C-Suite Executives More Aware of Trademark Portfolio Risk and Reward

By Brian Focarino
April 18, 2017

Last month, CompuMark released its findings from a survey conducted in August 2016 showing that eight in ten (80%) C-level executives of companies with 10 or more employees believe trademark infringement of their marks is on the rise.  Despite this, of the 440 executives polled, only one in five (20%) stated they have a process in place to actively watch more than 75% of their portfolio marks, while half admitted to watching only between 26-75%.

The survey, conducted on behalf of CompuMark by market research company Opinium,  was conducted online between August 12 and 22, 2016 on a sample of 440 C-suite respondents in North America and Europe in organizations of 10 or more employees. The research covered five countries (number of respondents indicated in parentheses) — U.S. (106); U.K. (104); Italy (59); Spain (59); France (57); and Germany (55).  The survey analyzed the perceptions of C-suite executives regarding trademark challenges, their outlook on trademark infringement and their approach to managing their trademark portfolios.

Despite their feeling that trademark infringement is on the rise, 66% of organizations stated they had plans to launch new marks within the next year, and 80% said they would likely launch even greater numbers if the trademark clearance process were simpler.  This is impacted by the immediacy of the digital age, where brand owners frequently feel pressure to compress the timeline for clearing and launching new brands.

According to Saegis, there are currently over 55.3 million active trademarks, with nearly 6 million applications filed in 2015 alone, more than double the rate of applications filed at the outset of the Great Recession.  In 2014, the U.S. outpaced Europe with respect to the percentage rise in filings, at 6.7% and 2.7%, respectively.  Globally, the World Intellectual Property Organization estimates the average annual growth rate for trademark applications at between 6-8% for each of the last two years.

As the volume of active trademarks increases, so too do complications for companies.  79% of polled executives believe trademark infringement is on the rise, while 63% report having been negatively impacted by infringement in the past.  More than half of respondents – 53% – indicated their organizations have taken some form of action against third party infringers, while over one third – 34% – admitted to having changed at least one brand name as a result of infringement.  Trademark trepidation is also on the rise, with 40% of polled executives indicating they are more concerned about infringement now than they were five years ago.

Playing a role in the trend, 61% of respondents indicated their organizations had launched new trademarks in the past year, with an additional 66% signaling they would be unveiling additional brands in the upcoming year (39% of respondents indicated they would launch one additional brand, while 27% signaled they would launch two or more).  To cope with the increased volume, 41% of respondents stated they had increased their budget for trademark matters, with only 5% saying they were dedicating less money to clearance.  While organizations are clearing increasingly more marks, 50% identified speed to market as the most significant hurdle facing their current clearance efforts, followed by hardships in clearing marks across all global markets (47%), finding a suitable mark to start with (43%) and launching in a multi-channel environment (42%).  Notwithstanding these hurdles, respondents expressed a 94% confidence rate that their marks had been properly cleared across all relevant markets, with respondents indicating a 97% confidence rate for the United States in particular.  Executives indicated they had 93% confidence (97% in the United States) that they had been provided with the right information needed to protect their existing marks in various jurisdictions.

While 79% of polled executives believe trademark infringement is on the rise, however, the number of actual trademark infringement cases brought to court remained fairly consistent from 2005 through 2015, with 3,820 cases filed in 2005 and slightly less, 3,449, filed in 2015 according to Lex Machina.  It is likely, however, that the relatively steady caseload could be the result of increased efforts around negotiation and arbitration, keeping infringement disputes out of court.

The executives’ 79% response rate reflects 32% who believe trademark infringement has or will “increase significantly” compared to 47% who believe it has or will “increase slightly.”  Of the remaining 21% of respondents, only 5% indicated they believed the instances of trademark infringement had or would decrease in the coming years.  Likewise, 40% of respondents stated they were more concerned about the prospect of trademark infringement than they were five years ago.  Roughly half of the sample population indicated they were “as concerned” as five years ago, and only 8% registered decreased concern.  Despite growing general fear of infringement, however, only 20% of organizations are actively watching more than 75% of their portfolio, and only 50% are watching somewhere between one and three quarters of their portfolio.

Of the 63% of polled organizations that had been negatively impacted by infringement in the past, 26% of respondents indicated the greatest impact was loss of revenue.  21% cited damage to brand reputation and customer confusion, respectively, as the most harmful aspect of infringement to their particular organizations, while 19% indicated their largest loss could be characterized as reduced customer loyalty and trust.  Interestingly, in a world where time is money, 12% of executives cited the lost time of their marketing and legal teams as the single largest detriment.

Some of the practical takeaways from the survey?  Clearance has always mattered, but it matters a lot in today’s rapidly evolving trademark ecosystem.  Not only are brand owners increasingly focused on clearing brands across multiple channels in multiple regions, but as more and more marks are adopted and registered, the risk of infringement and dilution is also likely to increase.  While protectability may be important from a legal standpoint, 45% of polled executives still indicated competitive positioning was most important to them when adopting a new mark.  Another 41% indicated they placed value on whether a mark is “unique.”  In the United States, protectability was cited by organizations as the third most important factor for a new mark – after competitiveness and uniqueness.  Other mark attributes executives signaled as important included global relevance, versatility and timelessness.

Another interesting takeaway is the rise in seasonal and secondary offerings – 53% of organizations indicated they would formally clear marks associated with these offerings.  Among the most risk averse respondent groups were organizations in the United States, 42% of whom signaled they would not consider launching seasonal offerings under a new mark if it was not cleared first.

Ultimately, the executives signaled hope that advances in technology will herald a more streamlined, speedy and reliable process for clearing marks and making informed decisions, which may in turn contribute to an even greater volume of mark generation.

The research also reveals executives’ increased awareness and attention to the risks and rewards presented by their trademark portfolios.  Amid trends toward increased scrutiny and shorter timelines, however, trademark professionals who can provide savvy, accurate and reliable counsel on time and on budget have never been more important.

The Author

Brian Focarino

Brian Focarino is an Associate in the trademark, copyright and advertising group at Cooley in Silicon Valley, a Young Lawyer Fellow for the American Bar Association Section of Intellectual Property Law, and a Fellow of the Internet Law & Policy Foundry. Prior to Cooley, he was a legal intern for trademarks and digital media law at Google in Silicon Valley, a legal intern for trademark, copyright and Internet law at Verizon, and a judicial intern for The Honorable Randall R. Rader, former Chief Judge of the U.S. Court of Appeals for the Federal Circuit. For more information please visit his firm profile page.

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