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legal issues in brand management*

Although the best defense against copycat competitors is to stay ahead of them with a continuous stream of innovative, highly differentiated, and superior products and services, it is equally important to seek as much legal protection as possible for your brand.

Trademark Law

As a brand steward, you must be aware of the laws under which legal protection is available. First, trademark law protects a brand’s identity. That is, it protects names, titles, taglines, slogans, logos, other designs, product shapes, sounds, smells, colors, or any other features that distinguish one source of products or services from another. Trademarks that protect services are often called service marks (“SM”). There are also “collective membership marks” (e.g., Boy Scouts of America) and “certification marks” (e.g., UL approved).

Trademarks, like brands, build in strength over time. The test for trademark infringement is “confusing similarity.” Put another way, if the average consumer believes both products to have come from the same source, there is infringement. Obviously, the more a consumer is familiar with a particular brand, the more defendable its mark. That’s why it behooves a company to do the following:

• Choose a distinctive mark, including a “coined” name. As I mentioned in the chapter on brand identity, brand names range from generic and descriptive to suggestive and arbitrary or fanciful (“coined”). Obviously it takes longer to build meaning for coined names, but they are also more distinctive and easiest to protect legally. Kodak, Xerox, and Exxon fall in that category. Suggestive marks are the next most protectable. Examples include Coppertone, Duracell, and Lestoil. Even common words can be used as trademarks as long as they are not used descriptively. These common words/phrases are also suggestive marks: Amazon (big), Twitter (brief and chatty), and Apple (different, offbeat). Descriptive marks are not protectable unless the brand creates a secondary meaning for the word, such as Weight Watchers, Rollerblade, or Wite-Out. Generic marks, such as Shredded Wheat and Super Glue, are not protectable at all.

• Avoid geographic names as a part of your mark—they can be the basis of trademark refusal.

• Register the mark.

• Be consistent in the use of the mark.

• Create strong trade dress (as discussed later in this chapter).

• Widely advertise and distribute its trademarked products.

• Do all of this over a long period of time.

Because the strength of a mark is dependant upon consumers’ familiarity with it, it is much easier for a competitor to neutralize your mark soon after it has been introduced than after it has been in use for a long period of time.

Courts use the following tests to determine infringement:

• Strength of the trademark claiming infringement.

• Similarity of the two marks.

• Evidence of consumer confusion.

• Care a consumer takes in comparing products.

• Intent of the organization in using the potentially infringing mark. (Some drugstores and grocery stores use generic brands that emulate a leading brand’s package shape, colors, typestyle, formulation, etc., and display the product side by side with the leading brand to imply that there are no differences between the two, encouraging consumers to purchase the lower-priced generic item. In this situation, there is clearly intent to emulate the leading brand and reduce the perceived differentiation and value advantage of that brand, but it is not clear that there is intent to deliberately cause confusion as to source.)

• Relatedness of the two businesses.

• Overlap between communication and distribution channels.

By using the mark in association with your products and services over time, you gain trademark protection. Registering your mark (marks can be registered at the state and federal levels) provides additional protection. Although common law and federal trademark statute protect an unregistered mark, registering your mark transfers the burden of proof to the second comer in challenging a mark’s registration. With federal registration, you can sue infringers in federal court. Also, after five years of registration, the mark becomes incontestable. Federal trademark registrations last ten years and can be renewed every ten years ad infinitum.

You can acquire trademark rights in one of two ways. To acquire trademark rights based on use in commerce, you must be the first person or organization that uses the mark in conjunction with the products or services for which trademark protection is sought. To acquire the mark base on intent to use, you must apply to register the mark through the United States Patent and Trademark Office.

Before choosing a trademark, first conduct a simple search to weed out marks that are not available. This search can be done online for free (for a list of online resources, go to www.brandforward.com). After that, for the remaining candidates, conduct a full search through a law firm specializing in trademark law or through an experienced trademark search firm.

Strong brands run the danger of becoming category descriptors. Always use trademarks as adjectives, not verbs or nouns. If your brand is in danger of becoming a category descriptor, consider talking about your brand in the following way that differentiates the brand from the category. For example: “Jell-O® gelatin,” “Kleenex® facial tissue,” and “Xerox® photocopier.”

Trade Dress

Trade dress is a second form of legal protection for a brand. Trade dress is a brand’s distinctive aesthetic design features (package or product design). To be protectable, trade dress must be nonfunctional and distinctive (or have acquired a “secondary meaning,” that is, source-identifying characteristics). The more nonfunctional differentiating features one can build into a product and its packaging, the more likely it will be that infringement can be proved.

It is easy for a competitor to say, “I developed this very similar product independently” when it is fairly generic (such as a birthday card with a floral design that says simply “happy birthday”). It is more difficult to convince a courtroom of that claim when your product has many of the same random, nonfunctional elements that a competitor’s product has (e.g., a line of greeting cards of an unusual size that open from the top with rounded edges printed on green-tinted recycled paper, all at 99 cents, and all addressing the theme of friendship). For a competitor to develop a similar line of cards with similar features independently is highly unlikely. It points to copying.

