Carrefour, Brands and the Russian Market;

I can think of no greater branding challenge than seeking to establish a transnational presence in the retail chain space. Even the 800lb gorilla --Wal-Mart--has not succeeded in establishing a dominant position in each of the national markets which it has sought to enter. The reason is not difficult to fathom. When compared with the difficulties in marketing a single branded product in a new jurisdiction, the requirements for successfully establishing a large-scale retail service brand in a new country are exponentially greater.

Thousands of products of inventory, ranging from perishable food to home furnishings, have to be purchased and made available to customers, real estate sites need to be carefully selected, pricing has to walk a tightrope between being competitive and being profitable, cultural differences have to be addressed, and managerial and on-the-floor service has to be constantly maintained. It is often a wonder that large retail chains can succeed at all across diverse regional settings.

That said, I was struck (even thunderstruck) by the announcement in mid-October that the giant French-based retailer Carrefour here was pulling out the Russian market. Just to keep the size of the company in perspective, it is the second largest retailer in the world (behind Wal-Mart) and racked up sales of nearly $36 billion dollars for Q3 2009. Nor do they shy away from adventurous markets. Nearly half a decade ago, my daughter found herself temporarily working at a Carrefour store in far Western China.

Against that backdrop, the compressed rise and apparent fall of Carrefour in Russia is noteworthy. As reported on the nytimes.com website on October 17, in an article entitled "French Retailer to Close its Russian Stores" under the by-line of Matthew Saltmarsh and Andrew Kramer, Carrefour opened its first hypermarket in Moscow in June 2009. A second store was opened on September 10, 2009, in a city called Krasnodar. The announcement of that opening, as reported on carrefour.com, was careful to add that it was being done "in line with the agreement concluded with the Administration of the Krasnodar region."

And yet, slightly more than one month later, the company announced (albeit apparently "buried ... in a trading update") that the closure was taking place because of an "absence of sufficient organic growth prospects and acquisition opportunities in the short and medium term that would have allowed Carrefour to attain a position of leadership." This is quite remarkable. We are not talking about closing a 180 square meter corner grocery, but rather two facilities, each of which was over 86,000 square feet. Moreover, we are not talking about a gradual phase-out of the facilities, but rather what appears an exodus of Biblical proportions. If there is any recent precedent for a retail pull-back of this size and alacrity from a entire national jurisdiction, I am not aware of it.

Coming and Going in Russia

Oversaturation of the Moscow market, limited growth possibilities elsewhere in the country, a difficult consumer ethos, a deteriorating economic environment, endemic red-tape and even corruption (recall the role of the Administration of the Krasnodar region in the opening of the second Carrefour megastore) all seem to have played a part. Still, these factors did not suddenly come together like a perfect storm only between June and October of this year. If these were factors contributing to the debacle, surely they must have been present, in whole or in part, before the summer 2009. If so, it sure sounds like someone was asleep at the wheel at company headquarters.

And now for the branding question: will the apparently ignominious withdrawal from Russia affect the transnational value of the Carrefour brand? I suspect that the answer is no. Mega-retailing is far more local than international. Still, this is a double-edged sword.

On the one hand, there is likely little added value to the Carrefour name per se when the company seeks to enter a new market. True, the size and recognition of the chain may ease the initial entry into a jurisdiction, but ultimate commercial success, and the resulting goodwill in the brand, must be earned. This seems quite different from the introduction of, for example, a MacDonald's chain into a new country, where the transnational goodwill preceding entry will likely be of assistance.

On the other hand, a local failure will not materially affect the overall value and goodwill of the brand. What happened in Russia will not likely cause an impairment of the Carrefour brand in France--the markets are separate and distinct . Despite globalization, digitization, and the growth of famous marks, for most brands the territoriality notion of trade marks is not merely of legal significance, but of commercial import as well.

IP Australia's IP tax advice

IP Australia's IP Toolbox offers a really useful page full of information concerning the tax implications for various IP regimes. Apart from breaking down current tax breaks and liabilities by (i) type of intellectual property right or product and (ii) species of tax, it also supplies information as to local variations in taxes across the different states. Considering that there are three sets of variables at play here, this page may just come in handy to anyone considering how, or where, to start an IP-based business in Australia.

"Let's rumble ..." but how much is it worth?

From Lee Curtis (Harrison Goddard Foote) comes this link to a trade mark which is reputed to have netted its owner Michael Buffer $400 million: the catchphrase slogan "Let's get ready to rumble". The phrase is apparently used at the beginning of boxing and wrestling matches. The same catchphrase is registered in the United Kingdom, for services in Class 35 (Advertising and promotion) and Class 41 (Cultural activities; radio, television, film, music, video and theatre entertainment services; master of ceremonies services; acting and voice-over services) in the name of Ready to Rumble, Inc.

