Who’s minding your brand?

Whether through concerns about cost or ignorance, many marketers are neglecting to guard their brands from copycats and counterfeiters. But you don’t have to take the pricey route to the courts: taking some simple steps is an effective defence.

The most valuable asset any marketer has is “the brand”. Millions of pounds are spent developing, nurturing and marketing them. Yet with a recession putting all budgets under scrutiny, many companies are now asking whether they can afford to protect their most precious resource.

Not only are they concerned about how much it will cost, many marketers are even unsure what brand protection involves. A recent survey by the Chartered Institute of Marketing revealed that more than three-quarters of marketers had a poor understanding of industry law.

CIM director of research and professional development David Thorp remarks: “ It never ceases to amaze me that there is such ignorance of the law.” Thorp claims many major companies spend an absolute fortune on developing intellectual property (IP) but spend “bugger all” on protecting, managing or exploiting it.

This is surprising, given the scale of piracy and counterfeiting in some sectors (see Facts & Figures). Thorp says most companies would be unable to estimate the value of IP held in their organisation, yet few employ dedicated intellectual protection specialists.

“When you consider that you can stop your competitors encroaching on IP or stealing your ideas, it’s utterly appalling,” says Thorp.

With the recession weighing heavily on marketers’ minds, Susanne Hasselmann, chairman of the Brand Protection Group, a division of the Anti-Counterfeiting Group, says that large multinational companies with a “budget of a couple of million” for IP management alone might still be investing in this area. But she warns that even some of the world’s most famous brands may well be under-resourced when it comes to brand protection.

 “A company like, for example, luxury shoe brand Jimmy Choo, might have one person working on this kind of thing,” she suggests.

The cost of IP protection may be high, and it might seem a dispensable luxury when budgets are under pressure, but can marketers really afford not to protect their brands in a recession? Marketing Week has identified several areas where companies may be losing the battle for protection and asks experts for strategies for dealing with these issues.

Protecting trademarks

Last month, Diageo decided to take legal action against Sainsbury’s over what it claims is a copycat version of that summer establishment, Pimm’s. It accused the supermarket of infringing its IP. Sainsbury’s launched alcoholic drink Pitchers in April this year, advising shoppers it could be mixed with lemonade and fruit – exactly how Pimm’s is traditionally served. The bottles are similar in shape and Pitchers’ label design echoes that of Pimm’s.

There is no doubt that Pitchers is intended to be perceived as a similar drink to its rival but whether the public will be confused that it is the same drink is another matter. For it is on that principle that the law rests. Unless the public believes that Sainsbury’s is “passing off” its own-label as the brand and that this will confuse consumers, there is no case.

In a recession, taking legal action over trademarks can be an expensive and risky way to spend your corporate budget. Simon Levine, an IP expert and partner at law firm DLA Piper, explains: “You have to understand that these laws were not developed to protect brand owners – although everyone thinks they do. They were to protect consumers so they didn’t go out and buy one thing, only to discover that it was something else.”

Levine continues: “It is not that the courts are anti-brand owner but they are saying that the average consumer is not an idiot, so don’t try to use the law to knock out one of your rivals who is trying to flog a product at a competitive price.”

Chief executive of agency The Partners and one-time founder of fashion label Duck and Cover, Jim Prior, agrees: “The mistake brands make is they don’t credit consumers with the intelligence that they really have. Brands are concerned with their own motivations, which is ultimately about not losing share of their market.

“No one is entitled to a monopoly on a particular idea and you can have two products that are similar – there is a continuum about the way they are packaged, presented and communicated. At some point, someone has to make a judgment about when the line has been crossed. Where that line rests is arbitrary – welcome to the law.”

It is not unusual for supermarket own-label products to use visual cues established by a brand leader. Sainsbury’s might argue that it is helping consumers navigate a series of choices in the drinks category; shoppers only know that choice is there because they recognise Pitchers as a product in the same territory as Pimm’s.

The Partners’ Prior claims that major supermarkets have carried out extensive research that shows consumers are best served by presenting similar products in similar ways. If the law is there to protect consumers, it would be hard for a judge to rule against the alleged infringer if it is in the consumer’s interests for things to look more the same as their competitors, rather than more different.

Prior thinks that brands need not necessarily look to litigate in a recession; instead, they could approach it as an opportunity. He says: “If I were Pimm’s, I would say the fact we are being mimicked says something about the strength of our brand. So we need to put some clear blue water between us and any mimic by establishing our brand as the authentic product.”

Prior suggests that pursuing this kind of legal case is only worthwhile if a brand’s IP is overwhelmingly the reason consumers buy a product. He observes: “You have to offset the amount of money you spend on lawyers and monitoring the actions of competitors against what advantage you might achieve by investing the same amount in promoting your own brand.”

