Tag Archives: brand value

Leading Brands Increasingly have the Most Valuable Patents

Patent portfolios associated with strong positive reputation appear to enjoy better performance, or so it seems.

It is no coincidence that many of the world’s best known and most valuable brands have other IP traits in common: Their reputation for quality, innovation, and consistency not only facilitates product sales and shareholder interest, but to enhance the value of their patents, trade secrets and authored content.

At the same time known expertise in securing and managing intellectual property rights and handling patent disputes (e.g. Microsoft (5), IBM (3), Intel (8) and Philips (41)) can add value to overall brand reputation. Good patents held by high-profile brands often appear to be worth more.

It is clear that the reputation of high-value brands for quality and reliability can help to a good patent portfolio to perform even better.

Interbrand’s “best brands” survey for 2012 includes many of the usual world-class names. Note how many of these brand giants are also patent powerhouses in their own right. Nine of the top ten have significant portfolios, and at least five out of the top ten very large ones. For 2012’s top 36 brands see the chart below. For the 100 best with an explanation of each, click here.

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In an article for Managing Intellectual Property that I wrote in 1998 with Dr. James E. Woods, an economist, we suggested that associating patents and patent strategy with positive reputation frequently results in enhanced value both for the patents and trademark. A well-known business brand that does not hold least some relevant patents and a strategy to generate return on them, is likely leaving value on the table.

Smart companies are learning how to use brand equity and reputation to leverage their reputation for innovation and importance of their invention rights. Perceived value plays a significant role in intellectual asset management, and a strong brand can make a good patent portfolio even better. Valuable IP rights, notably trademarks and patents, feed off of each other.

Intel Inside® was part of an aggressive advertising campaign launched by Intel (8) in 1991 to stimulate demand for its (patented) Pentium® processor. Whether there was a qualitative difference between it and comparable devices was unclear. Heavy branding in 130 countries via a five note, tone-based, jingle, served to provide the Pentium with margins up to three times higher than its competitors’. Without it the patent on the Pentium would have meant far less.

Functionally, Intel’s PC processor was not that different form AMD’s less costly one, but its venerable branding from an aggressive retail advertising campaign, paved the way to ubiquity. It’s no accident that a semiconductor maker is the eighth most valuable brand in the world, ahead of BMW (12) and Tiffany (70). Does anyone outside of a small circle of techies, lawyers and investors know who Micron is?

Of the Interbrand’s top ten, the only company that I am aware of that is without a respected patent portfolio is McDonald’s (7). Coincidence or intelligence?

Businesses with extensive patent holdings and reputation for generating return on innovation, benefit from branding their IP success. Nortel and Hitachi  are a examples of patent-rich businesses whose IP success and value may have been somewhat undervalued because of their clear brand identify. IP without brand recognition, I believe, leaves money on the table for well-known companies that fail to take advantage of leveraging their intangible assets.

Consumer products companies Disney (13), Nestle (57), L’Oreal (42), and Gillette (16), all have significant numbers of meaningful patents. (Global cosmetics maker L’Oreal, for example, has received 500 to 700 patents per year for the past decade, or about 6,000 patents.) Iconic eBay (36) has very few patents and seem to be uncertain what to do with those they hold. Google (4), until its purchase of Motorola (unrated), and rival Facebook (69) were in a similar boat. Both have yet to leverage their IP rights and strategy in context of their name recognition. Recently, AOL did leverage its reputation for early Internet success with a billion dollar sale to Microsoft. How these transactions are perceived publicly has become increasingly important.

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Apple (2), second only to “low tech” Coca-Cola (1), which supports it renowned trade secret with numerous patents, also has not done enough to leverage its highly valuable brand in context of its small patent portfolio. Spending a fortune to defeat Samsung (9) in a very public suit helped to enhance its perceived patent value and validate its strategy.

Large public companies with complex assets have the ability to leverage them in innovative ways: Patents certainly can benefit from the glow provided by a top brand, even those that are essentially geared to consumer products, like P&G’s (41,000 global patents).

At the same time, even the most highly regarded trademarks (brands) can enhance their importance though association with other valuable intangibles, such as patents. Branding patents is a win-win; so are brands with patents.

Illustration source: BrandMagazine.com

Apple v. Samsung Shows Brand Matters to Patent Holders, Juries

There is a Tendency to View Patent Prowess as a Function of Reputation and Perceived Innovation

Much of billion dollar verdict in Apple v. Samsung turned on brand reputation and perception of what it does that is truly innovative.

“What Apple v. Samsung Says About US Jury Trials” in Managing Intellectual Property quotes Ronald Beaton of Trial Graphix as saying “Juries in Silicon Valley are particularly IP-Savvy. The longer you live there the more it gets into your head.”

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Apple’s brand reputation is tops, but what about its less than stellar IP performance? You can hardly argue with Apple’s virtually world leading market value (PetroChina is number one) and unrelenting growth. It’s patent strategy, while less cohesive, did not stop it from winning a billion dollar victory over a generally stronger patent (but not brand) rival. If nothing else, Apple is the consummate technology packager, and it takes every opportunity to let audiences know it. Its reputation as a design leader was at stake, as was its perception as an innovator. Samsung’s infringement of that asset, it could be said, is what the local jury rewarded.