IP Finance wonders whether this trade mark is quite such a valuable business asset in Europe. In particular, is the use of the same phrase by another person when announcing the commencement of a boxing match a 'trade mark use' which can even constitute an infringement? Would the consumer even consider that the phrase, though associated with Buffer, had the quality of a trade mark? Does it truly cause the consumer to believe that a service is being supplied by someone other than the trade mark owner? What if the voice-over had the voice of a woman, a child or a person with a national or regional accent that was manifestly not that of Buffer himself?

The Vegemite/iSnack Trade Mark Saga Down Under: Fiasco or Triumph?

I have always wondered to what extent there is really no such thing as a good trade mark; at the most, there are bad trade marks that you simply wish to avoid. By this I mean that, as long as a trade mark passes muster legally, such that no one can challenge it as being too descriptive, and no third party can assert rights against the mark: it does not really matter at the end of the day what the precise mark actually is.

I thought about this question in reading an article that appeared on 3 November on nyt.com. Entitled "Vegemite Contest Draws Protests", under the byline of Meraiah Foley, the article describes a chain of events that began in July 2009 in connection with finding a name for a new variety of Australia's most distinctive food product--Vegemite. This product is described by the article as "salty, gooey yeast beloved millions of Australians", akin to that icon of the English breakfast table--Marmite. Akin perhaps, but in the eyes (palate?) of millions of Australians, Marmite is clearly inferior to their beloved Vegemite.

I have to admit--I have never understood the culinary attraction of Marmite, which means that I would probably also find Vegemite difficult to swallow. Perhaps the secret of Vegemite is a mix of culture and timing. As observed in the article, well-known Sydney chef Bill Granger observed that "Australian food was really bad until the 1970s: boiled meat and vegetables without any butter or salt. Vegemite was one of the things that actually had any flavor, and that's why it became so incredibly popular It is one of the only foods that is unique to Australia, and people see it as being quintessentially Australian." Whatever the reason, it seems that Vegemite has itself become an icon of Australian food products.

So what does any of this have to do with trade marks? It seems that the producer of Vegemite, Kraft Foods Australia, sought to launch a new variety of the Marmite product (mixed with cream cheese) by means of a contest to find a name for the gooey delight. To this end, Kraft caused jars and jars of the new product to appear on Australian supermarket shelves, with the words "Name Me" on the label. Weeks passed, and more than 3 million jars were sold (1 jar for nearly each 7th denizen of Australia), the product still remaining nameless. On 26 September, Kraft announced the winner via an expensive ad slot that appeared on the televised finals of the Australian football league--"Vegemite iSnack 2.0".

Now I would have thought that with the naming of the new product, the Vegemite business would return to normal. Au contraire. Anger poured in from all directions, inlcuding Facebook, Twitter, and a dedicated website (called "Names that are better than iSnack 2.0"). One online commentator called for the 27-year old designer who had come with the winning name to be "run naked through the streets of Sydney 'as retribution for his cultural crime' ". Another commentator simply said that the name was "un-Australian".

Kraft's reaction (or retribution) was soon to arrive. Four days later it announced that it was putting the name up for a re-vote. The ultimate winner, selected from an online and telephone poll, was --"Cheesybite." Product with the new name will appear on the shelf in a few months, after all of the jars with the "iSnack 2.0" name are sold.

Where Did You Hide the Cheesybite?

A public relations and marketing disaster for Kraft, no? Well, it it is not clear. As for the impact on Kraft's bottom line, the results were in fact spectacularly good. Sales for the "iSnack 2.0"-branded product rose 47% during the first two weeks of sales, while the sales of the original Vegemite product remained unaffected. In other words, Kraft actually increased sales for the Vegemite line. As well, the fact that the product had reached approximately 15% of all Australian households was a marketing achievement that brand managers usually only dream about.

There are those, especially with a conspiratorial bent, who seem convinced that Kraft planned the entire operation as a way of getting the consumers' attention amidst a cluttered and competitive supermarket environment. I rather doubt that, although Kraft's rapid response to the public outcry and subsequent revetting of the name must be applauded as an especially market-savvy move.Getting back to the question I raised at the beginning of this blog post--is there such a thing as a bad trade mark? I guess the answer, based on the Vegemite 'iSnack 2.0" experience, is both "yes" and "no."

