Brand Abuse and IP Infringements – Part 2: Enforcement and Return on Investment

In the first article in this two-part series, we looked at the impact of brand abuse and infringements against intellectual property (IP) on an organisation's brand value. In this second article, we delve into how action against enforceable infringements can deliver tangible return on investment (ROI) for a brand, and demonstrate the importance of a robust brand protection programme.

Enforceable infringements and ROI

Providing that a company has sufficient protection of its IP (e.g. trademarks registered in the appropriate product classes and geographic regions), there are typically a range of enforcement options available for the removal of infringing content. The existence of infringements can produce direct financial loss to an organisation; their removal allows some or all of this lost or diverted revenue to be reclaimed. This is clearly demonstrated in the following cases:

• Fraudulent copycat sites, designed to harvest user log-in credentials and provide access to funds through phishing
• Fake, branded sites selling counterfeit goods

Taking down these types of infringement also directly benefits a brand's consumer base, protecting customers from fraud, or substandard, non-legitimate goods that may put their safety at risk. For example, counterfeit versions of certain product types - such as electronics, automotive parts, safety equipment, pharmaceuticals and cosmetics - are particularly prone to exposing consumers to danger^[1]. Reported cases include drugs that contain either no active ingredient or incorrect ingredients^[2], toxic ingredients appearing in cosmetics^[3] or children’s products^[4], and instances of faulty electrical goods providing a risk of electric shock or fire^[5].

Even where an infringement is less obviously impactful, its presence online can still result in financial losses for the brand owner. Consider the case of a (cybersquatted) domain whose name contains a trademarked brand name with no significant content other than a parking page. If this domain receives significant amounts of web traffic - through users reaching the site via mistyping the URL or a search engine listing - and this traffic is monetised (e.g. via the inclusion of pay-per-click links), the owner of the fake domain can potentially generate revenue that should legitimately be going to the brand owner. If the brand in question is able to reclaim this domain through an acquisition process, it can also reclaim its web traffic, and a proportion can be converted to generate revenue for the brand owner. The table below demonstrates how this may be quantified in practice.

Table 1: Sample return-on-investment calculation for a reclaimed domain (using example values)

Similar techniques also exist for estimating the ROI associated with removing counterfeit or otherwise non-legitimate items on standalone e-commerce sites or marketplaces, or for estimating the total value of delisted goods. The calculations take account of factors like assumptions regarding the proportion of users who would buy a legitimate item if the counterfeits were unavailable, and the numbers of items available in the individual listings.

The figure below provides a case study showing the numbers of enforcement actions per month for a company in the movie industry focused on piracy of hard goods (i.e. DVDs, Blu-ray, etc.), over the first 24 months of its service with CSC. Note the initial 'spike' of activity, corresponding to the pre-existing 'landscape' of infringements, followed by a rapid decrease to eventual low levels as a successful enforcement programme greatly reduced the online availability of infringing items.

Figure 1: Example of number of enforcement actions per month over a two-year period with CSC

The importance of brand protection

A proactive brand protection programme allows an organisation to monitor for online infringements relating to its brand, and take remedial action, including the removal of the infringing content. This not only protects the organization from losses to brand value, but also shields its customers from exposure to harmful content and substandard goods.

Enforcement action is a key element of the suite of brand protection services offered by CSC, whose teams of experienced analysts offer a number of different methodologies for the takedown of infringing content. Considering activity on e-commerce marketplaces alone, over two million listings have been removed on behalf of our brand-owner customers since the start of 2016; an average of over 38,000 listings per month.

In many cases, the removal of individual infringements directly results in the ability for the brand owner to reclaim sizeable amounts of 'lost' revenue. Analysis of the statistics associated with enforcement action can allow a company to quantify the return on investment associated with its brand protection programme and can provide a compelling case for its continuation.

References

[1] https://www.ice.gov/features/dangers-counterfeit-items

[2] https://www.eurekalert.org/pub_releases/2015-04/uoc--fmt041615.php

[3] https://www.thefashionlaw.com/five-arrested-in-counterfeit-perfume-ring-scheme/

[4] https://www.theguardian.com/technology/2018/dec/02/whether-youre-unaware-or-dont-care-counterfeit-goods-pose-a-serious-threat

[5] https://www.theguardian.com/technology/2018/jun/06/dangerous-fake-electrical-goods-sold-amazon-ebay-investigation

This article was first published on 6 November 2020 at: 
https://www.cscdbs.com/blog/brand-abuse-and-ip-infringements-roi/

Also published at:
http://www.circleid.com/posts/20201112-brand-abuse-and-ip-infringements-part-2-return-on-investment/

Brand Abuse and IP Infringements – Part 1: Brand Impact

In this two-part blog series, we take a closer look at brand abuse and intellectual property (IP) infringements. In this first article, we explore the components making up a company's IP and how online content can affect a brand's value, both actual and perceived.

IP and brand value

The IP held by an organisation - i.e. the portfolio of brands, trademarks, and other intangible assets that provide it with its distinctiveness, and protect it from unfair competition in the marketplace - contributes a significant proportion to the total value of the business. A number of factors make up the total value attributable to IP, including initial creation costs, and its potential to generate future revenue^[1].

