Q&A on the sweet business of co-branding

In a recent commentary published in the Westlaw Journal Computer & Internet, Sideman & Bancroft intellectual property partner Kelly P. McCarthy and Samantha Von Hoene, a law clerk at the firm, discuss potentially sweet deals that can come about when two companies partner up for a co-branding strategy.

Their commentary, “Co-branding: A sweet business strategy,” kicks off with the 2013 announcement that a version of Google’s Android operating system would be called “KitKat,” a named licensed from Nestle, the candy bar’s creator.  We speak to Kelly P. McCarthy about this unexpected pairing and how companies can sniff out other successful co-branding deals.

Kelly P. McCarthy

Kelly P. McCarthy

Westlaw Journals:  What exactly is a co-branding deal?  Is this deal between Google and Nestle typical – where one company licenses another company’s product to promote their own product? 

Kelly P. McCarthy:  Co-branding is when two brand owners place both of their brands on a single product or service offering.  A great example would be the Banana Republic/Mad Med clothing collection.  The Google/Nestle deal is interesting because you wouldn’t typically think of a software product and candy have a common interest in a specific customer base.  However, the fact that it is a bit unique is what makes it newsworthy so both companies definitely benefit from that.

WJ:  In a co-branding deal, do brands retain their intellectual property rights in the products they bring to the table? 

KPM: Which party ends up with which rights at the end of a co-branding deal should be a major part of the negotiation on the front end.  Things can go awry if IP ownership issues aren’t appropriately addressed and documented in the co-branding contract.  At the very least, each party should be sure that they will come out of the other end of the deal with their brand intact.  Which party ends up with the underlying product rights may be a different story and largely dependent upon the facts of the individual product offering.

Westlaw Journals:  What are successful examples of co-branding deals?

KPM: 

  • Nike and Michael Jordan.
  • Kate Moss and Calvin Klein.
  • Google and Nestle (KitKat).
  • Issac Mizrahi and Target.
  • Fiat and Matel (Barbie).

WJ:  Why would companies decide to enter into a co-branding relationship?

KPM:  There are a lot of reasons why a co-branding arrangement would be desirable to brand owners, even ones who are already successful in their own right.  Typically the main goal is to reach a category or population of consumers not normally familiar with your brand.  In the case of a celebrity endorsement co-brand, the benefit is the brand gains credibility from being associated with a celebrity who a select population wants to emulate.

WJ:  What can happen when deals go sour? 

KPM:  We have all heard the stories of celebrities behaving badly and losing their endorsement deals.  Generally it can be a problem when a brand signed up for a partnership with a celebrity with one image and then that image changes.

For other types of co-branding deals, termination sometimes is not as easy as one party wants or both parties want.  There can be issues of inventory or arguments over who has rights to the underlying product or technology.  In some worst-case scenarios, a company may be forced to continue a co-brand deal even when they don’t want to.

WJ:  What are some risks involved with co-branding?

KPM:  The biggest risk is not getting what you signed up for, or what you think you signed up for.  Public perception about brands change and parties locked in a co-branding relationship can sometimes sink together.

WJ:  What are some key points that companies should negotiate or discuss before they formalize a co-branding deal? 

KPM:

  1. Be precise about exactly what product or service is being co-branded.  How much of it will be sold?  What will the supply chain look like?  Who has control over that supply chain?
  2. Consider termination provisions carefully and from all angles.  What if you need to end the deal fast, or are there reasons you would want to make it difficult for the parties to end the agreement?  What should be considered good cause for termination?
  3. Include air-tight intellectual property licenses and ownership provisions, consider quality control issues.

 

WJ:  If a company sees a co-branding opportunity, what is a good strategy for making it happen? 

KPM:  Think it through and document the deal thoroughly.  Don’t be blinded by the excitement of the deal.  Remember that all good things eventually end and craft your negotiation to protect your brand.

 

WJ:  Is this more of a business deal or a legal transaction or do companies need to see that it is both?

KPM:  Companies need to see it as both.  Legal absolutely needs to be involved.  Of course, at the same time, legal needs to keep in mind the business goals of the deal and work with the business people to make sure the deal doesn’t get bogged down in legalese.

Westlaw Journals:  Many large companies have co-branding guidelines.  (A quick Google search brought up The Wharton School’s guidelines, 3M’s co-branding guidelines, and even MetLife has a co-branding section on its brand center.)   Do you recommend for companies to come up with guidelines or, at least, think about them so they have a process in place if a deal arises in the future?

KPM:  If a company constantly finds that others are using its brands incorrectly, intentionally or unintentionally, a co-branding document could help.  Many companies call these, “Trademark Usage Guidelines” as these uses are not technically “co-brands.”  For a true co-branding deal, a formal agreement should be put into place.

WJ:  Thank you so much for your time!

Kelly McCarthy, an intellectual property attorney at Sideman & Bancroft in San Francisco, focuses her practice on copyright and trademark issues. She can be reached at kmccarthy at sideman dot com. Samantha Von Hoene is an intellectual property intern at Sideman & Bancroft. She attends University of California, Hastings College of Law and will receive her J.D. in 2015.

If you have any ideas for commentaries or would like to do a short Q&A on a hot legal topic, please contact Melissa Sachs at melissa.sachs at thomsonreuters dot com.