On the Trail to Market Success

How Intellectual Property Rights can be integrated

into Marketing Strategies

A thesis submitted to the Bucerius/WHU Master of Law and Business Program in partial fulfillment of the requirements for the award of the Master of Law and Business (“MLB”) Degree

Lara-Christina Koerfer July 22, 2011

 

13496 words (excluding footnotes)

Supervisor 1: Prof. Dr. Holger Ernst

Supervisor 2: Prof. Dr. Thorsten Teichert

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Table of Contents

1.   Introduction ................................................................................................................ 4  

1.1.   The  scope  of  the  thesis..........................................................................................................................................7  

1.2.   Defining  Intellectual  Property  rights..............................................................................................................7  

1.3.   Forms  of  Intellectual  Property ..........................................................................................................................8  

2.   Reference  to  patents  in  advertising ............................................................................. 9  

2.1.   Improving  the  company`s  and  or  brand  image  with  PR .....................................................................10  

2.1.1.   IBM.......................................................................................................................................................................... 11  

2.1.2.   Robert  Bosch  GmbH......................................................................................................................................... 12  

2.2.   Direct  reference  to  patents  in  product  advertising...............................................................................13  

2.3.   Indirect  reference  to  patents ..........................................................................................................................17  

2.4.   Merz  Pharma  Example  for  Integrated  Communication  Strategy ....................................................18  

2.4.1.   The  Brand  Merz  Special ................................................................................................................................. 19  

2.4.2.   The  brand  Tetesept .......................................................................................................................................... 24  

3.   Trademarks ............................................................................................................... 28  

3.1.   Nomen  est  Omen  (Plautus,  250  –  184  b.c.) ...............................................................................................29  

3.2.   Unilever`s  Trademark  Strategy......................................................................................................................30  

3.3.   The  Geicko  Gecko .................................................................................................................................................32  

3.4.   Usage  of  Trademarks  to  Highlight  USP  in  Cosmetics ...........................................................................33  

3.5.   Sebamed  pH  5.5 ....................................................................................................................................................33  

4.   The  power  of  Trade  Secrets ....................................................................................... 37  

4.1.   The  Coca-­‐Cola  Example .....................................................................................................................................37  

4.2.   The  KFC  Example .................................................................................................................................................40  

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5.   Survey  regarding  consumers  percetion  on  intellectual  property  rights  and  their  usage  

in  advertsinig ................................................................................................................... 43  

5.1.   Questions  &  Analysis ..........................................................................................................................................44  

5.2.   Limitations  to  the  Survey .................................................................................................................................57  

6.   Conclusion ................................................................................................................. 58  

7.   Bibliography .............................................................................................................. 62  

8.   Appendix ................................................................................................................... 67  

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1. Introduction

A change in technology and the increase of global competition have resulted in a decrease

of a products life cycle and increased in a higher pressure on companies to achieve high profit

margins, companies have realized the importance of intellectual property protection (Ernst,

2011, p.16). Never before has the number of intellectual property rights applied for been as

high. Alone in the United States1 520,277 patent applications have been filed in 2010, having

increased by 65% in only the last 10 years (U.S. Patent and Trademark Office, 2011).

While in the past simply owning intellectual property rights was enough, as there primar

application were to provide a legal weapon against theft and piracy from competitors, this is

no longer the case. Not only increasing research and development costs, which need to be

recovered in a highly competive economy but also an overwhelming amount of substitue and

complimentary products being available on the global market make it necessary to generate an

extra value from a companies intellectual property portfolio. To match this development

companies are increasingly selling, licensing and most importantly integrating it in to their

own marketing strategy.

While cost-cutting strategies only provide a short-term advantage, intellectual property`s

provide the opportunity to not only obtain a monopoly for a given period of time, but also

using this window of protection to build a strong brand equity. The brand equity obtained, can

1 The United States is chosen as an example, because it is regarded as one of the major global

markets, causing many foreign firms to also seek intellectual property protection in the United

States.