Protecting products and packaging

All manner of space-age technology is available to assist with authentication, tracking and monitoring throughout the distribution process until a product ends up at its final destination.

From nano-technology, radio frequency identification (RFID), textile labels incorporating DNA, to software applications with astonishing abilities to search and identify fake products on the internet, there is a mind-boggling array of solutions continually being developed.

When cash is tight, however, many brands may feel that going to these kind of lengths is not justified. It partly depends on the industry in which the company operates.

For example, pharmaceutical manufacturers might find cutting-edge technology crucial because of the industry’s very complex distribution chain. Tracking and authentication throughout that chain is pivotal, especially where public health is concerned.

Whereas in the textiles industry, fragmentation occurs at the manufacturing end. A major brand might have hundreds of manufacturing subcontracts but are often more controlled at the retail end as they own and operate their own outlets.

Brand Protection Group’s Hasselmann says: “What those types of businesses can’t control is the proliferation of subcontractors, often in the Far East, who, instead of producing 1,000 items actually produce 2,000, and then you can’t even distinguish the difference.

“It might be easier to protect yourself through better contractual arrangements and better auditing rather than on the technology side. It’s always about weighing up the threat against the cost benefits and how best to tackle counterfeiting in general.”

Hasselmann says brands can do a lot of little things which will help a great deal (see Checklist) rather than spend valuable money on the latest technology.

She warns: “When you’re talking about large-scale counterfeiting, they have a huge amount of money; changing your bottle shape will not stop those guys but it will help prevent the smaller ones from attacking your brand. Such small steps will give brands some payback and that will allow them space to deal with longer term strategies.”

Hasselmann reflects that during a recession, combatting counterfeiting may be more valuable to a brand than at other times. Rather than being a cost, it can actually help a company claw back a larger share of the market.

She says: “In this climate, if you can’t increase your overall market, what you can do is take share off the counterfeiters.”

One other factor that marketers should consider has recently raised its head in this context. Previously, when counterfeit goods arrived in the UK, HM Revenue & Customs would contact the importer and ask for them to voluntarily surrender the goods.

If no reply was received, the goods could be seized – silence was deemed as consent. Now, following a recent ruling, if there is no agreement to voluntarily surrender from the importer, Revenue & Customs requires brand owners to make an application under trademark infringement law.

Such applications are pricey and the result is that it is only worthwhile for a brand owner to take such expensive actions on larger shipments. Clever counterfeiters can take advantage of this by importing small consignments.

“Counterfeiters are expanding because people want cheaper products,” says Hasselmann. Rather than cutting back on protecting the brand at this point, she warns, “it’s the area you would want to invest in.”

Protecting marketing

Although there are endless examples of creative work in advertising resembling previous work, litigation is relatively rare. Former creative Matthew Abbot says: “You can sue, but it tends to be pointless. Everyone borrows from everyone else. And there is a commonality; if you are surfing the cultural zeitgeist and you have an idea, it is almost guaranteed that someone across town will have the same idea.”

In an exception to this rule, a Delaware firm is suing advertising agency JWT and its parent WPP, claiming JWT stole a product-placement concept to use in a campaign, for Bing, Microsoft’s new search engine.

But with the tighter budgets that many marketers face, the usual legal action is no longer seen as the only solution for tackling marketing theft. Instead, comparative advertising is on the rise, following a ruling in the European Court of Justice last year which allowed businesses to use competitors’ trademarks when comparing goods and services.

Unlike in the US, where comparative advertising has long been practised and allows rivals to be pretty rude about each other, the UK used to shrink from such measures. More recently, however, some companies – notably the major supermarkets – seem to be embracing the concept, which allows the use of competitors trademarks as long as the comparison is not misleading or denigrating.

Many companies with an axe to grind are also using the Advertising Standards Authority as a route to fight their corner, rather than more expensive court battles.

IP lawyer Sian Croxon, a partner at DLA Piper, says she is seeing an increasing volume of work that is linked to advertising standards. She explains: “You rarely take a trademark infringement case to court, except in fairly important situations for a commercial operation or they are out-and-out counterfeiters and they are bang to rights.”

Croxon explains the court route is very tough and decisions can run right through to the European Court of Justice, incurring huge expense. Understandably, most brand owners don’t want to spend their money that way if they can avoid it.

Croxon says the ASA route is being used principally by commercial competitors complaining about claims made in advertising, in any medium, by their rivals. In a world where cash is tight, relying on PR rather than the law has its advantages.

“It’s much cheaper, all the complainant has to do is pull the pin and throw the grenade, then stand back and watch,” she says.

Digital protection

For many people, lawyers especially, protection of brand and content in a digital environment is a fascinating developing area. As DLA Piper’s Levine says: “It’s new and cutting edge and who knows where it’s going to be in ten years’ time?”

