Exploiting Entertainment Marks Internationally
in a Downturned Economy(1)

This article was originally published in Licensing Today International (June/July 1992).

Comments are generalizations and may not apply to every situation. It is advisable to consult with a competent professional before relying on any written commentary. Paul D. Supnik is a member of the State Bar of California and not of any other state or country. The material set forth herein is not for the purpose of soliciting any engagements where to do so would be to offend or violate the professional standards of any other state, country or bar. This web page Copyright 1992, 1996 by Paul D. Supnik


 


The Economy
 

In this ailing economy one wonders whether there is any basis on which to turn outside of the country for exploiting entertainment properties based on trademarks. Not just United States has a weakened economy. However, it is possible today to favorably exploit trademarked entertainment properties around the world. Success does not require that the licensor necessarily be a major player in the merchandising industry. It does require a carefully thought out plan of selecting trademark properties with foreign licensing potential, selecting capable licensees engaging in a selective trademark registration program and carefully focusing efforts on meaningful territories.
 

The bad economy in the United States can have a beneficial effect in licensing from the United States to other countries, where the exchange rate is less favorable to the United States. The U.S. dollar having a lower value relative to european and asian currencies, means that a $25,000 advance today does not hurt the licensee as much as a $25,000 advance years ago when it took twice as many pounds or francs or other forms of currency in exchange to provide that advance. Thus, despite the weak economic framework both in the U.S. and abroad, there is still a significant opportunity to make financially worthwhile foreign deals.
 

Types of Entertainment Properties
 

Examples of entertainment merchandising trademarks include motion picture titles such as CROCODILE DUNDEE, DAYS OF THUNDER, THE HUNT FOR RED OCTOBER, HOT SHOTS, JAWS and of course, STAR WARS, some obviously more successful than others. Character names from motion pictures and television series may also have protection sought, such as the four characters from TEENAGE MUTANT NINJA TURTLES. Musical group names such as NEW KIDS ON THE BLOCK, THE BEATLES, ABBA, INXS and THE ROLLING STONES and the names of the individuals in the group, and a theme or design associated with the group (e.g. the "tongue" logo of the STONES) may have merchandising potential. Television series names such as THE SIMPSONS, television character names and television characters such as BART SIMPSON have been obvious successes. Of course, not all names have merchandising potential, and in fact very few have practical merchandising potential. It is rare when a musical group has significant long life merchandising potential. NEW KIDS ON THE BLOCK, THE ROLLING STONES and THE BEATLES are exceptions.
 

Longevity, or a perception of longevity is a desirable factor. Unless a musical group has a significant track record, longevity is unlikely. Most music group merchandising potential is limited to rock tour promotions. Television programs may have potential because they are broadcast over a lengthy period of time. Motion picture titles which have a cult following or have sequels might be more appropriate for merchandising than an untested film.
 

It may also be possible to engage in a focussed limited merchandising program with an unlikely motion picture title. That merchandising campaign could be a tie-in promotion. A specific single unique product might be incorporated into a motion picture as it is being made. One way to approach that situation is to engage in product placement before the film is produced. If attention is focused on a particular product, it can then be made the center of attention in the merchandising context. On an international scale, however, one must then focus on what countries are acquiring the product and obtain some understanding on how the product is going to be distributed in specific foreign territories. One of the myriad of factors used to judge theatrical distribution in a foreign territory is the use of high profile lead actor from a particular country in a film. However, the fact that a well known French actor appears in an American film does not guarantee significant distribution in England or Germany.
 

Cultural Aspects of International Entertainment Merchandising
 

How do entertainment marks travel? The sale of products carrying entertainment merchandising trademarks is intertwined with the culture of the society where sold. That does not necessarily mean that a mark which is popular in one country cannot travel to another country, or that it must coincide with the then cultural mores of the country. What it does mean is that at the time of attempting to merchandise the mark, there must be a motivating factor to have the consumer purchase the product bearing the mark. The consumer makes a statement by purchasing the licensed product. The consumer must want to make that statement. Motivation may readily be developed by the primarily vehicle which acquaints the public with the property. The fact that it originates from a different culture, e.g. the U.S., may be positive or negative.
 

Obtain practical information on how the property is likely to be perceived. An understanding from a native born person of the country of suitable sensitivity and sophistication in marketing is best. Though not a merchandising mark, the classic example of concern by the trademark lawyer is the word "DREK" proposed for use in connection with laundry detergent. That mark was not particularly usable in Germany with its negative derogatory connotation. And TEENAGE MUTANT NINJA TURTLES was not acceptable to the BBC, since NINJA had the connotation of hired assassin, resulting in TEENAGE MUTANT HERO TURTLES.
 

Governmental attitude toward merchandising from a different culture may have an effect as to whether the consuming public is likely to purchase goods bearing the mark, whether a licensee is likely to have a significant interest in merchandising the property, and finally, what the exposure of the main property is going to be in the country given particular constraints. By way of example, there are limitations on television programs which do not have sufficient French content in France. This is beginning to have an effect on programming originating from outside of the European Community and from the United States in particular. American programs are not likely to be found on prime time television programming in Europe to the extent that they have been in the past. Perhaps the television series Santa Barbara may have stood out in France, but the numbers of American programs in Europe on prime time has dwindled. One key to merchandising of a trademarked entertainment property is that it have a lengthy life, sufficient to warrant trademark registration and to keep product on the shelve.
 