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then to a certain extened compensate for a loss of protection once intellectual property rights

expire. This decreasing the chance that entering competion can cause sales prices to drop

drastically, a phenomenon known as the shark fin curve, by producing at a lower average total

cost. Most drastically this problem can be examined in the pharmacetuical industry, where “it

requires twelve years and approximately $500 million dollars to bring a new drug to the

market” (Conley, 2005, p.1-2), leaving only a short time period to recover the enourmous

sunk-costs, before generic drug companies enter the market with a similar (bioequivelent)

product at a lower price. (Conley, 2005, p.1-2)

Intellectual property rights provide the foundation for successful differentiation of the

product and the brand. By not only providing a unique selling proposition, that can not be

copied, but additionally by providing labels and names that can then asscociate to the brand.

With patents and trade secrets ensuring that competitors can not copy it and trademarks to

build brands and connect emotions, beliefs and values with patents and brand. But also to

create a personal connection to the brand.

And although the neo-classical economics approach is, that the well informed consumer

will choose the optimal quality price ratio, when making its decision, this is not the case in the

praxis. An overwhelming amount of products does not allow a scientific comparison of every

product a consumer buys. If people would analyze every product choice they make, it is

unlikely that there would be anymore time to do something else. Thus consumers will make

their decision based on their perception of the product and the brand image. Building up brand

loyalty is therefore an essential factor for a company to be successful. This can be achieved by

influencing the consumers perception by means of communication and thus differentiating the

product from its competitors. It is essential that the poduct can uphold the promises

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advertisied, which can be achieved by a higher quality or unique product feature. The same is

true vice versa, if a product has a certain unique quality, but this quality is not communicated

correctly, the products unique selling proposition will not be percieved by the consumer and

hence the product will not be bought by him – with the utmost probability it will fail in the

market.

This paper will focus on the connection point between company and consumer, more

preciously the communication from the company towards the consumer, in oder to establish

brand loyalty and unique selling points with the help of a companies intellectual property

portfolio. As intellectual property rights, especially patents, are expensive to develop, it

requires time to establish them in the market and their term of protection will not last forever.

Therefore it is important for a company to use the term of protection to build brand loyalty.

By analyzing the communication strategy of companies such as IBM, Robert Bosch GmbH,

Merz pharmacetuicals, Coca-Cola and KFC, examples of an effective communication strategy

build around a companies intellectual property portfolio can help to build powerful brands and

thus lead to success in the market. Apparently the examples used are from very strong and

successful companies – this is no suprise, as a failure to succeed in the market will lead to

immediate disappearance of the brand. Further the thesis will show how intellectual property

rights can be used to differentiate ones products from the comeptitors. The final part of the

thesis, analysis primary reasearch conducted to identify the consumers perspective on the use

of intellectual property rights in advertising to provide for additional suggestions to

implement into a company`s communication strategy.

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1.1. The scope of the thesis

While a companies individual communication strategy is divided in different targets

groups, namly shareholders, suppliers, retailers, employees govermental organizations,

competitors and the end consumer, this paper will focuses soley on a companies

communication towards the end costumer. Further although there are numerous thechniques

used in marketing, such as: sales promotions, direct marketing or direct response marketing,

this thesis will primarily cover advertising and briefly discuss public relations. The same

applies for the different marketing channels: direct mail, newspaper and magazine ads,

commercial websites, radio and TV, even social media pages. The following analysis will be

focused soley on reaching the target group through the means of print mediums.

1.2. Defining Intellectual Property rights

Before analyzing the different strategies of communication, it is neccesary to define what

is meant with Intellectual Property rights. According to the World Intellectual Property

Organization (WIPO) „Intellectual property refers broadly to the creations of the human mind.

Intellectual property rights protect the interest of the creator by giving them property rights

over their creation:“ (World Intellectual Property Organization, n.d.) Intellectual property

rights provide both positive and negative rights. Positive, as they allow the owner to produce

an invention and generate profit by it and negative as they prohibit others from producing,

selling and even using the invention, without approval by the owner, without a license

agreement and last but not least, without paying the owner a certain amount of money in the

form of royalties. There are two reasons for allowing the protection of intellectual property

and hence providing the owner with exclusive rights. 1) To foster creativity, since a new

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invention provides exclusive rights to the owner, providing the possibility to reearn the

investments made to obtain the creation. 2) It fosters the growth of the overall economy. In

order to understand this, one needs to know that intellectual property rights, with the obvious

exception of trade secrets are made publicly available once the protection is granted. This

allows the public to review the invention for further development and use it once the term of

protection expires.

