Branding in the Collaborative Economy

Legal Implications for Intellectual Property and Consumer Outreach

The following is an excerpt from a white paper released by Collen IP, an intellectual property law firm specializing in launching brands, advising on advertising and marketing strategies, and protecting valuable intellectual property rights. For more information, please visit www.collenip.com or contact [email protected]. 

For the full paper, please see: www.collenip.com/collaborativeeconomy.asp  

Introduction

The term “collaborative economy” describes an economic system where consumers prefer to share, rather than purchase, goods and services. It seeks to empower consumers and free them from the burdens of ownership. Hundreds of startup businesses have leveraged social media technology to meet this new demand. Even major brands, like Patagonia, eBay, and Marriott, are venturing into this space. Intellectual property – copyrights, trademarks and patents – are the lifeblood of these businesses.  Will the collaborative economy render such property obsolete? Will the venues for advertising and marketing become so diverse and diffuse that companies will no longer be able to afford to develop a brand identity? Despite the inevitable clash between intellectual property’s monopoly concepts and the collaborative economy, brands can remain stakeholders by fostering messages of trust and embracing consumer connections.

This excerpt summarizes the five areas of analysis in our white paper, examining the expected impact of the collaborative economy on trademarks, copyrights, advertising and marketing, counterfeit and grey market goods, and patents. Each summary ends with recommended best practices for businesses making operational adjustments for the collaborative economy.

Trademarks

In a changing marketplace, brands and trademarks remain a constant. A trademark is an asset to the brand owner and a sign of known quality to the consumer. The collaborative economy will require increased diligence from brand owners. As the marketplace shifts from outright sale to collective sharing, it will be more difficult to develop and manage trademark portfolios and brand identity.

Brand owners can expect to see an increase in the unregulated “private” use of trademarks that will undoubtedly test the bounds of permissible use guidelines. As such, trademark owners will have to develop strategies to maintain the value and strength of their brands against a more expansive field of usage.

Two principles should guide brands’ actions. First, brands must be vigilant in policing all forms of media to ensure proper usage to guard against becoming known as a “generic.” Second,

brand owners must police against a false impression that the brand endorses the person sharing goods or is somehow affiliated with the collaborator.

With the proliferation of social media, brand owners to some extent have accepted domain squatters as a fact of life. Nonetheless, the collaborative economy increases the danger of damage from these interlopers. Because the relationship between product/service and source is the sine qua non of trademark protection, owners must find a benevolent way to police uses that will not alienate customers. In the collaborative economy, a soft legal approach may be appropriate. For example, a letter outlining why the consumer’s use harms the brand owner and how the brand and consumer could work together is likely to create a better perception than rigid legal action.

“Fluid trademarks” are another area for brand owners to consider in a collaborative economy.  Consumers’ “collaborative” consumption philosophy comes at a time when brands are already striving for interactivity, with instant action and reaction from consumers via social media. Companies such as Google understand the consumer mentality and try to keep their brand fresh and different in the minds of the consumer every single day with playful permutations of their logos.

These fluid marks bring up their own legal issues: what is the protectable mark? Is it in the outline, brand colors, name, or logo composition? In a collaborative economy, is it fair use for “sharers” to use or create a reworked or creative rendition of a famous brand? While this strategy creates a closer tie between consumer and brand owner, it endangers trademark rights unless the brand owner works to preserve brand integrity.

Ironically, the collaborative economy thrives only with the trust brands develop through the work of the brand owner. Without investments in building brands and establishing instant consumer recognition of the quality of products or services, people could not identify effectively what they are “sharing” in a collaborative economy. Accordingly, the brand owner can take comfort in knowing that brands will remain relevant in the collaborative economy.

Best Practices:

• Police the brand. Remain vigilant in enforcing proper use of trademarks to avoid them becoming generic. Never let marks be used to describe the goods or services.
• As trademarks fall into the hands of consumers, protect the brand from false endorsements or affiliations.
• Direct proper use of the brand by disseminating internal use guidelines and engaging consumers through social media.
• Consider possible benefits of leveraging the power and trust of the brand to join the sharing community. Partner with collaborative companies to offer certification programs.
• Consider carefully how 3-D printing and an emerging making economy may threaten control of the brand and relevance of the brand. Strive for points of clear quality distinction to stay ahead of making technology.

Copyrights

While copyrights enable monetization through temporary monopolies granted to  content owners, a collaborative economy monetizes sharing over ownership. As such, it is difficult to conceptualize the role of copyright in a collaborative economy.

