Duets Blog : Creativity and the Law: DuetsBlog

Earlier this month, I noted Accenture's words in publicly ending its relationship with Tiger Woods, having announced around December 13, 2009, that it would "immediately transition" to a new ad campaign, and then compared those words to the company's actions in continuing to run the Tiger Woods airport ads even three weeks after their termination announcement. Right after Accenture's announcement, Going Concern Blog asked "Who Will Replace Tiger Woods at Accenture?" They offered some possibilities, including Phil Mickelson, who is already tied to KPMG.

Accenture's marketing team apparently spent some quality time at the zoo to come up with Tiger's replacements, yes, that's plural. A few days ago, in the Minneapolis airport, I saw Accenture's answer to Going Concern's question: Animals. Concourse G was sporting some brand new Accenture ads, one featuring an elephant balancing on a surfboard, with the tagline "Who says you can't be big and nimble?," and another featuring some frogs hopping over one another with the tagline "Play quantum leapfrog." By the way, how nimble or quantum-oriented is a company that needs at least four weeks to have their words and actions begin to merge?

Putting aside the timing for a moment, you might ask, why animals? Clearly animal mascots and endorsers are a much safer option than human beings, for a variety of obvious reasons. Indeed, one Twitter user notes that using an elephant is "no risk." By the way, someone ought to remind Daniel Snyder of this if he ever has the wisdom to re-brand the Washington Redskins professional football team, as I have previously suggested.

Actually, the largest surprise during my experience in Concourse G, a few days ago, was seeing a lingering Accenture ad still featuring Tiger, now more than a month after Accenture's promise of an immediate transition. The Tiger ad in question was of the thinker/doer variety, so a curious one to keep in circulation, as it appears Tiger is doing much more thinking than doing at the moment.

Given how long it has taken Accenture to "immediately transition" to new Tiger-free ads, given that it hasn't yet successfully removed all Tiger ads from circulation, and given the damage it is believed that Tiger has caused to the Accenture brand, I'm left wondering whether companies plan for these kinds of endorsement-gone-wild contingencies as part of their crisis management planning. It would appear Accenture did not and was caught flat-footed, but who would have guessed, right? Nevertheless, Accenture's unfortunate experience might be a good lesson to all those companies who closely link their reputation with endorsers or mascots outside of the animal kingdom. Perhaps having some pre-approved ads ready for emergencies would permit a nimbler and more quantum-like response when things go wrong.

With respect to the choice of animals, they certainly have served others well. For example, a clumsy white duck works for Aflac, and a little green reptile, seems to work pretty well for GEICO. To the extent either of those little guys offend, disgust, or embarrass anyone, at least Aflac and GEICO are in control of their words and actions, so any resulting damage is more easily considered a self-inflicted wound.

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The impact of the Tiger Woods scandal in branding can be viewed from two different perspectives. The first perspective comes from the point of view of the companies that paid Woods to endorse their products. The second perspective is how the personal brand of Tiger Woods will be impacted as the smoke clears from this series of events.

Two professors in University of California-Davis’ Economics Department attempted to measure the impact from the first perspective. They claimed that shareholders in publicly traded companies that Woods endorsed lost $5-12 billion in the weeks that followed the car accident in Florida that set off the scandal. They undoubtedly have an interesting perspective, but there are limiting factors in their research. However, an undisputable fact of the Tiger Woods scandal is that it put a lot of brand management teams in a very delicate situation. Brand managers at firms where Woods served as an endorser had to consider how their brands would be perceived by their target consumers if they were to continue the relationship. It is not an enviable position. 

