Brands A Growing Economic Asset, But Further Economic Work Needed, WIPO Says In Report

The World Intellectual Property Organization today issued its second-ever report on global IP trends, focussing on brands, the relevance of reputation, and image in the global marketplace. Increases in trademark applications and the global value of brands are presented in the report, which looks at economic impact, competition, and concerns over counterfeiting of brands.

The 2013 World Intellectual Property Report is available here.

WIPO Director General Francis Gurry said in a press briefing that the first such report, issued in 2011, focused on innovation. These reports aim “to provide fresh insight of different elements of intellectual property and encourage evidence-based policymaking,” he said.

Gurry pointed to new figures on branding investment, which he said are reaching US$500 billion per year worldwide.

Branding investments represent some 25 percent of all corporate investments in intangible assists, he said. Brands are an “indispensible guide for consumers,” and incarnate the image and the reputation of an enterprise and one of its most valuable assets.

Trademarks are the most widely used form of IP to protect brands, but have not received the same amount of attention as patents, he said.

Three main findings of the new report are that in 2011, companies worldwide spent US$466 billion in branding, the United States alone accounted in 2010 for US$340 billion spending in branding, and finally, the amount of branding correlates with the economic development of countries, Gurry said. Middle-income countries are spending more in branding than high-income countries spent when they were at a comparable state of development, he said.

Trademark applications quadrupled in the last 25 years, said Gurry. In 1995, worldwide applications were under one million; in 2011 they exceeded 4 million.

Carsten Fink, chief economist at WIPO, said the report offers a review of how globalisation has shaped branding strategies. Increasingly, not only companies but other actors such as individuals, nations, and nongovernmental organisations, are taking an active approach to branding, he said.

According to the report, the intensifying demand for trademarks is based on several factors, among which are: the economic growth driving the creation of new companies; the shift towards services, leading to a growing use of trademarks in the service sector; the globalisation of economic activity, which has prompted trademark holders to expand the coverage of their trademarks; and the emergence of the internet, which has encouraged trademark filings. The digital marketplace has increased the importance of brand reputation, the report said.

Markets for Brands

The report also underlines the importance of markets for brands, which “play an important but underappreciated economic role.” In the same way as patents, brands are increasingly licensed, bought and sold at the national and international levels.

In most cases, brands are a source of market power, which “does not raise any concerns about brand owners behaving in an anticompetitive manner,” the report said. But in certain instances, “strong brands can create high barriers to market entry, as new competitors may not be able to bear the high advertising costs of inducing consumers to switch to their products.”

It has happened, according to the report, that competition authorities have assessed the competitive consequences of strong brand, and intervened. This has happened, in particular, in cases of mergers and acquisitions that could lead to a concentration of brands, and in cases when owners licence their trademarks with restrictions on their licences, such as limits on carrying the products of competitors.

Sales of licensed merchandise, as reported by the top 15 brand licensors in 2012, shows that Disney consumer products sold US$39.3 billion of licensed merchandise (entertainment), Iconix brand group (apparel) US$13 billion, PVH Corp. (apparel) US$13 billion, Meredith (media and marketing) US$11.2 billion, and Mattel US (toys and games) US$7 billion.

In 2012, according to the report, Ikea “became one of the first companies to disclose its brand value, as part of a financial transaction between a holding company and one of its subsidiaries.” The brand name was sold for about US$ 11 billion.

The report underlines a need for further economic work on brands and trademarks. “The economic role and contribution of branding at the country-level and at the company-level deserves a more in-depth treatment in scholarly work on intangible assets,” it said. “More empirical research into the surge in trademark filings and its drivers is imperative.”

It acknowledges that “there is little understanding of the empirical significance” of the drivers of recent trademark filings.

Growing Value of Global Brands

The total value of the top 100 global brands increased by between 19 and 24 percent in the 2008-2013 period. In 2013, at the top of the list, the brand value of Apple was US$ 98.3 billion, Google $93.3b, Coca-Cola $79.2b, IBM $78.8b, Microsoft $59.6b, and General Electric $47b, according to Interbrand, says the report, which also lists results by BrandZ, and Brand Finance. Apple remains at the top position in the three rankings (Interbrand, BrandZ and Brand Finance).  

According to WIPO, “calculations, the technology sector and Internet sector, including brands such as Google, account for the most highly ranked combined brand value among the top 100 global brands,” the report said, “More established sectors, such as car companies BMW, Mercedes-Benz and Volkswagen; banks such as Wells Fargo, HSBC and J.P. Morgan; business service companies such as Cisco, Oracle and SAP, and conglomerates such as General Electric, Siemens or Tata are the next most highly ranked sectors in terms of their total value within the top 100 global brands.”

Internet Influence; Counterfeiting

There are three major ways in which internet has affected the role of trademarks in the global economy, the report says, though it lacks firm data for these assertions. The internet has spurred a boost in trademark applications, has extended the global reach of brands, and “increases the need for legal protection where rights owners face online sales of counterfeit goods or other forms of misuse of their trademarks.”

But the lack of macroeconomic data on counterfeiting activities across countries and over time “poses one of the biggest barriers towards providing more reliable empirical insights into this topic,” according to the report. “The availability of data on what are inherently illicit activities will continue to constrain investigations in this field. However, there appears to be scope to generate better data on the basis of information that is collected in the course of law enforcement activities.”

The report states that “even though it remains elusive” to measure global counterfeiting activity, “anecdotal evidence” suggests its increase.

As an anecdote, the reports cites the oldest counterfeit products on display at a Museum of Counterfeiting in Paris: stoppers to seal amphorae filled with wine, dating back to around 200 BC. The museum was the subject of a WIPO magazine article in 2009. The museum, created in 1951, was set up as an educational tool by the Union des Fabricants, according to the museum’s website. It is set up in a luxury private mansion in Paris, the website says.

International Cooperation

According to the report, an area in need of international cooperation is for well-known trademarks. A well-known mark can be grounds for refusal of an application for a new trademark in IP offices, even if that well-known trademark is not registered in their jurisdiction. However, determining whether there is a conflict with a well-known trademark in a particular goods or services class is arduous.

WIPO’s Global Brands Database, “which allows users to search for trademarks across multiple jurisdictions” is an example of international cooperation in that area, the report says.

However, “the protection of well-known trademarks raises special questions for international cooperation,” it says, as a “trademark’s recognition easily transcends national borders.” The question whether a trademark is well-known in a particular place is context-specific and international cooperation could help national authorities with this question, it says.

In that context, the report suggests the establishment of a framework for exchanging information on well-known trademarks, “possibly resulting in a directory of such trademarks.”