An organisation's brand will have a financial market value itself; a related concept is brand equity, which affects the value of the products and services associated with that brand. Brand equity is affected by factors like brand visibility (how well known the brand is to consumers, and its perception in the market), and customer loyalty (having a guaranteed income from an established customer base)^[2]. These factors drive certain behaviours in the market; for example, the willingness of consumers to trust a new, unfamiliar product from an established brand^[3].

The value of a brand as a proportion of the total value (market capitalisation) of the associated company can vary greatly, and is dependent on a number of factors, including company size and industry sector. For smaller organisations, which have fewer tangible assets, the brand value tends to be a larger proportion of the total value of the company. Companies where the brand name provides a significant part of their appeal (e.g. luxury goods companies, where "the company is the brand") may have proportionately higher brand values. For example, a 2007 study^[4] found that the brand value for jewellery retailer Tiffany was 75% of the company's total market capitalization. Considering a range of large brands across a spectrum of different industries, the value of a brand might typically represent something like one fifth of the total value of an organisation on average^[5]. Interbrand's 2020 'Best Global Brands' study aims to quantify the values of the 100 most valuable brands, in a list topped by Apple ($323B), Amazon ($201B), and Microsoft ($166B)^[6].

Brand damage and brand protection

Brand protection services, such as those offered by CSC, can help organisations identify online brand abuse and infringements against their IP, and take remedial action. The types of findings identified vary widely. They include reputation issues (negative comment and activism, brand association with undesirable content, etc.), unauthorised use of IP by bad actors (associated with the sale of counterfeit items or the creation of lookalike sites associated with fraudulent activity), and other brand issues, like brand dilution and uses of branded material by third parties. Some of these may result in generalised damage to the perception of a brand, which may affect its value but be hard to quantify, while others have directly measurable financial impacts. Similarly, the enforcement options available for the removal of damaging content varies significantly, dependent on the type of content.

Online content that creates reputational damage to a brand may be protected by the freedom-of-speech argument, where there are few or no routes for takedown. However, there is still value in brand owners monitoring for negative comments, as it provides awareness of the issues being discussed, and can provide an opportunity for the company to take remedial action. This action can include making changes to work practices, or broadcasting positive marketing messages to counteract the negative chatter. Left unchecked, reputation damage can have a significant detrimental effect on brand value. A recent report stated the value of Facebook dropped by $147 billion (7.4%) in a year in the wake of advertiser boycotts in response to the company's policies on hate speech^[7]. Other prominent organizations have also been subject to damaging stories and campaigns over the years. Nestle has been subject to an extended series of boycotts since the 1970s in response to their policies on baby-milk marketing, groundwater extraction, and promotion of unhealthy products. More recently, Oxfam was associated with accusations of sexual misconduct, bullying, and harassment by staff, resulting in significant dips in their levels of donations and volunteering. Google has also been accused of poor staff practices and user data breaches^[8].

A range of IP infringement types can also have significant effects on the value of a brand. When Christopher Bailey joined the Burberry organisation in 2001, he found a brand that had been significantly damaged, in part due to a proliferation of counterfeits. Fashion designer and retailer Alex Eagle notes that "Burberry check … became ubiquitous with fake goods, meaning it had lost its exclusivity". Working his way up to Chief Creative Officer in 2014, Bailey aimed to tackle these issues through a combination of promotional events, launches of new product across differing price brackets targeted at a variety of customer demographics, and - crucially - keeping "ahead of the copycat" by making products available in-store immediately after being exhibited at fashion shows. In doing so, he was able to help bring about an increase in share value of over 700% in 15 years^[9].

A programme of online monitoring and enforcement (where possible) against IP infringements can help an organisation protect its brand value. In part, simply being seen proactively defending the brand can be beneficial, increasing customer confidence, and making the company a less attractive target for infringers. Aside from these less quantifiable contributions to brand value, having an active brand protection programme in place, and removing individual infringements, also directly impacts revenue and profit. Standard techniques exist for estimating the value of these actions, providing a measure of return on investment. We'll cover that next in the second article in this series.

References

[1] https://www.ipwatchdog.com/2018/04/24/intellectual-property-valued-selling-business/id=96098/

[2] https://www.prophet.com/2016/09/brand-equity-vs-brand-value/

[3] https://www.forbes.com/sites/ryanerskine/2017/08/12/what-is-a-brand-really-worth/#7b17d6df2299

[4] https://seekingalpha.com/article/47276-interbrand-value-and-market-cap-a-more-meaninful-comparison

[5] https://www.linkedin.com/pulse/how-much-enterprise-value-brand-jonathan-knowles

[6] https://www.interbrand.com/thinking/best-global-brands-2020-download/

[7] https://www.campaignlive.co.uk/article/facebook-brand-value-falls-amazon-consolidates-top-spot-brandz-ranking/1688075

[8] https://www.alva-group.com/blog/how-to-measure-the-cost-of-a-bad-reputation/

[9] https://www.bbc.co.uk/news/entertainment-arts-41818169

This article was first published on 4 November 2020 at:
https://www.cscdbs.com/blog/brand-abuse-and-ip-infringements/

Also published at: 
http://www.circleid.com/posts/20201110-brand-abuse-and-ip-infringements-part-1-brand-impact/