Pre and Pixi smartphones to go to HP

Another challenge seems to come up for Microsoft with the news this week that Hewlett-Packard intends to acquire Palm for US$1.2 billion - a decision for Palm's operating system WebOS as the basis for new generation consumer smartphones and against Microsoft’s Windows.

The deal is expected to provide a lifeline to struggling Palm - their share price went down over 53% this year - and gives HP the chance to concentrate on the smartphone consumer market owning the end product.

According to the New York Times, Palm has 452 patents and another 406 applications on file. Research firm MDB Capital was reported to value Palm’s portfolio of patents at approximately US$1.4 billion; they believe the value of Palm’s IP alone is worth between US$8 and US$9 per share.

More information can be found here and here.

What Should We Do With Brand Rankings?

How qauntifiable are brands? I sometimes hear from MBA students the lament that, after courses in finance, operations research, micro-economics and the like, their branding course can seem a bit too touchy-feely, more art than (psuedo-) science. Numbers and data speak for themselves. If that is the perceived sense, then what better than to find better and more elaborate ways to express branding in quantifiable terms.

The most recent exposition of this approach is set out as part of the special report on "Global Brands" that was published in the April 28 issue of the Financial Times. As part of the special report, the FT set out the "Global Top 100", relying on the 2010 BrandZ Top 100 report.

According to the report, the top 10 brands by value are: (i) Google; (ii) IBM; (iii) Apple: (iv) Microsoft: (v) McDonald's; (vii) Marlboro; (viii) China Mobile: (ix) GE and (x) Vodafone.

Sliced differently, at the sector level, the leaders in year-on-year growth are: financial institutions (12%); beer (10%) and technology (6%). The three sectors with the greatest decline are: coffee (-6%); insurance (-7%) and cars (-15%). Newcomers to the list (in order of their ranking on the general top 100 list) are BP; ExxonMobil; Shell; ICICI; PetroChina; Telcel; Petrobas and USBank. See more generally the FT report here. How exactly does the BrandZ report do about its work? Permit me to quote from the article:

"The BrandZ Top 100 is the only ranking based on a brand valuation methodology that is grounded in quantitative customer research and in-depth financial analysis....

Insights into customer behavior and brand strength come from WPP's unique BrandZ database -- the world's largest repository of brand equity data. Covering thousands of brands and based on more than a million interviews, it provides a detailed, quantified understanding of customer decision-making the world over. Financial data are sourced from Bloomberg.com, analyst reports, Datamonitor regulatory bodies, Millward Brown Optimor's consultants then prepare financial models for each brand that link brand perceptions to company revenues, earnings, and ultimately shareholder and brand value.

The valuation methodology is similar to that employed by analysts and accoutants. Brand value (BV) is derived from each brand's ability to generate demand. The dollar value of each brand in the ranking is the sum of its predicted future earnings, discounted to a present day value. An important element of the overall calculation is brand contribution (BC), the portion of earnings that can be considered to be driven by brand equity, which is presented as an index from 1 to 5 (5 is the highest); an additional metric is brand momentum (BM), which indicatews each brand's short-term growth potential. This is presented as an indexed figure that ranges from 1 to 10 (10 is the highest)."

Whatever you want to say, "touchy-feely" this isn't. And yet----

1. There seems to be a real "black box" aspect in the creation of the ranking. I cannot but think of all of those AAA bond ratings that helped percipitate the subprime securtization crisis. I am not suggesting that BrandZ is subject to any potential conflict of interest such as that which hovers over bond rating agencies (who apparently are paid to rate the bonds of their clients for use by third parties). I also fully appreciate that it might want to keep some of its methodology and data confidential. Still, there is this lingering concern that, without the ability to reasonably evaluate the process of fact-gathering and the empirical robustness of the valuation models, there is a threat that the ultimate branding metrics may have a bit of misplaced quantitative certitude about them.

2. As a result, I would like to see more reporting and comparison of ranking methods in addition to a discussion of the end results. The FT is not alone in relying on a single report to base its report. I believe that Business Week, which has also published a yearly review on brands and brand values, also relies on a single source. The time for such reports to give equal billing to a more critical appraisal of not only the "what", but also the "how", of brand rankings.

3. Since BrandZ claims to carry out more than 1,000,000 interviews about brand decision- making, it would be most instructive to summarize the process of such decision-making. Who makes the decisions and does the process differ across sectors?

