The migration to mobile and what it means for brand owners

The recent acceleration in the pace of migration of products and services to mobile devices has revolutionised users’ experiences of the Internet. In particular, apps have assumed central importance for consumers, providing a vast array of services to an expectant audience with a hitherto unprecedented level of functionality and efficiency. Social media has also transformed the way that users treat their mobile devices: phones and tablets have become mouthpieces for the latest developments in a person’s life. For example, rather than waiting until they return home to their computers, users can now share their updates instantly. While this revolution in mobile Internet has undoubtedly created opportunities for brand owners, it also poses a number of legal and commercial risks, which may directly affect the image of the brand itself. This chapter identifies some of the key issues for brand owners, considering how best to develop and utilise their mobile presence.

Creating apps and legal issues

Developing a mobile presence

Once a brand owner has settled on an idea for a mobile presence, in particular for an app, it should first try to determine objectively whether this is something that really fills a void for users. The app market is saturated, meaning that an app which does not provide content or functionality that is significantly different from (or cheaper than) existing options may be eschewed by consumers, with a knock-on effect on the credibility of the brand as a whole. Where the app does offer an initially distinct service, the general absence of protection under IP law for ideas per se may encourage later third-party entrants to market the same idea under their own name. In such circumstances, the key factor in distinguishing seemingly identical apps will be the power of the brand under which they are promoted. To maximise the prospects of an app’s success, it is therefore critical that the brand be perceived as a market leader rather than a copycat that has belatedly followed others into the market to free-ride on their reputation. Success in the mobile and tablet market is frequently attributed to a brand owner’s image as a technological pioneer – highly publicised and highly anticipated releases help to create a perception that such products offer more sophisticated or user-friendly functionalities than their competitors.

However, planning for a successful mobile presence should not stop at deciding what content will be offered. Brand owners must also consider carefully how their offering will be created and brought to completion. Specifically, once initial development is complete, a brand owner must beware the tendency to release an app to the public before completing comprehensive testing. This rush to market can be prompted by several concerns:

• a desire to lead the market;
• an opportunity to capitalise on a particular season; or
• the need to generate revenue to recoup development costs.

However, in an age where consumer feedback can be provided to a worldwide audience almost instantly – through reviews posted both in app stores and on social media channels – a compromised product may have an immediate and lasting effect on the future desirability of the app and on the brand itself.

Apps in the fields of banking, health and fitness (to list but a few) may all rely on the input of personal data, and in some cases sensitive personal data. If security around this information is compromised in any way, the reputation of the brand itself may be at stake. While incidents reported by the press are often judged to be the result of weak passwords, rather than any particular weakness in the security offered by the storage provider, data storage companies’ uniformly swift responses to reports of hacking incidents or leaks of photographs online show that it is simply not possible to ignore how strongly customers feel about the need to be protected from unwanted intrusion. Brand owners must take great care, therefore, to ensure that their mobile presence keeps information secure and is not seen as an undue intrusion into customers’ private lives.

Trademark issues

As well as determining how to develop their mobile presence, brand owners must devote significant thought to how that presence will be marketed. For example, will an app be branded under a house mark or a separate mark altogether? As a legal point, where the brand owner already benefits from trademark protection, does that extend to software and apps in Class 9? If it does not, might the brand owner even be precluded from using its house mark on its mobile app because someone else has already begun using it in relation to software and apps? The imminent release of an app is the latest point at which a brand owner should re-evaluate its trademark portfolio, although ideally it should be part of the planning process from day one. However, in reality, businesses are scrambling to adapt to the ever-changing face of the Internet and apps would probably not have been in the forefront of most non-technology company’s thoughts before a couple of years ago. As such, businesses that may already benefit from a reputation and/or registered protection in banking or publishing may find that existing marks were not registered widely enough to preclude others from entering the app market using similar or identical names. Similarly, even though a company may enjoy a reputation for particular goods and services, it may not necessarily be free to use its house mark in relation to software or apps in Class 9.

Before marketing an app, a brand owner would therefore be well advised to conduct a European trademark clearance search for the name of the app and any sub-brands used within it, with a particular focus on earlier third-party registrations which include protection in Class 9. Care must also be taken to ensure that third-party marks are not inadvertently used within the app in a manner that could be considered detrimental to any of the functions of those marks. Where the brand owner intends to make the app available outside the European Union, clearance searches should also be undertaken in the relevant territories to avoid the expensive and unpleasant prospect of a foreign court taking jurisdiction over infringement proceedings.

Other legal issues

A brand may suffer significant damage and the costly embarrassment of having to redesign its mobile presence if it fails to devote sufficient attention to the software employed in the creation of its app. Most commonly, the software in question will either be open source or be licensed from an existing rights holder. However, both options involve potential pitfalls. If the code is licensed in from a third party, do the terms of the licence provide the brand owner with sufficient freedom to exploit its app in the markets it is targeting? What is the licensor asking for in return – are the licence fees/royalties realistic, given the app’s target market and/or commercial attractiveness? Can the brand owner continue to develop the app itself or must it go back to the licensor to negotiate over that development?

Where open source software (OSS) is used, there is a risk that any proprietary source code owned by the brand owner will be deemed a derivative work of the OSS through contamination of the source code. Depending on the licence under which the code has been acquired, this could mean that any subsequent distribution of that software may be on the terms of an open source (as opposed to proprietary) licence, which is likely to affect the brand owner’s ability to exploit the software commercially and to prevent others from decompiling and re-using it. In circumstances where the app is very closely associated with the brand (or where the app is, in effect, the brand) and the brand owner aspires ultimately to sell the brand and app together to a third party, its use of OSS may therefore impact on the value attributed to that corporate transaction.