Trading promotional copies or offering free digital downloads has become a standard way for artists to gain recognition. In this sense, collaborative content serves as a marketing tool to build word of mouth, elicit positive feedback, or promote previewing. Nonetheless, the ultimate goal has always been to give away content in order to garner outright sales. Some industries, like music and print news, have struggled to monetize giveaways, and they are still trying to claw their way back to profitability.

Learning from these examples, the collaborative economy leads us to three essential questions about copyright:

1) Is the current copyright law relevant and useful?

2) In a collaborative environment, how can copyright owners enforce their copyrights?

3) Can copyright owners engineer ‘sharing’ in a collaborative economy?

Current copyright laws present serious obstacles to sharing. At the same time, the online market now allows new and unknown artists to publish and republish as never before. In so doing, they are testing the boundaries of current law and endeavoring to stretch the current defenses to copyright infringement.

Like most intellectual property rights, copyright law seeks a balance between the limited monopoly granted to creators, and the right of the public to access creative endeavors. Once the copyright owner has made its initial lawful sale, the ‘First Sale Doctrine’ takes over to permit secondhand sales by the buyer. Extending this concept to permit ‘sharing’ of the goods purchased by an original consumer seems logical.

A “sharer” in the collaborative economy might cite the Fair Use Doctrine when “sharing” an image of a lawfully obtained copyrighted work. Such use, however, usually will not fall under any of the acceptable purposes for fair use: research, teaching or criticism. Still, the Fair Use Doctrine faces possible expansion in the collaborative economy.

The very purpose of copyright – to foster and reward creativity – relates to questions of sharing. From copyright’s inception, legislators considered how to reward the creator while encouraging sharing. Today, this dilemma illustrates the tension between the existing law and generational values that favor collaboration. Indeed, human nature often wants to say, “what’s yours should be shared; what’s mine is mine.”

In reality, the goal of ownership will likely not become irrelevant in the collaborative economy. Copyright law may adapt to collaboration either through court interpretations or legislative efforts. We may see expansion of the Fair Use and First Sale doctrines to allow a rightful purchaser of a copyrighted good to share. In the meantime, copyright owners can engineer control of the collaborative movement with innovative licenses.

Best Practices:

• Join forces with other industry members to lobby for legislative changes.
• Leverage emerging technologies that will allow for creative licensing.
• Employ flexible licensing for sharing copyrighted material. Innovate with new licensing structures that permit use but secure ownership.
• Consider licenses that have a limited duration to provide opportunities for evolving relationships.
• Move to the cloud to help restrict rampant infringement, unauthorized copying and use.
• Examine closely the extent of sharing that is permitted.

Advertising and Marketing

Advertising and marketing are the driving forces in the collaborative economy. Publicity may come from brands seeking to leverage this new economy, but the bulk of the commercial speech will come from the crowd. Social media and mobile marketing will spread information about available opportunities, and more players will buy into the collaborative model as they witness its power, ease of access, and savings potential.

At the same time, the collaborative economy can only flourish if consumers trust it more than they trust the traditional brand experience. Testimonials and peer confirmation will become an important part of buying into a brand. The crowd’s advertising and marketing efforts will fuel the collaborative economy as much as, if not more than, brands’ own promotion.

As the crowd speaks, it becomes harder to detect whether speech is commercial. The collaborative economy has introduced native advertising – namely advertising that blends news, consumer speech, and some form of commercial content. Brands also experiment with experiential or gamified content and argue for broader protection under the First Amendment as noncommercial speech.

In a sharing economy and, ultimately, a making economy led by 3-D printing, brands will contend with a maze of regulation aimed at preventing deceptive and unfair commercial speech. Individual brands, therefore, must remember to vet their campaigns for legal issues or expose themselves to financial and even potentially criminal penalties. They also have the opportunity to establish industry-wide ethical practices in branding that can help prevent regulation.

As brands transition into the collaborative economy, they should not disguise themselves as just “one of the crowd.” Old and new technologies will be employed to disseminate a message that they are still relevant, but their commercial speech will continue to be subject to regulation. It is more essential than ever for brands to be truthful and non-deceptive in their commercial speech.

Best Practices:

• Sharing is a commercial venture in the collaborative economy, subject to all the rules for commercial speech.
• Advertising that includes references to the experiences of friends and other consumers is still subject to regulation by the FTC and the various state rules to prevent deceptive advertising.
• Disclosure practices have already come under regulatory scrutiny in e-commerce. Undoubtedly, in the collaborative economy, it will be more important to make all disclaimers clear and conspicuous and unavoidable for the consumer.
• If marketing a specific advantage in the collaborative space (e.g. green goods, “Made in the USA”), remember that existing regulations may apply.
• Take advantage of traditional and new media marketing techniques. Focus on the increasing challenges to safeguarding consumers’ sensitive, personal data to avoid legal risk.