4. Further, how is brand information used and transmitted within a company? Are the BV, BC and BM metrics used within the company to make branding decisions; if so, how? Or are they merely snapshots of where the company has been, brand-wise, over the last year?

5. Circling back to my initial obervations about training brand professionals, the ultimate question is how answers to all of the above will make us better able to train individuals to carry out the corporate brand function.

More on black boxes here and here.

More on touchy-feely here.

Fair use generated $4.7 trillion in 2007, says "imprecise" CCIA study

Thank you Jeanine Rizzo (Fenech & Fenech Advocates) for drawing our attention to an Ars Technica article, "Fair use" generates trillions in the US alone", which discusses the quantification in dollar-and-cent terms of the value of the fair use exception to copyright infringement to the US economy. According to this article,

"... Fair use and other limitations on copyright themselves generate significant economic activity—$4.7 trillion in 2007.

The Computer and Communications Industry Association (CCIA), which counts Google and Microsoft among its members, today rolled out a report (PDF) on the value of fair use, one that tries to answer the question: "What contribution is made to our economy by industries that depend on the limitations to copyright protection when engaged in commerce?"

The method is similar to that used in several prominent piracy studies; in this case, the "fair use" industries are divided into "core" and "non-core" companies, depending on how important fair use is to their very existence. Economic activity and payroll numbers can then be crunched from this data, offering a rebuttal to any view of fair use that sees it as a mere afterthought in copyright law, one good for protecting YouTube parodies but not much more.

The CCIA report's numbers are staggering. The "fair use economy" accounted for 23 percent of all US real economic growth between 2002 and 2007. Fair use industries (core and non-core combined) generated $4.7 trillion in 2007. And "about one out of every eight workers in the United States is employed in an industry that benefits from the protection afforded by fair use. ..."

While it is conceded that analyses of this nature are "notoriously imprecise, in some cases amounting to little more than guesswork", the article suggests that the evidence-based approach offers a "useful corrective to simplistic views" on strengthening IP law.

Revenue from internal TM licensing to swell GKN pension pot -- or will it?

From today's Times Online, courtesy of Lee Curtis (Harrison Goddard Foote), comes this article entitled "GKN’s trademark transformed into revenue stream for pension scheme". According to the article,

"GKN returned to profit in the year’s first quarter with its best performance since the start of the recession. The engineer reported a 50 per cent increase in automotive sales to £852 million and a trading profit of £51 million, compared with a trading loss of £47 million in the first quarter of last year.

The company, which has cut three dividend payments and made 7,000 staff redundant since the start of the downturn, also said that it would address its £510 million pension fund deficit through a radical plan to direct licensing income from its own name into the defined-benefit scheme. ...

The next triennial review will be completed by the end of the year, but the latest gross deficit figure for the scheme is £510 million. To try to close that gap, GKN has agreed with the pension fund trustees to create an asset-backed cash payment scheme that will put £30 million a year into the pension fund for 20 years.

Cash currently payed by GKN businesses around the world to use the GKN trademark — in effect, an internal licensing fee — will be channelled into the pension scheme. This will be supplemented by rental income from five of the company’s UK properties. The asset-backed cash payment scheme has been valued at £331 million.
...".

The idea seems ingenious but I have this nagging doubt in the back of my mind that there's a fatal flaw somewhere along the way. Can any of IP Finance's tax-savvy readers help?

Digesting Zim's Indigenisation Policy

Zimbabwe, once the bread basket of Africa, has been treated with trepidation when it comes to investment due to reasons that have been well documented over the last decade. There is evidence though that some investors are now seeing the country as an exceptional investment opportunity but is this new gained status ephemeral? Recent news reports about the Indigenous and Economic Empowerment Act & Regulations are likely to force optimistic investors to reconsider, or adopt a licensing model to achieve their objective. An analysis of how and why investors will need to use IP to adapt is contained on the Afro-IP blog here.

A big thank-you!

Following the success of yesterday's seminar on "Brands and the Cost of Corporate Conscience", the IP Finance weblog team -- several of whose members were in attendance -- would like to offer their thanks to Marjolijn Vencken (Trouble in Paradise Sustained Solutions) for her outstanding and, as ever, controversial presentation.

