The asset value of a strong brand is now widely recognised, not just by brand owners but by investors. Over the past decade, the top 100 brands, as evaluated by the world’s largest brand consultancy Interbrand, have, year on year, shown a marked lead in financial performance over both the MSCI world index and S&P 500. Strong brands give better returns over time with less volatility and less risk. Luxury brands in particular, which reinvest a far greater proportion of their revenues in creating and maintaining the brand experience, have largely remained buoyant or, in some cases, had gleaming upturns during the global economic crisis. The strongest brands have maintained momentum in the traditional markets of US and Europe, while attracting new revenue in the burgeoning markets of China, India, Russia, Brazil and the Middle East.
Interbrand evaluates brand strength across several different factors that ‘measure the ability of the brand to secure the delivery of expected future earnings’. This article explores some of the legal tools that can be used to protect and bolster brand strength across these factors and protect against any threats that dilute or devalue the brand in the digital space.
Consistency refers to the extent to which customers’ and stakeholders’ experience across all points of engagement conforms to the brand’s core values and proposition – its DNA.
Bernard Arnault’s genius, when he acquired control of Christian Dior for one franc in the mid-1980s, was to buy back the licences and consolidate the designers for each arm of the brand, previously run like separate fiefdoms, into a single creative director. Thus the creative vision that shapes the brand inhered in a single individual, ensuring consistency and ushering in the era of the brand ambassador.
Several years later, John Galliano famously took over at the helm of Dior stamping his own imprint on the brand, most notably in his lavish advertising campaigns. Earlier this year, he was infamously ousted from the creative directorship of Dior, after The Sun published videos of an apparently intoxicated Galliano making racist remarks to customers in a Paris café. This sort of radical inconsistency between the story the brand tells about itself and the messages emanating from the brand ambassador can cause deep and lasting damage to a brand.
Galliano, who at trial cited a triple addiction to alcohol, sleeping tablets and Valium as the reason for his outburst, escaped prison with a €6000 fine and symbolic damages of one euro for the crime of ‘public insults based on racial or ethnic origin’. However, the media frenzy decimated the Galliano brand and did inevitable collateral damage to Dior.
In giving reasons for its clemency, the court found that although the insults were in public, the ‘extreme publicity’ they received in the media, exacerbating the harm, was not Galliano’s doing. Galliano’s fall from fashion grace gravely illustrates the risks of brand ambassadors who arouse great media interest showing their private dark side in a very public manner, in a way that is obviously inconsistent with the brand’s own values.
Contractual terms (eg morality and non-disparagement clauses) in the agreements engaging brand ambassadors – whether they are models, celebrity endorsers, or creatives – combined with media and digital media training can regulate their public conduct and the messages they convey about the brand. Employment and endorsement agreements can also include provisions requiring control over the PR and legal response in the event of a breach, which might contaminate the brand. Galliano’s subsequent defamation claim against the complainants was a distinctly desperate-looking and ill-advised attempt to stem the adverse media tide.
Galliano’s example is an extreme one. However, there are a number of pre-emptive measures a company can take online to secure vulnerabilities in relation to both the private and public figures that represent the brand. The first stage is mapping the online footprint of key executives and brand ambassadors for private or damaging information available to journalists or bloggers on public registers, social media, traditional media and the deep web (the 80 or more per cent of dynamic or hidden content that traditional search engines do not see or ‘retrieve’). This can be combined with digital ‘penetration testing’ (or ‘ethical hacking’) for key employees who may be vulnerable to infiltration by the media or ‘hacktivists’. Depending on the outcome of the audit, we can oversee the clean up and security operation to ensure that what is accessible is consistent with the brand’s values and positioning. The legal mechanisms for this rely on a complex mixture of, inter alia, defamation, privacy, copyright and data protection law, often with a multi-jurisdictional element. Technical tools can also be used to make the material less prominent online.
‘Historically, luxury has always held provenance in high esteem. The origins of a product – where it has come from, where it was made, the veritable history of its passage through time – are what secure value.’ – The Future Laboratory. The EU Commission reported that EU customs officers seized €1bn of ‘black market’ – ie counterfeit or pirated goods – last year, with 85% coming from China. That is to say nothing of the ‘grey market’, which deals in genuine products, sourced inexpensively through unlicensed channels, and sold at a low price and via low-quality websites that seriously tarnish the brand. This is a particular problem for luxury brands where high craftsmanship makes products difficult to fake but encourages a burgeoning grey market in genuine items imported and sold through unofficial channels. Both markets operate mainly through online sellers who sell through the post and can set up shop anywhere in the world.
Council Regulation (EC) No 1383/2003 allows a right-holder to lodge an application with HM Revenue & Customs for the detention by customs of any goods suspected of infringing an intellectual property right that are detected at the EU external border. This protects the following unlawful imports from flooding the market:
- Counterfeit goods – ie those in packaging bearing a trade mark that is identical, or cannot distinguished in its essential aspects from, a validly registered UK or EC trade marks for the same type of goods.
- Pirated goods – ie copies made without the consent of the holder of the copyright or right in a performance or design right (whether registered or unregistered), or of a person authorised by the right holder in the country of production.
In relation to the grey market, ss89 of the Trade Marks Act 1994 and s111 of the Copyright Designs and Patents Act 1988 permit rights owners/exclusive licensees to lodge customs notices to stop the importation of infringing goods into the UK from outside the European Economic Area. HMRC will treat goods bearing an infringing trade mark as generally prohibited and will prohibit specified shipments of goods infringing copyright.
