Patents and Trademarks Interacting

Patents and trademarks are important business means of securing an innovation.

If you run a business and especially if you run an IP portfolio, Peter Drucker’s thoughts should make you think hard. “Innovation” is one of the primary means of delivering unique value to current and future customers. “Marketing” first understands and then communicates this unique value to the customers. For innovations, patents are an important business means of securing innovation’s upside. The same is true for trademarks, they are vital in securing the upside of the brand generation.

A smart company utilizes its assets in an optimal way to arrive in an Aristotelian whole which is greater than the sum of its parts. The question is then: How do the patents and trademarks interact (or appear to interact) in company life.

Let us consider for a moment how patents and trademarks are created (or how do they “emerge”) and handled in a normal business organization.

From Technical Domain…

Let us first consider an invention. It is made to solve a technical problem, so it is born in some technological context (making aircraft engines more fuel efficient, making building insulation insulate more…). Inventors are usually experts in their respective field of technology, working in R&D or engineering corporate units. It is not easy to sell inventions directly because of so-called appropriability problem where the holder of an invention is not eager to reveal the invention, and the potential buyer is not eager to pay unless he knows quite a bit of the invention.

Naturally, if the invention is novel and involves an inventive step, it can usually be patented. A patent can directly be used as an item of trade.

Patents, along with employee knowhow, create company’s technologies.  “Technology” can also be sold directly . For example, engineers of an engineering company (e.g. Finnish Etteplan Oyj) can be leased for demanding project tasks. Dolby Ltd. sells products and technologies for the entertainment industry, esp. for cinemas.  

Inventions, Patents and Technologies belong to the “technical” domain. All can be used for trade, but in a majority of cases, they become commercialized when they form a part of a Product, Service or Channel of some business. Thus, at this stage, we cross the boundary, the great divide, between “technical” and “marketing” domains to the marketing one.

…To Marketing Domain

Naturally, the Product or Service should be trademarked to distinguish it from other similar products. Trademarks can also be used for trade (as discussed above) as licenses – for example, The Coca-Cola Company® licenses its trademark for bottling companies that make the final drinkable product (a bottle/can of Coke®).

And finally, Trademarks act as “handles” or piggy banks for brands. Brands can also be “sold” e.g. by brand extensions. For example Harley Davidson (iconic motorcycle manufacturer) has licensed the Harley trademark (with connotations to freedom, masculinity, toughness and authenticity) to be used e.g. for aftershave perfumes (this deal has been criticized as over-extending the brand).

As shown in Fig. 1, both Brands and Inventions operate on the level of Cognition. To “make” an invention, a broad understanding of the technical field is required. Similarly, to “make” a valuable brand, the collective cognition of the potential client base must be understood. The cognitive map enabling a person to invent, and, on the other hand, link emotions to a brand, exists only in the minds of the beholders. There is no physical counterpart. Word “make” in quotes denotes the fact that often there is an element of luck, creativity and serendipity in play.

Further, Patents and Trademarks, are purely legal constructs that are granted to the proprietor in formal proceedings in governmental or regional patent/trademark offices, enabling their holder to “say stop” to what the IP is granted for. In terms of physical counterparts, a patent or a trademark is a formal pamphlet. Thus, we can say that Patents and Trademarks operate on a “legal level”.

Finally, Technologies and Products/Services/Channels are constructs for trade. It should be noted that for trade, innovations, brands, patents, trademarks or technologies are not mandatory. A hairdresser can cut hair (for pay), a carpenter can build a new balcony etc. with no notion of “IP things”. But to build enduring competitive strategies and positions, inventing and branding must happen. And to make inventions and branding last (without blatant copying), patents, related technologies and trademarks are vital.

Thus, we can theorize that cognition level in business is the one creating true competitive advantage. As a consequence, an efficient corporation thus creates primarily inventions and brands, and attempts to minimize the costs of the other levels.

How to turn 1 + 1 > 2?

If this is true, a very interesting question follows: How should a company operate if Inventions and Brands are the primary levers of control in the business success/failure? This is a very broad question, as branding an invention directly is usually very hard. As an example, consider a handover algorithm in a cellphone network. This can be a praised feature for engineers (less dropped calls/longer battery life), but a consumer cannot understand even the basics of the handover process. Thus, this kind of invention can seldom directly contribute to a brand.

