(This article was written for AIB Business. The original article was published on June 11, 2015 and can be viewed here.)
More and more SMEs are now realising the benefits of export-selling, such as increased demand, risk mitigation, rising profitability and access to foreign resources and information. When establishing an export business, financial considerations are often top of the list of concerns, but Intellectual Property (IP) rights are also an important aspect in the success of an export venture.
In forming a cohesive export business strategy, much consideration should be given to the importance of Intellectual Property (IP) in establishing your brand in foreign markets. Here are five key issues to be borne in mind when planning to export your goods and services:
1. IP strengthens your brand image
To know exactly how IP can assist in your brand image, it’s important to know what constitutes “Intellectual Property”. IP covers a range of intangible assets arising out of the creativity of your business, which can be legally protected as IP rights. Examples of protectable IP include trade marks, patents and designs. Trade marks can protect a brand, slogan or logo, while patents and designs, respectively, protect the underlying technical innovations and the outward appearance of a product. Hence, registering your IP can protect your Trade Marks and innovations, each of which serve to promote, build and protect brand image while conveying important information about the quality, origin and reputation of your products or services. The reputation of a brand is core to both the demand for, and pricing of, your business offering. Therefore, it is critical to ensure your IP is both protectable and protected. There may be numerous forms of IP that your business can leverage to build your brand in export markets.
2. IP rights can provide market exclusivity
IP rights can be secured in your key target markets, providing a mechanism to prevent potential competitors from entering those same markets. This barrier to entry can result in a significant commercial advantage by reducing both the time and effort required by your business to establish a brand presence. As well as reducing the resources required, this IP barrier can also provide a commercial advantage as, by keeping the presence of competitor companies at a minimum, the opportunity to achieve marketplace supremacy arises. Establishing brand superiority in one market then provides an arena from which your company can develop into secondary, complimentary target markets.
3. Legal feasibility
In addition to looking inwardly at your company’s own IP, it is equally important to be aware of the potential existence of competitive IP rights in your target export markets. As a well-known example, Apple’s iPad® Trade Mark was already registered in China by another business, resulting in delays and financial penalties for Apple when entering the Chinese market. Various options are available to navigate existing IP rights in foreign markets, but it is invariably less difficult to deal with such issues before an export strategy has been formulated. Trade Mark or product can be redesigned or changed prior to final production and distribution, in order to avoid an expensive and potentially brand-damaging product recall. Similarly the time, money and other resources spent designing and manufacturing packaging, marketing material, and other promotional items may be irretrievably lost should problematic third-party rights become known after a market has been entered.
4. Language and Cultural barriers and IP
Language issues are particularly important when creating your company brand, and a Trade Mark or logo should be checked in the local language of the respective export market. It is quite common for a Trade Mark to have a very different meaning in another language. For example, when Coca Cola entered the Chinese market at first in the 1920s, they directly translated the company name into Mandarin as, “Ko-ka-ko-la.” While this appeared to permit name consistency it became a branding faux-pas as the direct translation in Mandarin meant “female horse bites the wax tadpole” (Morse 2009). Obviously this is not a translation one would want associated with a consumer beverage. Language issues are thus another important consideration before committing valuable and often limited resources to final product branding, packaging and specifications. The same can be said for cultural barriers, which can be seen often in the use of colours and symbols. In China, for instance, including a black border around an image symbolises death or the coming of death. Hence, it is crucially important to conduct IP scanning for competitive, language and cultural barriers before entering an export market.
5. Financial benefits of IP
IP owned by your business is often a valuable asset in various business negotiations. Indeed IP is one of the first things any investor will look for before committing finances to a business venture, including financing an expansion into new markets. IP rights will also normally form the basis of a licensing agreement – another business venture that could be considered. A license agreement allows your business to grant another entity the right to commercialise your IP in exchange for a license fee. This model essentially offers an alternative form of export, allowing indirect access to the market in question, and is a business model adopted by many companies. A prime example of a successful licenser can be seen in mobile phone manufacturer Nokia®, which no longer manufactures or sells any mobile phones or other hardware, instead licensing their IP to other device manufactures such as Samsung® and Microsoft®. By adopting this model, your business can derive revenue from otherwise unfeasible or inaccessible markets through partnering with a licensee, which has an existing local business infrastructure. Furthermore, if third-party rights exist in a target market, it may be possible to negotiate favourable license terms by cross licensing your IP to the third-party in question.
The benefits of exporting for businesses are evident. However, due diligence must be followed when determining market feasibility in terms of financial, technical and legal factors. In a globalised market that is becoming increasingly saturated, the role of IP in embedding your company’s brand in foreign markets is crucial to your export-selling success.