15 Nov 2018

You can’t control everything but you can control your brand

Authored by: James Dunne

In brief:

  • A ‘brand’ is the overall impression in a marketplace of either a particular supplier of goods or services, or of the goods or services themselves. The concept of a brand includes the goodwill associated with that brand, as well as various forms of intellectual property, the most common being trade marks.
  • Retaining effective ‘control’ of a brand enhances the value of the brand overall. For this reason, brandowners should adopt the same mindset when protecting these intangible assets, as they do for the tangible assets of their business.
  • If steps are not taken to control a brand at its early stages, this can have significant adverse effects on the ability of that brand to grow and diversify, both within its domestic market and internationally.

In this article we consider the six most important ways to maintain effective control of your brand, including:

  1. Brand mindset;
  2. Ownership;
  3. Brand distinctiveness;
  4. Controlling reputation;
  5. Registration; and
  6. Enforcement.

1. Brand mindset

It is relatively straightforward to attribute a value to the tangible assets of a business (such as a warehouse, stock-in-trade and so on) and brandowners are aware of the usual steps to be taken to control and secure those assets (such as security devices, stock control methods and secure premises).

However, the intangible nature of the brand of a business, and its associated intellectual property, often results in a mindset that it is somehow of lower value and importance than the tangible assets. This often means brandowners take few (and in some case, no) steps to control and secure these intangible assets.

For most brandowners, the value of the tangible assets of the business at the initial stage of operations will exceed the value of the intangible assets. Over time, however, and through use, this position changes, and the value of the brand can come to comprise a substantial proportion of the overall value of the business.

In some cases, the value and strength of the brand becomes so high that it becomes recognised by industry organisations such as ‘Superbrands’ (www.superbrands.com) or becomes a household name, such as APPLE, AMAZON or GOOGLE.

2. Ownership and control

The extent to which something can be controlled depends on the extent to which it is ‘owned’.

In the case of a brand, effective control is inextricably linked with the following factors:

  • How distinctive the trade mark(s) used under the brand are;
  • Whether the brandowner has ownership of all the intellectual property rights associated with the brand, such as copyright, designs, patents, confidential information;
  • Whether the brandowner has registrations in place for the various intellectual property rights, in the territories where it is/will be used;
  • How vigilant the brandowner is in controlling the use of their brand, both by the business itself as well as by authorised third parties such as distributors, licensees or franchisees;
  • How proactive the brandowner is in enforcing its rights against unauthorised third parties.

Below we address some of these factors.

3. Brand distinctiveness

The majority of brands are recognised in the market by their trade marks.

As outlined in our previous articles (see here for further details), the essential function of a trade mark is as a ‘badge of origin’ or ‘source identifier’. In other words, it enables consumers to identify and differentiate the goods or services offered by one trader, from those offered by another. This is particularly important in an increasingly crowded and global market. With access to smartphone devices, credit cards and drop-shipping services, consumers around the world can order almost anything they want from wherever they want.

A common temptation is to select a trade mark to convey a message about the features, characteristics, functions or other aspect of the goods or services offered under the brand. Other brandowners will also want to do the same thing, resulting in brandowners in the market using the same or similar descriptive terms for the same goods or services.

Not only does this mean that the ability of consumers to distinguish the marks from each other is reduced (thereby eroding the essential function of a trade mark), but trade mark registries may refuse to register a mark as a trade mark (on the basis it is descriptive and cannot be monopolised by any one entity), or register it but with limitations or conditions.

Alternatively, the mark may be of such low distinctive character that any third party can easily circumvent it. Consequently, the ability to enforce (or control) rights in any resulting trade mark registration is extremely low or non-existent.

For this reason, trade marks used under a brand should be as distinctive as possible.

4. Controlling reputation

Some brandowners, particularly those carrying out business in a market for the first time, find it appealing to have a ‘nod and a wink’ or make a ‘cheeky reference’ to another, more famous brand, that has come before them. Common examples include a similarity of the colour combination used in the trade mark logo or packaging, use of similar imagery in advertisements or the use of highly similar words for the name of the goods or services.

While the marks and brands are not identical, this ‘look alike’ strategy is deliberately intended to raise an association with the earlier brand in the minds of consumers and, by virtue of that association, attract consumers to those goods and services, rather than those offered by other traders, including the earlier brand.

While there is an obvious appeal in making a brand stand out in a crowded marketplace, this approach has considerable downsides. The earlier brandowner may take action against the use or registration of the trade marks, resulting in significant costs, either by way of rebranding costs, legal costs in defending an infringement action, an award of damages or a combination of any of these.

