FL_Module_4

MODULE 4: FASHION LAW AND COMMERCIAL LAW

“A brand is no longer what we tell it is, it is what the consumers tell each other it is”
---Scott Cook

WHAT IS A BRAND?

A brand is a name, terms, logo, or design (or a combination of them) that aims at identifying
a product or a service from one vendor or manufacturer and differentiate it from competitors.
Branding for many years has been seen as logos and advertisements.

A brand is much more than a name or a logo. It is not just image projection but it also recalls
clear relations in a consumer's mind.

Branding in general terms means personalizing a product to ensure a balance between
different economic values. In the fashion industry branding has become the dominant
competitive strategy for all successful companies.

Brand names in the fashion world tell you more than the quality of the goods you buy,
namely the history of the brand, designers behind the brand or concept of the brand, in other
words the identity of the brand.

In order to avoid weakening the brand identity, fashion entrepreneurs take every step to
protect the brand name or logo in countries they operate in and maintain the brand portfolio

on a regular basis. By protecting the brand name, fashion entrepreneurs safeguard what
rightfully belongs to them from infringers and maximise profits from the ownership of
valuable assets. They are also protecting the hard work and investment they have made in
developing a reputation

ASSIGNMENT OR LICENSING?

One can either assign or license a trade mark. “Assignment” makes the owners sells their
trademark completely. “Licensing” is more like taking a lease of the right. It grants someone
the right to exploit the owner’s trade mark in a particular way, in a particular location and for
a set period of time.

Brand Licensing is particularly prevalent within the fashion industry, where it is common for
brand owners to license the rights to produce various goods to manufacturers because
Assignment would squander the intellectual property rights of the owner and Licensing on
the other hand involves giving only the lease of the right. The rights of the owner in
“licensing” is exploited according to the set conditions only.

It has been rightly said by Robert Iger (CEO of Walt Disney) that, “The Heart and Soul of a
Company Is Creativity and Innovation.”Thus, by licensing the brand to third parties for
manufacture and sale of products the “heart and soul” of the company, that is its intellectual
property rights remain unsullied.

Globalisation and the proliferation of mass produced competing goods implies that
manufacturers and retailers are increasingly reliant on the brand loyalty of consumers.
Intellectual property can add substantially, potentially as much as 80%, to the value of a
business.

In 2016, Mulberry announced a new licensing deal for its ready to wear and footwear
collections with Onward Luxury Group, which has significant experience in manufacturing
and distributing fashion-luxury brand products.

TRADEMARK BRAND LICENSING
It is a commercial transaction whereby the owner of intellectual property ("the Licensor")
allows a thirrd party ("the Licensee") to use that intellectual property as the "brand" for a
specific product or range of products under contracted commercial conditions within a
license agreement that govern its use – for example the duration of the relationship, the
geography where the products may be sold, the distribution channels, the price positioning
and other considerations. The Licensor is remunerated for these arrangements in the form of
fees - usually calculated as a percentage of the licensed product's sales volume ("royalty").
WHY DO COMPANIES LICENSE THEIR BRANDS?
A brand’s equity is derived from the awareness and image a brand holds with its consumers.
Companies who know their brands well have a good understanding of the equity of the
brand.

A licensing agreement authorizes a company which markets a product or service (a licensee)
to lease or rent a brand from a brand owner who operates a licensing program (a licensor).
Licensing enables companies whose brands have high preference to unlock a brand’s latent
value and satisfy pent up demand that exists.

Apart from benefits to licensors, there are benefits to licensees as well. Licensees lease the
rights to a certain property for incorporation into their merchandise, but traditionally they do
not share ownership in it. Having access to major national and global brands, and the logos
and trademarks associated with those brands, gives the licensee significant benefits they
previously did not possess. The most important of these is the marketing power the brand
brings to the licensee’s products. Building a brand from scratch can take years, millions of
dollars and a lot of luck. The company which licenses a brand gains immediate access to all
the positive brand and image building that went before it. The licensee also takes with them
the reputation of the licensor

The Manchester United supporter scarf, The Prada sunglasses,The Paris Hilton perfume. The
Harvard University sweatshirt. What all these products have in common is that they are all
licensed products. The world of consumer product licensing is, to many, a giant hidden
industry worth over several hundred billion dollars in sales.

Brand licensing therefore produces financial income for the Licensor. It is a way to monetize
one's brand or other IP with minimal cost and, if professionally managed, limited risk.
However there are many other additional reasons companies license their brands.