1.3. Forms of Intellectual Property

Intellectual property can be broken down in four general categories. General, as these

categories could be divided even further.

1. Patents

Protection of an invention, by providing the inventor or the owner with a monopoly to

produce, selling and using the invention. Legal protection for the discovery of “any new and

useful process, machine, article of manufacture or composition of matter, or any improvement

thereof.” (United States Patent and Trademark Office, 2011)

2. Copyrights

“Copyright is a form of protection provided to the authors of "original works of authorship"

including literary, dramatic, musical, artistic, and certain other intellectual works, both

published and unpublished.” (United States Patent and Trademark Office, 2011).

It protects “the form of expression rather than the subject matter of the writing.” (United

States Patent and Trademark Office, 2011)

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3. Trademarks

“A trademark is a word, name, symbol, or device that is used in trade with goods to

indicate the source of the goods and to distinguish them from the goods of others.” (United

States Patent and Trademark Office, 2011) Thus they protect the labeling of a good, but not

the good itself.

4. Trade Secrets

A creation, which is not legally protected and hence not made publicly available. As the

name suggests, protection is obtained by keeping the creation a secret. This is only possible

when an analysis of the product would not allow a trained individual or a team of trained

individuals to determine or discover the trade secret. The most famous example of creations

protected by a trade secret is the Coca-Cola Coke formula.

Although there is no international system that allows a global protection of the invention,

there are certain international treaties such as the Paris convention that foster protection of IP

rights. Further big companies will often seek simulatenous protection of their invention in

different countries and regions. This is necessary due to globalization, which increases the

theft of intellectual property.

2. Reference to patents in advertising

Marketing can be distinguished into targeting three different areas: 1) Improving the

company`s image. 2) Creating brand awareness and building brand equity 3) Increasing

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product sales. It has to be noted that company name and brand name can be identical in some

cases.

2.1. Improving the company`s and or brand image with PR

One method for positioning the company as innovative can be accomplished through

public relations. Media coverage on a subject is anticipated to be more objective than

advertising. Thus a well written newspaper article can provide convincing arguments to

influence the perception of the company in the consumers eyes. Additionally media coverage

has the possibility for providing a detailed description, while advertising needs to be short and

eye-catching in order to stand out from the masses. A company can either directly approach

the media and request coverage or create a happening interessting enough to seek the medias

attention. Although a direct approach is likely to be percieved as less credible, the end

consumer is seldom able to distinguish between the two approaches when reviewing the end

result, and thus both can be considered as equally effective.

The simplest form for a company to communicate its patents via the media channel is

done by issueing a press release, which mentions that the company has applied for a new

intellectual property right, in this context most commenly refering to patents. Although this

method communicates the message it is unlikely to reach a wide audience. The simple

announcement of a patent application is not interessting enough to stand out in the daily

excess of information flooding created by the global broadcast and news system. The situation

could be different when the patent is percieved as a revelutionary innvention, encouraging the

media to spreading the ground breaking news.

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2.1.1. IBM

A corporation that has managed to gain a lot of media attention regarding its patent

portfolio is IBM. IBM has accomplished this by donating 500 hundred of its patents, which

can now be accessed and used by other software developers. In 2005 when the announcement

of the donation was made numerous newspapers covered the story, among them BBC News,

the New York Times, Information Week and cnet News. Also the story was then picked up in

endless blogs. It is hard to imagine that a single advertisiment would have managed to reach

an equally high number of people. “John Kelly, the senior vice president for technology and

intellectual property [of IBM], called the patent contribution ‘the beginning of a new era in

how I.B.M. will manage intellectual property’." (Lohr, 2005) For a giant player on the market

like IBM, who has always been recognized for its strongly protected interlectual property

portfolio, this provided the opportunity to reposition themselves, with consumers enthusiasm

for open source software rising. Further many Newspapers did not only cover the donation but

refered to IBMs achievement of being the number one patent application in the United States.

