Research finds brands are calling for stronger protections against internet giants Google and eBay and the rise of social networks
Research finds brands are calling for stronger protections against internet giants Google and eBay and the rise of social networks
The internet is viewed as a “double-edged sword” for businesses, according to the latest brands research from leading international intellectual property group, Marks & Clerk.
Nearly three-quarters (73%) of respondents to its annual survey – based on the views of 266 UK business executives responsible for brand ownership, marketing and control – agreed that, while the digital age has brought tremendous opportunity for brand promotion, intellectual property abuses and threats to brand integrity are more numerous and difficult to protect against.
In particular, 73% claimed that brands are more likely to be subject to unfair treatment online than offline, with almost two thirds (64%) revealing that the internet has made it harder for them to police and protect the reputation of their brands. Over eight in 10 (81%) claimed that the internet fosters a culture in which companies and individuals are more prone to exploit each others' intellectual property, “whether consciously or not”. At the heart of their concern is a belief that brands are not afforded adequate or appropriate legal protection in the digital age. Over eight in 10 respondents (81%) believed that intellectual property law has failed to keep up with the challenges posed by the rise of the internet.
One of the primary concerns to emerge from the survey centres upon the boost that e-commerce has given to counterfeiters. An overwhelming 95% of respondents agreed that the internet has “transformed” the nature of the threat posed by counterfeiting, with almost nine in 10 (88%) arguing that the rise of e-commerce necessitates stronger intellectual property protection as a result.
eBay and counterfeiting
Respondents reserved particular criticism for eBay, which has been at the centre of a recent storm of court battles with luxury goods companies over the abundance of counterfeit goods for sale on its auction site. Some 86% claimed that eBay should be at least partly liable for the distribution of counterfeit goods on its site, while almost six in 10 (59%) claimed eBay’s current efforts to combat counterfeiters using its site were insufficient.
A further 64% described it as “unreasonable” to expect brand owners to police individual items on the site themselves. A sizeable majority (91%) believed that stricter conditions and penalties ought to be directly imposed on secondary markets such as eBay, to combat counterfeiting.
Pam Withers, partner at Marks & Clerk, commented: “For many brand owners, the assertion that eBay encourages counterfeiting is probably politely described as an understatement. Platforms like eBay offer the counterfeiting industry one of the most effective distribution channels we have ever seen, while the size and scale of online marketplaces makes constant monitoring and the detection of crime almost impossible for brand owners.
“This reflects a much wider theme in our research that while the internet presents a vital means of distribution for companies, the free-flow of goods and information creates a dimension of risk that brands have never had to deal with until now. Never before has it been simpler to steal ideas and editorial and avoid being caught; never before have the negative effects of word-of-mouth discussion been felt so quickly; never before has it been so easy to distribute counterfeits or attack companies from behind a veil of anonymity. This is a serious challenge and ultimately one that may well be borne by the consumer if brands are continually abused online.”
Louis Vuitton exeprience shows the way
Already, the increasing protectionism of brands is becoming familiar reading. Luxury goods companies including Louis Vuitton owner, LVMH, have responded to the threat of counterfeiting by relying on ‘selective distribution agreements’ that restrict where their products are sold. In November 2009, the French courts fined eBay 1.7m Euros for selling prohibited LVMH goods – both counterfeit and genuine – on its site in breach of an earlier injunction. Notably, over half (55%) of respondents to Marks & Clerk’s research predict brand owners will increasingly deploy such restrictions. Furthermore, 62% support the right of brand owners to restrict distribution of their goods and services in this manner – although this has a clear potential impact on competition and pricing for consumers.
Above all, the research revealed an urgent call for reform of intellectual property law to protect brand owners and reflect the challenges of the digital age. Respondents were clear too as to the dangers of inaction by policymakers. Over three quarters (75%) suggested that, unless the law responds to the challenge of e-commerce, the damage will ultimately be borne by the paying consumer.
