News

New Fragrance and Beauty Products for Nautica

Nautica Apparel Inc., a subsidiary of Nautica Enterprises, Inc., a division of VF Corporation today announced it has signed a new global licensing agreement to develop, produce and market fragrances and beauty products for the Nautica brand.

Under the terms of the agreement, new prestige fragrances will be launched in department stores and the existing Nautica fragrance brands: Nautica Classic for men and women, Latitude Longitude and Nautica Competition will be distributed.

Courts and Torts: Touching on Intangibles

Intellectual property is important, say executives. So why don’t they act as if they mean it?

Like the late Rodney Dangerfield, intellectual property (IP) doesn’t get much respect. Yet the reason is still a bit of a mystery.

To be sure, executives at both big and small companies acknowledge that it’s important to handle IP – the intangible assets most often defined as patents, trademarks, copyrights, and trade secrets – correctly.

Half of 120 global senior executives responding to an Accenture survey released last year confirmed that managing IP and other intangible assets (such as brands, research and development, and goodwill) is one of the top three management issues facing their companies.

Fifty-two percent of the executives surveyed worked for small and mid-sized companies with annual revenues of under $500,000, while 37 percent worked for companies generating over $1 billion.

A whopping 96 percent said that managing IP and intangibles is important to the success of high-performing companies, while 49 percent deemed those assets to be the main source of long-term shareholder wealth creation.

But there’s a gap between such views and the effort executives expend to track and protect the assets.

Only 5 percent claimed that their companies have a robust system to catalog and measure the performance of IP and other intangibles.

Another 66 percent said their inventory-measurement process is informal or qualitative, while a full one-third admitted they don’t measure performance at all.

The cost of such inaction, however, can be high.

The Federal Bureau of Investigation estimates that U.S. businesses lose between $200 billion and $250 billion a year because of IP violations, and the U.S. Chamber of Commerce claims that those totals translate into the loss of 750,000 American jobs.

Still, most companies don’t even have a complete inventory of their IP portfolios, much less procedures to protect or commercialize their patents, trademarks, and copyrights, asserts valuation specialist Robert Reilly of Willamette Management Associates.

To be clear, not all companies are IP laggards.

Some, like the Coca-Cola Company, are masters of that universe. Indeed, Coke needs to be: the value of its flagship brand, for example, is about $39 billion–twice the company’s annual revenues, according to brand management firm Lipcott Mercer.

In the 2003 Management Discussion and Analysis section of its 10-K, Coke talks candidly about the care and feeding of its trademark and brand, noting that “maintenance of brand image” is one of the corporation’s three key challenges.

Likewise, IBM., which perennially tops the list of organizations that receive the most annual patents (3,415 in 2003), is a whiz at commercializing its IP portfolio. For the last five years,
Big Blue generated over $1 billion in revenues every year from its IP-licensing agreements.

Nevertheless, many companies reportedly mismanage IP in one way or another. One reason is that outside of the context of a merger or acquisition, there’s no accounting standard
to move them to repent and disclose their IP assets.

Under Generally Accepted Accounting Principles, companies aren’t usually permitted to record the value of self-generated IP (intangibles not acquired as part of a merger), says Dimitri Drone, a director of PricewaterhouseCoopers’ auditing and assurance group.

While some companies might mention IP assets in their MD&As, Drone says, “GAPP generally does not permit IP assets to be capitalized on the balance sheet, other than if they are purchased, such as in merger situations.”

The current M&A boomlet, however, could spawn wider reporting and better management of the assets. GAAP requires that companies involved in business combinations catalog and recognize the fair value of certain acquired intangibles, notes Matt Pinson, a PwC director.
Further, acquiring companies continue to test the value of newly-acquired IP for periodic impairment.

Besides the increase in mergers, another key motivation for better intangibles management is the current rise in IP-related lawsuits, which tend to force management to value intangible assets associated with the legal challenges.

Preliminary calculations from the U.S. Patent and Trademark Office (PTO) show that 5,533 patent- and trademark-related lawsuits were filed in federal courts during 2004, a 7 percentage point hike from 2003. Further, for the past 10 years, IP-related lawsuits have risen steadily.

