Meet the Brand Detectives
We hear lots about the challenges of brand valuation and evaluation, but International Organization for Standardization (ISO) brand standards can provide significant assistance, as James Nurton finds out.
The numbers 10668 and 20671 should become familiar to every trademark practitioner. These are the ISO standards for brand valuation and brand evaluation, respectively. Yesterday’s session Working with ISO Brand Standards: Brand Valuation and Brand Evaluation, which was presented by the Commercialization of Brands Committee, illustrated the importance of the standards with a hypothetical case study.
The case study concerned U.S. company UltraSlim’s acquisition of the Fitzy mobile app for US $250 million. Playing the part of UltraSlim’s in-house counsel, Debra Hughes, assistant general counsel at Blue Cross Blue Shield Association (US), said: “It’s going to be a nice fit. We’re trying to expand outside the United States.” Unfortunately, her CEO has just received a cease-and-desist letter from FitzMe in Brazil, a company that runs a chain of fitness studios in South America.
With UltraSlim’s marketing department impatient to start rolling out the Fitzy brand, and her CEO pressing for advice on how to respond, Ms. Hughes consulted her panel, playing their roles: Outside U.S counsel, Lucy Wheatley, partner at McGuire Woods (US); brand valuation expert Brian Buss, principal at Nevium Intellectual Property Consultants (US); and Juliet Alcoba, trademark and copyright attorney at Alcoba Law (US), who advises on South America.
According to Ms. Wheatley, “The first step is to ask: What sort of problem is this? Can we figure this out or is it a foundational problem?”
Answering this question, she explained, involves addressing issues such as the valuation of the Fitzy brand (as opposed to the patented technology in the app), the value of FitzMe’s brands, and UltraSlim’s exposure in the event of litigation.
Whatever decisions are made will have big implications for the business, said Ms. Wheatley, noting: “If we can’t use the Fitzy brand, how does this impact our plans? Do we need to loop in partners who were involved in the transaction? Are any covenants violated? Do we need to make different disclosures?”
This is where the ISO standards can help. The 10668 standard aims to put a dollar value on the financial benefit to the brand owner from having a brand (which is not necessarily the same as what was paid for the brand), while the 20671 standard sets out a rigorous framework for a non-financial approach and set of principles to get a qualitative measure of the strength of the brand to determine brand equity.
“Defining the value of a brand is complex and requires input from multiple stakeholders.”
“There are a lot of choices about how to do a brand evaluation, and that’s probably a good thing,” said Mr. Buss.
In this case, three organizations—UltraSlim, Fitzy, and FitzMe—hold the relevant data required by the standards. And that data is constantly changing, said Mr. Buss, explaining: “The purchase price allocation of the acquisition may not still be relevant. You might need a new valuation and different data.”
Defining the value of a brand is therefore complex and requires input from multiple stakeholders. Ideally, a company will have metrics for each brand, considering trademark and other intellectual property rights, website data, social media usage, celebrity endorsements, etc.
“What we want to know is: how does each brand contribute to the brand owner’s financial performance? “Mr. Buss said. “My role is to be a brand detective.”
In the Fitzy case, the strength of each parties’ trademarks, including their registration status, scope, and extent of use, will be critical due to the risk of losing all the value of the acquisition.
Therefore, Ms. Alcoba said an international approach is essential. She explained that if UltraSlim files trademark applications for Fitzy, FitzMe is likely to file oppositions, and in Brazil, that could lead to more delays to UltraSlim’s plans in South America. It also raises the potential for punitive as well as material damages in Brazil. To avoid such problems, proactive searching is essential, ideally on a monthly or at least quarterly basis, she added.
The panelists stressed that a brand’s strategy, and legal, marketing, and finance decisions need to be intertwined, and all relevant departments may need to be engaged in strategic decisions.
Noting that valuation and evaluation both require extensive behavioral, financial, and legal information about the brand, Mr. Buss said, “Brands have financial consequences. Brand owners and professionals need to gather, collect, and keep lots of details about their brand assets.”
And it is best to have these discussions, make decisions, assign roles, and assess brand valuation as part of your routine planning—so you do not have to do it in the middle of a crisis.
“It’s hard to learn. And it’s even harder when you’ve got the CEO on the phone,” said Ms. Hughes.
Video: Envato Elements / ginzburgstock
Photo of the Day
An in-person reunion of INTA leadership: (left to right) 2021 INTA President Tiki Dare (Oracle Corporation, US), 2022 INTA President Zeeger Vink (MF Brands Groups, Switzerland), 2020 INTA President Ayala Deutsch (NBA Properties, Inc.), and INTA CEO Etienne Sanz de Acedo.
Saturday, April 30, 2022
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