Respondents were almost unanimous (98%) in their desire to see more consistent and stiffer penalties levied directly on infringers, while 96% wanted legislation enacted to spell out the distinct responsibilities of brand owners and online commercial players. Over nine in 10 (93 per cent) respondents were in favour of further harmonisation of European trademark and copyright law, to increase efficiency and consistency.
In particular, the research revealed support for fundamental change to UK trademark law, which is based upon the origin of goods and services and there being no confusion in the public mind. Nearly three-quarters (74 per cent) argue that there is a case for trademark infringement applying in certain situations even when there is no possibility of public confusion, such as when a rival is seen to exploit or tarnish the original brand.
Kirsten Gilbert, partner at Marks & Clerk Solicitors, added: “Such a strong call for reform reflects the frustration felt by brand owners over the nature of the threat posed to brands in the digital age. Much of the action we have witnessed in the courts has centred upon the “free-riding” off brands with reputation. In short, those that have considerably more invested in the quality and profile of their goods and services have considerably more to lose in terms of the reputation of those brands.
“This is made highly complex too by the thorny question of the neutrality of popular online platforms. While no-one would argue against the benefit for the consumer of online channels, the need for them to be commercially viable – typically funded by advertising spend – sits awkwardly with a claim for neutrality and immunity from any legal responsibility.”
Google and the growth of search advertising
Marks & Clerk’s research further revealed particular criticism in relation to Google, which has benefited from the rise of search-related online advertising. Its AdWords sponsored keyword service allows advertisers to bid on keywords that relate to a competitor’s brand name.
Almost six in 10 (58%) respondents argued that Google's dominance within the European online search market puts the search engine in too powerful a position. Meanwhile, although the courts have more recently sided with Google over potential trademark infringement in allowing words protected by a trademark to be bid upon by rivals, brand owners view this activity rather differently. It found 71% of respondents are uncomfortable with businesses making commercial use of a rival's brand name in this manner, with 63% believing this to be “not at all” acceptable when the brand name in question is protected by a trademark.
A majority (61%) suggested that both the search engine and third-party advertiser should be held legally responsible for the commercial use by rival businesses of a brand owner’s name in the keyword service. By contrast, less than a quarter (23%) take the view of the courts that the advertiser alone ought to bear the brunt of the liability.
Gilbert said: “Online advertising is not new in itself, but the sophistication of techniques combined with the dominance of Google in Europe and recent legal decisions means that it is taking on newfound significance.
“For major brand owners, activities of this sort may appear a clear-cut case of free-riding off their reputation and investment. To ensure that your search engine listing appears at the top of search results is no small feat, and often requires millions in advertising and PR spend over time. What incentive is there for such investment when users searching for your name may easily be diverted to the competition? For many, it means spending yet more time and money – defensively – merely to stand still.”
Social media – the next big threat for brands?
Marks & Clerk’s research also suggested that the challenges brand owners face online are likely only to be exacerbated by the rise of social media.
The importance – and indeed commercial opportunity – of social media to brand owners is striking from the research. The survey found 62% believed that social media will migrate from a popular communication channel to a “substantiated sales and revenue source” for businesses within the next two years. One fifth (20%) argued that this is already the case, as social media cements its position as a valuable commercial channel-to-market.
However, with the growing use of social media comes a corresponding threat to brand owners, particularly if social media looks to search advertising to establish a stronger and more viable business model to sustain itself. Over two thirds (69%) believed that social media sites such as Twitter, LinkedIn and Facebook will become the “next big threat” for brands, as social media follows in the footsteps of internet giants like Google.
Withers added: “With the nation now held firmly within the grip of social media, our research shows clear concern that the digital threat to brand owners is most likely to increase, rather than recede, in the future. Search advertising revenue is hardly new, yet the prevalence of online search is certainly a growing facet of business marketing and likely only to extend over the coming years as social media platforms begin to monetise their impressive reach. With Facebook reportedly having the world’s ‘third largest population’ – more than 400 million users, compared to a population of just over 300 million in the US – it is little wonder we are seeing increasing protectionism and nervousness from brand owners.”