Further, given that Patents are proxies for Inventions, and Trademarks are proxies of Brands, how to best organize the IPR operations, e.g. how to make decisions on what to patent and what to trademark? Is there an interrelation between the patent and trademark portfolios?

What Do IP Databases Reveal?

The project paper mentioned above contains a more in-depth explanation on how research was conducted, but in the scope of this article suffice it to say that top companies in the Millward Brown BrandZ “2012 BrandZ Top 100” were examined. The key findings are:

1 Maximizing Technical Qualities to Enable Patenting

As one of the key takeaways, if the product or the channel related to the product is one bit technical, from the standpoint of IPR it can be wise to make it as technical as possible.

·         A mass of patents behind the trademark appears to support the brand. In case of Nike®, Nike air cushioned running or basketball shoe is, from the standpoint of patents, hi-tech. The same applies for Gillette® razors. If technicality is not evident, one can promote it e.g. by personal endorsement (Michael Jordan of Nike)

·         If the product (like Coca-Cola®) has no relevant technical features, maybe its channel (like the Coke® vending machine) has, and maybe it is wise to patent those features to create a distinguished sales process

·         If the industry is technical, often the branding and trademarking strategy has a strong backing from the patent portfolio

·         Technology (example Apple®): By developing, protecting and branding ”game changing technologies” a company can steer boldly into the crowd of established players, and change the game to the company’s advantage.

·         Oil & Gas (example ExxonMobile®): In this sector, it is very likely that a patent “can live its afterlife” as a trademark. By creating e.g. a patented lubricant (usually feasible for tens of years) and branding it, the product will be purchased at premium price even after the patent has lapsed.

·         Cars (example BMW®): It is possible to bundle several patents into one branded package which is trademarked like EfficientDynamics®.

2. Increasing Brand Equity by Patents

The paper has demonstrated several schemes of advantageous branding of products or services that are also backed by patents:

·         As a starting point, one can brand a clear technical improvement with one or more patents covering the improvement. For example, BMW® Efficient Dynamics®- brakes harvest energy and improve fuel efficiency

·         If branding a clear technical improvement is not possible, one can always attempt to brand a perceived technical improvement which is “proven” by attaching the improvement to the performance of stars.

·         It is also possible to technically improve and brand the user experience, e.g. Apple iPhone® usability vs. competitors in 2007-2009.

·         If the product or its usage cannot even vaguely be improved in a patentable way, is it possible to improve the sales channel technically, and patent this improvement? Preferably, the customer associates the improvement of the channel to the branded product, increasing brand equity.

·         On the other hand, if brand equity is created by strong marketing (e.g. add campaigns), the copying can be made a lot harder by patenting. Consider Gillette® Focus®-shaving system (with 5+1 blades) which is both trademarked and the details of which are patented.  

·         Further, it is also possible to make a branded service harder to copy through patenting. ExxonMobil® MazeFlo® technology improves drilling reliability.

Ultimately, product and channel can be branded as an entity, and both channel and product are branded also separately. As a prime example, consider Apple® iPod® (with several patented features) that can be filled with music from Apple® iTunes® web shop (also with patented features). 

Don’t be afraid of patents!

This paper has studied how patents and trademarks “play together” in the marketplace. Several key takeaways are indicated. However, there is no “silver bullet” that always generates an overall more valuable IP portfolio. Some notable companies and brands like Nike, Apple, ExxonMobile, Gillette and Coca-Cola have extensive IP portfolios boasting active intertwined trademarking and patenting activities.

As one of the key teachings of this paper, companies should not be to cautious of the technical requirements of patenting. If their product is not technical, perhaps a service or a sales channel related to the product is. Further, if the technical effect is weak, it can always be turned, in the minds of the consumers, relevant and worthy of patenting e.g. with personal endorsement.

IP is about creativity. Most importantly, IP can also be used in a creative way to achieve business success. Hopefully this paper has presented fresh ideas in this context.

 

Olli Pekonen
Dr.Tech., Director, IPR; Chairman, Finnish Association for Corporate Patent Agents
Beneq Oy

This article is an excerpt from MBA Marketing Project Paper “Patent/Trademark Interaction”, made for partial fulfillment of eMBA/MBA studies in the Aalto Executive Education.