There are two reasons for the litigation surge, according to Reilly.
One is that companies that are more tenacious about protecting their intangible assets have been suing to protect them.
The second is that, with the economy struggling to emerge from a downturn, businesses are willing to pursue even small claims (between $3 million and $5 million) to recover lost IP revenues.

A typical patent-infringement case costs plaintiffs between $2 million and $5 million and can last two to five years, according to Gary Morris, an IP attorney at Kenyon & Kenyon, who noted that 95 percent of the cases are settled out of court.

Still, the price of admission can be worthwhile. For example, Texas Instruments Inc. won a total of $2 billion in two patent-damage settlements 1996 and 1999. More recently, Johnson & Johnson was awarded $700 million in two patent infringement court decisions in 2003.

Further, patent-infringement, trademark counterfeiting, copyright-piracy, and other, more traditional cases will be joined by newer varieties, Morris thinks. He and other legal experts predict that two different types of lawsuits will emerge this year: suits by private-company investors charging mismanagement of IP assets and shareholder-derivative suits charging public companies with a lack of compliance with the Sarbanes-Oxley Act.

In the case of private companies, original investors who no longer have an interest in a company, for example, may seek to recover their share of the gains realized by the more lucrative management of IP assets by a later owner, according to Morris.

The underlying idea of the Sarbox non-compliance issue is the same.
Companies lacking solid process for managing IP assets are most open to regulatory charges of failing to present a fair and accurate picture of their financial health, opines Stacey Rabbino, legal-services network manager at AARP and the former chief IP counsel for VeriSign Inc.

That deficiency may get them into hot water with the Securities and Exchange Commission. The SEC could argue that since senior executives failed to develop procedures to identify and value a company’s IP, they won’t be able to gauge which assets are material and require disclosure, according to Rabbino, who acknowledges that her theory hasn’t been tested yet in the courts.

The allegations, she said, could involve possible violations of sections 302 (certification of financials by CFOs and their bosses) and 404 (assessment and certification of internal controls over financial reporting).

By Rabbino’s lights, executives can’t comply with either of those provisions unless they know what their IP portfolio contains, and then value those assets to find out if there’s material risk associated with the possible mismanagement of them.

Regarding 404, she says, companies must set up ways to ensure that IP information flows up to the Sarbox disclosure committee, where the question of materiality should be debated. One procedure, for instance, is to assign a senior executive to the role of keeper of corporate IP knowledge.

For their part, disclosure committees will likely have to make some tough choices in balancing business and legal interests. Members will have to decide how to disclose enough information to give shareholders an accurate picture of the company without tipping off competitors to trade secrets.

What’s the best defense against Sarbox-related charges of IP mismanagement?
While companies that make a good faith effort to inventory and value IP will retain some leeway with the SEC, they won’t get a free ride Rabbino thinks. A good-faith effort involves auditing and valuing IP, and developing an enforcement program to protect and monetize the intangibles, she adds.
Companies also should document IP transactions (licensing deals, for example) and assign one point of contact for all IP related issues.

A tall order? Maybe, but companies are already being forced to take tangible steps to avoid a lawsuit concerning their intangible assets.

Brand Communication Trends

The trends on the horizon in 2005 did not develop overnight or take place in a vacuum. Rather, the years prior set the stage for these changes.

The trends have been built on a platform that includes the gradual adaptation of new technologies in television and radio and increasing acceptance of alternative marketing techniques.

Traditional commercial advertising through media outlets such as television and radio is now on the chopping block, thanks to a wide array of new technologies and services.

In television, the proliferation of Digital Video Recorders (DVR), including TiVo, and Video on Demand (VOD), means that viewers are watching their favorite television programs sans commercials.

That trend is unlikely to abate anytime soon, as DVRs and VODs are expected to be used in over 30 million households in the United States within three years.

Similar to DVRs and VODs in that it is commercial free, satellite radio is drawing an increasing number of listeners away from traditional terrestrial radio programming.

According to a recent issue of Brandweek, although satellite radio currently claims only 4.5 million subscribers compared to 290 million weekly terrestrial radio listeners, satellite subscribers are expected to grow by approximately 200 percent this year alone.

Companies who rely on traditional media to promote their brands are not going to leave television and radio advertising altogether, but they are being forced to rethink their advertising models or else be faced with a continually shrinking audience.

Leading edge companies will even take advantage of the changing face of media technology by viewing it as an opportunity and not as a threat.