Right: Marjolijn Vencken has a chuckle while Amanda Michaels, in the chair, keeps a straight face (photo: Filemot)

Starting with the question of how much money (if any) brewers should pay towards preventing or remedying the damage done through binge-drinking by a non-target audience of minors, she then examined means by which brand-owners invest in showing their green credentials in order to excuse, hide or even reduce the environmental damage done by their products. Instructive case studies involving Land Rover, Heineken, Philips and Liberty Mutual were analysed and the role played by corporate social responsibility (CSR) was examined. Both during and after Marjolijn's presentation there was some lively questioning and discussion, befitting the blend of divergent interests of the rapt audience. It was a lovely way to celebrate World Intellectual Property Day.

The IP Finance weblog would like to thank both Marjolijn and her chairman Amanda Michaels for their input. Thanks are also due to London-based IP specialists Olswang LLP for providing its excellent hospitality, in conjunction with sponsors Hogarth Chambers.

Footnote: a fresh fourth edition of A Practical Approach to Trade Mark Law, written by Amanda with her colleague Andrew Norris, was launched earlier this month by leading publishers Oxford University Press. You can get details of its contents and even order it from its home page here.

Ambush Marketing: those companies thumbing their noses at trade mark laws…

Recently I came across an excellent article written by Mike Du Toit of South African law firm Edward Nathan Sonnenberg on “Ambush Marketing”. As the World Cup in his home country approaches, the moment is indeed well-chosen to focus on this topic, which raises many interesting economic and legal issues.

Briefly, “ambush marketing” refers to all strategies used by companies to promote their brand during large-scale events (usually sporting events) without paying an expensive fee (the 2006 FIFA World Cup fifteen official Partners paid around €40 million each according to the Daily Telegraph) for the status of “official sponsor” and for the bundle of rights and commercial privileges that goes with it. Perhaps the most interesting feature of “Ambush Marketing”, and certainly the most frustrating one for official sponsors and for the organizational committees in charge, is that such marketing stratagems have been conceived to have a strong impact in the media while remaining fully compliant with all applicable legislation. Nike holds the reputation of ambush marketing mastermind, because its marketing teams always find original ways to fully profit from the popularity of a major event while pushing its rivals back into the shadows (Puma knows a little bit about ambush marketing too ... Ask Lindford Christie!).

Right: Lindford Christie ...

In their quest for sponsors, event-organising committees or sports federations such as the ICO or the FIFA are faced with the so-called free-rider problem. It is not possible to prevent companies from advertising during the event on the basis that they are not officially affiliated with it, unless what they do is against the law. Moreover there are many other ways to advertise a company rather than paying the requested sponsorship fee. By being the official sponsor of a popular sportsman for example, a company can also enjoy a high level of visibility nonetheless. To overcome this free-rider problem, committees must make sure that they use all the legal means at their disposal to prevent ambush marketing, while offering a maximum of visibility to officially affiliated partners.

As Du Toit suggests, the legal means to prevent ambush marketing are relatively limited notably in the area of trademark law, as the measures taken for the forthcoming World Cup demonstrate. The World Cup has been designated as a “protected event” in terms of section 15A of the Merchandise Marks Act 1941.

In a notice published on 17 November 2005 in Government Gazette no 28243). The FIFA prohibited “the use of 2010 or Twenty Ten used with the words soccer, football, South Africa, RSA, SA, World Cup or with soccer or FIFA World Cup imagery under the terms of Trade Marks Act No. 194 of 1993, because its use implies an association with the World Cup. Likewise the expression World Cup cannot be used with the words “soccer”, “football”, South Africa, RSA, SA or soccer imagery ”. However the use of general football terms and imagery for the promotion of a company cannot be prohibited. Moreover the FIFA publishes guidelines to illustrate instances of unauthorized commercial association with the forthcoming world cup, whose deterrent effect is questionable, since it informs potential ambushers more than it probably should. Given this thin layer of protection, which is probably one of the most comprehensive ever awarded to official sponsors of an international sporting event, it is quite remarkable that so few large-scale ambush marketing campaigns have taken place in the past.

Below: ... and what can you see in his eye!

Nevertheless committees and federations have been learning from their previous mistakes. Therefore in order to face this lack of legal protection that could compromise the stability of this fragile sponsorship system and avoid successful ambush marketing, they created a safety net protecting the interest of official sponsors through a systematic use of contractual means. To that extent once being awarded the 2012 Olympic Games, London has been immediately required to sign the “Host City Contract”, which oblige them to respect all commitments made in the bidding process including the protection for the official sponsors. As a result the London Olympic and Paralympic Games Act 2006 entered into force with specific chapters concerning advertising and trading. Likewise for the World Cup, every host city has been required to sign similar “host city agreements” with the FIFA.

