Two recent trademark stories are worth discussing. The first – which centers on British multinational retailer Marks & Spencer – is significant because it clearly demonstrates that a trademark is more than merely an indicator of source, it is also a saleable asset, and in many recent examples, the primary asset at the center of an M&A transaction. The second scenario – which considers the implications of brand extensions – is similarly noteworthy in that it suggests that the strength of companies’ trademarks may be far more robust than we think they are.
The first story involves well-known London-based retailer Marks & Spencer, which, like many other retailers, has been hit by a COVID-induced shopping slump, causing its clothing sales to fall by almost 25 percent in the 13 weeks leading up to December 26. (Despite such a marked drop, there is one type of clothing that is still doing quite well in these days of remote working: pajamas/loungewear.)
Against that background and in order to help ease its enduring woes by bolstering “its efforts to sell a wider selection of brands online, a strategy that will pit it directly against its larger FTSE 100 rival, Next,” according to the Guardian, M&S announced on January 11 that it would acquire English fashion brand Jaeger Retail Limited, which had been in liquidation. Curiously, both M&S and Jaeger Retail were founded in 1884, although only one of these old-timers has been able to keep going.
Addressing the acquisition, which was expected to close by the end of January, an M&S spokesman said, “We have set out our plans to sell complementary third-party brands … to accelerate our transformation and turbocharge online growth … in line with this, we have bought the Jaeger brand.” M&S has, in fact, not only bought the Jaeger brand, but it has also bought a number of other brands, including Early Learning Centre, Nobody’s Child and Ghost London, in furtherance of this same aim.
An M&S spokesman was quoted in January as saying that the company was “in the final stages of agreeing to the purchase of product and supporting marketing assets from the administrators of Jaeger Retail Limited.” The reference to “product” presumably refers to a limited amount of Jaeger stock, and while the term “supporting marketing assets” is not defined but presumably refers to trademark registrations. What is quite clear from the news of the parties’ deal is that M&S is not taking on the Jaeger shops or concessions, thereby, putting the Jaegar brand at the center of the transaction.
In other words, what M&S has acquired is the “Jaeger” trademark – and presumably, a number of related marks, as well – which it will apply to an array of goods, namely, apparel. As such, the trademarks will serve as assets that the company believes will produce a revenue stream – i.e., a valuable business asset.
A robust and flexible asset
The second recent news report refers to the concept of brand extension, or in other words, the practice of taking an existing brand and using it in relation to goods or services other than those for which it has been used in the past. Many companies look to – and ultimately, benefit from – various brand extensions because they enable brands to enter into new market categories, thereby, introducing new revenue streams. But while such endeavors bring opportunities for increased brand use, companies generally do not undertake brand extensions lightly.
In fact, before undertaking a brand extension, brand owners are encouraged to consider various issues, such as: The business case: is there money to be made? The legal issues: is the brand (name, logo) available in respect of the extended goods or services (this will be determined by way of a clearance search, something that can be an expensive exercise)? Protection: if the trademark is available, should it be registered for those goods and services (cost will often play a role here)? Reputation: is there any risk that the extension will dilute or tarnish the brand as it currently exists?
The last question is a particularly compelling one for consumer-facing companies. In a recent article for MarketingWeek, entitled, “Damaging brand image is rarely harmful because it matters so little,” marketing expert Mark Ritson suggests that companies may be completely overthinking things on the reputation front, and in fact, brands are far more robust than we like to give them credit for. With that in mind, Ritson suggests that most consumers may not really care about things like brand image or values. He cites examples, such as Ben & Jerry’s, which started out as a purveyor of dog food before becoming an uber successful ice-cream company; and Porsche, which took considerable flak from consumers when it first brought out its monster 4×4, only to now sell more off-road vehicles than sexy sports cars.
In Porsche’s case, it was synonymous for decades with two things, “sports cars and performance.” Its Cayenne model, which it introduced in 2002, “was neither,” according to Ritson. Since the now-90-year old Porsche had firmly established itself as the maker of exquisitely designed and engineered sports cars, a push towards SUVs was challenging initially. “Porsche’s entry into the SUV category would surely undermine its sports car credibility and perceptions of performance, and ultimately taint the brand,” Ritson asserted, “Or would it?”
“When we published the plan that Porsche would develop and sell an SUV, [our] core fan base could not believe it,” Klaus Zellmer, CEO of Porsche Cars North America, said in an interview last year. “They would say, ‘That’s not my brand anymore.’” Yet, almost 20 years later, the Cayenne is Porsche’s best-selling car of all time, and the automaker’s bigger models continue to sell across the board. SUVs, for example, made up more than two-thirds of Porsche’s U.S. sales in 2019. Consumers ultimately were persuaded.
Ritson’s somewhat depressing conclusion is two-fold. One, “The business of brand management is very risk-averse. We use words like ‘tarnish’ or ‘damage’ whenever we see a brand deviate from the strict trajectory that its positioning and brand image dictate,” but, he states, “time after time, almost without exception, these deviations do not result in destruction.” And second, in the age of Trump, “what people think of you is far less important than the more brutal objective of getting people to think about you.” Leaving aside the fact that the age of Trump is over, there is, nonetheless, food for thought here for companies and the length at which they can extend their valuable brands.
Rowan Forster is an Executive in ENSafrica’s Intellectual Property department. He specializes in the drafting, filing and prosecution of patent and design applications, and in trademark filing and prosecution in various jurisdictions.