The Penguin in Chains - Brands and Trademarks in an Open Innovation World
Posted By
Teresa da Silva Lopes and Paul Duguid
05 December 2011
Living in a world characterized by fierce competition and saturated markets is leading twenty-first century multinationals to look for new ways for growth and survival. Both large leading multinationals and small and medium entrepreneurial enterprises collaborate through the creation of open innovation and intellectual property (IP) landscapes, and share their resources, know-how, compounds and technology. The BIG Innovation centre recently launched in September 2011, is evidence of such collaboration. Having already attracted leading multinationals as partners, it aims to facilitate the collaboration between businesses, universities and other institutions, and the government, and act as a key contributor to policy making and to the development of the UK as a global innovation hub.
Such open innovation projects are however all associated with the ‘hard side of innovation’, looking essentially at patents and copyrights, and neglecting the ‘soft side of innovation’, in particular brands and trademarks (the aspects of the brands that can gain legal protection through registration). Despite the possibilities of leveraging brand equity, and the diversification of portfolios to overcome barriers to entry, trademarks are complex to manage and use as part of collaborative strategies. That is why they are little discussed by policy makers and not much emphasis is placed on trademarks in explaining British competitiveness.
Evidence on branding and trademark strategies illustrates their complexity and uniqueness in relation to other forms of IP. First, businesses and other institutions seem very keen to keep their ‘individuality’. Most of the high-profile Free/Libre Open Source (FLOSS) projects, while disdainful of the patents and copyrights used to control and restrain software-driven technology, nonetheless have registered and take care of their trademarks. Taking the lead, Linux, Mozilla, Firefox, and Wikipedia have all fought to prevent misuse of their trademarks. (See, for example, the Linux Foundations "Trademark Guidelines", which cover some 11 marks and in spirit are quite unlike their view of software patents.)
Second, unlike patent collaboration, brand collaboration does not tend to take place between direct competitors but rather between partners with complementary skills, often from distinct industries. Examples are Nike and iPod in sportswear, H&M and Stella McCartney in fashion, Mercedes and Bridgestone tires in the automotive industry, and Sony and Ericsson in telecommunications. The airline industry provides one of the few cases where direct competitors enter into brand alliances, such as One World and Star Alliance.
Third, by extension, brand alliances often result in brand wars. In the "old economy", the classic brand wars pitted Coke against Pepsi or Chrysler against Ford against GM, highlighting "horizontal" rivalries between classic competitors. In the "new economy, we also see branding battles with Intel fighting Microsoft and Dell over who brands the PC, or more recently AT&T competing with Nokia and Android to brand the mobile phone. Unlike the old brand wars, these are cases of "vertical branding" as the fierce competitors lie along a single supply chain, and so doing both compete and cooperate. In the PC wars, Intel's "Intel Inside" campaign brilliantly tried to subordinated its partners--and in the process surprised even Intel with its success. It was not surprising, however, that when Apple went to Intel to supply processors for the ‘Mac’ did not countenance Intel sticking its brand on the outside of Apple products and so diluting Apple’s highly valuable brand identity.
But the new Mac was not simply a struggle between two corporate brands. With its OS X running on Intel chips, Apple managed not only to tame Intel's "accidental brand" but also to suppress another, rather different brand. For Apple built its system on the Open Source version of Unix, BSD. (BSD was developed at Berkeley after a successful battle with AT&T over the right to this nonproprietary version of Unix. The mark BSD was registered in 1991 after the University of California's triumphant victory over AT&T's copyright claims. The related mark FreeBSD was registered in 1996.) Technologically, the tightly closed Apple system manages to live happily with an open source kernel. In terms of vertical branding, however, the BSD mark is restricted by Apple to the point of invisibility. But the BSD mark has always been rather self-effacing, defensive brand. The new Open Source marks like Firefox, Mozilla and Wikipedia are more brash and outgoing.
Fourth, to combine brands can be the first step to dilution. A brand and its trademark is associated with the whole ‘personality’ and reputation of the product and is in many ways indivisible. Patents, in contrast, are often combined to produce new products with new identities.
Fifth, successful brand management requires the ability to use of a wide range of strategies and tactics which may be case specific - to brand, the industry, or the institutional environment in which the company is operating. Because corporations are aware of the long-term impact that trademarks have on their profitability, growth and survival, they need to have in place strategies that range from informal approaches to infringement, to business retaliation, change in the modes of entry into markets, or the use of the law. This ability to manage these risks associated with the lack of IP protection in some markets is a key source of competitive advantage of firms.
It remains an open and yet important question, then to what extent the brands of Free/Libre Open Source projects - which technologically have made such an important contribution to modern technology - are compatible with those of proprietary systems. The latter seek to benefit from the remarkable power of the Open Source method of technology development in a combination that seeks to combine the strengths of the open with the closed. Here there can be technological collaboration. But in the relative use of their brands, in relationships that are inherently both cooperative and antagonistic, there is likely to be something closer to ideological confrontation.
Furthermore, FLOSS trademarks have traditionally worked primarily as certification marks, testifying to the character of that is neither made nor owned by the brander. Certification trademarks have an interesting if little documented history (for example in the US, where the Linux marks are registered). There is usually a clear dividing line between the certifier and the certified. Supply chain collaborations complicate this relationship as do Open Source projects such as Google's Android, which is owned by a private company (rather than a foundation).
If we wish the UK to be a hub for the creation of IP landscapes and Open Innovation eco-systems, we need to take into account not only the hard side but also the soft side of innovation. A more thorough understanding of the role of trademarks and the tradeoffs that exist between keeping trademark ‘individuality’ versus forming alliances need to be better understood, as well as the power relations in vertical and horizontal chains, and alternative strategies that firms pursue to prevent and mitigate IP infringement. In fact the recent history of trademarks provides a good basis for understanding British competitiveness in industries such as services and consumer goods.
By Teresa da Silva Lopes and Paul Duguid
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