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23 November 2017 Brands as a Legal Asset

By Eric Ziehlke, Partner

Introduction

Brands are an intellectual property asset.  Unfortunately they rarely appear on a company's balance sheet.  As a consequence, brands may often be inadequately identified, valued, protected and exploited.  Bearing this in mind, it is wise to institute a program to protect and nurture your brands.

Identification

It is important to carry out a regular stocktake of your brands.  All your brands should be exhaustively listed and their ownership verified.  It may be that some of your brands are owned by now defunct companies.  It may be that the copyright in devices and images contained in your brands actually vest in the advertising or design agency who created them.  If you are using any brands under licence to third parties, you should ensure that you are complying with the licence terms.

Valuation

Brands are often seriously under-valued by the companies who own them.  It is important to remember that brands not only provide increased sales, they can also deliver those sales at a premium price.  The effect of a strong brand on your company's profitability can be crucial.  For this reason, the best way of valuing a brand is to assess the long term effect on company profitability should that brand be lost. 

Protection

The essential way to protect brands is to register them as trade marks.  All distinctive brands should be registered for all the goods and services for which they are used or likely to be used.  Brands should be registered as trade marks in all countries in which your company operates or intends to operate.  Many people believe that the registration of company names and business names on the relevant registers provides them with effective ownership and protection of those names.  This is not the case.  Company and business name registrations provide no proprietary ownership of those names.  The only way to obtain proprietorship in company and business names is to register them as trade marks.  It is strongly advisable to set up a brand book specifying the layout, font and content of your brands.  In this way, you can ensure that your brands are consistently represented to your market.  You should regularly monitor your brands to ensure that your trade mark registrations are updated and renewed. 

Exploitation

Once you have identified, valued and protected your brands, you are then in a position to exploit the potential in those brands.  Here are a few examples of how you may gain real benefit from your brand portfolio:
(a)           Advertising – treat your brand advertising as an investment rather than an expense.  A brand actually increases in value through use.  The major world brands have achieved their commercial value through prolonged, consistent and extensive advertising.
(b)           Pricing – if your brand is valuable, ensure that your customers pay a premium for that branded product or service.  You should never compete on price with your brand against a generic product.  The fundamental value in a brand lies in the price premium and image it commands.
(c)           Brand Strategy – you should devise a brand strategy for your portfolio of brands.  For example, if you own a well-known brand, this can be used as an umbrella for a series of sub-brands which draw off the perceived market value of the main brand.
(d)           Licensing – you might consider licensing your brand to third parties who may be in a better position to exploit your brand in certain markets.  All such licensing arrangements should be the subject of strictly worded legal agreements.

The Legal Dimension

The first step in developing a comprehensive brand strategy is to consult your intellectual property lawyer to assist you in identifying and protecting the intellectual property in your brands.  Once these safeguards are in place, you can set forth to exploit your brands to the full.  Swaab Attorneys can offer you a free IP Health Check to start you on your way to a profitable brand strategy.  You are welcome to give us a call at any time.

Eric Ziehlke, Partner  |  Phone: +61 2 9233 5544  |  Email: ejz@swaab.com.au

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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