Two examples of this reference are: “I.B.M. was granted 3,248 patents in 2004, far more than

any other company, according to the United States Patent and Trademark Office.” (Lohr,

2005). And also :“IBM topped the list of annual patent recipients for the 12th straight year,

with 3,248 patents — or 1,314 more patents than No. 2-ranked Matsushita of Japan”

(Auchard, 2005). For IBM this has the positive effect of being percieved as an innovative,

future orientated company, as consumers seldom realize that patent application is not equal to

patents granted and that a patent is not automatically a certification for innovative quality. It is

also unlikely that IBM donated its most valuable patents, but rather ones, which fall under the

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category of sleeping patents. Bearing this in mind, IBM managed to receive a great marketing

with only a relativly low investment.

2.1.2. Robert Bosch GmbH

The Robert Bosch GmbH on the other hand, chose a more costly approach, which will

improve the company`s image in the short term as well as in the long term. In a co-operation

with the state Baden-Württemberg, the Robert Bosch GmbH founded the “Bosch Zentrum für

Leistungselektronik – Bosch Center for Powerelectronics (italic writing indicates: translated

by L.K.” (Robert Bosch GmbH, 2011). According to the Press release published on the web

site of Bosch, the company and the state contribute a total of 30 million Euros to create a

unique learning environment. Bosch also provides an explanation for its motivation for

carrying out this project. „Hochqualifizierte Absolventen sind der Schlüssel für Innovationen

und damit auch für wirtschaftlichen Erfolg. Es muss uns daher gelingen, exzellent

ausgebildeten Nachwuchs zu gewinnen, damit der Innovationsmotor Bosch weiter läuft. -

Highly trained graduates are the key for innovations and thereby also economical success.

We therefore have to succeed, in winning excellent trained young talents, so that the

innovation engine of Bosch can continue running ” (Robert Bosch GmbH, 2011). This

statement made by Dr. Wolfgang Malchow, chief executier, signals two points to the reader:

1) Bosch is an innovative company 2) Bosch is actively trying to maintain this position.

Indirectly the center provides another strategical advantage for the Bosch GmbH. By

educating and training young professionals in the establishment, students will automatically

form a personal bond with the company. bond to the name of Bosch

„Wir erwarten, dass das RBZ in der Erforschung der Schlüsseltechnologien und -

methoden der Mikro- und Leistungselektronik einen wesentlichen Beitrag leisten wird, der

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letztlich in überlegenen Produkten mündet – We are expecting that the Robert Bosch Zentrum

will render a substantial contribution in the study of keytechnologies and the methods of

microelectronis and power electronics, which will ultimately lead to superior products “,

sagte Dr. Volkmar Denner, bei Bosch für Automobilelektronik verantwortlicher

Geschäftsführer

2.2. Direct reference to patents in product advertising

A brand has two ways to advertise their product as patented. Either through a reference to

the patents in the advertising and / or by patent reference on the product itself. Especially in

the highly sensible areas, such as products from the cosmetical-, pharmaceutical-, automobile-

and safety technology industry, one can find a close link between patents and advertising. The

direct emphasis of the patent by the respective company advertising are in these areas

especially common, but also the indirect emphasis of the patent.

The advertising done by the cosmetic brand Charles of the Ritz for example uses the

following line to to advertise their lipstick: “Your lips are soft and sensual. Your lips are sassy

and sensational. Your lipstick is so terrific it is even patented” (Grossman, 2003, p.6-7). This

suggests to the target group, that because the lipstick is so terrific it is patented. Of course,

being „terrific, is not a criteria for obtaining a patent, but in the eyes of the consumer the term

patented is a prove for quality. A similar example is the advertising for a pacemaker by

Woodcock Washburn shown below.

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Image 1 Woodcock Washburn –

Pacemaker Advertisiment (Grossman, 2003, p. 6-7)

Below the painting displayed in the advertising, the consumer can read the following

statement: “Pacemaker – Date Jan. 19, 1999 – Patent # 5.861-011 – Gustest A. P. Stopp – The

Art of keeping hearts beating”. The advertising includes its patent in a painting a the

reference, in a labeling identical to labels of paintings when displayed in a museum. Thereby

combining both the technical terminology of the patent, as well as providing an emotional

appeal to the consumer. This emotional appeal is created, by the usage of a painting and by

labeling it as “the art of keeping hearts beating”. The advertising is likely to catch the

attention of the viewer, by the brutal display of an x-ray of a rib case including a pacemaker,

but manages not to provoke the viewer, by displaying it as a piece of art. Further after having

grasp the attention of the consumer, the advertisement clearly identifies the the unique selling

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proposition of the product. A patent protected pacemaker, which ensures that the heart will

continue beating.