In order to respond to the new reality, advertisers are expected to increase their use of product placement and to integrate advertising into a wider range of entertainment content, expanding beyond film product placements.

In some respects, the new technology may even make advertisers’ job easier. TiVo and DVRs are capable of tracking viewer profiles and preferences, which companies can and will take advantage of in order to better target their customer demographic.

As traditional advertising channels become less effective, companies and advertisers are spending more of their marketing budgets exploring new ways to promote brand awareness.

Perhaps the most successful new advertising channel to come out of this trend is “stealth marketing.”

According to a recent report published by the University of California Berkley in the California
Management Review, stealth marketing is based on the simple premise that word of mouth
from peers is the most effective promotional technique, and attempts to create a buzz about a brand in an obtuse or surreptitious manner.

Stealth marketing effectively mitigates the problems associated with traditional advertising by reaching a target audience through means that are not necessarily perceived by consumers to be an “advertisement”.

Conceptually, stealth marketing has been around for years. However, new methods have been
developed and enhanced by technology to make this form of marketing much more effective.

Viral marketing is one of those methods, and is defined in a manifesto on the topic by the CEO
of BzzAgent, a marketing firm that specializes in stealth marketing, titled “The Word on Word of Mouth”.

According to this document, viral marketing “delivers a marketing message that spreads quickly and exponentially among consumers” and it typically comes in the form of email or video.

Another new stealth marketing technique involves using brand pushers. Brand pushers are hired or volunteer to generate buzz about a product by, for example, promoting a certain beer at a bar and recommending it to friends without appearing to be affiliated with the company.

Celebrity marketing takes advantage of celebrities’ visibility in order to push a brand by having them, for instance, mention their pharmaceutical drug “of choice” in an interview.

Bait and tease advertising literally teases the costumer into actively becoming aware of the product.
For instance, Mercedes created a movie trailer for a non-existent movie that was played in theaters, featured a new Mercedes car, and drew viewers to its website in order to find out the movie’s release date, thereby gaining valuable consumer information.

Finally, product placement has recently moved beyond movies and television, and companies are now integrating product advertisements into pop songs and video games.

Given stealth marketing’s surreptitious nature, ethical concerns have been raised that may ultimately limit certain methods that are deemed too underhanded.

The FDA, for example, has raised the issue of not being able to regulate celebrity marketing of pharmaceutical drugs because celebrities are not required to disclose the drugs’ side effects.

Additionally, as consumers become more aware of stealth marketing techniques, advertisers will have to come up with new and innovative techniques in order to reach their target audience.

Nevertheless, given the general effectiveness of stealth marketing and its potential upside
compared with the diminishing success of traditional advertising, stealth marketing will be increasingly utilized in the coming years, and companies will strategically embrace it as a new way to create brand awareness.

Spalding signs master licence for Japan

Russell Corporation announced today that it has entered into a master licensing agreement with for the development of the Spalding brand in Japan.

The five-year agreement includes all facets of brand building, from product development to distribution, and includes channels of distribution from large scale sporting goods stores to suburban specialty shops.

According to Scott Creelman, president of Spalding, “As sports become an increasingly instrumental fixture of contemporary life, we believe that the licensee can certainly further heighten our stature as a sporting brand. It has a reputation for building brands and developing business that is second to none in Japan.
They understand that sports now involve not only people engaged in them, but lifestyles that encompass sports on a variety of levels including spectators.”

“With the mounting concern about wellness in recent years, sports have come to be regarded as an integral part of a health lifestyle. They have also evolved into a key theme in the fashion field. As such, the world of sports is expanding its borders even further. For example, this year will see the birth of the ‘bj League,’ Japan’s first professional basketball league. Spalding is committed to spreading the new spirit in all of its doings,” said the president of the
licensee.

Pillsbury ice cream

Kemps has enlisted the Pillsbury Doughboy to help peddle a new line of ice cream across the country.

Kemps partnered with General Mills Inc. to create Pillsbury Ice Cream Classics.
Designed to capitalize on America’s fascination with baked goods mixed into ice cream, the seven-flavor line taps into the brand equity of the Pillsbury Doughboy.

It is Kemps’ first product launch outside of its traditional Midwest markets. It’s also the first time in its 135-year history that the Pillsbury name is on ice cream.

