A company’s brand is its most valuable asset. Today, the concept of “brand” stretches beyond a company’s logo, colors, product design, and general trade presence to include its retail experience, employee actions, product performance, and more. As a tangible asset, it builds equity that translates into trust. Trust, in the hearts and minds of consumers; trust with employees, vendors and stockholders; trust with investors. Trust that equals money in the bank. On every level, brand is worth fighting vigorously to protect.
In fact, Interbrand releases an annual Top 100 Brands list that reveals the percentage of a company’s revenues directly attributable to its brand. Interbrand projects five years of earnings, deducts operating costs and taxes, strips out patents and management strength, and assesses the risk profile of the company’s earnings forecasts. It then values a company using market leadership, stability, and global reach—three brand value factors that a company’s intellectual property protection program can have the ability to directly affect.
The Top 10 brands on the 2005 list include Marlboro, Toyota, McDonald’s, Disney, Nokia, Intel, GE, IBM, Microsoft, and, at number one, Coca-Cola.
At the International AntiCounterfeiting Coalition (IACC), our focus is on protecting brand value and deterring the counterfeiters who unscrupulously copy branded products. We feel strongly that brand dilution and consumer mistrust in a company’s brand promise can be the direct consequences of a company’s counterfeiting problem and as damaging as the loss of sales. Because a company’s brand asset is so important to its health on every level and the destruction of it so easy, brand protection is arguably one of the most important functions within a company today. An asset left unprotected is a target.
So what has brand protection from an intellectual property protection perspective evolved to mean in the 21st century? Basically, that no company today that hopes to thrive tomorrow can afford to ignore it.
A comprehensive intellectual property protection program today encompasses everything from Internet policing, the management of manufacturing relationships in foreign countries,and the use of technological solutions to internal brand protection program development and an ability to have a bigger voice in the political arena.
Enlisting the help of two of my fellow IACC members, here is an overview of some of the best practices for brand protection in the 21st century.
Protecting the Tangible Product
Technology can be invaluable when it comes to protecting your company’s physical product. Authentication technological solutions that cover products as they move from the pointof manufacture to the point of distribution are integral to supply-chain protection efforts and can help a company recover millions in lost revenues.
IACC member Duncan Ritchie of Authentix shares how one technology solution works to protect consumer products ranging from pharmaceuticals to fuels to spirits to banknotes as they move throughout the distribution chain; a system that in the past three years has helped companies and governments recover $3 billion.
Companies have the option of using patented nanotechnology-based markers that can be incorporated into a variety of products. These nanomarkers…some for use in packaging materials, some for use in fuels, some for use in ingestibles…are FDA-accepted markers that can be used to authenticate products, not just their packaging.
According to Ritchie, layering authentication features is the best approach to give products several security features, including overt features (color-shifting inks, olograms), covert features (invisible ink that only reacts to a specific wavelength of light), and forensic security features.
Like other brand security service providers, Authentix also manufacturers devices that test for the presence of these markers. If the markers are present, the products are genuine.
Another security solution involves mass serialization to label products down to the item level. It provides products with a unique signature comparable to a unique license plate.
As serialized products move through the supply chain, they can be assigned unit codes that establish “parent-child” relationships. These codes are scanned and data is uploaded each time the associated shipment moves through various points in the supply chain. Automated databases track products as they move from production to point of sale.
For each industry, there are specifically designed security solutions.
For the healthcare and life sciences industries, Ritchie says markers are effective for authenticating packaging materials and are incorporated into inks, substrates, and blister packs. Medicines themselves also are authenticated with FDA-accepted in-product markers. Over $40 billion of the nation’s drug supply currently is being safeguarded with such solutions.
In the spirits industry, markers authenticate the packaging and the spirit itself. This helps combat the fact that in some regions, authentic bottles are refilled with counterfeit spirits.
In the oil and gas industry, markers are added to fuels at the terminal. The presence of these markers can be tested at retail outlets and provide information including whether the fuel has been diluted and if so, how much.
Forensic testing provides even more information about the substances with which diluted fuels have been compromised.
Authentix recently developed an innovative solution for a leading fuel company brand with a costly counterfeiting problem. The fuel brand was being diluted with other cheaperfuels and solvents in a Latin American country. As a consequence, the client was losing sales volumes and revenues. Moreover, the adulterated and misbranded fuel was causing damage to customer automobiles, thereby damaging the reputation of the brand. To maintain the integrity of its supply chain, the client needed a means of ensuring that its authorized retail franchisees only sold authentic branded fuel.
All fuel supplied to the franchised outlets originated from two major refineries supported by a complex distribution network. The technology-based solution implemented included markers that were blended into the fuel at the terminal with fuel additives placed at the beginning of the supply chain so the fuel can be verified for continued presence at retail fuel pumps. The marking solution included both a quantitative and qualitative covert marker, field inspection using a simple authentication process, an online investigative data management tool, and chain of evidence custody tracking for legal case management support.
As a result of the comprehensive fuel marking and testing program, legitimate supply was maintained to 2,400 fuel stations. More than 500 legal actions were taken to close or de-brand fuel stations that were knowingly selling adulterated fuel. Furthermore, consumer confidence in the brand was restored, which is being tangibly reflected in the company’s bottom line; sales have since grown by 10 percent, equivalent to $250 million annually.
Protecting the Processes Surrounding the Design, Production, and Distribution of the Product
According to Vincent Volpi, IACC member and CEO of PICA Corporation, a global security management and loss prevention company, successful IP protection strategies are likefootball—winning teams bring it both offensively and defensively.
