Canada: Brands: Valuable Assets That Need The Attention Of Corporate Officers And Directors

In a 2006 decision, the Supreme Court of Canada noted that "The power of attraction of trade-marks and other 'famous brand names' is now recognized as among the most valuable of business assets." Subsequent Canadian financial studies have also identified brands as very valuable corporate assets. The laws governing Canadian corporations require officers and directors to protect such assets. There are important questions that those entrusted with brand oversight should continuously address.

In June 2007, Brand Finance Canada released its "Index of Canada's Most Valuable Brands," which identified and ranked Canada's 50 most valuable brands. The top five – RBC, TD, MANULIFE, BELL and CIBC – had an average value of $3.5 billion. The value of each constituted, on average, 4.8 per cent of the total enterprise value of the brand owner. SEARS CANADA was ranked 50th in terms of brand value; however, its brand value/enterprise value ratio was the highest, at 48 per cent.

One contributor to the Brand Finance Canada Index stated, "In an increasingly open world economy the route to sustainable advantage is the creation of strong intangible assets including patents, designs and above all brands." Another stated that "... one of the least recognized and most valuable aspects of the brand is its role as a business system ... and not just as a marketing communication initiative."

A second study was published in June 2008. In that month Interbrand released its "Best Canadian Brands 2008" report, which identified and ranked Canada's 25 most valuable brands. The top five – BLACKBERRY, RBC, TD CANADA TRUST, SHOPPERS DRUG MART and PETRO-CANADA – had an average value of $4 billion. The report's authors noted that:

Evidence is stronger each year that brands have the ability to create significant economic value for the businesses they serve ... If brands are managed correctly they can move seamlessly across geographies, creating demand for their goods and services around the world.

In September 2008, Interbrand released its 2008 "Best Global Brands" rankings. Two Canadian businesses appeared on the list this year for the first time. The THOMSON REUTERS brand was 44th and was valued at $8.3 billion. In 73rd position was the BLACKBERRY brand, with a value of $4.8 billion. Interbrand's Global CEO commented:

The increasing complexities of the global economy reinforce the importance of protecting and growing a brand. It is a company's most valuable asset – and a far less volatile asset than others during a time of economic uncertainty.

The duties of officers and directors of public and private corporations in Canada are set out in federal and provincial statutes and court decisions. Those duties include ensuring that the corporation's assets are appropriately protected. Given the rising prominence of brands as valuable corporate assets, stakeholders may increasingly seek confirmation that the corporation has a well-developed and well-executed brand management program.

Although a corporate brand can include numerous components, at its core are one or more trade-marks. Proper trade-mark management is an essential element to a corporate brand management program. It is not simply an administrative or clerical function. Rather, it is a legal function that ideally interweaves the realities of trade-mark statutes and court decisions with the identification goals of all parts of a corporation – including product development, manufacturing, marketing, sales, human resources and stakeholder communications.

A corporation should continuously ask three key questions as part of its trade-mark management program:

1. Exactly what trade-marks is the corporation using?Trade-marks can be words, phrases, symbols, designs, colours, shapes of wares or their containers, or modes of wrapping or packaging wares. Trade-marks can also be elements incorporated into the construction of wares. In some countries, even sounds and smells can be trade-marks.

If the corporation has not yet used a mark but intends to use one in the foreseeable future, it can obtain rights in such a proposed trade-mark. In order for trade-mark rights to continue to exist, a mark must be continuously used in commerce. The decision not to use a mark is an important one.

2. In association with precisely what wares and services is the corporation using (or proposing to use) its mark? Trade-marks must be used in association with wares and/or services. Some marks will be product-specific marks that are only used in association with one product or group of related products. Some will be corporate identifiers that are used in association with all of the corporation's products.

Trade-marks and product/service offerings come and go. It is important to regularly update lists of the corporation's trade-marks and of the wares and services in association with which they are used. They represent the core of the legal trade-mark rights that the corporation owns and can enforce.

3. Has the corporation filed applications with the federal government to register its trade-marks?Such applications, and the resulting registrations, accord to the corporation valuable rights. For example, once a mark is registered, the corporation owns the exclusive right to use it across Canada, even though the corporation is actually only using the mark in one part of Canada. Registration also confers upon the corporation the right to stop others from using the mark, or a confusingly similar mark, anywhere in Canada.In the case of a trade-mark that is already registered, the corporation should do periodic checks to ensure that the list of wares and/or services set out in the registration is up to date. As use of the corporation's marks expands, new applications should be filed to augment existing registrations.

A corporation's brands are valuable assets that constitute its public face and persona. The corporation's officers and directors are ultimately the guardians of its identity. They should ensure that an appropriate brand management strategy is in place within the corporation, and that it is followed.

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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