A different approach is stating the patent claim on the packaging. The brand Alpecin

promotes its Coffein Shampoo, by including its patent claim directly on the packaging. As can

be seen in the image below, the following is stated under the products name: “mit

patentiertem Haut-Aktivator, Pat. Nr. EP1396261B1 – with patented skin aktivator, patent nr.

EP1396261B1” (Dr. Kurt Wolff, 2011).

Image 2 Alpecin – Coffein Shampoo (Dr. Kurt Wolff, 2011)

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By providing not only the patent name, but even the patent number, the claim increases its

credibility. While it is unlikely that the consumer will actively search for the patent, providing

the patent nr. will allow him to do so. The producted ist targeted primarily at men, who in

general are said to have a higher interest for technic. The technical reference of the patent

number can thus be assumed to appeal to the target group. The product completes the picture

by providing an definition of the patents effect, by stating: “Simuliert die Haarwurzeln schon

beim Waschen – stimulates the hair roots already during washing” (Dr. Kurt Wolff, 2011).

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2.3. Indirect reference to patents

Image 3 Neuer Patent-Motorwagen (Daimler Archiv, 2011)

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While the first car build by Rheinische Gasmotorenfabrik Benz & Cie. now widely known

as Merceds-Benz, did not only advertise the patent its innvention was based on, but included

the term patent into the inventions name, as can be seen in the image above, this can no longer

be done.

Besides unique naming of the product, the advetisment also highlights that the product is

“patented in all Industry countries” (Daimler Archiv, 2011). Further it directly states the

unique selling proposition by declaring on the left side: “Full substitut for vehicles with

horses. Saves the carte, […], and the maintenance of the horses” (Daimler Archiv, 2011).

And continuing on the right side: “Steering, holding and braking easier and simpler”

(Daimler Archiv, 2011).

Nowadays the problem with product related patent advertising is that it increases the

chances of infringing a patent from a competitor. Especially in the automobile industry, where

one distinctive feature vsible to the consumer, is protected by a number of patents. A

company can protect itself by patent fencing, by acquiring all related or near substitues of

such. But if a few of the patents are not owned by the company itself, but are licensed, a direct

patent related advertising becomes complicated. To overcome this problem, car producers

have applied a more or less indirect approach. By using terminology such as “innovation”,

“new”, “efficient” and “unique”, they indirectly convey patent ownership.

2.4. Merz Pharma Example for Integrated Communication Strategy

Merz Pharma is the ideal example for using intellectual property rights in their

communication strategy, combining both brand and product patent advertising.

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2.4.1. The Brand Merz Special

The following examples will show how Merz Pharma uses product packaging to

communicate its patent claims.

Image 4 Merz Spezial Packaing (Merz Consumer Care GmbH,

2011)

The grey box on the carton packaging of the dietary supplement: „Merz spezial Dragees“

the following claim can be read: „Zum Patent angemeldet. Das Besondere an Merz Spezial

Dragees: Die Micro-Kapillar Formel. – Applied for Patent. What makes Merz Spezial

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Dragees so unique is: The Micro-Kapillar Formel “ (Merz Consumer Care GmbH, 2011).

Interestingly the patent application Merz Pharma is referring to, which was filled in 2004, was

granted and is still effective. (Dr. Beutler, Prof. Dr. Dr. Schmidt, Funke, & Becker, 2004).

Therefore using the term „zum Patent angemeldet – applied for patent“ rather than „patentiert

– patented“ could be seen as misleading, because it could suggest that a patent was filed, but

not granted. On the other hand it could give the consumer the impression to buy a highly

sophisticated developed product, which still stuck in, as every consumer knows, the lengthly

patent apllication process, but already available on the market, so that at least the consumer

does not need to wait anymore to benefit from it. When comparing the advantages and

disadvantages of the statement “applied for patent”, the advantages outweigh and are thus the

smarter strategy.

Another product line, belonging to the same brand „Merz Spezial“ Merz Pharma refers to

their intellectual property rights even more directly.

Image 5 Merz Spezial Facial Mask (Merz Consumer Care GmbH,

2011)

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The image above, shows one of the many facial masks that are offered under the brand

Merz Spezial. On the front side of the packaging the consumer is presented with a logo

stating: „Patentierte Microbione®; Tiefenwirksam - patented microbione® – depth effect“.

