By Georgina Scott
Co-branding partnerships have become increasingly popular since the late 1950s. In today’s global, hyper-competitive market, leveraging your trademarks through a co-branding strategy presents a lucrative opportunity to increase brand visibility, awareness and recognition.
So, what is co-branding?
Co-branding can be broadly defined as a marketing strategy whereby two or more brands collaborate to produce a unique product or service. This product or service is branded with both brands’ trademarks to create a new single mark. Some examples include:
- Nike and Apple partnering up to create the Apple Watch Nike+
- Covergirl and Lucasfilm collaborating to release their limited-edition Star Wars inspired makeup line
- MasterCard becoming the first credit card company to integrate with Apple’s innovative Apple Pay technology
- Red Bull and GoPro’s Super Bowl XLVIII commercial where famous skydiver Felix Baumgartner completed a space jump from over 39 kilometres above Earth
- Starbucks teaming up with Spotify to offer all Starbucks employees a free premium subscription to curate playlists for each of their stores
- H&M collaborating with designer Alexander Wang to produce an athleisure collection for H&M stores
What are the advantages of co-branding?
Undoubtedly, co-branding has many advantages. Perhaps the most obvious, is the potential to leverage trademarks to increase sales revenue. A prime example of this is Adidas Yeezy, a luxury shoe line created by musician Kanye West and sportswear giant Adidas. Back in 2015, West and his business dealings were in dire straits with a USD16 million debt, which escalated to USD53 million a year later. Following the success of his co-branding relationship with Adidas however, West netted over USD100 million in royalties by 2018, demonstrating the money-making power of co-branding.
The launch of a new product or service is also made easier when funded by two separate entities. These brands can jointly fund the marketing of this new product, utilise each other’s pool of talent, and share any associated risks of failure with the new launch. Moreover, in the same way Adidas benefitted from Kanye West’s “street cred”, a brand can enhance their own image through association with another renowned brand.
Co-branding also gives all parties in the partnership the opportunity to tap into each other’s customer base. Parties can lean on the other’s existing market credibility to build customer trust and establish recognition for their own brand within a new target audience. This association positively influences the customers’ purchase decision as they are more likely to do business with a trustworthy company. Thus, co-branding may aid in entering a new market or growing current market share.
What IP issues arise in co-branding relationships?
Although co-branding relationships can be fruitful endeavours, their success is often contingent on four key IP-related considerations. Firstly, both parties must agree on what legal structure this relationship will take. One option is to establish a joint venture company. This is commonly used when a new product containing co-branded ingredients is created. Each party licenses its brand into this new joint venture and when it comes time to terminate the joint venture, the licenses will end and revert to their respective licensors. An example of such a structure is Diamond Walnut Growers Inc combining with Sunsweet Growers Inc’ to create a new fruit and nut joint venture, called Diamond/Sunsweet. Sun-Maid, known for its raisins, would later join this alliance on similar terms.
Another popular option is cross-licensing. In this scenario, the parties involved would grant a license to each other to use each other’s respective trademarks. When the relationship ends, the licenses will revert to their licensors. One of the major benefits of this structure is that registration with a trademark office would not be needed as the trademarks maintain their own legal integrity by being displayed separately.
A second significant consideration is deciding the owner of the co-brand’s newly created intellectual property (IP) once the relationship terminates. Co-branding relationships do not last forever. This begs the question, who will own the rights to the marketing content and packaging elements upon termination? Each party will have contributed to the development and execution of this co-brand and is likely to want ongoing access to the fruits of their labour.
Similarly, co-branding strategies oftentimes generate a new customer base. Upon termination of the co-branding relationship, who will own the rights to the customer database?
Finally, most brands have set style and communication standards that govern the use of their trademarks. When two sets of standards collide in a co-branding situation, particularly during the initial stages, there is potential for substantial disagreement. This issue would become even more pronounced on social media where a mistake can have a widespread and devastating impact on a brand, even long after the co-branding relationship has ended.
How can I protect my brand when considering co-branding?
Thankfully, the concerns outlined above can be overcome with a comprehensive agreement and the right choice of a co-branding partner. The co-branding agreement is legal document that will oftentimes involve lengthy negotiations, outlining the legal structure you will adopt, what will happen with IP created during the partnership, and style guidelines for the use of your trademark.
The co-branding agreement will also typically include a termination clause, ensuring that each party’s IP assets are kept intact even if the partnership ends. Failure to agree on the terms of termination may allow your partner to continue profiting from the co-branded trademark. Therefore, a thorough agreement is undoubtedly a worthwhile investment to protect your IP.
From a business perspective, the selection of your co-branding partner should also be carefully considered. This helps prevent issues such as incompatible brand identities, failure to appeal to target customers, and poor execution. For example, oil company Shell and toy manufacturer LEGO ended a decades-long partnership due to misaligned brand values. Shell’s controversial drilling activities in 2014 triggered environmental protests targeted at LEGO, which threatened the latter’s reputation. This shows that although two brands may seem compatible in the beginning, unanticipated conflicts may arise, causing the association to backfire on one or both of the parties involved.
Conclusion
To wrap things up, it is important to carefully consider whether a co-branding partnership is right as part of your marketing strategy. Should you decide to pursue this strategy, you must take into account the IP issues that may arise from the partnership. These concerns must then be adequately addressed by establishing a comprehensive co-branding agreement with your partner(s) to protect each other’s valuable assets. If you require further information about protecting your IP rights when it comes to co-branding, please feel free to contact us at kass@kass.asia.
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