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IP versus IP – a modern business dilemma

23 June 2010

Businesses apparently view the Internet as a double-edged sword, according to recent brands research by intellectual property specialist, Marks & Clerk. Nearly three-quarters (73 per cent) of respondents to its annual survey, which draws on the views of 266 UK business executives responsible for brand ownership, marketing and control, argue that while the digital age has brought tremendous opportunity for brand promotion, intellectual property (IP) abuses and threats to brand integrity are more numerous and difficult to counter.

In particular, 73 per cent claim that brands are more likely to be subject to unfair treatment online than offline, with almost two thirds (64 per cent) revealing that the Internet has made it harder for them to police and protect the reputation of their brands. Over 8 in 10 (81 per cent) claim that the Internet fosters a culture in which companies and individuals are more prone to exploit each others' intellectual property, “whether consciously or not”. At the heart of their concern is a belief that brands are not afforded adequate or appropriate legal protection in the digital age. More than eight in ten respondents (81 per cent) believe that intellectual property law has failed to keep up with the challenges posed by Internet growth.

One of the primary concerns to emerge from the survey centres on the boost that e-commerce has given to counterfeiters. An overwhelming 95 per cent of respondents believe that the Internet has transformed the nature of the threat posed by counterfeiting, with almost 9 in 10 (88 per cent) arguing that the rise of e-commerce necessitates stronger intellectual property protection as a result.

Respondents reserved particular criticism for eBay, which has been at the centre of a recent storm of court battles with luxury goods companies over the abundance of counterfeit goods for sale on its auction site. 86 per cent claim that eBay should be at least partly liable for the distribution of counterfeit goods on its site, while almost 6 in 10 (59 per cent) claim eBay’s current efforts to combat counterfeiters using its site are insufficient. Some 64 per cent describe it as “unreasonable” to expect brand owners to police individual items on the site themselves.

A sizeable majority (91 per cent) believes that stricter conditions and penalties ought to be directly imposed on secondary markets such as eBay, to combat counterfeiting. Marks & Clerk partner Pam Withers thinks that, for many brand owners, the assertion that eBay encourages counterfeiting is probably politely described as an understatement.

“Platforms like eBay offer the counterfeiting industry one of the most effective distribution channels we have ever seen, while the size and scale of online marketplaces makes constant monitoring and the detection of crime almost impossible for brand owners,” she says. “This reflects a much wider theme in our research that while the Internet presents a vital means of distribution for companies, the free-flow of goods and information creates a dimension of risk that brands have never had to deal with until now. Never before has it been simpler to steal ideas and editorial and avoid being caught; never before have the negative effects of word-of-mouth discussion been felt so quickly; never before has it been so easy to distribute counterfeits or attack companies from behind a veil of anonymity. This is a serious challenge and ultimately one that may well be borne by the consumer if brands are continually abused online.”

The research reveals an urgent call for reform of intellectual property law to protect brand owners and reflect the challenges of the digital age. Respondents are clear too as to the dangers of inaction by policymakers. Some 76 per cent suggest that unless the law responds to the challenge of e-commerce, the damage will ultimately be borne by the paying consumer.

Respondents are almost unanimous (98 per cent) in their desire to see more consistent and stiffer penalties levied directly on infringers, while 96 per cent would like legislation enacted to spell out the distinct responsibilities of brand owners and online commercial players. Over 9 in 10 (93 per cent) respondents are in favour of further harmonisation of European trade mark and copyright law, to increase efficiency and consistency.

In particular, the research reveals support for fundamental change to UK trade mark law – which is based upon the origin of goods and services and there being no confusion in the public mind. Nearly three-quarters (74 per cent) argue that there is a case for trade mark infringement applying in certain situations even when there is no possibility of public confusion – such as when a rival is seen to exploit or tarnish the original brand.

Marks & Clerk’s research further revealed particular criticism in relation to Google, which has benefited enormously from the rise of search-related online advertising. Its AdWords sponsored keyword service allows advertisers to bid on keywords that relate to a competitor’s brand name.

Almost 6 in 10 (58 per cent) respondents argue that Google's dominance within the European online search market puts the search engine in too powerful a position. Meanwhile, although the courts have more recently sided with Google over potential trade mark infringement in allowing words protected by a trade mark to be bid upon by rivals, brand owners view this activity rather differently. 71 per cent of respondents are uncomfortable with businesses making commercial use of a rival's brand name in this manner, with 63 per cent believing this to be “not at all” acceptable when the brand name in question is protected by a trade mark.

A majority of 61 per cent suggest that both the search engine and third-party advertiser should be held legally responsible for the commercial use by rival businesses of a brand owner’s name in the keyword service. By contrast, less than a quarter of respondents take the view of the courts that the advertiser alone ought to bear the brunt of the liability.

Online advertising is not new in itself, but Marks & Clerk partner, Kirsten Gilbert thinks the sophistication of techniques combined with the dominance of Google in Europe and recent legal decisions means that it is taking on newfound significance.

“For major brand owners, activities of this sort may appear a clear-cut case of free-riding off their reputation and investment,” she says. “To ensure that your search engine listing appears at the top of search results is no small feat, and often requires millions in advertising and PR spend over time. What incentive is there for such investment when users searching for your name may easily be diverted to the competition? For many, it means spending yet more time and money – defensively – merely to stand still.”

And then there are social media. Marks & Clerk’s research suggests that the challenges brand owners face online are likely only to be exacerbated by their rise. The importance – and indeed commercial opportunity – of social media to brand owners is striking from the research. Some 62 per cent believe that social media will migrate from a popular communication channel to a “substantiated sales and revenue source” for businesses within the next two years. One fifth (20 per cent) argue that this is already the case as social media cements its position as a valuable commercial channel-to-market.

However, with the growing use of social media comes a corresponding threat to brand owners, particularly if social media looks to search-advertising to establish a stronger and more viable business model to sustain itself. 69 per cent believe that social media sites such as Twitter, LinkedIn and Facebook will become the “next big threat” for brands, as social media follows in the footsteps of Internet giants like Google. Pam Withers concludes:

“With the nation now held firmly within the grip of social media, our research shows clear concern that the digital threat to brand owners is most likely to increase, rather than recede, in the future. Search-advertising revenue is hardly new, yet the prevalence of online search is certainly a growing facet of business marketing and likely only to extend over the coming years as social media platforms begin to monetise their impressive reach.

“With Facebook reportedly having the world’s ‘third largest population’ – more than 400 million users, compared to a population of just over 300 million in the US – it is little wonder we are seeing increasing protectionism and nervousness from brand owners.”

Les Hunt
Editor
 


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