Additionally, in the age of social media, there may be adverse opinion against this ‘look alike’ activity. In our view, the adage of ‘any publicity is good publicity’ is increasingly outdated in the 21st century, since it can be virtually impossible to stem the flow of negative commentary and opinion online.

Not only is there the immediate damage done to the particular brand, but also to the brandowner itself, coupled with a potential loss of trust by consumers in both the current and any future brands that may be offered by that brandowner.

For the same reasons, authorised use by licensees, franchisees or distributors for example, should be carefully managed to ensure there is no damage to the goodwill or reputation of a brand. This could include imposing requirements on how and where a trade mark can be used. A ‘use guidelines’ document is often provided by brandowners, along with mandatory adherence required under the terms of the relevant licence.

The extent to which the use of the trade mark or other intellectual property can be effectively controlled will be determined by the nature of the rights which are owned by the brandowner.

5. Registration and effective control

The available budget for the protection of intellectual property rights and a brand overall is often limited, particularly in the early stages of a brand. This is especially the case in a climate of increased pressure on budgets and challenging economic conditions in many markets.

Many brandowners may, as a result, skimp on their brand protection strategies. As seen above, this can result in a weakening of the brand overall, a reduction in its value and the risk of exposing the brandowner to loss of control of the various intellectual property rights in the brand, if third parties were able to exploit gaps in its protection.

The recommended strategy is to consider i) for what and ii) where, a brand will be used, now and in the next two to five years. Any brand protection strategy should ‘map’ the business plan and intended routes to market over those coming years.

A balance between the need for protection, the available budget and the future plans of the business can be difficult to achieve, and depends on various factors. In addition to cost, query:

  • Will the brand be promoted in the press, Internet, social media and other media outlets? This has the risk of third parties in other countries becoming aware of the new brand and adopting the same in their country, before the brandowner gets there.
  • Does the brand have appeal in other markets? Food and beverages, fashion, perfumes and retail outlets are some of the most common brands that launch in one region or country and expand internationally.
  • Is the brand likely to be copied by others? The cheaper a product associated with a brand is to produce, the more likely that it will be vulnerable to copying by others.

From a trade mark perspective, many countries are members of the Paris Convention. This allows a trade mark application filed in one member country to be filed in other member countries and, provided those applications are filed within six months of the first filing, the recognition of those rights will date back to the date of first filing. This can be a helpful way to spread the cost of an international filing program to other countries.

For example, a trade mark filed in the UAE could form the basis of the following filing program under the Paris Convention:
 

Date of first  filing the UAE

Territory

Scope of coverage / population

+1 month

European Union

28 (at present) countries and 508 million

+2 months

China

1.4 billion

+3 months

United States

325 million

+4 months

India

1.3 billion

+5 months

Brazil

209 million

+6 months

Indonesia

264 million


*Source: United Nations population data

This amounts to a consumer market of approximately four billion people (nearly 50% of the estimated global population in 2018) and provides a considerable scope of protection.

6. Enforcement as control

In general, enforcement of a right is easier and cheaper in places where that right is registered, than where it is not.

While many countries recognise unregistered rights, the onus will be on the brandowner to establish that they are indeed the owner of the rights. This requires supporting evidence (incurring time and cost) and convincing a tribunal, court, enforcement authority, trade mark registry or other body that this is the case. There is also the risk that rulings will not be in favour of the brandowner. In other countries however, little recognition is given to unregistered rights.

It is therefore a false economy not to protect the various intellectual property rights through registration at the earliest possible opportunity, since it effectively removes the other costly requirement of establishing ownership down the line, and reduces the risk of a finding that a brandowner is not, in fact, the owner of the right.

Use of a ‘watching services’ in countries of interest/potential interest can provide early notification of third party applications for similar or identical trade marks and allow brandowners the opportunity to oppose them before they become registered. It is more difficult and expensive to challenge a registered mark, than it is to oppose it before it is registered.

Conclusion

By considering where a brand is now and where it intends to be over the next two to five years, decisions can be made on where and when to sensibly and effectively protect the various intellectual property rights that form part of that brand.

In securing protection of the brand, the extent to which it can be controlled and commercialised is elevated, resulting in:

  1. a corresponding increase in the value of the brand overall;
  2. a more cost effective ability to enforce, and
  3. the avoidance of costs of establishing ownership of right gone unregistered.

For more information, please contact us on sectors@hadefpartners.com.