As with the clearance of the brand itself, where the software is neither licensed nor open source, it may also be necessary to conduct a freedom-to-operate search in order to ensure that the integration of that software into the app does not infringe a third party’s rights (whether patents or copyright). This will be particularly important if the brand owner intends to market its app in the United States, where patents for computer-implemented inventions are more common. In addition, where the brand owner has commissioned a third party to create an app on its behalf, it should ensure that there are adequate warranties either to ensure that only original or properly licensed code is used or to divert liability in the event that the app infringes another party’s rights. The brand owner may also wish to guarantee that any IP rights subsisting in the app are assigned to it under the terms of its agreement with the developer. In the absence of any such assignment, the brand owner should seek undertakings precluding the developer’s use of the app in any later projects carried out on behalf of third parties.

Although it is to be hoped that the above factors will affect only the functionality and exploitation of the app, the potential for infringement proceedings and/or embarrassing press articles precipitating reputational damage to the brand itself is high. As discussed, the app market is extremely crowded and therefore negative press attention – particularly where it relates to the appropriation of third-party intellectual property – may cause consumers to switch their allegiance to other competing apps. In circumstances where the brand owner operates a portfolio of apps, the damage can be limited. However, if the app and the brand are significantly intertwined, the app’s downfall is likely to impact negatively on the brand.

Opportunities for brand owners

With so many potential pitfalls in the creation of apps, and indeed any other mobile presence, one may ask why brand owners should take the risk of moving to mobile in the first place. There are two reasons why such a move is a good idea. The first is simple: brand owners’ competitors and, more importantly, their customers are already there. There is hardly an industry where participants and consumers are not already using mobile devices to help them conduct their business, and they are accounting for an ever-increasing proportion of internet traffic. The second reason is less defensive and more forward thinking: there are new opportunities in the mobile world for brand owners to promote their brand and to nurture an affinity for it in the minds of customers. Both reasons require further examination.

It is one thing to lead the migration to mobile. As noted above, innovators perceived to be at the forefront of technology are often rewarded with consumer loyalty that other brands can only dream of. Yet while there is no shame in following others to embracing mobile devices, there is often a penalty for doing it badly, or at least in a way that fails to meet consumer expectations. So while it seems inevitable that almost all brand owners will embrace mobile devices at some point, it is important that they do so only when they are ready to do it well. There is no advantage to be had from associating a brand with a slow, glitchy, badly organised mobile presence. Such an offering will not only frustrate users, but also reflect poorly on the brand owner and call into question its commitment to quality and to understanding consumers’ needs. So while it is certainly not ideal to be perceived as a technological Luddite, it may be far worse to be perceived as technologically incompetent.

Nonetheless, when a brand owner understands the opportunities presented by the migration to mobile, the investment required for an appropriate mobile presence can be justified. Further, the fear of being left behind can evolve into a desire to tap into the opportunities offered by the technology carried around in customers’ pockets. The packages of technology offered on mobile devices offer brand owners an opportunity to engage with their customers in ways that simply do not exist in other forms of technology. For example:

• cameras allow consumers to record their excitement at new purchases and their interactions with new products;
• social media and full-HTML browser integration enable customers to share their experiences with friends and strangers alike, instantly;
• QR codes and barcode readers mean that customers can compare prices without having to postpone their purchase until they return home;
• GPS provides opportunities for location-based services, such as advertising special offers for stores in the customer’s vicinity; and
• push notifications allow brand owners to present timely information directly to customers about issues such as product refreshes, special offers, announcements, price drops and even product recalls.

Of course, if customers can share positive experiences on social media, brand owners must acknowledge that they can also fire off angry messages about a poor consumer experience. Yet while this will happen regardless of whether a brand owner is online, a presence on social media permits brand owners to open dialogues with disgruntled customers more easily, and to demonstrate for all to see their commitment to treating customers with respect and to correcting mistakes. Indeed, failure to respond to criticism on social media can exacerbate a problem and lead to negative PR which, if occurring repeatedly, can begin to harm a brand.

Conclusion

It is now a fact of life that consumers contact their friends, learn about events and share their thoughts about life, love and everything – including, crucially, their experiences of a brand – on their mobile devices. Brand owners which approach their mobile presence with the same values that they imbue into their goods and services can benefit from that dynamic by offering consumers opportunities to share their positive experiences by responding to criticism in a timely and effective manner, and by enabling customers to carry with them useful information about their goods and services.

When the opportunities presented by the migration to mobile are embraced, the investment needed to create and deploy an interesting, lawful and useful mobile presence can be more easily rationalised and brand owners can look forward to strengthening their relationships with existing present and future customers.

Locke Lord Edwards

201 Bishopsgate

London

EC2M 3AB

United Kingdom

Tel +44 20 7861 9000

Fax +44 20 7785 6869

Web www.lockelord.com

Ben Hitchens

Counsel

[email protected]

 

Ben Hitchens holds the position of counsel in the firm’s IP group. His practice covers all aspects of IP law, with a particular focus on trademark and copyright litigation in the online and digital domains. Mr Hitchens has recently assisted clients in the High Court, Court of Appeal and General Court of the European Union on a number of high-profile disputes.

 

John Olsen

Partner

[email protected]

 

With more than 30 years’ experience in IP law, and in particular trademark law, Mr Olsen advises clients on the selection, acquisition, exploitation and enforcement of trademark rights throughout the world. His hands-on approach is unique in helping clients to understand the interrelationship of IP rights worldwide and to ensure that their trademarks enjoy as much exclusivity as possible. Mr Olsen advises clients ranging from individuals through to multinationals.

The UK Legal 500, Chambers & Partners UK and Chambers Global recommend Mr Olsen as a leading IP lawyer. He is also, along with only six other lawyers, recognised as one of the most highly regarded individuals in Europe by Who’s Who Legal Trade Marks 2014.