Trademarks and IP strategies in times of crisis

The economic crisis has been making headlines all over the world for a few months now. This article discusses the impacts of the recession upon trademarks and IP strategies.

Economic downturn and IP protection

According to statistical surveys, the immediate and predictable impact of a recession should be to freeze trademark applications. The French Trademarks Office (INPI) announced a decrease of 0.6% in the number of trademark applications in January 2009, whereas this period normally sees an increase of 4 to 5%. Statistics from the OHIM also evidenced a substantial drop in the number of Community trademark applications. Applications originating from US applicants plummeted by 21% in the final quarter of 2008 and by 8.2% over the whole of 2008. Community trademark applications from the UK and Spain also dropped respectively by 17% and 14% over the same period. On the other hand, international trademark applications increased by 5.3% in 2008 (with a particularly high filing activity during the first six months, compared to the second half of the year).

In practice, we did not observe a significant increase in the overall volume of trademark applications. However, trademark owners tend to give preference to trademark applications rather than trademark searches, in their concern to reduce costs. This choice obviously conveys high legal risks of exposure to subsequent opposition, infringement and/or cancellation actions.

Fortunately, defense proceedings remain a priority amongst IP owners. The WIPO Arbitration and Mediation Center announced a new rise in the number of administrative complaints in 2008, compared to 2007 (+8%), although a slight slowdown can be observed in the increase itself (18% in 2007 compared to 2006 and 48% in 2006 compared to 2005). Luckily enough, 85% of all domain name claims are still ruled in favor of the plaintiffs.

Economic downturn and brand value

The current economic conditions do not have a systematic and immediate impact upon the value of the brands. While many sectors are experiencing a fall in business, only the financial and insurance industries are faced with a direct reduction of their brand value. In fact, consumer brands have suffered an average 4% setback, as opposed to 33% for the banking sector.

Outside the financial sector, several factors now deserve to be considered with particular attention, for IP owners to be able to enhance their brand value assessment. COCA COLA had higher than expected quarterly income from their sales of products but ended reporting a loss of USD 1.45 billion due to impairment loss for writing down the USD 2.3 billion value of their North American Franchise License. The recent new communication of McDONALD’S as a healthier and value-for-money restaurant, combined with consumers now concentrating their spending on everyday goods, also contributed to increasing the brand value. More than ever, valuation processes are necessary in today’s context in order to ensure effective assessment of the brand value.

Also noteworthy is the tendency of trademark owners to cut costs by downsizing their communication and marketing budgets. This has an undesirable consequence, as the only legal result is a loss of market share directly affecting the brand value.

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