Brand and IP reputation are intrinsically bound. Apple’s patent history is not the most auspicious. Many say it has the wrong or too few patents (probably less than 3,000 worldwide, excluding those it paid $2.6 billion for in the Rockstar Consortium). The company is believed to be vulnerable in many areas that it sells products. (See smart phone suit chart below.) Samsung has some 30,000 patents.

Faith in Proprietary Design

Putting so many eggs in its design patent basket was a bold move for Apple that paid off for now. The right combination of foreign infringer, venue (Silicon Valley) and jury pool,  clearly paid off. So did the company’s perceived value as a technology innovator.

One wonders if the chips would have fallen the same way if it were Google or Facebook defending itself in San Jose on a patent infringement charge asserted by a Silicon Valley neighbor. Apple to SV is what the General Motors was to Detroit. I’m not certain the others can claim the same loyalty.

At the end of the day Samsung is not likely to have to cut a check for $1 billion anytime soon, if ever. The effect on an injunction on its devices, should it be granted, will be negligible according to Sanford C. Bernstein analyst Mark Newman. The devices in question are older ones and will account for less than 1.4% of the Korean company’s worldwide profits. And bet you didn’t know this: Apple is still Samsung’s biggest customer for mobile device components.

In the end, Apple v. Samsung is really about a kind of court-ordered mandatory license that sets a high bar for any potential competitors. Samsung can certainly afford the “damages,” and what’s wrong with their having to live with an oligopoly if the high cost of entry narrows the competitive field? For smartphone outsiders the answer is simple: they will have to innovate better to succeed.

The uncharacteristic respect that the court and jury showed for design patents may have more to do with the fact they are Apple’s than any legal precedent or direction from the bench.  Brand can be powerful tool for enhancing patents and positioning a business as inherently innovative. It is something that Marshall Phelps realized at IBM in the late 1980s, as did Bill Gates at Microsoft starting in the late 1990s.

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A Culture of Success

Patent portfolio holders would be wise to be more transparent about their IP activities, and, where appropriate, attempt to establish a culture of IP success and ROI. A company’s reputation for innovation and managing its IP rights proficiently, today, can be a valuable asset.  Often, it can hinge on its perceived ability to innovate.

Michael Hages, an IP attorney writes in Core 77, a design magazine, that “The traditionally meager status of design patents is the reason why many designers are likely surprised by the prominence of design patents in Apple v. Samsung.”

“The real potential for impact, however lies in the mere fact that the design and business worlds are paying close attention to the design patent side of this case in the first place. Design patents have been around for over 150 years and in that time have only seen limited usage. Sure, many people or corporations have sued in the past to enforce their design rights with some success, but both the number of design patent lawsuits and the number of design patents granted pale in comparison to those of utility patents.

” …In all reality, practically everyone who has an opinion holds design patents in the lowest esteem of all the different forms of IP protection.”

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So, how did Apple pull off the design patent victory of a lifetime? What does it mean for other industries and products where design rights are crucial but not typically enforced?

That will depend on who else is willing to step up and defend their design patents as vigorously as Apple. It also will depend on who the parties are. The auto industry is one area where gentlemanly cross-licenses have trumped aggressive enforcement. Design patents can be useful, even if it is just to slow competitors down. But they have to be enforced, a nasty, expensive and somewhat speculative process that does not always result in direct financial return.  For Big Three U.S. automakers design enforcement has not been a cultural imperative. It will be interesting to see if Apple v. Samsung will have a lasting impact consumer electronics and other industries.

Illustration sources: hypebot.com; wsj.com; ritholz.com 

Disclosure: I have no position in the shares of or current business relationships with any companies mentioned in this article.

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SIDEBAR:

Apple v. Samsung jury foreman, Velvin R. Hogan, is a 67-year old retired engineer who holds a patent and has had a 35 year career in hard-drive technology with Memorex, Storage Technology and Digital Equipment, companies that are either out of business or have seen better days. Fortune’s summary of interviews with Hogan about the case and what led the jury to its decision makes for fascinating reading.

SEC Investigates Goldman Sachs Fraud

The Gold Standard No More?

In a provocative IAM blog, Joff Wild asks will the Goldman Sachs brand be irreparably harmed from the SEC fraud investigation whether it secures a conviction or not? “Will Goldman Sachs pay a long-term reputation price for its current woes?”

There is no way of measuring the precise impact, but the investigation for what may have been systematic fraud would have to affect at least some transactions and clients. The more important question is what will it take for GS to recover?

Reestablishing faith in banking system and financial institutions will go a long way to helping. Investors, regulators and individuals must see that Wall Street is not being held to a different legal standard than Main Street because its members wear white collars or because they are needed to lead the economy back from the financial ruin they may have helped to instigate.

If convicted GS will at some point need to admit its lapse (if that indeed is what is was), expect that some officers will serve jail time and explain what measures are being taken to prevent fraud in the name of profits from recurring. It will also need to hold itself to a standard that exceeds any current legal requirements or future ones being proposed by the Obama administration.

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The best thing that can happen to GS and for banking is for people to see that financial crimes do not go unpunished, and that they are an aberration, not a way of life. For hallowed brands like GS and other intangible assets there is no substitute for reliability and consistency of purpose and message. Brands imply higher quality and endure because good managers make sure they represent real values.

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No aggressive advertising or public relations campaign can repair the damage sustained by a brand if core values are in question.


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