On the one hand, the original mark per se seems to have been a bad marketing ploy, taking Australian culture and sensibilities into account. On the other hand, the trade mark issue was quickly resolved, the issue quickly disappeared, and Kraft does not seem to have suffered any harm to its business. So does, or does the mark, not matter? For the last word, I bring the words of Professor of Marketing, Paul Harrison, from Deakin University in Melbourne: "If people like the taste of it, they'll keep buying it--if they don't, they won't. Ultimately, you don't want people thinking too much about your brand, you want people to become habitual about it."

Funding and the Fortunes of IP Litigation: forthcoming event

There's an attractive event coming up on 9 February 2010: it's "Funding and the Fortunes of Intellectual Property Litigation", another in the series of 11am to 3pm seminars held under the auspices of barristers' chambers Hardwicke (Lincoln's Inn, London, which is where the event will be held).

At £50 plus VAT, this is a very reasonably priced way to pick up some useful information, do a spot of networking, enjoy a tasty lunch and acquire 3 CPD points. Speakers are Elizabeth Gutteridge (Deloittes) on , financial remedies, Mark Engelman (Hardwicke) on third party funding arrangements before and after the Jackson Review and Mick Smith (Calunius Capital) on the risks and mechanics of IP insurance. IPKat team member Jeremy is in the chair. For full details and registration click here.

Open Source and Biotechnology: Whither or Whether Ideology?

I venture to say that most of us are well aware of the fault lines between proprietary and open source software. Proprietary software is characterized by keeping source code secret together with contractual restrictions on the use of the software, plus a reliance on the negative right aspects of copyright and other relevant IP law. Open source, to the contrary, rests on collaborative development and disclosure of source code, subject to various terms and conditions.

Less well-known is the effort to adopt the open source model to subject matter other than computer software. A particularly interesting effort in this regard is the use of open source principles in connection with biotechnology. A useful summary can be found in an article by the prolific and distinguished Professor Robin Feldman (left) of the University of California Hastings College of Law and Kris Nelson (a member of the Class of 2009 of the same school) that appeared in the Fall 2008 issue of the Northwestern Journal of Technology and Intellectual Property, "Open Source, Open Access, and Open Transfer: Market Approaches to Research Bottlenecks."

The authors discuss what they call Open Source Technology and Open Science. While the proponents of these variations of open source software are aware of the differences between the underlying subject-matter of software and biotechnology respectively, there appears to be a belief that that there is enough common ground to speak of both areas in a roughly similar fashion.With respect to Open Source Technology, there are two general categories. The first is described as focusing on bioinformatics ("the application of computer software and methodologies to solve biological problems"). The second category is marked by a move from the specific focus of the software interface to an effort "to ensure that the biotechnology tools required for research and innovation are openly available."

In particular, this second category centres on solving biotech-related problems in what the authors call "underserved communities." By this the authors mean communities with limited financial resources, with the result that there is an inability "to navigate the maze of patent rights and licensing necessary to engage in the targeted research." Stated otherwise, this approach intended to enable projects to deal successfully with the daunting problem of patent thickets.

Examples of projects of this kind are: (i) the HapMap Project here (a multi-country project researching genetic differences, with the goal of a certain mapping the human genome); (ii) CAMBIA here (expanding access to biological research, with a focus on disadvantaged communities); and (iii) the Public Patent Foundation here (aimed at solving the problem of patent thickets by establishing patent pools with open accessible patent rights to the participants of the program).

The authors point out several salient differences between Open Source licensing and the biotech variety:

1. Open Science is based on patent rights, which will sooner or later become public knowledge at some point. The same cannot be said of software under Open Source.

2. The resource requirements of Open Science, with an emphasis on sophisticated lab equipment, favor large organizations.

3. The very fact that Open Science is based on patent rights, while Open Source is based on copyright, means that each arrangement will reflect that particular aspects of the underlying legal right.

The authors conclude, with perhaps a tinge of understatement, that "Open Science Systems have not always matched their initial expectations." Perhaps the problem lies in the expectations themselves. When one considers the history of open source software, one is struck by the unique combination of ideology and technology that came together to forge "the movement". It is not at at all clear that this combination exists with respect to biotechnology, with the possible result that ideology may be the driving force, sometimes in an exaggerated and less than helpful fashion. That said, I have virtually no direct experience with open source arrangements in the biotech context. Perhaps my own views on the subject are themselves driven by my own ideological predilection on the subject.

Will the sci-fi franchise continue?

Will we yet see more Terminator movies? The Financial Times reported on the weekend that the rights to the Terminator film franchise will be auctioned this month. The rights are being sold by Halcyon, the production company behind Terminator Salvation, the latest instalment in the Terminator series which grossed $380m worldwide. For more information, see also here.