To protect its trademarks and trade dress, a company must constantly be watchful for and strenuously defend against infringement. For instance, Apple has filed several lawsuits to defend its iPhone against knockoffs, winning a major legal battle against Samsung in summer 2013. Trademark rights can be enforced through lawsuits at a state or federal level. Proving infringement requires proof that the infringer had second use of the mark and that the second user’s mark is confusingly similar to the senior party’s mark.

When launching brand extensions, companies should be careful to maintain the same brand identity and trade dress in those new items. If the brand’s name and logo are the only common elements across all a brand’s products, it weakens the power of the other trade dress elements to differentiate and legally protect the mark.

Copyright Law

Although organizations don’t often pursue this protection, logos are typically protectable by copyright law. Make sure your organization, and not an outside person or agency, owns the copyright to your brand’s logo. Advertising/marketing agencies will often include an assignment of rights, titles, and interests (including copyright interests) to their clients in their letters of agreement. While trademark infringement requires proof of “confusing similarity,” copyright infringement requires proof of “substantial similarity.”

Online legal interpretation is evolving, but in general, organizations whose brands are strong and well known (“famous brands”) can legally defend their names and other marks against unauthorized use in domain names and meta tags. For example, Playboy (unsuccessfully) and Estee Lauder (successfully) sued other sites for using their brands’ names or slogans in their sites’ meta tags.

Other online legal issues include the following:

• Cybersquatting, which refers to people who register and warehouse domain names that are other party’s marks

• For-pay search engines selling marks as keywords to businesses that don’t own the marks

• Spammers who use the e-mail addresses of others as return addresses for their solicitations

SPECIAL PROBLEMS

Organizations that license and franchise their marks encounter added challenges to protecting their marks. License and franchise agreements should be drafted to provide maximum control over the mark and to minimize the mark owner’s exposure to liability. Furthermore, every effort should be made to establish processes to review, approve, and monitor use of the mark by licensees and franchisees.

Trade Secrets

Don’t overlook trade secrets as a form of protection. Trade secrets are simply information, techniques, procedures, codes, patterns, plans, processes, formula, and prototypes that are developed confidentially and that are kept confidential. Trade secrets even include customer lists and instructional methods. The Coca-Cola syrup formulation is an example of a trade secret. (The added value of this approach from a brand perspective is that it often creates a mystique that has its own cachet.)

Sometimes it is better to keep something a trade secret than to patent it. In some industries, companies routinely watch for competitors’ new patents and then try to design around them. Noncompete and nondisclosure agreements are important, but not infallible, in protecting trade secrets. The Economic Espionage Act of 1996 protects trade secrets against theft. Information is legally considered to be a trade secret if an organization can show that it took reasonable measures to keep the information secret and that there is economic value to the information not being made public.

A business can protect its trade secrets in the following ways:

• Share confidential information only on a “need to know” basis.

• Limit the number of employees exposed to trade secrets. Always inform employees exposed to those trade secrets a) that they are being exposed to secrets and b) of the importance of keeping the secrets secret.

• Mark all confidential documents CONFIDENTIAL—NO COPIES ALLOWED. For added security, number each copy and keep a log of which numbered copy was given to which employee.

• Use access logs for trade secrets.

• Require anyone (employees, suppliers, customers, consultants, and other business partners) who might come in contact with trade secrets to sign confidentiality and nondisclosure agreements before the relationship begins.

• In consultant contracts, be clear about what intellectual property the consultants are to assign to your company during their assignment.

• Require employees to sign noncompete agreements that prohibit them from working for competitors for a period of time after their employment with you ends. If this is done within an employment contract, present this information to prospective employees well before they commence their employment with you so that the “consideration” is employment.

• Employment contracts can also prohibit moonlighting or consulting for companies in similar lines of business while employed at your company or, less restrictively, while on company time or using company equipment (including computers).

• Educate employees about the treatment of proprietary information during and after their employment with you.

• Carefully orchestrate employee terminations so that employees are not able to take proprietary information with them.

• Schedule exit interviews with departing employees. Use those interviews to remind departing employees of their confidentiality obligations.

• Develop, communicate, and enforce security processes—from physical security for the building to security of paper documents and computers. Secure confidential information with electronic and mechanical locks. (Passwords or codes should be changed regularly.)

• Never store or allow transfer of confidential information outside of your company’s firewall.

• Make extensive use of shredders.

• Be especially careful of contract workers. Provide them with a company computer so that they don’t have to use their own on the job.

• Conduct trade secret audits.

• Most important, identify all trade secrets and develop formal protection plans for those secrets.

False or Deceptive Advertising

False or deceptive advertising is another legal consideration in brand management. Advertising is considered to be false or misleading if it could mislead consumers about a product’s place of origin, nature, quality, or maker. (It is not necessary to prove actual deception.) Advertisers must be accurate about material aspects of their products or services and those of their competitors (in comparative advertising) to avoid prosecution.¹ The Federal Trade Commission looks for the following when investigating complaints:²

• What are the expressed or implied claims? What was said and what was not said?

