Unilever profile
Unilever’s IP management: creating the bedrock for global brands
A review of the way in which it handled intellectual property issues led to a major re-engineering of the IP function at Unilever. The consensus inside the company, as well as among observers looking in, is that the move has considerably strengthened the owner of one of the world’s largest portfolios of trademark and patent rights. By Rick Marsland
One hundred and fifty million times every day, brand extensions. For example, in 2000 the someone somewhere in the world buys a company acquired Bestfoods, Slim.Fast, Ben & branded product from Unilever. If you’re a Jerry’s and Cressida within a single six week marketeer, it’s a dream scenario. If your job is period, adding a combined total of 35,000 managing the IP underpinning those brands, trademarks to its portfolio in the process - that figure underlines the scale of the challenge. including 15,000 from Bestfoods alone. Add to While Unilever needs little introduction, for this a worldwide portfolio of 25,000 patents, consumers the Anglo-Dutch fast moving and the scale and critical importance of consumer goods (FMCG) giant's global Unilever’s IP management task becomes clear. Our IP assets portfolio of brands is probably far more visible “Our IP assets are quite simply the building- “are quite simply than the company itself. With operating blocks of our new launches and of our the building- subsidiaries in 90 countries, sales operations competitiveness in the marketplace,” says in another 60 and global turnover of around Louis J Virelli, Unilever Senior Vice President blocks of our V48 billion (US$57 billion), Unilever’s leading and General Counsel for Intellectual Property. new launches brands such as Knorr, Hellmann’s, Persil, “Being a consumer products company, we and of our Birds Eye, Wall’s, Flora and Dove represent face the fact that the lifespan of our products competitiveness just the tip of the iceberg. While the company can be short-lived. We want not only to be in the has not explicitly valued its brands, it does say first, but to be first with products that will V marketplace that 14 of them are worth more than 1bn in have a longer than normal life expectancy. IP - annual sales, and five in excess of V2bn. and particularly patents from a technological Louis J Virelli” Three years ago, Unilever launched a radical point of view - is what will deliver and strategic shift to focus more tightly on a select maximise exclusivity in the market.” group of major brands. Under its ongoing This importance is increasingly appreciated “Path to Growth” strategy, the company is by external stakeholders, ranging from analysts rationalising its global portfolio of 1,600 and the media to governments and regulators. brands to 400 over the five years to 2005. Unilever’s press office staff have seen a That process is already well underway, with gradual but clear increase in IP-related some non-core brands such as Unipath sold enquires in recent months. And Michael Steib, off, and others being realigned and a Morgan Stanley analyst based in London harmonised across borders. covering major European food stocks, confirms IP’s pivotal role. “It is critical to companies like The IP portfolio Unilever,” he says. “It may be less high-profile While the reduction in the brands portfolio is in investors’ minds than with IT companies, but dramatic, the complex relationship between these companies can only grow by doing a brands and IP assets means the effect on the handful of things - and one of them is IP portfolio is much less pronounced. The innovation, which has to be underpinned by IP.” possibility of any significant reduction in its According to Steib, Unilever is doing well in global trademark portfolio of 135,000 this regard. “A core element of Unilever’s Path registrations and applications is made less likely to Growth is innovation, and a significant part by its continuing programme of acquisitions and of that is managing its IP. As well as reducing
14 Intellectual Asset Management July/August 2003 Unilever profile
the number of brands and rationalising costs by focusing on a smaller number of major brands, the programme is also about extending the remaining brands into new categories - such as extending Dove successfully into shampoos. So far Unilever has done an excellent job and has met or exceeded its own targets. Effective management of IP has played a central role in that.” When you think “in terms of the New structure overall value of Since the start of 2003 that role has been handled through a new organisational structure your IP to the for Unilever’s global IP department: a change business, it aimed at unifying the management of all types makes sense to of IP rights, and integrating it more closely into bring [trademarks the business as a whole. The apex has and patents] remained unchanged, with Stephen Williams, together Joint Secretary and General Counsel, as the board-level representative of IP. Richard ”Heath He is reported to by Louis Virelli, who explains that last year’s strategic review of all activities in Unilever’s corporate centres reached a clear conclusion: that the long- standing separation of trademarks and patents management had outlived its usefulness, and that the two groups should be merged. “We found that each group was doing a very good job on its own, but that they looked upon themselves as having different global IP team of more than 150 people internal clients - which was not actually the spread across three continents. On the case,” says Virelli. “The trademarks unit patents side, it includes 50 specialist patent tended to work very closely with the attorneys and an equal number of support marketeers, and patents with the scientific staff split approximately three ways between R&D specialists. The two groups were co- the US home and personal care research operating, communicating and co-ordinating centre in Edgewater New Jersey, the foods very well together. But there was no single research centre at Vlaardingen in the point of contact for the business, and no Netherlands, and two sites in the UK - the unified direction across both groups. We corporate research centre at Colworth, and decided it was time to merge them and get the European home and personal care synergies as