When a brand chooses to link arms with a celebrity endorser, it must consider which celebrities will be effective endorsers. It is essential to select celebrities that will positively contribute to revenue growth and profitability. I believe that a celebrity endorser is most effective when the target consumer perceives them as attractive or desirable in some fashion and the product is related to the expertise of the celebrity. For example, Michael Jordan was an effective endorser of both Nike and Gatorade because of his status as an elite athlete and the fact that both brands are related to athletic performance. Gisele Bundchen is an effective endorser for Dolce & Gabbana fragrances because scent is an important aspect of appearance and she is the embodiment of phenomenal appearance. She would be far less effective as a celebrity endorser for the Toyota Camry. With regards to Tiger Woods, he is most effective in endorsing Nike Golf products and any other golf related brands. His effect is diminished for brands like Gillette and AT&T.

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When brands and trademarks are at risk of being infringed, swift and immediate protective action is required, given the inherently reputational nature of the resulting damage. That is why the law typically presumes the necessary "irreparable damage" when issuing immediate injunctive relief, once a plaintiff is able to show, among other things, that it is likely to win its trademark infringement claim. Without "irreparable harm or damage" there can be no court's injunction because the simple payment of money will right the wrong.

But, what about outside the context of trademark infringement and court ordered injunctions, in the world of contracts, for example, when a sponsor no longer wants to be associated with a celebrity endorser that has become damaging to the sponsor's reputation? Is the same degree of immediacy required to erase all public signs of the relationship? Perhaps it depends on whether the damage rises to the level of irreparable damage or harm. If so, then perhaps no amount of money will be or should be spared to pull the ads immediately and stop the reputational bleeding.

One might ask how this dynamic has played out between Accenture and Tiger Woods.

After the New Year, and about three weeks after Accenture announced it had ended its relationship with Tiger Woods, I noticed a multitude of Accenture ads in three different airports (Minneapolis, Dallas, and Phoenix), all featuring guess who? Tiger.

My first thought was genuine surprise to see them, given it had been three weeks, and further given that Accenture was so promptly out of the gate as the first sponsor to publicly sever its ties with Tiger. Indeed, two weeks after Tiger's reputational scandal broke in the news, Accenture announced Tiger "is no longer the right representative" for Accenture's advertising, and it was reported the company would "immediately transition" to a new advertising campaign. Some experts even cautioned that Accenture's Tiger billboards and airport advertising "need to be replaced quickly" for obvious reasons, as they now "damage" Accenture's brand and reputation.

So, how damaging to the Accenture brand is the lingering association with Tiger and the smirks that seem to follow given the now rather awkward branding messages that Accenture had adopted as part of the Tiger relationship? If you read Accenture's words from December 13, how quickly they were announced, and how others have praised Accenture for taking this swift and necessary action, the damage sounds quite serious, perhaps even irreparable, but isn't talk cheap? Or at least, more inexpensive than actions? 

For example, I'm certain the cost of scrubbing a website and purging corporate headquarters of any sign that Accenture still knows "what it takes to be a tiger" is far less than the cost of purging all airports of any trace of the Accenture/Tiger endorsement arrangement. In any event, it would have been more than mildly interesting to be part of the dialogue that must have quantified the cost of implementing the directive for an "immediate" transition from Tiger, and the alternative quantifications of slower transition plans, and the one that the company eventually settled upon.

Do you agree that the greater the damage to Accenture, the more "immediate" the transition would have been, i.e., days, not weeks or months?

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You may recall the Gatorade v. Powerade false advertising lawsuit filed by a Pepsico entity (Stokely-Van Camp, Inc.) against rival The Coca-Cola Company back in April, discussed here (with a copy of the complaint).

You also may recall how G scored an F in the courtroom, back in August, losing a hotly contested motion for preliminary injunctive relief, discussed here.

So, I guess it was only a matter of time before G decided the case wasn't worth breaking a sweat over any longer.

Interestingly, the Stipulation and Order ending the case, has the owner of the Gatorade brand dismissing with prejudice (meaning they can never be reasserted) all claims it had asserted in the lawsuit against Powerade brand owner Coca-Cola. 