The power of the internet raises a whole series of debates such as: is copyright dead? Many ask how it is possible to have an enforcement regime that works when people can, at the flick of a button, send something around the world, or more to the point, access it immediately from anywhere.

One strategy aimed at tackling the issue is the Anti-Counterfeiting Trade Agreement, an international treaty which is thought to be likely to incorporate more stringent measures with standard international enforcement practices (see Brand Protection Guide).

Moves for a crackdown on illegal file sharing in the UK (where an estimated 7 million users are involved in illegal downloads) have recently been led by Lord Mandelson, thought to be keen to beef up UK policy from the strategy initially laid out in Lord Carter’s Digital Britain report.

Levine lays out some of the challenges: “Where rights holders can protect themselves is by shutting down websites that illegally host content. But where it gets increasingly difficult is when people set out to operate out of countries where it is hard to enforce, such as China or Indonesia.”

He warns: “If there is a server sitting in one of those countries, it can be very hard to trace it, let alone enforce rights, and it still doesn’t stop people in the UK picking up the content.”

Levine explains this kind of activity is generally tackled in two main ways. One is for rights holders to enforce against piracy in jurisdictions where they can do so effectively and the second is to try to attack the payment mechanism some of these illegal operators use, such as PayPal, by attempting to convince them that they shouldn’t be working with those unscrupulous operators.

Furthermore, Levine offers a third way of tackling the issue. “Come up with an economic model that makes people want to buy the legitimate goods,” he suggests. He points out that while the music industry has been struggling for years against illegal downloads of tracks, it has recently developed products such as Spotify that fund and distribute music in a new way. This helps create valuable revenue streams rather than simply stripping firms of funds in fighting lengthy legal battles.

With the quadruple threats to brands from trademark infringement, counterfeiting, ripped-off marketing and the Wild West of the internet, some businesses might feel that the battle to protect their identity has already been lost.

However, it appears there are a number of easy steps that companies can take to protect their brand, even in a recession. While legal recourse is always available, when even lawyers are suggesting that marketers simply innovate to beat their rivals, it seems that spotting opportunities rather than challenges may be the best way of all to protect your brand.

Facts & Figures

Brand protection

  • Audio visual industry lost £531m in 2008
  • Music industry losing £165n annually from physical piracy
  • Music industry lost £180m from online piracy in 2008
  • Music industry projected to lose £1.2bn from online piracy 2007-2012
  • An estimated 7m people in the UK are involved in illegal downloads with half of all the traffic on the net in the UK being content that is shared illegally
  • Counterfeit clothing and footwear costs legitimate businesses £3.5bn annually
  • Business software industry loses £1bn annually
  • Criminal gain from fake clothing and footwear is £3bn
  • Criminal gain from DVDs is £200m
  • Games software industry estimates losses at £350m annually
  • The Rogers Review estimated that criminal gain from IP crime in the UK was £1.3bn in 2006 with £900m flowing to organised crime
  • The European Commission reported that the total number of counterfeit and pirated articles seized by customs officials in Europe was 79 million in 2007
  • The World Health Organisation estimates that up to 1% of medicines available in the developed world are likely to be counterfeit. This figure rises to 10% globally, although in some developing countries the WHO estimates one-third of medicines are counterfeit
  • 23% of small and medium-sized enterprises have had their business significantly affected by IP crime
  • 40% of businesses surveyed by ipCG took no practical action such as trademark registration or employee training to ensure their and others’ IP is protected
  • 78% of UK marketers admit to having a poor understanding of the Trade Mark (Relative Grounds) Order 2007 and 80% of the Unfair Commercial Practices Directive.

Sources: Chartered Institute of Marketers; Alliance Against IP Theft; The World Health Organisation

CASE STUDY

Brand protection:
Will ACTA help protect my brand?

If you haven’t heard of the Anti-Counterfeiting Trade Agreement (ACTA), don’t despair – negotiations for the proposed international treaty are shrouded in secrecy.

The idea is that ACTA would establish an international legal framework with countries signing up on a voluntary basis to make a kind of global pact to share information and increase co-operation on piracy issues. The European Commission says the goal is to improve the enforcement of existing IP laws and create standards for enforcement practices.

One of ACTA’s main objectives is to get large emerging economies, where counterfeiting is rife, such as China, India and Brazil, to sign up to the deal. Six rounds of negotiations have already taken place, with the next scheduled for November in South Korea. What has happened during negotiations is hard to gauge, given the level of secrecy surrounding them.

However, a framework for discussion has been released and areas up for discussion include criminal enforcement, civil enforcement, border measures, internet distribution and other digital measures.

A leaked document suggests there will be new legal regimes aimed at forcing internet service providers to co-operate with rights holders and remove illegal material, shut down file-sharing websites and provide information on illegal file sharers, without the need for a warrant.

