus exclusively on this area.
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