It shows Coca-Cola only dismissing with prejudice its affirmative defenses and counterclaim, "insofar as they specifically address [Gatorade's] marketing, labeling, advertising and/or promotional claims concerning the inclusion of calcium and/or magnesium in Gatorade Endurance Formula." All other defenses and claims asserted by Coca-Cola were dismissed without prejudice (meaning they are not barred from being reasserted in the future).

Given this unequal treatment in the settlement, it would appear that Gatorade was more anxious to end the case than Powerade.

Recalling that Gatorade and Powerade battled in court over advertising claims back in 2006, any predictions on how long until these two sports drink brand rivals slug it out again in court?

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Tiger Woods’ scandal proves once again that celebrity gossip mongering is a blood sport. The bigger the celebrity, the more the blood will flow. In Tiger’s case, he can open up a blood bank. Though it’s unlikely to reach the insanity that was unleashed when Michael Jackson died last summer, it will take the feeding frenzy to a new, all-time low, not because of his marital infidelity, but because of his immense stature as an iconic personality and global brand.

Our addiction to sycophantic enabling of celebrity bad behavior is beyond the pale. We reward and celebrate mediocrity. We give a moral equivalency and equal airtime to those knowingly doing the wrong thing. The discussion isn’t about right versus wrong anymore, but instead the takeaway is “don’t get caught!” Woods’ actions aren’t praise-worthy, but the punishment meted out in the court of public opinion of his private, personal situation is off the charts. Tiger’s poor job at managing the damage control process seems to be as big an affront to the public as what got him into this position.

His off-links activities are irrelevant to the golf world in the scheme of what he has done for the sport in the past 15 years. Let’s remember he plays golf and doesn’t hold elected public office. He didn’t impugn the integrity of his sport by betting or use performance enhancing drugs. Does Tiger Woods deserve to be vilified like O.J. Simpson, Eliot Spitzer, Mark Sanford, John Edwards, Bill Clinton, Marv Albert, Pete Rose, Alex Rodriguez, and many others?

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Friendster, the pioneer of social networking, was recently acquired by the Malaysian company MOL Global Pte, which is an affiliate of MOL AccessPortal Berhad, a company that operates and develops payment systems in Asia, for $1.8 billion. I assume at this price the return on investment was pretty nice for the founders of Friendster, but the price for Friendster reveals much more. The use of social networking as a marketing tool continues to grow and so does its importance.

More and more companies are developing or using social networking Web sites to connect with their customers to create brand loyalty and otherwise connect with their customers. For example, Kodak published Social Media Tips to help any business integrate social networking into their marketing plans. Some companies have created social networking Web sites for specific products. And it’s important for companies to consider developing social networking Web sites because it has become the norm for consumers to consult some form of social media before purchasing any product or service. 

But why should a company develop its own social networking Web site? For starters, control. As the owner of the Web site, you control the content and overall image the Web site conveys to consumers. A company does not want to exercise too much control over the content because it is important to create a space where consumers are free to speak, but some control is necessary to comply with certain legal protections afforded to Web site owners like the Digital Millennium Copyright Act and the Communications Decency Act. 

Additionally, the development and maintenance of a Web site can be inexpensive. However, do net let the low price tag trick you into believing development of a Web site is simple. There are a host of legal issues that can trip up even the most sophisticated business. And because there are many companies that provide marketing automation software products and services, it is important to be aware of the legal issues facing both the software developer and end users so that the two can form the most productive relationship.

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Let's talk turf today, two kinds. OK, maybe three.

First, with Target Field looking more and more like the long-anticipated brand new outdoor home ballpark for the Minnesota Twins, all Twins fans and the local media can think or talk about this week is the new real bluegrass blend turf being installed now (as I type this blog post, in fact, see live webcam here), as it was just transported from Graff's Turf Farms in Fort Morgan, Colorado.

Second, most are looking forward to saying goodbye to the artificial turf of the 27-year old Hubert H. Humphrey Metrodome, and have been counting down the final days for some time.