Defensive tactics for IP protection management include
- Filing for the appropriate patent and trademark protection in the countries in which you are doing business,
- Regularly checking the design, invention, and utility patents and trademarks of your competitors, and
- Frequently auditing your IP security for gaps and making certain your company’s IP program and internal polices are current.
One of the best defensive tactics is to make certain your research and development team is designing products and the equipment to produce your products with IP protection in mind. Your products need to be difficult to copy by design. Carefully weigh the following options because they can provide additional layers of protection.
- Can your production be compartmentalized to further protect your products? Can you outsource different parts of your product to different companies?
- Are you keeping essential technologies, procedures, and designs in your home country if you are manufacturing your products in another?
Volpi knows that even the most well-executed defensive strategies alone do not protect your IP. Offensive strategies are of equal importance. Effectively implemented offensive strategies can expand the responsibility for protecting your company’s IP beyond the legal and LP departments. Offensive measures can include
- Filing complaints against those you catch counterfeiting your product,
- Using investigative tools and techniques, and
- Turning your constituencies, from employees to suppliers, distributors to consumers, into your advocates.
Internal Partnerships. Talking to people in the know, inside and outside your organization, establishes a communication network, creating an ongoing information flow.
Internal partnerships should be developed with every department within the company—legal, security, risk management, licensing, buyers, design, sales, production, compliance, distribution, sell-offs, information technology, and public relations. Each serves a unique function that will strengthen your program.
For instance, a strong relationship with your buyers will help you develop practices to prevent the purchase of counterfeit product in retail operations. Design alliances help you protect designs and establish controls in the design process.
Sales relationships can be key in identification of issues in the field and establishing best practices and controls. And, the public relations department is invaluable to thecoordination of all media coverage in any aspect of the IP enforcement program to the company’s best possible advantage.
While internal relationships are essential to the success and reach of an intellectual property program, so are the external ones. This is advocate-building with the outside world.
Investigators and consultants aid you in developing field resources by industry and geography.
Law enforcement is essential to establishing contacts to leverage for prosecutions.
Informants make gaining inside information and insights into your industry easier.
Vendors can control other rogue vendors and establish vendor cooperation and compliance.
Manufacturers can help you establish cooperation and compliance for manufacturing and sub-contracting activities.
And don’t forget customers; they have a major stake in your products delivering on their promises. Educate your customers about potential counterfeit problems. They wantto hear from you about products masquerading as yours with the potential to cause harm. They want to be educated about how to protect their families from the dangers of fake products. Include a hotline or online reporting mechanism — some means of reporting IP theft to your customers. Here again, enlist the efforts of your public relations department.
Make Your Voice Heard in the Market Environment in Which the Product Is Sold
At the IACC, our members represent a cross section of business and industry, from autos, apparel, luxury goods, and pharmaceuticals to food, software, and entertainment.Our membership ranges from small companies to the biggest firms, with combined annual revenues exceeding $650 billion. IACC members set aside competition and come together toshare best practices and company perspectives in a more impactful way.
Our mission is to actively develop and conduct training for domestic and foreign law enforcement officials, submit comments on intellectual property enforcement laws andregulations in the U.S. and abroad, and participate in regional and international programs aimed at improving intellectual property enforcement standards.
Domestically, we are in the midst of developing a new model statute and have undertaken a legislative project to improve state criminal counterfeiting laws. Our end result will be based on input from our membership, so every recommendation reflects the needs of their respective industries. Furthermore, the IACC is supporting a number of bills, including legislation that would increase criminal penalties for pharmaceutical counterfeiting. More deterrent laws will ultimately mean fewer counterfeiters.
In addition, we are partnering with the federal government on a number of education and training programs, including the Department of Commerce’s Webinar series on IPR issues inChina. Another IACC/U.S. government partnership includes the PTO Enforcement Academy.
As the problem of counterfeiting is worldwide, internationally, we are providing comments and industry input with regard to intellectual property legislationproposed by the Chinese and Russian governments. We also are working on Canadian law and enforcement.
The IACC routinely provides comment on proposed legislation affecting intellectual property around the world. Every year, for example, the IACC prepares a Special 301 submission to the United States Trade Representative. Our 2006 submission covered Belize, Canada, China, Costa Rica, Malaysia, Mexico, Russia, and the Philippines.
The Special 301 submission summarizes industry experience and recommendations from our membership and includes or comments on the perceived failures of certain countries to liveup to the member obligations of the World Trade Organization. The 301 submission is very fact- and labor-intensive and any one company would face a massive undertaking to generate its own while only being able to offer a fraction of relevant insight. By pooling forces, however, and submitting information through a collective group like the IACC, the 301 submission carries more weight and authority. This year the Final 301 Report of the United States Trade Representative incorporated many of the points raised in the IACC’s submission.
In order to expand our international presence, the IACC visits other countries to work diplomatically with government decision-makers on counterfeiting and piracy issues within their systems. I just returned from China where I was communicating the concerns of our membership to Chinese national officials. While we are critical of the pace of intellectual property protection in China, we must continue to constructively engage Chinese officials and train them in modern methods of anti-counterfeiting.
Another important charge for the IACC is education. Toward that priority, we plan and host two annual seminars that offer updates and best practices in anticounterfeiting. Networking and learning opportunities at these events run the gamut from giving our members a chance to establish a dialogue with government representatives to providing the opportunity for them to learn more about the counterfeiter mentality directly from ex-counterfeiters themselves.
Counterfeiting and piracy are complex and dangerous problems, as dangerous to your bottom line as to your reputation. That’s why they require 360-degree solutions. Perhaps your company is already looking at your intellectual property security problem from every angle and employing all of the solutions our members have described to protectyour products, processes, and market. If not, we hope you will be inspired to do so.