a result.” research centre at Port Sunlight. There are Richard Heath, Unilever’s Head of Corporate also two Unilever patent attorneys based Trademarks and General Trademark Counsel, permanently in Mumbai, India, and in Sao adds that the shift also reflects wider changes Paulo, Brazil. in the global IP landscape. “When you think in On the trademarks side, 56 specialists are terms of the overall value of your IP to the split across three European locations, with 34 business, it makes sense to bring them of them - including the brand protection unit - together,” he says. “Plus, industrial designs based at Colworth UK, 12 home and personal have traditionally been seen as part of care trademark specialists based at one of patents, but changes to the laws on industrial Unilever’s corporate head offices in London, designs in recent years have sharply and 10 foods trademark specialists based in increased the degree of cross-over with the other corporate head office in Rotterdam, trademarks. These days you can protect three- Netherlands. All IP specialists across both dimensional trademarks, colours, sounds - so disciplines work closely together with one industrial designs are no longer mutually another and with research and marketing exclusive with trademarks, and bringing people from across the business. patents and trademarks together becomes an “The review of the corporate centre even more logical step.” confirmed that the patents, trademark and legal departments were functions that we One group, global coverage needed to own internally, because it meant The result of this merger is an integrated, they were closer to the business and better
Intellectual Asset Management July/August 2003 15 Unilever profile
understood the needs and strategy of the far easier to manage centrally. Also, when it business going forward,” says Virelli. “The key comes to disputes with competitors or anti- is that IP management should not be a matter counterfeiting actions these used to be of doing work as it is handed to you, but handled locally - but now the international rather of helping to direct the business to context of both types of activity means global achieve the results set out in the strategic co-ordination is absolutely critical.” plan. It’s not patents or trademark processing This approach means decisions and actions - it’s IP portfolio management.” on the management and expansion of the IP Virelli adds that the new unified structure portfolio are also initiated and co-ordinated has better positioned the IP function to play centrally. “With trademarks, we tend to file this role. “The synergies include better registrations wherever we sell or manufacture interaction by patents with marketeers and by products,” says Virelli. “We don’t take that trademarks with our R&D community,” he says. approach with patents, since it would be “In the brief period since we created the incredibly expensive. What we have is a filing consolidated IP group, we are definitely seeing scheme for each category, depending on the more of this type of interaction. Plus as part of nature or type of innovation that emanates the reorganisation we have created a specific from each one. Scheme one might cover very trademark operational group - 35 people, now significant innovation to the business and take based at Colworth, who do most of the in the largest number of countries, whereas a preparation and searching that is a critical part narrower invention in the same category might of any brand launch or extension. Being able to be filed in fewer countries under scheme two.” co-ordinate these people with the rest of the IP Regular category-specific review meetings are department creates further synergies. In the held centrally to decide on new filings next few years I believe we can create a truly and renewals. world-class IP support and admin group with multiple capabilities applicable worldwide.” The ability to offer a single point of contact also fits neatly with the requirements of the Path to Growth programme. “Path to Growth clearly involves a significant amount of M&A,” says Virelli. “With divestitures, the new structure enables us to appoint a person from the IP group to act as the primary point of contact for the M&A lawyers across both trademarks and patents - which in turn makes the whole process more efficient and better-informed.”
Centralised role A further key aspect of Unilever’s approach to IP is its centralisation - recently underpinned by a new overarching global IP policy, agreed at board level in June 2003. Given Unilever’s devolved global structure, with the corporate centre acting as the hub for a diverse range of focused operating companies such as Unilever Bestfoods, Unilever Ice Cream and Frozen Food, Slim.Fast, Lever Fabergé, Ben & Jerry’s and Unilever Cosmetics International, the general approach is to co-ordinate and own IP rights centrally, and then to license their use to the relevant operating companies. This separation not only aids the management of the IP portfolio, but also gives the entire group greater strategic flexibility. “Our IP strategy is centrally-driven and centrally-managed,” says trademarks head Richard Heath. “If we were to try to do it on a national or regional basis, we would be in danger of following one strategy in one region and another elsewhere. IP law is actually quite harmonised internationally these days so it is
16 Intellectual Asset Management July/August 2003 Unilever profile