Separately, Lord Mandelson is believed to have personally intervened in enhancing UK policy on illegal file sharing. The UK Government has set a target of reducing the problem (currently estimated at about 7 million UK users involved in illegal downloads) by at least 70% in the next few years.

IP lawyer Sian Croxon, a partner at DLA Piper, agrees ACTA negotiations have been “under the radar” but says this is not unusual when sovereign states negotiate for treaties of this type.

But will ACTA really benefit consumers? Leaked details have caused widespread concern that rights to freedom and privacy may be eroded. Croxon confirms: “There is a concern from a number of quarters that things are being negotiated and agreed that will impact on individual liberties, and as such there should be access to the debate.”

The need for international co-operation and partnership to clamp down on counterfeiting is widely accepted, however. Croxon says: “There are those who feel that IP remains incredibly valuable to the growth and development of business at all levels. Piracy and counterfeiting has become an insidious and endemic problem. It really has got to be tackled on an international level.”

Nevertheless, there are further concerns that ACTA will enable the implementation of legislation from an international level that would not necessarily pass through at national level. If a country signs up to the international agreement, its national court has to implement that.

Croxon observes: “Doubtless, developed countries that are spearheading this recognise it as a practical route to get improved levels of protection.”

She does admit that alarm among the public about just how and in exactly what ways ordinary consumers will be affected is a likely reaction to some of the potential measures.

“There is a big perception problem; people think of teenagers downloading music and buying fake bags in a market in Turkey on holiday. But the truth of the matter is that it is fundamentally undermining several key markets and people’s willingness and ability to invest in them,” she notes.

“There is an enormous PR battle because of the divergence of the arguments. There is such a volume of genuine criminality out there – organised criminality of serious proportions – and the enforcement authorities are losing the battle against it,” she adds.

Croxon believes the negotiations for international co-operation through ACTA demonstrates a slow but growing realisation among nation states that they can’t ignore the issue of counterfeiting any longer.

She concludes: “You cannot ignore the civil liberties argument, but the damage that is being caused by counterfeiting has to be addressed and this treaty is trying to do that; it won’t be a panacea but it shows a will.”

Checklist

Brand protection: the essentials

Make sure you view anti-counterfeiting technology as an enabler and not the Holy Grail itself. New technologies developed to tackle counterfeiting will not magically remove all fakes from the market. Be clear about a technology’s purpose before incorporating it or adopting it.

The main reasons for using authentication or tracking features are:

  • To enable a specified group of people to identify suspect products and to authenticate these as genuine.
  • To enable investigators to track the product back to its manufacturing source or individual points in the supply chain, which provides valuable leads for investigations into illegal diversion and counterfeiting.
  • To deter counterfeiters from copying your products and brands.
  • To establish a clear sign to customers and partners of your commitment to protect your products.
  • Think like a counterfeiter and assess how easy it would be to copy your product and packaging. Are there investments your company can make, such as embossing product packaging, that would make it more costly or even prohibitive for counterfeiters with smaller operations?

There may already be some inherent security features in your product or package. It is therefore important to understand what makes a good security feature. Consider the following:

  • Does the counterfeiter have the technical expertise to manufacture your products and packaging?
  • If not, how do they produce them and how does it differ?
  • Can the counterfeiter easily source all the raw materials? Can it be made difficult for him to buy some of the critical materials?
  • Does the counterfeiter have the manufacturing capabilities that are necessary to produce the product and packaging? Does it require major investment?

Before deciding to invest in and implement a technology solution there are a number of actions you can take. These will not require much investment. They are part of good housekeeping and can generate some excellent benefits in the short term.

  • Review brand manuals and ensure that instructions, designs and colours are consistent and that they are stored and issued from a central point. This will ensure that there are no differences in designs and colours, thus enabling law enforcement and other investigators (including internal staff) to identify potential counterfeits more easily. It will also ensure there is more control over the distribution of IP internally and to third parties.
  • Ensure that any manuals and designs are stored securely and that subcontractors are contractually obliged to do the same.
  • Any staff and subcontracted staff should be contractually obliged to protect IP.
  • Ensure that any data transfer is secured or encrypted.
  • Understand what data is currently held on products. For example, if you have to maintain batch codes for potential recalls, can you access the information and generate reports that are useful in investigations? Speak to other departments in your company to understand what information they deal with and how this can help.
  • Review existing product and packaging designs – there are a number of features that can be incorporated into product or packaging and which will provide a low level of security:

– Embossing;

– Perforations (number of perforation dots, and different sizes and shapes);

– Packaging shapes and materials that may be difficult to source by the counterfeiter;

– Microtext;

– Visible fluorescent inks;

– Integrated security designs within the packaging.

In addition, always consider including these features into new packaging designs and ensure that your trademark is applied to all your packaging and components, as well as the outer pack.

Source: The Anti-Counterfeiting Group

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