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Brand Matters Issue 1 | June 2014

Brand Matters

Welcome to the first issue of Brand Matters, our new e-bulletin focusing on issues that affect brand owners and advisors.

Jeremy Hertzog


Editor's Note

Welcome to the first issue of Brand Matters, our new e-bulletin focusing on issues that affect brand owners and advisors.

Regardless of sector – from retail, fashion, sport and media, through to life sciences, finance and real estate – a brand is one of the most valuable assets that a business or an individual can own. But navigating the world of brands can be a minefield, particularly in light of technological advances and the international nature of modern business. In this first issue, we look at the rise (and fall) of celebrity endorsements, changing practices for European trade mark registration and the power of online shopping malls such as TMALL in China.

We welcome your feedback, so if there is anything in this newsletter that you wish to discuss further, or any ideas for future issues, please do not hesitate to contact me or any member of the team.

From hero to zero

One of the sporting world's biggest controversies this summer came courtesy of Luis Suarez, the Uruguayan football player banned from all football-related activity for four months and fined 100,000 Swiss francs for biting an opponent during the FIFA World Cup. This was not an isolated incident; Suarez has previously been found guilty of biting other players and also of racism by the FA. So has Suarez the "brand" been tarnished by this summer's events?

In the aftermath of the World Cup you would have to say "yes". But provided he can keep his mouth shut and let his feet do the biting, we would expect him to bounce back, just as he did last season and other 'fallen' sports stars have done before him.

In the days after the incident, 888poker, which had a sponsorship agreement with Suarez, initially 'reviewed' the relationship and then claimed they had terminated it. It would be interesting to know the basis for this termination. Sponsorship agreements usually contain morality clauses that catch the sportsperson's behaviour in his or her private life, such as drug taking or criminal activities, but do not always cover on-field activities. Given Suarez's previous behaviour, perhaps the agreement included a termination rights for certain unusual on-pitch behaviours.  It might be that 888poker terminated on the basis that Suarez brought them into disrepute but that would not appear to work if he was already a biter when they signed him up (Suarez's first on-pitch bite was in November 2010).

Since this incident, Suarez secured his "life team dream and ambition" of signing for FC Barcelona. Press reports state that Suarez-bearing Barcelona shirts were being sold in stores before he had even signed a contract. Once Suarez returns to playing, if he maintains or eclipses the on-pitch quality he demonstrated for Liverpool, it is possible that his previous misdemeanours will not undermine the value of his 'brand'.

Separate image rights agreements are often entered into alongside footballers' playing contracts; under these, sums are paid into a separate company into which the player has previously transferred their image rights, so that the club can use the player's name, signature, voice, nickname, likeness, image, photograph, shirt number, autograph, initials, computer generated portrayal and so on.  These arrangements mean that sums paid for use of the player's image are not deemed to be income and so can be attractive from a tax perspective and allow the image owner to build up a nest egg offshore (and the club would not pay NI on the payments to the image rights company).

There is no such thing as an image right in the UK so sports stars and other celebrities have to protect their image through a variety of means. Chief among them should be registered trade mark rights, which give them a clear licensable right and the ability to prevent others from using their brand commercially.

Sports stars such as Cristiano Ronaldo, Lionel Messi, Jessica Ennis-Hill and Tiger Woods have already registered their names as UK or European trade marks but Luis Suarez has not yet taken a bite at brand protection! From as little as a few hundred pounds, he could apply to register his name as a trade mark in the United Kingdom.

For more information, please contact Rebecca Davis (trade marks) or Lewis Cohen (licensing and sponsorship).

Colour blind

It has long been standard practice for UK trade mark practitioners to recommend filing graphic trade mark applications in black and white to obtain the broadest protection. This has now been called into question by guidelines issued by OHIM - the European trade mark registry - in June, which are due for implementation this month across the entire EU.

The guidelines state that an earlier black and white (or greyscale) trade mark is not identical to the same mark in colour unless the differences in colour are insignificant – that is, they are of such a limited nature that a reasonably observant consumer would only notice them if he or she examined the marks side-by-side.

Also, use of a colour version of a trade mark registered in black and white will no longer automatically constitute genuine use of the black and white trade mark, unless the colour in which the mark has actually been used does not alter its distinctive character.

There is now a conflict between EU Trade Mark Registry practice on oppositions and non-use (registration in black and white may not suffice) and how the courts approach infringement (a black and white registration may well cover all colours).

Clients need to seek expert legal advice on filing in black and white and/or colour to develop a strategy that does not leave them exposed. Contact Sally Britton for more information.

Tmall or not tmall

China has undergone rapid and dramatic economic development over a very short time; it is now the world's second largest economy and has the largest e-commerce market. E-commerce accounts for more than 10% of China's total retail sales and one B2C platform, in particular, simply cannot be ignored.

Since its inception in April 2008, TMALL has experienced staggering growth so that it now accounts for over 40% of the Chinese B2C market. Established by Alibaba, already a success in the B2B market through its eponymous website and in C2C through Taobao, it is at the epicentre of the Chinese shopping experience.

