Australia: Managing your products when a patent expires – how good brand management can maintain product and brand awareness, and build market share

Last Updated: 24 November 2017
Article by Georgina Hey

The Australian Government's recently expressed interest in cracking down on misuses of market power may have left some patent holders with concerns about the proposed amendments to the Competition and Consumer Act 2010 (the Act). All the fuss relates to section 46 of the Act: the provision which prohibits a company with a substantial degree of market power from taking advantage of that power to eliminate or damage a competitor, prevent market entry or prevent or deter competition. The change proposed is to implement an "effects test" which will question whether conduct complained of under this provision has the purpose or likely effect of substantially lessening competition.

"Why are these changes concerning for patent holders" you ask. Well, as you know, patent holders enjoy a temporary monopoly over an invention, which lasts for up to 20 years from the filing date of their application (or up to 25 years for pharmaceutical substances). When their patent right expires, patent holders often see a multitude of competitors entering the market and eating away at their market share. With the introduction of an effects test, patent holders trying to preserve their market share after the expiry of their patent right may inadvertently be using their diminishing market power to lessen the competition, therefore exposing themselves to an ACCC claim.

Patent holders can however rely on their reputation and brand to preserve their market share once their patent right expires. This emphasises the need for an effective branding strategy for all businesses, including patent holders well in advance of any patent expiry date.

By definition a branding strategy is a long term plan for the development of a successful brand through brand awareness. Below are some of the key components of a comprehensive brand strategy.

  1. Communicate a clear vision of a company's overall goals. At the heart of every branding strategy sits the company's overall goals and the communication of those goals to consumers. By way of an example, we considered Bayer's ASPIRIN brand which has far outlived its patent period.

As you may know, ASPIRIN medicine was created more than 115 years ago and is commonly understood to be the most utilized pain reliever in history. So much so that ASPIRIN arguably became a generic term for pain relievers. So why has Bayer been so successful in maintaining its market share after the expiry of the ASPIRIN patent? Part of the ongoing success of Bayer's ASPIRIN brand is linked to their 'Science for a better life' moto and their various initiatives which embody the company's long standing and 'personal' investment in the wellbeing and future of its customers. This clear commitment combined with the company's reputation, and continued strong support for the ASPIRIN brand continues to distinguish it from competing generics, and is part of the explanation for ASPIRIN's ongoing success.

  1. Be consistent in communicating the brand image. It is essential for consumers to be able to easily identify a brand and instantly associate it with the company's product. By way of an example, we looked to Velcro. Velcro's patent on its fastening technology expired in 1978, which allowed third parties to begin manufacturing goods with the "hook" and "loop" system conceived by Velcro.

Although the patent has expired, the VELCRO trade mark continues to be hugely valuable as it allows Velcro to distinguish its goods from those of its competitors in the marketplace. The increased value of the mark led Velcro to implement strategies to mitigate the risk of its trade mark becoming descriptive. These included the publication of strict guidelines on the proper use of the VELCRO trade mark, preventing competitors from using the mark to advertise products similar to theirs, preventing misuses of the mark by media, and educating the public. For example, on 25 September 2017 Velcro's legal team published a humorous YouTube video which sought to educate consumers about both the VELCRO brand and proper trade mark use. The opening verse of Velcro's video goes as follows:

We're a company that's so successful that everywhere you go You see a scratchy, hairy fastener and you say, "Hey, that's Velcro!" But even though we invented this stuff, our patent lapsed 40 years ago Now, no matter who else makes it – you still wanna call it "Velcro"

  1. Be flexible enough to keep up with the new trends and new competitors. Indeed, while consistency aims to set the standard for your brand, flexibility enables you to make adjustments that build interest and distinguish your approach from that of your competition. By way of an example, there are few toys as recognisable as the LEGO brick, and although LEGO products have undergone extensive development since the launch of the traditional LEGO brick in 1958, the foundation has remained the same. Unsurprisingly, Lego's US patents which were issued in the 1960s have now expired, thus opening the market to imitators and forcing Lego to adapt.

Before the 2000s, the organisation spent most of its time and effort marketing to children and parents, not focusing on their growing adult fan base; a fan base, which on average, spends significantly more on LEGO products per year than the average child. Upon becoming aware of this untapped fan base, the organisation began designing more complicated and expensive sets, such as the $500 Star Wars Millennium Falcon set that includes 5,000-pieces. In doing so, LEGO shifted the brand away from being 'merely' a toy business into an entertainment industry powerhouse, as evidenced by the successful string of Lego movies and character-related endorsement and licensing deals.

  1. Be aware of the competition, and use it as a challenge to improve your branding strategy. This may seem obvious but being in the same business and going after the same consumers requires some sort of awareness. By identifying your key competitors, you may be able to learn from them, and ultimately outperform them. In a crowded marketplace, differentiation is crucial.

If you are considering or are already involved in the development of a branding strategy, speak to a member of our IP team to discuss the products we could offer to support the protection of key aspects of your brand.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Georgina Hey
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