Sustainable growth through trusted brands

December 2014 Sustainable growth through trusted brands

This article is adapted from a presentation delivered by John Noble, Director, British Brands Group, on behalf of AIM to the IP Summit on 5 December 2014.

AIM’s contribution to the IP debate in the EU comes from the standpoint of industry. AIM’s membership comprises corporate members and national associations that have a similar but more local constituency. Altogether, AIM represents directly or indirectly some 1,800 companies ranging from the SME to the multinational.

Members are primarily manufacturers of branded products in fast moving consumer goods. They are united in their purpose to build strong, evocative brands and as such place the consumer at the heart of what they do. Understanding individuals and continuously finding meaningful ways to contribute to their lives provide the route to success.

Intellectual property (IP), and particularly trade marks, are the foundation on which brands are created, sustained and grown. Investments in quality, reputation and innovation are captured by and protected for the investor via IP rights and, if successful, a return secured which funds the next turn in a virtuous cycle. In short, trade marks are essential to the business model of branding and inevitably therefore trade marks form an important of AIM’s work.

AIM’s engagement on IP is centred on the need for a well-functioning, efficient and cost-effective dual trade mark framework that functions as well online as offline, delivering real benefits both to individuals (consumers) and to businesses of all sizes. The ‘dual’ system relates to national trade mark systems and the community trade mark system.

While trade marks may allow branding to function, brands and trade marks are very different. Trade marks are geographical in scope, must be capable of representation and are held on a register. Brands in contrast are deeply personal, held in the minds of individuals and created over a lifetime of experiences with the product or service in question. They have been described as “fiendishly complicated, slippery things”, shifting and changing with each new experience.

While trade marks and brands may be fundamentally different, they perform a similar function, allowing individuals to discriminate between choices and make informed buying decisions on the basis of a range of rational and emotional attributes. Trade marks function as signs of origin and quality, as well as heuristics (mental shortcuts) to the brand knowledge stored in the mind.

A trade mark, when first registered, is of little if any value. It is only when that trade mark is imbued with meaning, via investment by the trade mark owner and the exposure of individuals to the product or service to the extent that it affects their preference and buying behaviour, does real value begin to accrue. Once achieved on a global scale, that brand value can amount to billions of dollars.

The macro-economic benefits of trade marks and brands are beginning to be better understood via studies published by WIPO, OHIM and the UK IPO. The Observatory and European Patent Office’s report Intellectual property rights intensive industries: contribution to economic performance and employment in the European Union found that trade mark intensive industries in the EU account for 21% of all employment, pay wages 42% higher than non-IP intensive industries, contribute to 34% of EU GDP and represent three quarters of EU exports by value.

Oxford University’s report Trade Mark Incentives found a direct, positive correlation between firms that register trade marks and employment, productivity and growth. Meanwhile, Millward Brown in its comparison of the performance of the S&P500 with a portfolio of branded companies found that, between 2006 and 2013, the S&P500 grew by 45% while the branded portfolio grew by 81%, clearly illustrating their growth potential.

The message for policymakers is clear. If the intention is to build a successful, robust, globally competitive, growing economy, brands are essential to have in the armoury.

The trade mark reforms underway in the Trade Mark Package present an opportunity to ensure the framework delivers the optimum consumer and economic benefits in the future. Negotiations are now at an advanced stage though there are still some points worth making:

Renewal fees remain unjustifiably high. They need to be lowered to at least be in line with registration fees, something that will be of direct benefit to the SMEs that form the majority of CTM holders as well as to others;

Clarity on the respective role of trade marks and the Misleading and Comparative Advertising Directive is required if consumer confusion and a lawyers’ charter are to be avoided. The Misleading and Comparative Advertising Directive functions well and will be undermined by any contradictions in the trade mark reform;

Strong transit controls are required to allow customs to seize counterfeits passing through the EU. Without them the EU will become the counterfeiters’ hub of choice for the distribution of their fakes;

Finally, the input of users to national trade mark offices and OHIM is crucial if those organisations have an ambition to be customer-focused. The primary role of these offices is to provide trade mark services to business and the input of users will help ensure these are effective, efficient and priced at a level that is sustainable but without the risk of creating distorting surpluses.

The scale of the OHIM surplus has unquestionably complicated and prolonged agreement to the Trade Mark Package. While it has created some opportunities it has also presented significant difficulties and obstacles. Lowering renewal fees and ensuring that prices for services reflect input costs will help ensure the problem does not recur. Trade mark owners should not be exploited. To do so reduces their capacity to create the quality jobs, growth and export competitiveness that the EU so badly needs.

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