Counterfeit and Grey Market Goods

Counterfeit and grey market goods, facilitated by the low cost of entry offered by the Internet, flood the marketplace. In a collaborative economy, consumers share the product, removed from the original point of sale, and therefore lack access to information concerning the product’s source. How can the collaborative crowd distinguish counterfeit or grey market product from the “real McCoy”?

Participants in a collaborative marketplace miss the initial purchasing conditions that can help to define whether or not a product is genuine. Instead, they must rely on faith and a presumption. Consumers may suffer real health consequences from counterfeit goods not subject to the rigorous manufacturing process of a trusted brand. On the other side, brands may suffer from both lost sales and tarnished reputations if counterfeit goods are allowed to flourish.

The new level of anonymity provided by the collaborative economy makes identifying counterfeit products more difficult, but also presents opportunities for brand expansion. The brand owner can partner with sharing providers to offer some consistency in the consumer experience.

 If brands partner with collaborative providers to ensure high quality and trusted goods and services, they may increase sales and further develop their intellectual property’s good will and value.

Best Practices:

• Monitor the marketplace by acquiring goods and inspecting for authenticity.
• Record marks with the U.S. Customs Service for help in policing for importation of counterfeit goods.
• Develop marketing to identify consumer sectors that value genuine and unaltered goods.
• Certify certain collaborative distribution channels.
• Partner with collaborative providers to share the burden of quality control.

Patents

The collaborative economy presents interesting new questions for patent holders. While the collaborative economy encourages breaking down the barriers that limit the exchange of information and technologies, patents, like most intellectual property, create temporary monopolies. Will patent owners be able to reap the benefits of their patents while participating in a collaborative economy that seeks to limit or eliminate the exclusivity that their patents create?

One way a patent owner can control the post-sale distribution and sharing of patented goods is to offer them to consumers under a license, as opposed to an outright sale of goods. Patent owners can also participate in the sharing of ideas and technology through patent commons. These repositories of patents allow use of patented technologies and provide a common location for specific patents of interest.

Knowledge-sharing organizations, such as patent pools, are another potential solution to the challenges of integrating patent law into the collaborative economy. These pools have proved extremely popular in the information and communication technologies sectors, but they raise some legitimate concerns about anti-competitive practices that exclude rival parties.

What about patent enforcement? Under the current patent laws, it may be difficult for a patentee to enforce its rights when infringement occurs, particularly in the case of 3-D printing. Some services in this emerging sector are designed for easy sharing of potentially infringing designs. This makes it difficult to track the unauthorized dissemination of a patented design or identify who has infringed the patent holder’s rights. Liability also becomes a question mark, as patent infringement may be spread across multiple parties. Indirect and contributory infringement may detract from the value of a patent holder’s intellectual property and is much tougher to prove. Considering the seismic change to the copyright enforcement landscape due to easy downloading of music, videos, photos, and text, we may see a similar pattern emerge as 3-D printing enables individual replication of patented designs.

While the concept of monopoly is under direct fire in the collaborative economy, patent owners have several strategies for maximizing their impact on the marketplace.  The takeaway for inventors is to focus on filling a niche with products that facilitate collaboration and making. In addition, patent holders need to align themselves philosophically with the new economy and consider innovative forms of licenses.

Best Practices:

• To preserve exclusivity rights, consider using licenses as an alternative to sale. This is analogous to current software practices with end-user license agreements.
• Be proactive in developing business models that will be competitive in the context of the collaborative economy. For example, consider whether a business structure whereby consumers “rent” rather than “buy” is feasible for your business.
• Consider the pros and cons of participating in a patent pool or a patent commons. Evaluate whether you and your competitors would mutually benefit from the sharing of knowledge and resources.

Conclusion

The collaborative economy will undoubtedly change the way companies do business, the way consumers interact with brands, and the expectations consumers have for their lives. It is our hope that this paper will spark dialog on the practical and legal consequences of operating in the collaborative economy and preserving the relevance of brands. While some of our intellectual property and consumer protection laws will evolve over time, companies need to stay ahead of the regulatory curve if to thrive in this new world. By proactively joining the collaborative economy and using their intellectual property to build trust in products, services and commercial speech, brands have an opportunity to shape the legal landscape and how people function and trade within the sharing mindset.

Tags: Collaborative Economy, Consumer Outreach, Intellectual Property