Interface with the business teams in place in four areas where On a day-to-day level, Unilever’s approach to counterfeiting is a particular problem: the new brand or product initiatives is to have IP Middle East, India, China and South-East Asia. specialists involved from the start, alongside In Richard Heath’s view, the issue of functional experts from elsewhere in the counterfeiting for Unilever is getting worse, business. Virelli explains: “We have made largely due to the increasingly global nature sure our IP people are physically and visibly of organised crime and the sophistication of located alongside at least one of their clients, the perpetrators. These factors in turn require either in R&D or marketing. In terms of our an increasingly global approach. “Where once involvement with the business, our attorneys we had more targeted protection in are given responsibility for a category, geographical areas, now we protect our business group or product area - generally a leading brands worldwide,” he says. “In some category. They are intimately and constantly cases - for major well-known marks - we can involved with what is going on, working with rely on agreements such as the Paris the researchers and development groups to Convention. But there are certain territories ensure that what they are doing is both free of which are now international sources of third-party patents and patentable itself.” counterfeits and are not even primary Educating the rest of the business about IP markets for us. So it makes sense to protect is another major thrust, mainly handled them there for defensive reasons.” through seminars and lectures for As well as going more cross-border, management and staff at various centres counterfeiting is also increasingly cross- across the business. Where possible, these company. Unilever’s raids on counterfeiting are conducted by a trademark, patent and factories in countries such as China will often marketing specialist together, and present also turn up counterfeit brands from employees with an opportunity to put detailed competitors such as Procter & Gamble or questioning on every aspect of IP and L’Oreal. In such cases, Unilever seeks to co- branding. Richard Heath comments: operate with the other companies affected, “Everyone in the business needs to know and may mount joint actions if the about IP, because it has an impact at the infringement is serious enough. employee level. It is the creativity and innovation of our people that is generating the Expanding IP rights IP in the first place, and they need to As part of the management process, understand the process.” Unilever’s IP function is also charged with Meanwhile, the continuing work needed to keeping an eye on new opportunities created underpin existing, new and extended brands by legal changes to expand the IP portfolio. goes on. “The most crucial day-to-day activity “We have people who are responsible for that the centralised IP team does is to make monitoring the laws on trademarks and sure that once a product is launched, it will patents to identify areas where we may be not fall foul of anyone else’s IP,” says Virelli. able to seek protection for any technology or “That is vital because if we get it wrong, it We have could mean all the time and money involved in R&D, manufacturing and launching the made sure our product has been wasted. We don’t want to “ launch a product and then have someone IP people are knocking on the door with an injunction.” To date, he says, Unilever has managed to avoid physically and serious problems in this area. “The way we know we’re doing a good job is that we don’t face that situation - and when people have visibly located alleged infringement, we have managed to alongside at prove otherwise.” Enforcing rights least one of At the sharp end at a local level is Unilever’s worldwide network of internal and external legal advisers. Aside from the centralised IP their clients, team, the group has in-house legal departments in over 25 major countries, and either in R&D or retains a local law firm in every one of the 225 identifiable jurisdictions across the world. marketing There are also dedicated regional enforcement ” Intellectual Asset Management July/August 2003 17 Unilever profile
property that we have acquired or developed, Unilever fact box and that we could not have protected Company: Unilever plc previously,” says Virelli. “For example, in Headquarters: London (UK), some countries foodstuffs have only recently Rotterdam (Netherlands) become patentable, and we have certainly Global turnover: V48 billion/US$57 billion taken advantage of that.” Employees: 247,000 Virelli is less forthcoming on Unilever’s Number of brands: 1,600 in 2000, activities in terms of licensing its IP to third reducing to 400 by 2005 parties, pointing out that such agreements are Trademarks: 135,000 usually subject to binding confidentiality. “Our Patents: 25,000 priority at Unilever is to carry out R&D and Size of IP dept.: 156 branding for our own products,” he says. “We are not an independent research organisation. Selection of key brands We are not a university.” Knorr, Hellmann’s, Persil, Dove, Birds Eye, He continues: “Having said that, with Path Wall’s, Flora, Slim.Fast, Ben & Jerry’s, Lipton, to Growth and the focus on core brands there Ragu, Colmans, Bertolli, Magnum, Suave, are technologies and brands which we may no Ponds, Omo, Cif, Lynx, Axe, Vaseline, Skippy, longer need, or which we may never have Breyers, Wisk, Comfort, Snuggle. used. Plus when we sell a business we may retain the technology or brands. In the circumstances we can license IP, and Virelli foresees the newly-consolidated IP sometimes do so. We actually reached such function continuing to develop into an an agreement last week, although our increasingly influential element of the business licensees have confidentiality so I cannot - with a growing role in strategy development name them. But have we made real money and execution. “Real-time IP information input, through licensing? The answer is yes.” retrieval and sharing across the department and the business is now an achievable goal,” Future strategy he says. “We will work faster, more effectively Looking forward, Unilever thinks its IP and more closely with the rest of the business. organisation is on track to play a major Which will make Unilever better able to ensure strategic role in the years ahead. “For the first its strategy is being carried out. Which is why time, we have a consolidated IP support and we are here.” admin group,” says Virelli. “This is proving incredibly valuable - and is something we don’t believe many other companies have in place.” Significantly, Virelli is unimpressed by the trend towards giving IP a precise monetary value in its own right, preferring to see it as a key driver of wider corporate value. “The way you really value IP is how your company performs in the marketplace,” he says. “We are a branded consumer products company, and what matters is that consumers know and trust the quality of our products. IP’s role is to support that.” [email protected]
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