|Legal: Brand extensions|
The team at Hudson Gavin Martin share legal watch-outs when “stretching” your brand. The term “brand extension” refers to the practice of using an established brand name for new products, including goods or services. Increasingly companies are seeking to get more out of a brand and to diversify their business in order to maintain a competitive edge.
Extending an existing brand is often seen as a more cost effective method compared to introducing a new brand, with less risk and greater chances of being successful due to consumer familiarity with the established brand. However, brand extensions are not always as triumphant. From a legal perspective, you need to be equally cautious when extending a brand so as to not infringe others’ rights and to ensure that the brand extension is also capable of being protected from infringement by others.
A brand is more multifaceted than simply a name trade mark or logo. A brand encompasses all the associations consumers attach to it. For example, the physical attributes of the product, performance characteristics, marketing, pricing and distribution strategies may all affect the brand’s identity as perceived by the consumer. There are several positives to extending your brand. These include the possibility to move into potential new markets with less cost and risk than trying to create a whole new brand from scratch. Brand extensions are also often better at driving repeat purchases and increasing customer loyalty, at least in a shorter time frame.
However, there are also some potential downfalls. Although a brand extension may increase sales immediately, in some instances it can dilute and deteriorate the core brand, which may damage the identity of the brand in the long term. The key is to make sure the brand extension works in favour of the parent brand rather than to its detriment.
Finding a good fit
If you do consider extending an existing brand, there are a number of ways to go about this. This may be by focussing on the consumer target market, or the product benefits offered by the brand, or its key features or attributes. One important consideration is assessing the degree of “fit” between the goods of the established trade mark and the new proposed product or service category. How consumers evaluate brand extensions is largely dependent on the brand identity that has been established. For example, a well known success story is the NIKE brand, which started off with footwear and extended into sportswear in general. On the other hand, the toothpaste manufacturer Colgate did not have much success when it tried to move into ready-made meals. In New Zealand, when jeweller Michael Hill launched Michael Hill shoes in 1992 to extend the brand to footwear this too didn’t last long. In both cases, it appears that the parent brand’s goodwill had been “stretched” too far.
As with any new brand, it will be important to ensure that the proposed name for the brand extension does not encroach on an existing trader’s rights. Under the Trade Marks Act 2002, trade marks are categorised according to classes, which are relevant to the product or service type. For example, beverages will be listed in class 32 whereas retail services for providing food and drink will be listed in class 43. Trade marks are only registered in respect of the specific goods and/or services on which they are used, in accordance with these classes. This means that if the established brand is registered in respect of certain goods/services in one class, but the brand extension is in an entirely unrelated class, then you may find that a similar mark may already be registered in that class. The risk of this happening may be low with regards to similar products as the New Zealand Intellectual Property Office cross searches similar classes when looking at the registrability of a trade mark. However, for extensions into new product categories, it will be important to check that the proposed new name will not infringe an already existing trade mark registration.
In addition, it will also be important to check whether any unregistered rights exist, which may prevent use of the proposed brand extension. Evaluating the reputation of a trade mark is important when assessing the likelihood of confusion with the trade mark of another brand. This means that if the brand extension still incorporates the name of the parent brand, and the parent brand has a particularly strong reputation, then the chances of confusion may be lower than with a name that doesn’t rely on the existing brand identification. Conversely, if the proposed brand extension is an entirely new name to the parent, then you will need to do a more thorough investigation as to whether its use will be confusingly similar to another trader’s rights in the name.
It will also be important to consider whether the proposed name is capable of trade mark protection itself so as to prevent others from registering and using confusingly similar marks. In New Zealand, a trade mark can only be registered under the Trade Marks Act 2002 if it is distinctive, meaning that it cannot look similar to an already existing registered mark, be in respect of similar goods and/or services, or be descriptive of a characteristic of the goods or services. It is often the case that the proposed brand extension may simply consist of the parent brand name plus a descriptor of some kind. For example, descriptors such as “Light” or “Slim” to denote low-calorie products will not be registerable in and of themselves. However, use of such descriptors would normally fall within the protection of the parent trade mark registration, as long as the specification is wide enough to cover the new uses of the brand. If not, then it would be worthwhile filing a new application in additional classes or if appropriate, registering the new brand in logo form in order to cater for this specific form of use of the parent brand.
If you are expanding into new markets which fall outside the New Zealand domestic market, then you may want to consider brand protection on a larger scale. Even if the parent brand has a significant reputation in New Zealand this will not make much of a difference when expanding into new markets in countries where it has little or no reputation. Therefore, it would be advisable to at least conduct a trade mark clearance search in these countries to ensure you will be able to use the new name without infringing other traders’ rights in that country. Following this, it may be worthwhile filing a new registration in accordance with the specific country’s trade mark registration system, in order to protect its ongoing use.
Overall, the above considerations are important to ensure your brand extension launches into the market smoothly and successfully. If you are looking at extending your brand, it is advisable to seek advice from an intellectual property law professional from the outset who will be able to assist with possible names for the proposed brand extension, and appropriate avenues for brand protection.
Mark Gavin is a Partner at law firm Hudson Gavin Martin, which specialises in intellectual property and technology law.