Hosting over 70,000 brands in more than 50,000 online stores, TMALL provides a direct channel to the vast Chinese consumer market and aims to meet Chinese consumers' ever-growing demand for authentic brand-name products. The likes of Casio, Burberry, Nike, Puma, Gap, Unilever and Uniqlo have all been represented on TMALL.

On Taobao, poor quality counterfeit goods have proliferated, whereas TMALL's success is founded on the promise that the goods are genuine. Sellers are required to demonstrate their entitlement to sell branded goods and consumers are entitled to compensation from TMALL if they buy counterfeit goods. TMALL promises to remove counterfeit sellers and will retain the sellers 'security' deposit (up to $25,000).

However, brandowners can find themselves competing alongside distributors, resellers and parallel importers as TMALL does not guarantee brand exclusivity. TMALL has something of a bazaar feel to it as it hosts so many brands and stores. Some, particularly luxury brands, have decided that the lack of exclusivity and/or multitude of brands does not fit with their brand image and have either not joined or used the platform only for specific promotions or products.  For example, Puma had its biggest ever online sales day on TMALL and used its presence to sell off previous season's stock, thereby raising its local profile and attracting savvy Chinese shoppers who prefer not to pay full prices. Others, including Puma to find a channel where it could sell at full price, have launched their own Chinese-language websites alongside or after launching on TMALL.

Despite TMALL's promise that all products on the platform are authentic, there have been high-profile incidents of counterfeits being sold through TMALL. Therefore, brand owners do need to keep an eye on TMALL whether they are on it or not.

When trading internationally, companies always need to consider whether they have protected adequately their trade marks and other IP rights.  In China, that also means ensuring that brands are registered as trade marks not just in their original language but also in traditional and simplified Chinese and, more challengingly, the way the Chinese do/will refer to the brand – which is often totally different to the simple translation of the brand.  Too many businesses have discovered that someone else has already registered their trade mark in China and, with a first to file system, businesses need to protect their brands in China as early as possible.

While it is possible to operate on TMALL from outside China, a company on TMALL may need/want to establish a local company or use third party expertise to establish and manage Chinese-focussed operations such as overseeing product listings and marketing, international shipment, warehousing and logistics, customs clearance, returns and refund etc.

TMALL cannot claim to be a panacea for all businesses wishing to launch a Chinese ecommerce offering but, at the very least, brands need to consider the opportunity its unbelievable popularity creates for building brand awareness and engaging with Chinese consumers.

If you have any queries, please contact Lewis Cohen.

Blog: Looking back at the 2014 FIFA World Cup

For the past few weeks, the whole world has been watching the FIFA World Cup. One of the biggest sporting events on the planet, it is estimated that it will add R$183 billion (around £52 billion) to the Brazilian GDP. However, the tournament has not been without its challenges. Click here to read our Business Shapers blog on illegal ticket touting, and here for a reminder of what the World Cup has meant for Brazil.

Blow to Sports Sponsorship

It's been reported that Premier League clubs could lose £60-90 million in advertising and sponsorship revenue as a result of a change to the UK's gambling laws (Financial Times). This loss of revenue would not stop at the Premier League, but potentially affects all sporting clubs and bodies that benefit from gambling advertising and sponsorship, as well as TV channels and the advertising industry itself.

The Gambling (Licensing and Advertising) Act 2014 is intended to change the circumstances in which offshore gambling companies can lawfully advertise in the UK from 1 October 2014 onwards. These changes would affect sports clubs and advertising agencies, because they could commit an offence if they advertise or endorse the 'wrong type' of offshore gambling company.

These developments have led to concern from a number of offshore betting companies who currently advertise on perimeter hoardings at football games or sponsor football shirts. British football games reach TV audiences across the globe, making our football clubs attractive partners for online gambling companies. But there are concerns that this may change as and when the Act comes into force.

Anyone currently negotiating a sponsorship agreement between a gambling company and a sports club needs to pay particular attention to guidance issued by the Gambling Commission on 18 July 2014. This indicates a particular opposition to any 'physical' advert for gambling which is not licensed in the UK. This would include football shirt sponsorship deals involving, for example, Asian-facing sportsbooks with no UK licence.

If you are involved in sponsorship or advertising arrangements with any gambling operator (licensed or not), then you should seek specific legal advice regarding the advertising offences set out in the Gambling Act, to ensure that you go into those arrangements with your eyes open and with specific protections built into your contract.

If you want to know more, including how we may be able to help you strengthen your sponsorship and advertising arrangements, please get in touch with Stuart McMaster or Susan Breen.

Blog: Tomorrow's brands

Mishcon de Reya’s annual Fashion Gallery recently took place, in association with our eco-fashion and art blog, Lawfully Chic. The event, sponsored by Black Cow Vodka, supported a number of emerging retail and fashion brands. According to the Evening Standard's City Diary column, the pièce de résistance was the blow-dry bar. Click on here to view a short film of the gallery.

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