Furthermore the logo is presented in form of a stamp print, reinforcing the scientific sincerity

of the statement. The addition of the trademark sign to the word microbione, further indicates

intellectual property protection, likely to increase the percieved uniqueness and value of the

product to the consumer. When the consumer then views the backside of the packaging the

first heading states: „mit patentierter Tiefenwirkung – with patented depth effect“ (Merz

Consumer Care GmbH, 2011) and under it can read about „Das Geheimnis der Merz Special

Feuchtigkeitsmaske liegt in den Naturproteinen, den sogennanten Microbionen® - the secret

of the Merz Special facial mask lies in the naturproteins, the so called Microbionen®” (Merz

Consumer Care GmbH, 2011). Followed by two sentences explaining how the Microbionen

work and what effect they have for the skin. This layout on the packaging design, can be seen

on all Merz Spezial face masks.

The internet presentation of the Merz Spezial product line, corresponse with the

intellectual property communication strategy displayed on the packaging. Below a screenshot

of this webpage is displayed.

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Image 6 – Merz Spezial Webpage: Portionsmasken – Das Patent (Merz Consumer Care GmbH, n.d.)

On the left hand side of the webpage, several headings and subheadings can be seen.

Under the heading of “Portionsmasken”, the subheading “Das Patent – the patent” (Merz

Consumer Care GmbH, n.d.), both highlighted in orange, can be viewed. Similar to the text

displayed on the packaging, the text on the webpage introduces the consumer to the “secret”

of patented technology, its functions and its result for the human skin. The photo of a woman

raising her finger to her mouth complements the idea of a secret being shared. While the text

on the packaging stops there, the webpage takes the idea a level further. By using the word

“einzigartig – unique” and the term: “Im Gegensatz zu anderen Gesichtsmask – In contrast to

other facial masks” (Merz Consumer Care GmbH, n.d.), Merz Pharma shows that no other

company can provide these unique technology and hence only products of the brand Merz

Spezial provide outstanding results to the facial appearance of the user. Lastly, the same

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stamp print logo as found on the packaging stating: “Patentierte Microbione®;

Tiefenwirksam” (Merz Consumer Care GmbH, n.d.), is displayed next to the text on the

webpage. Overall the webpage uses the word “patent” and “patented” four times, each time

displayed in a way that stands out from the text: twice written in orange, once written in bold

and once in the logo. This simple form of repetition has several effects: 1) It guarantees that

the reader spots the term. 2) The repetition increases the credibility, as “repeated statements

are rated as more true than new ones” (Bacon, 1979) 3) Actively links the patent claim to the

product.

Image 7 Merz Spezial Webpage: Schaum-Masken – Das Patent (Merz Consumer Care GmbH, n.d. )

As displayed in Image 2, the brand Merz Spezial uses the same subheading and page

layout, including text, for its product line “Schaum-Masken – foam masks” (Merz Consumer

Care GmbH, n.d.).

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It has to be noted, that the direct reference to the patent as described above, can only be

found on the German website. This is most likely due to the fact, that Merz Pharma only owns

the patent in Germany.

2.4.2. The brand Tetesept

For its brand Tetesept, Merz Pharma uses a similar method of displaying a reference to its

patent claim on the packaging.

Image 8 tetesept baths salts packaging (tetesept, 2011b), Image 9 tetesept baths salts packaging (tetesept,

2011a)

Image 3 and 4 show the front of two of tetesepts bath salts packagings. Both use the same

circular logo stating: “Pflegedepot; Patentierte Bade-Liposome – nurture depot; baths-

liposomes” (tetesept, 2011a)(tetesept, 2011b). Inside the circular logo a orange drop falling

into water is shown, to supprt the idea that the bath salts add improtant liposomes to the water

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to ensure that the skin does not dry out during the bath but provides additional skin care. As

the main target group of the products are going to be women, who tend to apply a high

amount of skin care, both bath salts provide a unique selling proposition: Providing relaxation

as well as skin care. While the implied skin care is suggested by the logo described above,

relaxation can be applied from the following: 1) general association with bath salts as being

relaxing 2) the products names: „Abendruhe – evening calmness“ (tetesept, 2011a) and