• Are the claims material? That is, do they say something about the product’s functions, features, performance, effectiveness, maker, price, or safety?

• Does the advertiser have evidence to support the claims?

• Could the ad as a whole mislead a consumer acting reasonably under the circumstances?

Note that claims such as “best in the world” or “the world’s leader” are considered to be puffery (not false advertising) and that the average consumer is believed to process such claims with some degree of skepticism. False advertising claims can be brought before the following entities for resolution:³

• The organization against which the claim is made

• State or local consumer protection offices

• The National Advertising Division of the Better Business Bureau

• The Federal Trade Commission

• Industry self-regulating bodies

• Advertising regulatory bodies

Ethics in Marketing

Related to legal issues is the topic of ethics. Ethics is not a topic that I hear marketers talking about very often, but it is something that I think about frequently because I understand the societal impact of what I do. Marketers can often drive human desires and behaviors, getting people to buy things that they may or may not need, making them feel better or worse about themselves in the process.

So what are some of the ethical issues in marketing? First and foremost, we should not be using marketing to make a product that is clearly harmful more appealing to people—for instance, selling cigarettes by appealing to people at a deep emotional level. This can be achieved by linking the cigarette brand to independence, rebellion, good times, or coming into one’s own power.

Next is getting people to buy stuff that they just don’t need. How many toys does one child actually need? How many pairs of shoes are enough? Or how many homes are enough?

Then there is using fear to sell something. As we all know, fear works really well as a motivator; however, constantly using fear to market products and services only serves to create a more fearful society, where people are more motivated to avoid potential problems than to embrace that which is beneficial or uplifting.

Making false claims is both unethical and illegal. I am personally not as concerned about what is generally considered to be puffery; for instance, stating that one’s brand is “the best in the world,” because few people are going to take that statement at face value.

Certainly, an ethical dilemma that most marketing agencies face is whether to do a) what is in the client’s best interest or b) what the client wants (if you know that what the client wants is not in its own best interest). In this situation, are you forthright with the client but then ultimately collect your fees for executing what the client desires, or do you walk away from the project or business if what you are being asked to do is not in the client’s best interest? Is the client always right or is the client sometimes wrong?

How about getting someone to pay a huge price premium for a product because your brand bestows status on that product? Is this just helping people climb Maslow’s hierarchy of needs, or is it getting them stuck on one step in that ladder (at a hefty profit to the brand)?

Knowing that brands can sometimes make people feel more appealing, loved, smart, accomplished, or valued, I want to scream to them, “You are already appealing, loved, smart, accomplished, and valued. You don’t need a product or brand to be that.”

There is also this question: Does the relentless pursuit of more and better products, services, and experiences lead to improved lives with more leisure time and a higher quality of life, or does it just constantly raise the bar for what will satisfy while depleting natural resources and placing more demands on people’s lives?

How about those huge purchases that marketers can get people to make—for instance, luxury cars, luxury boats, fine art, and expensive wines? Some people can easily afford these things and very much appreciate even minutely incremental improvements in quality. Others, however, may be stretching their budgets to “keep up with the Joneses.” This second group may experience immediate post-purchase remorse after such a large purchase. Is it ethical to market to these people based on aspiration?

And, related to that, if people experience buyer’s remorse immediately after a purchase, is it a good thing or a bad thing to create a post-purchase touchpoint that relieves their anxiety and makes them feel better about the purchase?

And what about selling functional substance, a real solution to a problem, vs. good feelings? Many brands (and salespeople for that matter) are masterful at selling good feelings without really delivering much else. I often feel this way about motivational speakers. Is something tangible really more valuable than something completely intangible?

Is it better to market to and deliver on a need or a desire? Is one better than another? What if people desire something that is not good for them? Is that the marketer’s problem? Is it another person’s right to judge what is good or bad for you?

So how do I see that marketing can be truly helpful to organizations, brands, and their customers? First and foremost, brands can help organizations focus on how they can best add value in the market, especially in unique ways. A brand’s unique value proposition can become the organization’s internal rallying cry, energizing employees and mobilizing them to deliver on the brand’s promise. Marketing can also highlight a particular brand’s unique advantage over competing brands, helping consumers to make more informed decisions. If businesses include marketing research as a part of marketing (as well they should), there is a huge advantage to understanding what customers actually need and want so that the organization can deliver it to them. Identifying and determining the best ways to meet human needs is a noble endeavor

Use the checklist in Figure 20–1 to assess the efficacy of your brand management practices in the area covered by this chapter. The more questions to which you can answer “yes,” the better you are doing. The checklist also provides a brief summary of the material covered in the chapter.

* I am not a lawyer and this chapter is not legal advice, but rather is meant merely to help you consider the legal issues in brand management. When actually dealing with any specific issues in this area, please consult with lawyers who have expertise in intellectual property law.