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Solicitors Journal: An Innocent Mistake

innocent logo.jpg

Managing intellectual property is essential from day one, as Innocent learnt at the High Court. Thayne Forbes examines why the company could lose the rights to its famous logo, and the importance of 'innovative' intellectual property. 

Introduction

Smoothie-maker Innocent lost the rights to its halo logo trademark in a recent court ruling, which highlights the importance of protecting intellectual property - and the associated litigation and costs in failing to do so.

Innocent hired design company Deepend in 1998 to create their logo with a brief to draw ‘a face with a halo above it’ - and Innocent’s logo was born.  

Innocent claims Deepend were to receive shares as payment, although the designers went into liquidation in 2001 before receiving remuneration. The halo logo copyrights were later transferred to Deepend Fresh Recovery Limited, who cancelled Innocent’s trademark after providing the original sketches. The parties have been battling it out in the courtroom ever since, and Innocent suffered a huge blow after being unable to produce a contract to prove ownership of the designs. Despite claiming ‘equity’ rights to the intellectual property – they have, after all, been trading using this logo since 1999– the judge dismissed this argument.

This is a major setback for the company whose brand development is hailed as a success story of ‘how to do it right.’ Born from being voted in at a festival by punters voting on the question ‘should we give up our jobs to make smoothies’ - the brand has injected it’s fun personality into its products and marketing, to create a vibrant ethical health food brand.

The company has taken 15 years to grow to this stage and become a global brand, and this ruling is threatening their intellectual property, the key to their brand value and heritage.

Protecting IP

Innocent’s legal position is a precarious one - so how can such situations be avoided and what lessons can lawyers learn from this case? The obvious advice is to ensure that your client’s IP is protected from the offset and is managed as an integral part of the business strategy moving forward. Trademarks should be registered with the appropriate body for your jurisdiction(s) and should be used with consistency.

Registering a trademark allows businesses to protect a key component of brand identity, and in doing so they can differentiate themselves from their competitors.. A brand is a collection of intangible values perceived by the customer - for Innocent ‘healthy,’ ‘ethical’, ‘environmental’ and ‘fun’ spring to mind. Customers use intangible assets such as brand names, symbols and designs to connect with a brand’s values. Consequently, loss of these rights put the company in a very serious position. Innocent risk losing their core values if their customers can no longer recognise and connect with the brand – this puts them at risk of losing a significant chunk of their brand value.

Innocent’s key error was made in the agreements between themselves and Deepend’s designers. Innocent are not the only start-up company to have entered into arrangements with a design company where assets other than cash (e.g. shares in the business) are arranged as payment. Crucially, these should be legally watertight to ensure both parties are protected. When employing a design agency and working closely with someone, it may be easy to establish a relationship of trust and make false assumptions related to IP ownership. However as Innocent have discovered it is what is written down on paper that counts in the courts.

With Innocent’s rapid expansion it is possible that small details were overlooked, however when it comes to IP these small details can cost millions of pounds in court proceedings, loss of brand value and other related costs further down the line. In Innocent’s case they could have bought the rights to their logo when Deepend liquidated in 2001, which would have spared them from the position they are in today.

Once the rights to IP have been lost, a business has no choice but to fight to protect it, buy it back, or to rebrand, the latter of which poses a large risk. IP disputes often end up in court and companies can often be seen as overzealous in their litigation – but this shows how highly companies regard their IP, which often encompass their most important assets.

McVities Jaffa Cakes

Innocent are not the first company where an IP-related error has put their brand in jeopardy. This case has stark similarities with McVities Jaffa Cakes, who famously fought with the courts to prove that their products were ‘cakes’ and not ‘biscuits’ to avoid paying full VAT – only to then find their brand name and product copied by several European supermarkets, after failing to register their ‘Jaffa Cake’ trademark. European supermarkets pushed out the brand in favour of stocking their own Jaffa Cake products at a cheaper price. McVities still offer their product, but their brand value suffered as a direct result of allowing their brand name to be diluted, opening up the market to fierce competition.

Showing equity through consumer research

There is some hope for Innocent in the appeal for this ruling - a recent example found that a logo designed for company Griggs by a freelance designer, who tried to sell it to a third party after claiming ownership, belonged ultimately to Griggs; the judge ruled that the designs were synonymous with the brand’s identity and that there was an implicit agreement between the two companies. Of course, getting a judge to reach this decision requires a lot more evidence (and legal costs) than simply producing a signed contract proving the business’ rights.

Nevertheless, Innocent’s legal team could consider conducting consumer research to prove that their logo is meaningful to customers and that the general public associate the image with the Innocent brand and its values. Innocent’s product development and marketing has used the cartoon-like shape with a halo above it extensively and adapted according to their offering, changing the cartoon character but keeping the halo consistent across all of their products.

Research could be done using a simple ‘pack test’ where consumers are shown logos and asked to identify this with a brand. This could further delve into the values they associate with the logo. Presenting this information to the court would most likely go a long way in supporting their ‘equity’ argument. Research is regarded as expensive in court proceedings but judges highly prize the opinion of the average consumer (when the research is conducted objectively).

Conclusion

Innocent’s plight is a direct result of failing to protect their IP and is a reminder that IP is integral to brand value and consumer recognition and should not be overlooked when negotiating contracts. Innocent has built its brand on strong health and moral values, and its packaging, brand name and indeed logo all represent these facets. This recent blow has jeopardised the future of their brand and is a lesson to all– innovative IP is at the root of all successful brands and therefore protection of that IP is integral to maintaining a competitive advantage. Underestimating the value of IP could cost you greatly in the long term.

Thayne Forbes is joint managing director of independent brand consultancy firm Intangible Business

April 23, 2013 ● Legal

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