The coronavirus pandemic has had a great impact on the economy and businesses around the world bringing budget discussions to the forefront. In such tough times, one must not neglect Intellectual Property (IP) assets and their protection to focus on other tangible assets. Businesses will undoubtedly be cutting costs and stopping unnecessary spending, however it is important not be tempted to make risky cuts to IP budgets. Rather, one must maintain IP protection, including trade mark protection, to make sure that there are the necessary measures in place for the business to continue functioning efficiently during the crisis.
The focus of the article is how trademark finances and operations can be managed during times of crisis by remembering lessons learnt from past tight economic times like the 2007-9 Global Financial Crisis.
Re-assess and prioritise key activities related to the trade mark department
Trade marks and the brands they represent are essential in boosting the value of a business. They can be the key factor to expanding a business once the economy returns to normal. It can therefore be worth holding onto them rather than making budget cuts across IP costs. Once you let go of your trade mark protection, you abandon your company’s brand, image and reputation which takes several years to rebuild among consumers and clients.
It is, therefore, more sensible to make a list of trade mark registrations owned by the business and prioritize according to the needs of the business. Consequently, prioritizing according to the value which a trade mark can guarantee in the long term can help plan ahead to maximise the use of that trade mark and further add value to the business.
The answer might not be to totally abandon a trade mark but to look at more leverage through sale, transfer, licence and/or retention (discussed further below). It might also be an option to explore less expensive forms of trade mark protection for new projects.
If downsizing on the registered trade marks is not an option for the business, it very important to keep the available IP assets protected from unauthorized use. This proves to be more important in a downswing economy which presents an increased opportunity for counterfeiters to try and infringe IP rights as more companies decide to abandon theses rights or do not fully maintain them due to budget cuts. As a result, it is crucial to defend against litigation claims and to maximise the use of existing IP assets or to strategically acquire new marks to maximize protection and create new revenue.
Consider Licensing – with caution
The licensing of trade marks during tough economic times has to be properly calculated and planned. While licensing can boost a brand’s exposure and revenue, it can also be a step too far and result in dilution of the brand’s reputation.
Licensing can act as an extension to the brand by infiltrating new markets and production lines. It can allow a brand an increased and longer lasting relationship with the brand’s consumers even if the most well-known product has reached low consuming levels. Additionally, diversifying a brand’s portfolio by licensing can lead to different sources of income and to gain extra value from registered trade marks.
In this regard, several factors need to be considered. Going too far with licensing by reaching too far into new product categories which are inconsistent with a company’s core brand can cause consumers to lose faith in a company. In this way a brand can lose its prestigious reputation and its value. For instance, if a luxurious brand that is perceived to be luxurious and expensive like Chanel were to licence its brand to a stationery line, this could shift consumers’ perception of the brand. As a result, this may drop the price of the original core product as consumers may be willing to pay less for its products.
Therefore, when a decision to license is made, focus on the consumer’s perception of the brand and aim to enhance that perception. Moreover, consider whether the expansion of the brand would result in short term revenue or long-term equity, to maximize long term profits.
Worst Case Scenario: Insolvency
In an insolvency scenario, the administrator will try to bring the company back to its feet or try to find the best outcome for creditors. In this situation, brand value can be a critical asset for facilitating business revival because brands can actually outlive the business. Brand value comes from the loyalty it generates, the price premium that the brand warrants and market shares.
Carefully managed brands are resilient and can survive insolvency and business failure because brands are independent assets. Therefore, in this situation it would be sensible to include IP assets in the valuation of the business assets as these can add considerable value to a company in a state of insolvency. Otherwise, more strategic planning and trade mark protection could allow trade marks to continue carrying out their function to preserve the brand while the business gets back on its feet.
When faced with these difficult decisions, it is always best to consult with IP and trade mark counsel. In this regard, Maclachlan & Donaldson can help you assess the efficiency of your IP strategy and provide you with the options available relating to the sale, licensing or transfer of IP rights. Please feel free to send an email to firstname.lastname@example.org or email@example.com and we would be pleased to discuss your needs with you.