IP in a Downturn: In-house IP teams are coming under pressure to find efficiencies as the economy slows.
The broad consensus among economic forecasters is that the world is headed for a slowdown. It’s just not yet clear how widespread or how bad it will be.
Many companies are already implementing hiring freezes or even laying off employees. In-house IP teams are also being asked to tighten their belts and ensure that budgets are used wisely. Recessions are not pleasant, but they do present an opportunity to find efficiencies.
The cost of trade mark and patent upkeep is fixed – at least for a period of time – so budget tightening tends to focus on variable-cost savings. IP enforcement activities often come under pressure first. This is actually a good thing, as enforcement should be reviewed periodically to ensure alignment with corporate goals. It sometimes becomes a business-as-usual activity that generates sub-optimal results.
So how can an in-house IP team get more bang for the buck when it comes to IP enforcement? Let’s first look at what not to do.
The illusion of online takedowns
It’s no secret that a huge volume of the products sold through online retail platforms are counterfeit. The extent varies – depending on the policies of the platform and the country in question – but counterfeit listings for a brand on a single platform can easily run into the thousands.
Issuing requests for platforms to take down these listings feels like low-hanging fruit for in-house IP teams. The problem is that such takedowns often only remove the advertisement for a counterfeit product – not the item itself. What’s more, an entire sub-sector of AI-driven software companies is emerging that assist brands in taking down fraudulent listings. These companies can show impressive numbers that don’t reveal the true counterfeit picture.
“This is a growing trend that in-house IP teams need to watch out for,” says Rouse Principal and Head of Enforcement, Nick Redfearn. “These software companies produce reports showing how their algorithms identify fraudulent listings and send automated notices for millions of dollars’ worth of counterfeit goods to be removed. Business or marketing departments may see this and think the project is a success.”
“But these numbers only show how many advertisements were removed. The counterfeit products remain in stock, and in many cases the ads are even posted again the very next day,” he says.
“Online takedown work remains a necessary part of the enforcement mix, but it needs to be driven by KPIs that target the actual fake goods,” says Redfearn. “So we recommend segmenting your budget. Don’t just put everything into online takedowns because it looks like an easy thing to do – it’s only half of the problem.”
Balance your brand-protection activities
Counterfeiting may in fact increase during an economic downturn, as people look to save money by buying cheaper goods. Recessions are a boon to the grey economy.
This is all the more reason for brands to continue spending on offline enforcement measures that seek to disrupt supply chains by targeting merchants, distributors, shippers and factories. A comprehensive enforcement strategy aims to identify the supply sources of counterfeit products as well as the intermediaries who drive the demand. It’s about more than just removing items from online stores.
The challenge for in-house IP teams – especially those faced with hiring freezes or headcount reductions – is that their offline enforcement efforts may become spread too thin. Instead of a piecemeal approach that just scratches the surface here and there, teams should identify those areas with the potential to yield the most impact.
“You’ve got to come at the counterfeit problem from both the demand side and the supply side,” says Redfearn. “Building the right strategy and mix of online and offline work is challenging. It requires careful consideration, and the formulation of coherent arguments that IP teams can use to convince their managers of the need for specific programs.”
“You need to study a given market in its entirety and set the right balance for the budget available,” he says. “This means online surveying, online to offline investigations, identifying counterfeiters and copycats, and then working with local authorities to take action when necessary to set a deterrent.”
Conducting a brand-protection strategy audit
With the forthcoming economic downturn forcing IP teams to adjust their budgets, now can be a good time to perform a complete review of enforcement strategies and activities.
Brand-protection programs are most effective when a company’s internal processes and dependencies are properly aligned. If products are technical in nature, for example, then R&D teams need to be involved in creating the anti-counterfeit program. The roles of marketing teams, downstream distributors and other stakeholders need to be defined too. Internal stakeholder alignment is key to an IP enforcement program’s success within a company.
Anti bribery-and-corruption compliance is critical in today’s regulated world. The longer a program goes on without such an audit, the higher the risk of illicit behaviour. Selecting vendors for online programs or identifying the right anti-counterfeiting marking technologies for your products can benefit from an outside review.
“It’s always best to use an independent consulting team to review an existing program,” says James Godefroy, Rouse’s Deputy Head of Enforcement. “The existing provider may have a conflict reviewing a program they designed. A fresh pair of eyes helps brand owners define the most impactful activities and set the right KPIs for their enforcement work.”
“It may be worthwhile for a company to switch away from doing more expensive in-market raids and instead focus on more customs’ seizures. This can be better bang for the buck, as working with customs is generally cheaper than conducting raids.”
“There is no single formula for anti-counterfeiting activities and KPIs. Companies in different industries have different activity mixes and measures of success. You need to conduct a thorough review to figure out what’s right for your particular product and brand,” says Godefroy.
As financial belts tighten over the next 12 months, the most proactive IP owners will ask all these questions and find ways to answer them.