Executives at both companies – as well as industry insiders – believe it is a brand marriage made in heaven.

“We are good at making and marketing ice cream, but to move beyond your traditional geographies requires a familiar brand for consumers,” said Tom Piper, Kemps’ senior brand manager for Pillsbury Ice Cream. “For those who don’t know Kemps, we think this product will
be wildly more popular than if we were to enter new markets just as Kemps. It takes time to build a reputation, and Pillsbury already has it.”

“It’s an example of brands realizing there are no rules anymore and that there are all sorts of new ways to get a brand out and achieve distribution and gain luster,” he said.

For General Mills, the partnership makes for an easy entry into a new category for the Pillsbury brand.

“We are tapping into the knowledge and expertise of one the top ice cream manufacturers in the country,” said a manager of General Mills. “Kemps’ reputation for quality and innovation is unparalleled in its industry.”

More than 75 licensees have rights to use the Pillsbury brand and the Doughboy character.
Such products range from housewares and collectibles to apparel and fund-raising items.

The national rollout is a big step for the company as it is a cornerstone of Kemps’ growth strategy.

Brand Ranking

Brandchannel.com, run by Interbrand, asked its readers to name the most influential brands. Some 2000 readers answered.

Then Brandchannel possesses the boldness to publish a ranking from this non-representative, arbitrary sample.

Hopefully your research agency is more professional.

We find it even more embarrassing, that classical media spread this “news”.
There, the Brandchannel readers are even called “experts”.

Ebay, shooting star among brands

ebay is at present the strongest brand in Germany.

This is the result of the study “Best of brands”.

ebay replaces previous year winner Siemens, which behind the discounter Aldi came in 3rd place in the category company brands.

The study – second of this kind – was initiated by Seven One Media, Serviceplan, “Wirtschaftswoche” and the German Association of trademark owners.

The goal is to measure the strength of brands both according to psychological and according to economic criteria. Thus, the results of a representative survey are combined with indices of the
present economic success of the brands.

ebay did not make past years top 10 list.

Aldi moved from third to second rank.

In the category of the strongest product brand adidas could maintain ground as winners. The sports article rand ranks ahead of Sony (entertainment electronics) and the detergent brand Persil. Sony jumped ahead from the 10th place, Persil from eight.

At present the most strongly growing brand in Germany is Samsung.
The success of the mobile phones of the Korean electronics company contributed substantially
to the first place in this category.

Previous year winner Haribo does not reach the list of the ten best growing brands, at the places two and three follow Sony, for photography, and IBM.

Monitoring todays word of mouth

Are you monitoring classic media like TV, radio, newspapers and magazines to catch the news
about your brand and your competition?
If so, what you see is paid content.

And what does guide potential buyers mostly?
Recommendations or “word of mouth”.

It has been proven in countless studies, that recommendations are the number one source for consumers as well as business people when making important purchases.

Are you monitoring today’s word of mouth?

Someone said in the early 90ies, the internet will become the equivalent of the village well.

Thanks to email, news groups, blogs and consumer exchange portals it did.

Twenty percent of consumers, who purchased a 2001 or 2002 vehicle, sought advice of other
consumers online before they bought.

Here is a tool to monitor and measure word of mouth, www.intelliseek.com/brandpulse.asp.

It is an internet monitoring tool that helps you measure and track the pulse of consumer “buzz”
about your brand, company, or emerging issue.

BrandPulse collects and analyzes content from public online databases and discussion boards.

And measuring is the first step towards control.

Grundig enters cell phone market

Grundig, a manufacturer of consumer electronics, will enter the market for cell phones via licensing.

According to Grundig Intermedia GmbH new cell phones under the Grundig brand will be
available soon.

Grundig Intermedia is the successor of the Grundig AG, which went into chapter 11.

Managing director, Hubert Roth: “We are convinced that the license will increase the value of our brand Grundig and will give us access to the telecommunication market.”

Grundig has ambitious plans to expand its brand into new industries.

The licensee markets private label cell phones to service providers, approximately four million
in 2004. He has the exclusive rights to produce and distribute mobile telecommunication products and accessories under the Grundig brand. According to the CEO it will launch
four cell phones in March 2005 and present those at CeBIT in Hannover.

The brand recognition will allow the licensee to establish itself in new markets.