Last, and most importantly for the purposes of this blog, let's talk about the importance of legal turf.

Selecting the legal turf or forum where a trademark dispute or battle is fought in federal court is often a very strategic decision. Litigants not infrequently end up battling over where the dispute will be decided, long before even getting to the substance of their dispute. Certain aspects of the federal trademark laws are interpreted differently around the country, which can lead to what lawyers call "forum shopping," basically, making forum selections based on where the plaintiff believes his or her case will most likely receive a favorable judgment. Indeed, most companies who file trademark lawsuits would prefer to file them close to home (unless forum shopping benefits dictate otherwise), in their own backyard, for that perceived home field advantage, and, because the out-of-state defendant typically ends up needing to hire two sets of lawyers to defend, their usual trademark counsel and local counsel too.

The general legal rule is that the first to file a trademark lawsuit is the one who gets to select the turf where the battle will be decided. There are exceptions to this general rule, perhaps we'll explore those another time. For now, however, suffice it to say, being the first to file, often creates some helpful advantage or at least some leverage to bring the matter to a more favorable amicable resolution. The first-to-file plaintiff is able to make his or her settlement demand, with the comfort of knowing that -- if it is not accepted -- he or she already has secured the place for the dispute to go forward. If it happens to be a place where the defendant does not want to litigate, for one reason or another, this can facilitate perhaps better settlement terms for the first-to-file plaintiff.

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Learning at least a few new things each day is a good thing. One of the many things the special women in my life (wife and daughter) taught me today is the meaning of the apparently ubiquitous acronym BFFL: "Best Friends for Life." So, the special men in my life learned something along with me today. I'm not sure what that says about me and my boys?

Anyway, this acronym got me thinking about all the billboard advertising promoting Friends reruns I have encountered over the last several months. It's everywhere. What has struck me about this advertising (besides the sheer volume) is how different it is from the advertising that used to run while the television series was still being filmed and before the syndication of Friends, at least, as I recall. The website for KSTC-TV Channel 45 (based in the Twin Cities) depicts the kind of promotional photograph I recall seeing reguarly while the series was running and pre-syndication:

All six Friends cast members were promoted together as a united group or ensemble of, well, friends, apparently subscribing to the belief that the whole (the program) was greater than the sum of its parts (the cast members). This marketing approach (apparently required by Warner Brothers in the early days of the program) also was consistent with and reminiscent of the solidarity the Friends cast demonstrated during their multiple contract re-negotiations with NBC and Warner Brothers over the years. It is reported that each of the six received $1 Million per episode during the last two seasons, despite the likelihood that each of their relative values most likely was not commercially equivalent.

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I don't recall what I was doing in January of 2007, but I apparently missed the news that Cisco had sued Apple over Apple's then-newly announced iPhone product.  I actually stumbled upon this accidentally when I recently searched for federal trademark registrations for IPHONE and found only one, and it belongs to Cisco.  (PDF here.)  Your eyes are not deceiving you:  since 1999, IPHONE has been a federally registered trademark for use in connection with "computer hardware and software for providing integrated telephone communication with computerized global information networks," and Cisco is the current owner of this registration.  No joke.  Look here. 

This raises dozens of questions in my mind, of which I will present only a few. 

Q1.  Did Apple conduct a trademark search prior to rolling out the iPhone?

Q2.  If so, what was the legal and business thought at Apple about Cisco's IPHONE trademark registration?

Q3.  What should a company like Cisco do when a junior user adops an identical trademark for use on identical goods, and the junior user's product is wildly successful?

My suggested answers are after the jump.

