One of the workshops at this year’s MARQUES Annual Conference is on “Managing Split Brands in the Age of the Internet”. In a preview for Class 46, Bahia Alyafi of the MARQUES Intellectual Asset Management Team discusses some of the IP issues raised by split brands:
Irrespective of whether we use the traditional definition of brands as an object or more current definitions of brands as ideas, experiences or relationships, the bottom line is a brand aims at identifying and differentiating one seller’s products and services from those of another.
If the chief objective of a brand is to provide an indication of ownership and source of products, then how can a brand be split, or jointly owned?
Due to the nature of a brand as an intangible asset, the interest of each owner/joint owner in the brand cannot cover part of the trade mark – ownership extends to the trade mark as a whole. Therefore, while split brands cover the entirety of trade marks, split agreements take on many forms. First of all, the split can be structured by type of product or service sold, such as the case of Davidoff cigars and Davidoff cigarettes on the one hand and Davidoff perfume on the other hand (pictured right). The split can also be structured based on field of use, such as the split of the Apple brand between Apple Corps Ltd for the Beatles and Apple Inc. Finally, the split can be by geography, such as the case of Persil between Henkel AG and Unilever.
How do split brands arise?
One might wonder how this happens and it raises the following question: what are the legal and commercial implications of such positions for brand owners and for consumers?
Split brands have been used as a means to monopolize markets and ensure high barriers to entry; a prominent example is the word Superhero which was jointly registered as a trade mark in 1979 by New York-based Marvel and California-based DC Comics in an effort to prohibit others from using it (pictured left). The two companies, which are usually fierce rivals, spent 37 years monopolizing the mark and targeted different businesses that use the term “Superhero” in their branding. It was not until 2016 that this trade mark was allowed for registration in conjunction with other words by a third party in the UK.
Split brands have also stemmed from geopolitical issues, such as the Havana Club trade mark, which is at the center of an ongoing dispute between Bacardi, which claims the rights to the US mark, and Pernod Ricard, which distributes the rum in 124 countries through a joint venture with the Cuban state-owned company Havana Club Holdings (see pictures right). The dispute mirrors the historic and current political issues taking place between the United States and Cuba.
The most common source of split brands stems from M&A deals that are typically consummated between two competing companies having the rights to the same brand in different jurisdictions. The Seven Up brand (pictured left) was the casualty of such a deal, whereby in 1986, Philip Morris sold its United States operations to a private investment group, which subsequently merged with Dr Pepper Company, and sold the international operations of the Seven Up Company to Pepsico Inc. Currently the rights to the Seven Up brand are held by Dr Pepper Snapple Group in the United States, and Pepsico Inc (or its licensees) in the rest of the world.
Rivalry between family members can turn vicious and as a result leading brands can have split ownership and independent operations. While this is common in brands that include family names such as the Rothschild’s and Valentino, other noteworthy examples are Aldi – the common brand of two leading global discount supermarkets owned by two brothers with over 10,000 stores in 18 countries. The businesses separated into two groups in the 1960s, Aldi Nord and Aldi Sud, after the two brothers had a disagreement about whether or not to sell cigarettes at the retail outlets.
Joint ownership of brands is also commonly used as an expansion strategy, whereby the parties involved jointly collaborate to achieve their respective strategies. In March 2017, ITOCHU Corporation agreed on the joint ownership of the Penfield’s trade mark with Yamato International, allowing each owner to focus its efforts on its strengths in developing and expanding the brand equity in North America and certain markets in Asia.
In situations where sales and profits are declining, stocks are devaluing and finally the company is filing for bankruptcy, intellectual property assets take on an ancillary role, as the pivotal goal becomes getting through the liquidation proceedings with the most possible value and least destruction. Split brands are often founded in such circumstances, which lead competitors, distributors and/or licensees, and independent third parties, to own the same brand. Converse is a fine example of a brand that split from bankruptcy proceedings, whereby Itochu Corporation, the holder of the registered trade mark CONVERSE for shoes (pictured), which manufactured and sold shoes under this trade mark, purchased the trade mark right in Japan from Converse Inc, an American company, in 2001. The company subsequently sold the shares to Nike Inc in 2003; however it kept a joint marketing agreement.
Impact of split ownership
The splitting of ownership, use and goodwill of a brand is detrimental to the distinctive character, reputation and equity of the brand thus having an impact on all stakeholders involved, including brand owners, investors and most importantly, consumers.
Workshop 3 during the Annual Conference will present and discuss the complex issues raised by split brands, and the discussion will provide practical guidance and experience in managing split brands in multiple industries and jurisdictions. The speakers will address topics including: the history of split brands; split brands in the 20th century; the in-house transactional perspective; and what happens when there is a family feud.
Find out more about all the workshops on the Annual Conference page here.
Bahia Alyafi is with Alyafi IP Group and a member of the MARQUES Intellectual Asset Management Team