It is probably too soon to say if such measures will be sufficient to thwart the underhand ambushing plans of renowned “rogue” companies like Nike, Pepsi or Mastercard during the immanent World Cup and the next Olympic games. Let’s be patient and, to quote Du Toit, let the games begin.

Experiences of IP and VCs

Next Thursday 29th April in London, Jon Calvert of ClearView IP will be sharing his experience of investors and their views on intellectual property in an evening presentation for the Licensing Executives Society.

According to Jon, the likely programme will include:
- IP in early stage companies
- The management team's knowledge of IP
- Divergence between the IP and the product/service being sold
- The patent landscape
- Variations in due diligence with the amount to be invested

The meeting is open to non-members as well as members of LES. More information is available here.

Cloud Computing: Winners and Losers

I continue to ponder various points about cloud computing that were raised in a session on the subject in which I participated earlier this week. I paid particular attention to the presentation of a senior technical person, with extensive experience in cloud computing at a research lab operated by one of the world's leading high tech companies. His words got me to thinking about who might the winners and losers in a cloud computing-dominated world.

By way of quick summary, let us characterize cloud computing as the provision of various computer-related services where the user makes use of services accessible from a remote site instead of from the user's own IT resources. The underlying idea is that such sevices should be provided as a ultility analagous to electricity and water. While the concept was first floated in the 1960s, it entered the mainstream only in the last decade due to a series of hardware, communication, software and financial considerations. Two aspects are particularly noteworthy.

First, the user need no longer take software licences for which he pays regardless of whether the the software is actually is being used. Instead, under the SaaS model ("software as a service"), the user in principle need only pay for the software services that it actually uses (in actuality, it appears that this is not precisely the case, but the "software on demand" model is close enough for our purposes.) Second, the remote cloud computer centres serve to replace the need to maintain full-scale IT centres on-site. This is done by maintaining immensely large computer centres manned by the most skilled IT personnel, thus enabling the user to tap into these computer centres for a variety of their data services (so-called "platform as a service" and "infrastructure as a service").

Against this backdrop, who might win and who might lose? Permit me to propose the following list.

The Winners

1. Manufacturers of hardware and communications equipment--They will be called upon to provide the computer centres with the necessary equipment to support and expand these facilities.

2. Manufacturers of various hand-held devices--One of the claimed reasons for the recent attractiveness of cloud computing is the explosion of hand-held devices, which in principle permit connectivity anytime, anywhere. The popularity of these devices will be enhanced by the ability of their users to acess usable applications on the fly. The ability of the computer cloud to provide these contents will be a major determinent in how successful this hand-held revolution will actually be.

3. Users--There has long a been a feeling that users of computer software pay for software that in effect rests unused most of the time. When licensing models were based on payment per CPU, or user, or computer station, there was no ready way for users to free themselves from this model. When software is longer stored within one's local IT system, then the possibility is created for users to pay only for the software that they actually use.

4. Owers of the computer centres--It is Amazon.com that is widely attributed with first seeing the commercial possibility of making use of excess capacity in its computer centres to provide storage and access capablities. Whether true or not, it appears that a number of computer-related entities--e.g,, Amazon.com, Google, Microsoft and IBM--will come to dominate the infrastructure for cloud computing.

The Losers

1. Current software licensing models--Pureyors of software licensing may be challenged to find the kind of metric for charging users for the use of their software that will be as lucrative as the current model.

2. In-house IT departments--One of the claims is that local IT departments are both expensive to maintain and too often do not attract the calibre of person required to provide the necessary support. Whether that is true or not, the expansion of cloud computing may lead to a reduction of in-house IT positions.

3. Open source software--By some accounts, cloud-computing will only strengthen the hand of proprietary software, protected by copyright and patent, at the expense of software development under the open source model. Thus, while cloud computing may encourage cooperation at the user level, it does nothing to undermine, and may even strengthen, the hand of the proprietary software industry.

I am certain that there will be additional potential winners and losers in the cloud-computing world. In any event, it will be interesting to see how cloud computing plays out in the years to come.

More on winners and losers here