Market Size in Relationship to Culture

The foreign market must be adequately significant to make licensing worth the effort. If potential licensing revenues in a territory are anticipated to be $30,000 over a period of several years, and that is spread over several different classes of merchandised properties, does it make sense to spend $3,000 in legal fees for the registrations, an additional sum for reviewing and negotiating the licensing agreements, when the anticipated revenues are limited? Perhaps that cash available at the outset might be better used for greater concentration in territories likely to be more productive. On the other hand, if there is an advance which pays significantly more than for the initial setup costs and legal fees, perhaps the more critical question is whether the supervision of the license agreement warrants the dilution of one's effort.

A significant factor is whether the there is a sufficient concentration of the purchasing consumer to warrant the expense and dilution of the effectiveness of the licensor's overall business. Some countries may have large populations, but the number of purchasing consumers is not likely to be significant. For example, India has a population approaching one billion. From that population, the consumer with any disposable income might be only 10%, which still in effect would be a country in itself with a large population comparable in size to England or Japan. However, the cultures of India are so different from that of the Western world and the exposure of the people of India to Western culture is so limited that any effort in Western style merchandising is likely to be futile. Though developed as a democracy, the media and culture is carefully controlled by the government, which in itself to a great extent reflects its society. The flow of Western entertainment product to and from India is highly limited. Thus, the demand for entertainment based merchandised goods is limited. That coupled with an inability to easily control pirated merchandise is likely to minimize any meaningful demand for products believed to be desired in India from a merchandising perspective.
 

Approaches to Trademark Registration
 

One potential mistake which may be made is the registration of every conceivable character title in every imaginable class in too many countries. While given an unlimited budget, this approach might appear to be the best protection. However, each character added increases the potential market but can be expensive from a protection standpoint. And if too much effort is diluted across many characters, it is questionable how those characters are truly going to be recognized by the public with any significance. The extent of the trademark registration program is a business decision in which the need for protection has to be balanced with the reality of realizing a reasonable return on investment. You can lose if you under register for a successful property. You can go broke quickly if you spent all your money on a massive registration program on a relatively untested property.
 

Understand what a license is and how rights are acquired. A trademark license is essentially an agreement not to sue for infringement. But there has to be a basis for the license, whether real or perceived. Thus, the licensee is paying for the right not to be sued. The licensee may also be paying for an exclusive right, that is the right to be free from otherwise lawful competition of others. In order to be in a position to give the licensee something beneficial, the licensor needs to have rights or a proprietary position in the character. Why should a licensee pay money absent a registration? In countries where the use of a property is significant, that may result from what is known in the Untied States as common law usage. In much of the world, those rights in a trademark property are likely to be acquired only by registration. Thus, for a trademark property absent an application for registration deposited in the country in question, there is a question as to what rights have been granted.

Trademark Registrations
 

The issue of registration is important since in most countries outside of the United States, registration becomes quite critical. Rights are generally determined by registration rather than by use. And the nature of the registration becomes quite important. While broader based registrations might be obtained than in the United States, it becomes very difficult to enforce a registration across different classes.
 

Common classes registered internationally include class 28, which deals with toys and sporting goods, class 16 dealing with prints and publications of various types and 25 dealing with clothing. Perhaps of more limited benefit are classes 41 and 9 which might be used for registration of entertainment services, in the form of titles of series and production services, and class 9 which may be used in connection with title series on home video and related goods. Key issues include deciding in which classes to register. Additional classes tend to multiply the costs. Yet there may only be certain classes from which most of the licensing revenues are derived. Another factor which may multiple the cost of registrations are the features of the mark registered. Registering a single mark containing words and a device results in a cost outlay of one sum. That sum may be virtually tripled if separate registration are obtained in each major territory also for simply a word mark, and separately for a device mark. While it is true that in an infringement action, the comparison is generally made with the mark as a whole, particularly in questionable markets, the business decision which may be warranted is to go for the less expensive route. The decision is similar to that being made in purchasing IBM or a clone, and the perception to superiors if the decision turns out to be incorrect.
 
 
 

The Paris convention provides that filing in foreign countries can have the benefit of filing in the home country if the foreign filings are within 6 months of the filing in the home country. For the past three years or so, "intent to use" applications have been possible in the United States. This means that it is possible to file a trademark application in the United States based on an intent to use application, then file the selected foreign applications within 6 months to maintain priority. From a cost perspective, this gives a limited lead time in making a determination as to whether to proceed with foreign filing in particular countries while still taking advantage for the foreign filing priority deadline.
 

There is a trend in various parts of the world to grant protection for marks even where registration does not exist on the grounds of passing off. And the requirements for proof of passing off have eased to some extent, and some courts around the world have not required fully developed proof. Thus, for example, in England, marijuana smoking turtles appear as the TEENAGE MUTANT NINJA TURTLES were enjoined without registration. Where a trademarked property is used in connection with copyrighted characters, protection might be swifter than for a word mark in which the mark had been registered by others earlier. The ABBA case in England, the mark had been previously registered by other than the rock group.
 

INTRODUCTION (Part II)

Disclaimer


Paul D. Supnik
Attorney at Law