Co-branding has helped mega worldwide brands increase their sales and their reach.
BMW and Louis Vuitton partnered their luxury brands with the automaker creating an i8 sports car with space for a four-piece set of luggage crafted from carbon fiber. Red Bull and GoPro created a Super Bowl commercial that showed off the energy drink’s extreme sports brand through the other brand’s wearable camera in a skydive from space. And there’s the Doritos Locos Taco, a Taco Bell menu item featuring a shell made from Doritos chips.
While all of this might sound great to marketing and sales groups, they need to reach out to legal before a deal is finalized. Co-branding agreements are rife with potential landmines that could negatively impact your trademark rights. Worst case scenario? A co-branding deal results in dilution or even loss of your company’s marks.
In addition to vetting the sales projections, expanded audience reach, and finalizing the co-branding concept, companies should get their marketing and legal teams on the same page right away when considering a co-branding agreement and take steps to protect their IP.
Types of co-branding agreements
Joint ventures and cross-licensing are two ways companies can agree to work together through co-branding.
In a joint venture, the brands will create a new company to create their co-branded product, Each party licenses their brand into the joint venture for as long as it is in operation. One example is Diamond/Sunsweet, a joint venture of Diamond Walnut Growers and Sunsweet Growers to sell fruits and nuts.
In a cross-licensing arrangement, the companies grant licenses to each other’s existing trademarks for use on the co-branded product or products. The licenses revert to their owners when the co-branding relationship ends.
Trademark considerations for establishing a co-branding agreement
The biggest pitfall of co-branding is the potential for dilution of a mark (or loss of the mark entirely) if there are not tight controls in place on how another company can use your mark and vice versa. To avoid this, companies need to craft a detailed agreement that sets out the relationship, IP and rights upfront to make sure everyone is on the same page. One of the key provisions should be usage guidelines to ensure the trademark owner can control how their mark is displayed by their co-branding partner and vice versa.
Let’s say your company enters into a partnership that allows the partner to use your house mark in its product name because it uses your company’s technology. Without an agreement, there are no clearly defined benefits — or safeguards — from letting a third party use your mark. A way around this situation would be to license the mark to the partner for a defined fee and under a list of requirements outlined in a co-branding agreement — or in lieu of licensing the mark, require the partner to attribute the use of your technology in advertising regarding the new product.
In a cross-licensing agreement, the details of the licensor and licensee should be clearly defined, including the definition of the IP to be licensed and the percentage of revenue sharing or royalty payments. The manner in which the trademark is used by the licensee should also be clearly delineated in the agreement to reduce the chance your company’s brand could be diminished or damaged. Absent certain requirements in an agreement, a trademark owner could be found to have abandoned their rights through naked licensing—i.e., licensing a mark without ensuring that the goods or services offered under the mark conform to the standards set by the mark owner/licensor.
You may also want to consider any termination or cancellation provisions, depending on who you are entering into the co-branding relationship with. What if the other party tarnishes your brand because they make racist or misogynistic statements to the press and your brand is harmed by association? You need to think about how you can end the relationship beforehand.
Also, business partners can fall out. What happens if one company feels its IP is being misused by the other party? Having clear rules and expectations outlined in the co-branding agreement is critical to protecting your marks. The length of the agreement, reasons for termination, and processes for renewal and cancellation should be outlined as well.
And agreements should, of course, be crafted with a forward-looking eye. Through the course of a co-branding agreement, new intellectual property will be created, such as trademarks for new products created in a joint venture. New customer databases could be created through the sales of the co-branded product. Who owns that IP once the agreement expires, or is terminated? The agreement should outline these processes.