A trade mark, personified by a brand, can be one of an organisation’s greatest assets. Indefinitely renewable, a trade mark can live on longer than the creative team that dreamt it up, the company that launched and nurtured it, and even the generation that adopted it. Being able to legally maintain and enforce trade marks rights that are a core to a brand is critical to maintaining brand strength, value and longevity.
The Brand Finance Group reports in Global 500 2016 [PDF 1.65MB] that in 2007 Coca Cola was the world’s most valuable brand. It remains, according to the analysis, the 8th most powerful brand in the world based on Brand Strengthi. But based on Brand Value (a numeric value based on brand strength, royalty rate and revenues), Coca Cola’s ranking has fallen from 11th to 17th in the last year. Measured against other brands and over time, it is a brand going ‘backwards’ as this graph from the report shows.
Page 10 Global 500 2016, Brand Finance Group, February 2016
The problem according to Brand Finance – and the mediaii – is the product. The looming obesity crisis is increasingly associated with an excess of sugar in our diets, and fizzy drinks are in the spotlight.
When the product with which a great brand is associated falls from favour, what impact is there on the trade mark rights associated with the brand? And given the nexus between legal rights and brand value and strength, how can the association between a great brand and its product be managed while avoiding legal pitfalls?
In this post we set out the legal issues that can impact on brand value, strength and longevity, and give examples of products that have fallen from the public’s favour and how organisations are attempting to protect the associated brand from collateral damage.
The legal pitfalls for brands of stressed products
While a trade mark is indefinitely renewable, just because it is on a trade marks register does not mean it is in good health.
- The most likely risk to befall a registered trade mark associated with a stressed product is that it falls into non use. By remaining unused in the market for a period, in most instances, of 3 years or more, a trade mark can be attacked and removed from the Register, so losing the advantages and protections afforded by registration.
- An additional risk of an unused trade mark is that of brand dilution. While the market reputation of a brand can live on past the cessation of sales using it, at some point, the market will start to forget. A brand owner, unable to attack a similar trade mark in the market for fear of a retaliatory non use action, may find that the legal rights accrued by others become increasingly close to their own. The consequence of dilution is that brand ‘real estate’ may be lost. The more diluted a brand becomes, the less likely the market is to associate products with it and consequently, the lower the brand strength and value.
- Brand dilution and diminishing reputation also disable access to remedies available under competition law for misleading and deceptive conduct. Legal actions taken under consumer law typically seek to stop a party leveraging the brand reputation of another. To be successful in Australia at least these actions require proof of confusion in the marketplace. In the absence of adequate reputation, proof of confusion is unlikely.
- A product which is decreasingly in favour because of its associations will inevitably taint the brand under which it is sold, and consequently the brand value and strength. Brand misuse and the development of an unfavourable reputation can also impact on the likelihood of success in legal action taken under competition law.
Keeping the tradition and values – launch additional products under the same brand
Coca Cola’s response to their declining brand value has been to bring out new Coke sub branded products. Diet Coke and Coke Zero having arguably been successful. Diet Coke is the third most popular carbonated beverage in the US after Coke and Pepsi, but the low calorie, naturally sweetened Coke Life product is not amassing fans. It was recently reportediii that the company will ditch individual personalities for each of its sub brands, and in future pursue a one brand strategy under the tagline ‘Taste the Feeling’.
The challenge for Coca Cola in this approach is to maintain a stable of products under the same brand that each speak to different values and customers, but without one product taking all the others down, along with the reputation, of the brand. With a brand as strong as Coca Cola, it will be a long time before the core brand suffers the worst of the legal risks outlined. But when the fall from grace has been so rapid in such a short period of time, the company will no doubt be exploring all its options. The good news is that by maintaining a single brand, the risk of a non use action can be avoided.
Bury the recent past – Leverage the love to remodel the product
The approach adopted by the new owners of brand Malvern Star seeks to bring their brand back from the edge of commercial extinction by burying the most recent product past, but leveraging the once great reputation of the brand to remodel the product.