A licensing agreement is useful to enlarge the society’s geographic market; to decentralized
and differentiate the offer in order to reduce the business risks; to increase the recognition,
popularity and fame of her core brands, giving the same image of trademark in each store
and in all points of sales; financial benefits in remarry market due to positive feedback in
licensee’s products and in secondary market because of royalties in licensee’s sales.

Strategic licensing of intellectual property rights in the fashion industry can clearly be very
profitable for both brand owners and licensees. Through licensing, a brand owner allows
another entity or entities to use its intellectual property, usually its trade‐marks, but often its
copyright, or patent rights, by another entity in exchange for royalties. The arrangement is
for a certain period of time, for a certain category of products, within a certain territory.

Through licensing, brand owners are able to increase revenue and profit, expand into new
product categories and territories that might not otherwise be easily accessible, raise overall
brand awareness, and obtain access to expertise and new distribution channels. A license can
also provide the brand owner with access to new technologies, markets and customer bases.
Licensees benefit by being able to generate additional revenue through the association of a
product with a designer, celebrity or popular trade‐mark that adds value to the product.
Licensees obtain the benefit of having their products linked to a famous brand with strong
consumer relationships and intellectual property rights. Licensees may also obtain access
through licensing to a sought after design or patented feature that could not otherwise be
incorporated in its products.

Licensing of brands in the fashion industry has traditionally involved the licensing of brands,
designs or other intellectual property to a manufacturer, marketer or distributor, for a fee.
This type of licensing is invisible to the consumer. The brand owner maintains control over
the quality of the products and the brand image is seamlessly maintained. The possibilities of
brand extension through licensing agreements are endless; however, they typically fall into
two main areas, brand expansion and geographic expansion. First, through licensing, a
fashion brand owner may be able to extend the breadth of its brand through the creation of
complementary products. For example, a clothing designer wishing to expand its brand to
include other products may use licenses to add fragrances, cosmetics, home collections, or
accessories to its brand label without being required to develop an expertise in each area of
desired expansion.

Licensing out enables brand owners to expand their product line into categories that are not
core to their business. High end car manufacturers, for example, often produce clothing,
accessories, and even house wares lines in order to be top of mind with consumers on a day
to day basis.

In addition to the expansion of product lines, a license may also assist a fashion brand owner
to expand to new geographic markets. By entering into licensing agreements with foreign
licensees, a fashion licensor has the opportunity to expand globally to geographic areas
where it does not have a business presence, raise awareness of its brand and sell its products
in foreign markets.

Licensing out also enables the exploitation of celebrity names and likenesses to enhance the
image of a product line and generate interest in it due to its association with the celebrity and
the quality, image and other intangible perceptions tied to the name or person. The licensing
of designer fashion names and brands into such categories as apparel, fashion accessories,
health & beauty aids and home goods is one of the best known facets of the business.

Fashion licensing is meant to be invisible to the consumer, who is not to even consider that a
third party licensee is making the products that carry the designer’s name. Of course, in a
well-executed, tightly run licensing program, the brand owner maintains strict control over
design and quality, and the licensee manufactures and the agreed upon specifications, so the
brand image is seamlessly maintained.

Designers often take advantage of their own brand names to expand market opportunities by
licensing into related product categories besides fashion, including all kinds of accessories,
home goods, and health and beauty aids. The original brand may be licensed to a third party,
who will manufacture, market, and distribute goods under the brand name, even originating
apparel designs in some cases.

Success in fashion licensing is built on a successful original brand and a well-run licensing
arrangement, with clearly defined roles for all involved. Tight control over design and
quality control are essential to preserve the all-important brand image, and retain its
productive value for the long term.

Getting fashion products to customers involves entering into a series of business
relationships – all of which require commercial agreements. We have special expertise in
advising on distributorship, agency and supply agreements. Our fashion clients benefit from
our advice on concession and franchise agreements. We also know the tricks behind
conditions of sale.
According to the Estimated Global Licensing Revenues – 2018, the Fashion Industry
contributes an amount of $32.1 billion through licensing. 1
BRAND LICENSING AGREEMENTS
Brand Licensing agreement between the Licensor and the Licensee is like any other
commercial agreement and sets out the name of the parties, the term of the license, the
conditions on which the license has been granted, the geographical limitations, the quality
standards to be maintained while manufacturing and selling the products, the liability of the
parties, confidentiality of the information and intellectual property rights, the consent of the
parties and government approvals.

1 www.licensing.org