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Hopefully you enjoy riddles. It is late Sunday afternoon, 4:30 pm to be exact. Too early for valet parking at Fogo de Chao, a wonderful Brazilian steakhouse, so you drive two blocks and enter a parking lot with the following sign:

You had a very nice dinner and now you're ready to leave the parking lot at 6:15 pm. Based on the above sign (and contract, by the way), how much do you owe the parking attendant? Instead of humming the Jeopardy thinking music theme song, might I suggest you consider humming the 1970 Five Man Electrical Band tune "Signs" during your calculation. And for any '70s challenged folk, I'll prime the pump for you: "Sign, sign, everywhere a sign, blocking out the scenery, breaking my mind, do this, don't do that, can't you read the sign?"

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Too often, trademark owners that seek to exploit their brands through various licensing arrangements inadvertently fall into the trap of an unintended franchise. Such disguised franchises can lurk in a variety of agreements and relationships, including reseller, distribution, and independent contractor agreements that include a trademark license with a fee along with very detailed quality control requirements. Sometimes those requirements are more a reflection of the licensor’s intent to control the business activities of the licensee than merely to ensure the products and services meet certain quality control standards. When the licensor exerts too much control over the day to day activities of the licensee, the relationship can evolve from a licensor/licensee relationship to a franchise with serious implications.

Several states have a "three prong test" to determine if a franchise exists. Those requirements generally include: (i) a license to use a trademark; (ii) the payment of a franchise fee for use of the mark; and (iii) significant control exerted by the licensor/ franchisor or significant assistance given by the franchisor or assistance by the licensor. The control required to create a franchise relationship can be established by training programs, operation manuals, and established business or marketing plans or methods of operation.

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I am often amazed about the number of agreements (of course none that I drafted) I encounter that grant trademark rights (or fail to grant trademark rights when they should) without any corresponding use restrictions or requirement to comply with quality control standards.  It is an essential requirement of a trademark license that the trademark owner must exercise quality control over the products and services offered under the mark to avoid abandonment of the mark. A trademark license lacking in quality control is commonly referred to as a “naked license.”  The underlying rationale for this requirement is that consumers could be mislead and the trademark will cease to have any utility as an indication of the source of the product or service if the licensee is allowed to depart from the trademark owner’s quality standards. Failing to exercise quality control can have serious consequences to trademark owners. The most devastating consequence of course is the loss of trademark rights that may result from abandonment of the trademark.

But there are other “less severe” consequences that still create serious and often expensive problems for trademark owners particularly when there are no use restrictions or guidelines to govern how and where the mark should be used.  

Too often such essential terms tend to be overlooked in other "non trademark" agreements that include or should include a trademark license with appropriate use restrictions including Value Added Product Reseller Agreements, Distribution Agreements, Technology License Agreements, and Software License Agreements to name just a few.  Failing to include trademark use restrictions and guidelines not only may result in a potential loss of rights in the mark, but could lead to disputes over the ownership of the mark and the continued use and registration of the mark and related domain names incorporating the mark after termination of the Agreement.

Brand managers are tasked with making important and sometimes difficult decisions in selecting the “right mark” to convey the perfect image for their products and services. The selection of a new mark often comes with a significant investment of time and money by the company to launch a new product.  Such important considerations underscore the importance of the legal, business, and marketing groups to collaborate to develop a branding strategy that will take into consideration where the marks should be registered and how the marks should be used to avoid the pitfalls encountered in the various licensing arrangements that can sometimes result in a loss of trademark rights.

Perhaps in response to some of the pitfalls noted above, the software industry has become increasingly aware in recent years of the need to require appropriate trademark license restrictions, guidelines, and quality control standards to protect their marks and thereby avoid common pitfalls. For example, take a look at Apple's Quick Time Distribution Agreement. Software vendors also use Trademark Use Guidelines and quality control standards to ensure their marks are used properly used. Other high tech industries that license their brands to multiple licensees also have a well thought out Trademark License Program. 

We have only scratched the surface of the myriad of pitfalls that lurk in the various trademark licensing scenarios. Stay tuned for my next entry where I will discuss other trademark license issues that can create an “unintended franchise.”

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