The trade mark was originally registered on the Trade Marks Register in Australia in 1926, and the company has been in existence since 1902. The Malvern Star brand, at a low ebb in sales, has until recently been associated with a somewhat tired bicycle product produced at low cost for the ‘family’ and entry level market. Nonetheless, ‘enormous fondness’ reportedlyiv exists for the brand. Swiss company Scott Sports is leveraging this fondness to revitalize the brand by injecting more ‘verve’ into the product with retro styling and modern design. Increasingly it is being stocked against leading global brands Giant, Trek and Specialised – all associated with a fine product.
Although continuous use has occurred protecting the trade mark against removal, the most recent investment by Scott Sports in 2015 was probably timely as the reputation of the product was at risk of becoming at best obscure, and at worst damaged.
Park the brand – lose the products
Treasury Wine Estates is blessed by having acquired one of Australia’s biggest brand portfolios. This allows the company scope to position its products at will with little need to create new trade marks and campaigns. But keeping a large portfolio in good legal health is a commensurately large task – especially when the company adopts strategies that involve ‘culling 30 percent of its product lines’ while ‘keeping the trade marks ‘in the vault for potential future use’v. Unlike the Malvern Star strategy which seeks to leverage a strong, but nevertheless diminished brand, this strategy probably relies on the very fragmented nature of the market in which Treasury Wine sells it products, and the ability of consumers to quickly forget what sort of product a brand is associated with.
Unsurprisingly, the company has not been specific about which brands will disappear, or where product cuts are happening. Doing so would turn the spotlight on the brand real estate that other competitors might want for their own trade marks in a crowded market. Trade marks with no associated use can be quickly and easily removed from the Trade Marks Register, and Treasury Wine Estates will be keen to ensure that they do not help this process along.
Former bedfellows of Treasury Wine Estates, Carlton and United Breweries, has nearly come unstuck using this strategy. In a case decided in 2013,vi Elixir Signature Pty Ltd sought to have a large number of historical trade marks owned by CUB removed from the Trade Marks Register by reason of their non-use. In an interesting turn of events that went to the legitimate intent of the parties and to issues of equity, the hearing officer declined to remove those trade marks that had been historically used, even if only to a minimal extent, and so had a level of residual reputation. In essence, CUB was able to rely on the risk of public confusion to maintain the vast majority of the trade marks attacked. This despite there being arguably very little brand strength or brand value associated with these trade marks, and certainly, no use on products.
Conclusion
The fall from consumer grace of a product will inevitably have an effect on brand strength and value, and along with that, potential diminution of legal rights. When a product starts to fail, marketers together with legal teams should consider their options to find the balance between persisting with the product and damaging the brand. Strategies are available which can save a brand despite its association with a product which is in decline, and which can mitigate against legal risk. Evidence would suggest that the best brands, with longevity behind them and even a modicum of good reputation, can be immune, at least for a while, to legal risk.
By Karen Sinclair
Contact Karen: k.sinclair@watermark.com.au
i The Brand Finance Group recently released its 2016 analysis of the world’s most valuable brands, Global 500 2016 [PDF, 1.65MB]. In defining their methodology they describe what they call ‘Brand Strength’: ‘Brand Strength is the part of our analysis most directly and easily influenced by those responsible for marketing and brand management……We analyse marketing investment, brand equity (the goodwill accumulated with customers, staff and other stakeholders) and finally the impact of those on business performance’. They go on: ‘…brand strength [is calculated] on a scale of 0 to 100 based on a number of attributes such as emotional connection, financial performance and sustainability, among others.’
ii The Australian Financial Review 22 February 2016, Coca Cola ditches multiple personalities in new campaign James Chessell
iii The Australian Financial Review 22 February 2016, Coca Cola ditches multiple personalities in new campaign James Chessell
iv The Australian Financial Review 23 March 2016, Malvern Star goes retro to get back on its bike Simon Evans
v The Australian Financial Review 22 February 2016, Treasury Wine puts products on ice Simon Evans
vi CUB Pty Ltd v Elixir Signature Pty Ltd [2013] ATMO 74 (10 September 2013)