„Herzklopfen – heart beating“ (tetesept, 2011b) 3) the description of the products application:

„Abtauchen und den Alltag vergessen – submerge and forget daily routine“ (tetesept, 2011a)

and „Träumen und sich verführen lassen – dream and let yourself be seduced“ (tetesept,

2011b)

Image 10 tetesept bath salts packaging backside

(tetesept, 2011a)

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When reviewing the backside of the packaging, containg a detailed description of the

product and ist application, three phrases stand out as they are displayed in a different color

than the remaining text. These include the name of the product, the senses targeted; sight,

smell, touch and the „Pflege der patentierten Bade-Liposome – The nuture of the patented

Bath-Liposomes“ (tetesept, 2011a) (tetesept, 2011b). This technique connects the name of the

product with an emotional appeal and the certificed care of the patent claim in the mind of the

consumer. The box below the text provides the consumer with further statements reinforcing

the idea of the product being scientific proven skin nurturing. By using phrases such as:

„Nach aktuellen wissenschaftlichen Erkenntnissen entwickelt – Developed according to

current scientific insights – „ „Hautverträglichkeit [...] dermatologisch bestätigt – Skin

friendliness [...] dermatologically tested “ „Besonders hautpflegend mit patentierten Bade-

Liposome – Especially skin nurturing with patented bath-liposome“ (tetesept, 2011a), the

sincerity of scientific achievement is established. Finally, to complete the picture, the word

“patented” is used three times within the text displayed on the backside, using the same

repetition technique as explained in the previous example of Merz Spezial fascial masks

describtion.

tetesept also integrates its intellectual property communication on its website, while not

using it as product related reference but for increasing brand equity.

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Image 11 tetesept profile statement (tetesept Pharma GmbH, 2011a)

The above screenshot shows tetesept`s profile statement. The company describes itself

and its products as “qualitativ hochwertige und gleichzeitig innovative Gesundheitsprodukte –

of high quality and at simouetanously innovative health products” (tetesept Pharma GmbH,

2011). Further the company states, as highlighted by the author in Image 3: „Ein wichtiges

Erfolgsgeheimnis liegt zudem in unseren innovativen, patentierten Rezepturen – furthermore

an essential success secret also lies in our innovative, patented formulas“ (tetesept Pharma

GmbH, 2011). This communicates to the consumer, that tetesept`s patent protfolio

differentiates the company from ist competitors in higher quality and innovation, making

tetesept`s product the better choice.

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Image 12 tetesept Focus statement (tetesept Pharma GmbH, 2011b)

“Daher werden tetesept Produkte in einer eigenständigen medizischen-pharmazeutischen

Forschungsabteilung nach einzigartigen Rezepturen entwickelt und sind vielfach durch

Patente belegt. – Therefore tetesept products a are produced in an independent medical-

pharamceutical research department following unique formulas and are frequently proven by

patents”(tetesept Pharma GmbH, 2011b). Interestingly the company uses the word prove and

not protected, although patents provide protection and not certification of a product being of

high value.

3. Trademarks

Trademarks are the key component to a successful branding strategy and play an

important role in the profit margins a company can generate, as they allow companies to

charge premium prices. Trademarks allow for categorization by identifying a product

belonging to a certain brand and therby provide differentiation of a product from its

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competitors, as the brands trademark will be displayed in addition to the product name on the

packaging. While products might be identical, a trademark is by its legal requirement bound

to be distinct and unique. By using a trademark to label a product and continuously using it in

advertising, product recognition, brand loyalty and brand awareness is build, which will than

transfer to other products of the same brand. Well-known trademarks also create barriers to

entry for competitors, as the costs for establishing itself in the market and building brand

recognition by the new entrants will be especially high. Trademarks also allow for trade

secrets and patents of one product to be connected with the entire product range of the brand.

3.1. Nomen est Omen (Plautus, 250 – 184 b.c.)

As companies have realized the importance of a well defined trademark for the company`s

name, the issue has already shifted to high importance in a company`s branding strategy. An

article published in the Frankfurter Allgemeine Zeitung on Juli 19th, 2011, focuses on just this

issue. “In the past company notations had a descriptive character. Founders-, and

respectively owner names dominated alongside a detailed description of the field of activtiy or

products. By this transparency one tried to cannote reliability.” (Schmidt, 2011). The article

continuous with showing that nowadays the trend moves to imagenary labels, „to not raise

clear expectations, but trigger positive emotions in the consumer and the business partners.“

Targeting the emotions of the target group, trademarks help to create a personal relationship

between the consumer and the brand. (Schmidt, 2011).