At the front end of sale, doppelganger domain names, which allow infringers to siphon off a brand’s click-through rate, tarnish the brand’s online presence and can take away significant revenue through the sale of inauthentic goods online. A domain name strategy will involve pre-emptively registering domains that include the marks of your company or brand and attacking any abusive registrations as they arise. Proceedings can be brought against such registrants for trade mark infringement or the tort of passing off. However, it is often quicker to bring a complaint under the relevant domain name registrar’s dispute resolution service or negotiate a settlement on the back of threatened infringement proceedings.
Burberry is the astonishing success story it is today because of the total clarity about what it stands for as a quintessentially British brand. It speaks its message across all points of engagement. Part of Burberry’s success has been its embrace of social media. In September this year, for example, Christopher Bailey’s spring/summer 2012 collection did the first-ever #Tweetwalk – live-tweeting of each look as the models emerged onto the catwalk.
In embracing social media, brands should also ensure that they and their employees are clear about the inadvertent brand messages they may be sending out. From CEO to seamstress, it is essential that employees understand the values, positioning and proposition of a brand and do not send out messages that are inconsistent with these.
It may seem a gargantuan task to continually monitor what each of, say, Dior owner LVMH’s 56,000 employees are saying about the brand on Facebook and Twitter. However, a well-drafted social media policy that chimes with the brand values can ensure employees are clear on responsible social media use. A social media audit to uncover any misleading or damaging messages that are being ventilated is the first stage. As well as revealing vulnerabilities in the way the brand is connecting with customers, it can also highlight the weak points of contact that will assist with monitoring and containment in the future. This first stage audit will enable a company to explore its tolerances and ultimate aims from a social media policy. This then will guide the drafting of the company’s policy. Finally, legal practitioners can advise on policing, enforcement and monitoring going forward to ensure the policy is adhered to.
Presence is the degree to which a brand feels omnipresent and is talked about positively by consumers, customers and opinion formers in traditional and social media. Twitter, Facebook, comment forums and the blogosphere have created a platform for the routine, casual and public disclosure of what would have once been private conversations. Interfering with the free and open discussion of your brand is a recipe for bad publicity. However, action should be taken where information online is damaging or misleading. In such circumstances, using the notice and take down procedure of a website’s host will usually be sufficient to effect removal of defamatory content without incurring the expense of bringing proceedings. Laurence Godfrey v Demon Internet  confirms that once the host of a website is on notice of defamatory content, it will no longer have the defence of ‘innocent dissemination’ under s1 of the Defamation Act 1996, which hinges on the host’s knowledge. The host may therefore be liable if it does not remove defamatory material following a complaint.
The policies of social networking sites furnish a maligned brand with a far vaster array of ‘actionable’ grounds for complaint, so that, for example, impersonation accounts, which flourish on social media and can seriously devalue a brand’s digital presence, can be quickly and inexpensively removed.
The first page of Google, which 96% of searchers do not browse beyond, is a brand’s online CV. Damaging material can continue to attract clicks and haunt a brand’s digital presence long after it was first uploaded. Nonetheless, the Court of Appeal’s modern twist on a case from the nineteenth century affirms that defamatory material published online remains actionable irrespective of when it was originally published. In Loutchansky v Times Newspapers , the Court of Appeal held that in relation to online material, the rule in Duke of Brunswick v Harmer  applies so that, every time a newspaper’s online archive, a blog or even a tweet is accessed, there is a new publication and the limitation period starts to run from that date, and not from the date of the original publication. The globalisation of brands and media means a multi-jurisdictional approach will often be required. Bespoke packages can be created to monitor brand presence across traditional and social media. Search engine optimisation can also help diminish the presence of websites that tarnish the brand.
In another modern twist on a nineteenth century case, in exceptional circumstances, an interim injunction can be obtained for persistent trolls or attack sites (see eg Robins v Kordowski , which circumvents what is commonly seen as an insuperable rule, from Bonnard v Perryman , that a defendant cannot be restrained from publishing a libellous allegation which it intends to defend on the basis that it is true or that it attracts a defence of privilege or fair comment).
Interbrand defines this as the internal commitment to the brand in terms of time, influence and investment. The highest flyers in the top 100 brands spend billions on marketing and advertising. However, too many companies use a purely reactive approach to protecting brand identity and reputation, often when it’s too late. While John Galliano’s very public disgrace proliferated across the media, there had been previous incidents which had not emerged into the public domain. In order to ascertain the extent of reputational risk, a company should conduct an audit across several fronts to identify risks and areas of vulnerability related to each of the principles of brand strength. Once aware of the risks, the company can then take a decision on whether to take legal action or merely monitor areas of vulnerability.
It is crucial that a company makes internal preparations to respond to a potential crisis, as well as to the smaller, more habitual threats which arise almost daily. This means having a considered and well-drafted policy on reputational risk, building in levels of tolerance so that minor threats can be ignored and more serious threats monitored and escalated where necessary. There must be an agreed chain of command and nominated decision-makers. Without this, the management often wastes its energies in frantically re-arranging the deckchairs, while the ship is sinking.
Corporate reputation is usually collateral damage when controversies arise: while it is the individual who is under attack, the brand is inevitably caught in the crossfire. Brands can minimise this damage by managing publicly available information and taking steps to deal with damaging information appearing online. In addition to managing the media and making sure action is taken to correct inaccurate stories in the press or stop publication altogether.
LVMH were admirably quick off the mark once the Galliano video evidence started circulating, putting its ‘zero tolerance’ policy into action by immediately suspending the designer pending an investigation and later terminating his contract. The company’s decisive and unequivocal action will have mitigated the damage to Dior immeasurably. A clear policy on reputational risk, with appropriate advisers primed to respond 24/7, can make all the difference, in either preventing a crisis or providing clarity when a company is in the eye of the storm.