As companies compete to launch new products and highlight their competitors' shortcomings, they may inadvertently trigger expensive legal and copyright disputes - such risks need to be managed effectively, say Rupert Alabaster and Giles Crown
In times of economic difficulty, companies tend to become more prolific and provocative in their marketing tactics as they strive to make more noise than their competitors.
So it comes as no surprise that this is happening in the current economic climate. There is a groundswell of marketing across many sectors - including from companies not traditionally interested in this type of promotion - as businesses act quickly to launch new products and increase market share. However, with these marketing opportunities comes a range of new risks that need to be managed, not least because the emphasis is often on speed rather than control.
Such risks need to be mitigated as companies must make sure their brands stand out for the right reasons - rather than because they have inadvertently failed to protect their own intellectual property, infringed the IP rights of others, or suffered defamation or invasion of privacy issues.
Brand protection imperative
As a commercial challenge this is increasingly important, not least because protecting your brand makes clear business sense. As Interbrand says in its Top Performing European Retail Brands 2008: "Companies that place high importance on managing the economic value of their intangible assets, and primarily their brands, consistently outperform basic economic measures."
Managing the economic value of a brand needs to be looked at from a range of angles, which marks a departure for many companies. For example, although the negative consequences of a product recall on the value of a brand tend to be well understood, the risks to more intangible assets such as IP - which can account for 75% of a company's value - can be just as destructive to brand value, but are less well understood or prepared for.
Online risks proliferate
One area where companies have significantly increased their marketing activity is online. Companies are using websites and viral marketing with greater frequency because they offer cost-effective ways of approaching a broad market and boosting their brands.
Companies also want to reap the benefits of being part of the social networking phenomenon, but often forget to consider the risks - something that can have expensive consequences. For example, in one recent trend, companies have been allowing 'user generated content' by customers and suppliers on blogs, chatrooms and forums without relevant clearance protocols - leading to increased copyright and defamation exposures. In addition, companies are using browsing data for targeted behavioural advertising online.
All of these activities create significant legal risk, and you only need to look at the billion-dollar Google v Viacom case to realise the potential impact on the bottom line if such risks are not dealt with effectively (see box, above).
Another recent trend is for more companies, in their advertising, to position themselves in relation to their competitors - an approach that carries significant business opportunities, but also potential drawbacks.
Comparative advertising is a high risk strategy and can create unwanted legal problems for companies because they may inadvertently infringe a competitor's trademark or include something factually inaccurate in an advert. And this is one area where competitors are unlikely to ignore such mistakes as they tend to be understandably unhappy about being featured in such advertising (See box).
Finally, companies must also watch out for other, less obvious risks when it comes to promoting themselves. According to Interbrand, one of the biggest issues for companies launching a new brand is that they may not have carried out proper due diligence, especially regarding the globalisation of the brand - for example, in terms of URL or naming issues.
Problems can even arise from the shape and design of new products. For example, Kenwood recently successfully defended itself against claims that its new kMix mixer shape was too close to KitchenAid's iconic Artisan mixer, which was registered as a shape trademark. There was also a long-running dispute between Procter & Gamble and Reckitt Benckiser over the design of P&G's 'Febreze' air freshener. Such disputes are costly and time-consuming, whether they are ultimately successful or not.
Managing your exposures
It is important to note that such risks cannot be entirely avoided - for example, someone could post a defamatory comment on your website at any time. But they do need to be managed effectively for companies to reap the benefits of increased marketing activity.
To protect themselves, companies have traditionally turned to a range of covers, including professional indemnity, directors' and officers' liability, employment practices liability, public liability and specific IP rights policies. However, all of these might be termed 'part solutions' to the problem, often excluding at least one of the necessary covers.
Such exclusions explain why companies keen to cover themselves for the whole range of exposures in this area are increasingly looking for a more comprehensive solution. In response, work is underway between specialist brokers and underwriters to design more holistic coverages that provide protection for these emerging risks; protection that can stand alone or wrap around a company's present corporate insurance programme.
- Rupert Alabaster is director of professional risks at Miller Insurance Services and Giles Crown is head of the media, brands and technology department at law firm Lewis Silkin.
Google, owners of YouTube, and Viacom are engaged in a $1bn (£497m) lawsuit over alleged copyright infringement. Viacom, which owns MTV and Paramount Pictures, alleges that about 160,000 unauthorised clips of its programmes have been viewed on YouTube without its consent. Following the launch of the lawsuit, YouTube introduced filtering tools in an effort to prevent content that infringes copyright from appearing on the site. The case continues.
Comparative advertising landed telecoms company 3 in court when O2 took exception to the company's use of the O2 'bubbles'. O2 launched a legal battle claiming that its bubble trademarks had been infringed in an advert that first aired in 2004 and featured bubble imagery to refer to O2 when comparing its tariffs with 3's. However, after a four-year battle, the European Court of Justice found that 3 could use robust but fair advertising that incorporated the bubble imagery, as long as it did not cause consumer confusion.
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