Valea AB The ins and outs of brand licensing While licensing presents many new geographical markets, but also – and opportunities, the practical problems that perhaps to an even greater extent –to new can arise when extending a brand into product markets. new market sectors through a licensee should not be overlooked Consult a branding expert Before taking the decision to license your By Andrew Hammond and Gunnar Hjalt, brand for use in a new market, it is advisable Valea AB to consult a branding expert, who will be able to answer a myriad of questions related Brand licensing offers many opportunities to licensing. Can licensing harm the brand – at least in theory. According to the 2013 strategy and brand promise? Can the brand’s Licensing Industry Survey conducted credibility be maintained in a new market? by the International Licensing Industry How long will it take to establish the brand in Merchandisers’ Association, brand owners the new market? How much will it cost? The generated $5.45 billion in royalties in 2012 in branding expert is also likely to have an idea Canada and the United States. of how much it would cost to repair the image However, the practical problems that of the original brand should the licensing can arise when extending the use of a brand venture go wrong. Is it true that an unknown to new market sectors through a licensee brand can suffer no harm in this respect? The should not be neglected. Brand extension by branding expert will have the answer. the brand owner itself is difficult enough. Brand licensing – the appointment of a third Adjust your business plan party to uphold the image of a brand in a new Launching products in a new market through market – presents additional challenges. This a third party may sound easy, but it is a step article addresses some practical issues from that requires careful analysis and planning, both marketing and legal perspectives. and a solid strategy. The original business model and business plan will not usually Marketing cater for such a new scenario and will likely Entering a new market means breaking new need to be adjusted. Brand licensing should ground. Brand owners rarely know exactly be considered a cornerstone of the brand how a new market will behave and what owner’s business model if it hopes to achieve challenges they will face. The motivation substantial revenue from such activity. behind brand licensing is that the brand Thus, the business model should reflect the carries strength from the original market, but seriousness of the brand licensing venture. brand owners cannot know whether and to what extent this strength will prove useful in Adjust your marketing plan a new market. Furthermore, there is the risk Similarly, the marketing plan will need to be that the strength of the brand in the original adjusted. Marketing activities in the new market market may be harmed due to its use in a new will be carried out primarily by the licensee, market. This is true in relation to not only but the brand owner should be heavily involved 76 IP Monetisation www.iam-magazine.com Valea AB in decision making related to marketing and tools may be of little use. A proper licensing should incorporate such new efforts into its agreement is futile if the brand owner has original marketing plan. Although the new failed to do its homework in analysing the market will be relatively unknown territory, the chances of success of a licensing venture branding expert will know what to look out for. that will strengthen, rather than harm, the Moreover, the licensing agreement (discussed brand. A licensing agreement is no substitute below) must ensure that the marketing plan for for a solid business plan, and certainly will the new market will not harm or weaken the not repair defects in an inadequate plan. The brand image. licensing agreement should address the most important aspects of the brand licensing Choose your licence partner carefully arrangement and be clearly synchronised with The main reason for permitting a licensee to the business plan. exploit a brand in a new market is that the licensee presumably has more experience Defining ‘brand’ than the brand owner in that specific The term ‘brand’ encompasses aspects of market. Nevertheless, an expert in a certain various types of intellectual property. The market might not have the necessary level of definition of a ‘brand’ usually relates to professionalism that is needed to match the trademarks. Annual listings of the world’s brand image. The licensee should be not only most valuable brands frequently include the experienced, but also professional, honest, APPLE, IBM, GOOGLE, MICROSOFT, PHILIP loyal and determined, and should have the MORRIS and COCA-COLA trademarks. Some right contacts. It is possible to include these of these trademarks are also expressed by their criteria in a written agreement to some corresponding logos, which are important extent, but proper qualification of the licensee from a communication perspective. Logos will contribute greatly to a profitable and are trademarks by definition. Apple has also controlled business deal. obtained trademark rights to the design of its stores. In some cases, packaging can also Legal framework be subject to trademark protection. Apart After consulting a branding expert, the brand from trademarks, brand licensing also relates owner will be equipped with a set of tools to copyright – for example, in terms of to begin implementing its licensing venture. merchandising for cartoons, films and the like. However, it also needs to establish a set The logos of the world’s most famous of rules for the licensee; otherwise, these brands are also copyright protected matter. In The licensee will have been appointed partly due to its professionalism; it is equally important for the brand owner to behave professionally towards the licensee. This will give the licensee confidence in the brand owner’s management of the licence www.iam-magazine.com IP Monetisation 77 Valea AB addition, logos are by nature graphic designs asset; it is also a great tool for ensuring that are protectable as industrial designs. flexibility and will help the brand owner to Trade dress or packaging can also be protected avoid unnecessary problems. by design registration. In this context, it might seem peripheral to refer to a patent as Adjust your IP policy an example of a brand; but when considering, Entering into a brand licensing arrangement is for example, the importance of a sizeable not the same as conducting ordinary business patent portfolio in communicating the image relating to the brand’s primary market. It is of a technology leader, the relationship a different way of earning money, and thus a between brand and patents makes more sense. different business model applies. As discussed It is thus necessary to be receptive to more above, the business and marketing plans will than just one type of intellectual property need to be amended. This will also entail when defining the scope of a brand. adjustments to the IP policy. A new market leads to the introduction of new competitors whose Check status and scope of IP rights relating activities should be monitored. New competitor to the brand behaviour might call for the establishment Since the object of a licence is a brand which, or amendment of an existing application for in turn, can be expressed through different customs seizure of counterfeit products. The IP rights, checks related to the status of new market will hopefully be financially the brand should be carried out in order to important in the long run, but initially it is often determine whether there are any word marks, an experiment, and the IP policy should be clear figurative trademarks, copyright or designs that this non-core market takes lower priority in force in the relevant territory. Who owns in certain respects than the original market. It these registrations? Have the renewal fees is presumably not as important to maximise IP been paid? protection for all types of merchandise as it is In addition, a trademark registration (as for products intended for the original market. opposed to copyright or design registration) In other aspects relating to the brand image, will not be valid without an explicit the new market should be regarded as equally connection to the goods or services for important. which it is intended to be used. Although the original brand may be well established Get organised for certain goods or services, it would be Successful brand licensing requires the brand prudent first to conduct a simple freedom- owner to have a team in place that can handle to-operate investigation in relation to the various new tasks. For example, deadlines relevant trademark classes of the new market. must be observed, royalty payments must Thereafter, it will be necessary to register the be monitored, product configurations and trademark in relation to the new goods. marketing material must be approved and the It is not recommended to enter into a licensee’s activities must be supervised. licensing arrangement until the trademark The brand owner must have a mechanism has been registered in connection with the in place to resolve internal inquiries on relevant goods in the new and non-core whether use of the brand is authorised, or market, although it is theoretically possible whether the trademark has been infringed. to base a licensing agreement on copyright Internal inquiries and information about only. Trademark rights are the heart and soul suspected misuse of the brand by a licensee of a brand licence and should normally be its must be swiftly forwarded to the right people focus.