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Brand Abuse and IP Infringements – Part 1: Brand Impact

In this two-part blog series, we take a closer look at brand abuse and intellectual property (IP) infringements. In this first article, we explore the components making up a company’s IP and how online content can affect a brand’s value, both actual and perceived.

IP and brand value

The IP held by an organization—i.e., the portfolio of brands, trademarks, and other intangible assets that provide it with its distinctiveness, and protect it from unfair competition in the marketplace—contributes a significant proportion to the total value of the business. A number of factors make up the total value attributable to IP, including initial creation costs, and its potential to generate future revenue1.

An organization’s brand will have a financial market value itself; a related concept is brand equity, which affects the value of the products and services associated with that brand. Brand equity is affected by factors like brand visibility (how well known the brand is to consumers, and its perception in the market), and customer loyalty (having a guaranteed income from an established customer base)2. These factors drive certain behaviors in the market, for example, the willingness of consumers to trust a new, unfamiliar product from an established brand3.

The value of a brand as a proportion of the total value (market capitalization) of the associated company can vary greatly, and is dependent on a number of factors, including company size and industry sector. For smaller organizations, which have fewer tangible assets, the brand value tends to be a larger proportion of the total value of the company. Companies where the brand name provides a significant part of their appeal (e.g., luxury goods companies, where the company is the brand) may have proportionately higher brand values. For example, a 2007 study4 found that the brand value for jewelry retailer Tiffany & Co. was 75% of the company’s total market capitalization. Considering a range of large brands across a spectrum of different industries, the value of a brand might typically represent something like one fifth of the total value of an organization on average5. Interbrand’s 2020 Best Global Brands study aims to quantify the values of the 100 most valuable brands, in a list topped by Apple ($323B), Amazon.com ($201B), and Microsoft ($166B)6.

Brand damage and brand protection

Brand protection services can help organizations identify online brand abuse and infringements against their IP, and take remedial action. The types of findings identified vary widely. They include reputation issues (negative comment and activism, brand association with undesirable content, etc.), unauthorized use of IP by bad actors (associated with the sale of counterfeit items or the creation of lookalike sites associated with fraudulent activity), and other brand issues, like brand dilution and uses of branded material by third parties. Some of these may result in generalized damage to the perception of a brand, which may affect its value but be hard to quantify, while others have directly measurable financial impacts. Similarly, the enforcement options available for the removal of damaging content varies significantly, dependent on the type of content.

Online content that creates reputation damage to a brand may be protected by the freedom-of-speech argument, where there are few or no routes for takedown. However, there is still value in brand owners monitoring for negative comments, as it provides awareness of the issues being discussed, and can provide an opportunity for the company to make changes. Changes can include modifying work practices, or broadcasting positive marketing messages to counteract the negative chatter. Left unchecked, reputation damage can have a significant detrimental effect on brand value.

A recent report stated the value of Facebook dropped by $147 billion (7.4%) in a year in the wake of advertiser boycotts in response to the company’s policies on hate speech7. Other prominent organizations have also been subject to damaging stories and campaigns over the years. Nestle has been subject to an extended series of boycotts since the 1970s in response to their policies on baby-milk marketing, groundwater extraction, and promotion of unhealthy products. More recently, Oxfam was associated with accusations of sexual misconduct, bullying, and harassment by staff, resulting in significant dips in their levels of donations and volunteering. Google has also been accused of poor staff practices and user data breaches8.

A range of IP infringement types can also have significant effects on the value of a brand. When Christopher Bailey joined the Burberry organization in 2001, he found a brand that had been significantly damaged, in part due to a proliferation of counterfeits. Fashion designer and retailer Alex Eagle notes that the “Burberry check ... became ubiquitous with fake goods, meaning it had lost its exclusivity.” Working his way up to chief creative officer in 2014, Bailey aimed to tackle these issues through a combination of promotional events, launches of new product across differing price brackets targeted at a variety of customer demographics, and—crucially—keeping ahead of the copycat by making products available in-store immediately after being exhibited at fashion shows. In doing so, he was able to help bring about an increase in share value of over 700% in 15 years9.

A program of online monitoring and enforcement (where possible) against IP infringements can help an organization protect its brand value. In part, simply being seen proactively defending the brand can be beneficial, increasing customer confidence, and making the company a less attractive target for infringers. Aside from these less quantifiable contributions to brand value, having an active brand protection program in place, and removing individual infringements, also directly impacts revenue and profit. Standard techniques exist for estimating the value of these actions, providing a measure of return on investment. We’ll cover that next in the second article in this series.

By David Barnett, Brand Protection Strategist at Stobbs

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