By a study asking contestants to choose a portfolio investment soley based on ten different

company names, and more than one third of the contestants choosing the same company, the

article shows the significance of the company`s name. Interestingly companies often

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outsource the task of finding a suitable name. As the name does not only need to be trendy

and aesthetic, but primarely needs to match with the company. For agencies specialized in this

area, this is a lucartive business, as creation of an appropriate name costs between 80000 and

200000 Euros for the company. The fact that companies are willing to pay these amount,

shows how high companies rate the important of the perfect name. Two famous examples of

big german companies, which have recently changed their name to match the contemporary

trend are „Hochtief“, formerly known as „Gebrüder Helfmann, Bauunternehmer“ and

„Symrise“, formerly known as „Haarmanns Vanillinfabrik“ (Schmidt, 2011). The number of

trademarks listed is endless. “Everyday, each of us encounters at least 1,500 trademarks and

up to 30,000 if we visit a supermarket.” (Bellis, n.d.).

3.2. Unilever`s Trademark Strategy

A company that has a lengthy portfolio of brands and the corresponding trademarks is

Unilever. The company, offering products ranging from food products, hygiene & beauy

products to cleaning products, does not only use the trademarks to differentiate the brands

from competitors but also differentiate the products from one another. For example the brand

„Domestos“ being positioned as “Experts in killing germs” (Unilever, 2011a) would probably

not be suitable for introducing a new chocolate ice cream. By labeling a product under the

following trademark:

Image 13 Domestos trademark

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The consumer will immediately percieve it as an aggressive cleaning agent, even if the

product itself is unknown to him. Thus a well-known trademark will make it easier for

companies to introduce new products, because the trademark identifies the product as

belonging to the brand and allowing the exisiting brand image is immediately asscociated

with the new product in the perception of the target group. Additionally Unilever uses a

different trademark to represent the company Unilever, providing an umbrella for the

individual brand trademarks. This trademark is exibited below.

Image 14 Unilever trademark (Unilever, 2011a)

While the products and brands trademarks are always displayed in the most evident way,

Unilever does use the Unilever trademark on the backside of the product to show that the

brand is part of the Unilever group. While it seems logical to signal to the consumer that the

brand belongs to Unilever, a long established and highly recognized company, not every

company will pursue this appraoch, due to different reasons. For once, companies often use

different brands to cover a wide range of target groups. For example the Volkswagen AG uses

different brands to cover the entire automobile market from the mass market to the premium

class. The key indicator of the individual positioning is the price, but in order to justify a

higher price for an Audi than for a Skoda, the product must be percieved as differentiated in

the eyes of the consumer. If the two models appear differentiated, then the consumer will be

willing to pay the price premium for the brand Audi. The automobile industry is one of the

most competitve industries in the world and in order for car companies to meet profit margins,

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synergies have to be accquried. Therefore the Volkswagen AG for example uses the same

plattform, meaning identical underbody and suspensions, to build the Skoda Octavia, the Seat

Altea, the VW Golf and the Audi A3. Although most people are aware that these three brands

belong to the same company, they seldom are aware of the fact that the cars have an identical

plattform. Further the Volkswagen AG would harm its own positioning strategy by constantly

communicating that all four brands belong to the same company, The main distinction of the

cars is achieved through design and engines. This allows it for Volkswagen to charge different

prices. If customers would on the otherside percieve them of equal quality, then the question

would arise, why to pay more for an Audi, if you can have the same quality in a Skoda and

making it hard to position one brand below or above another brand. For example positioning

the Skoda as not as high in quality and therefore cheaper than an Audi.

3.3. The Geicko Gecko

Logos, names and signs are not the only categories falling under trademark protection, as

it is possible to also obtain unconventional trademarks such as motion trademarks, sound

trademarks and even scent trademarks.

Image 15 Geico Gecko (St. Petersburg Times, 2008)

The Geico Gecko, displayed in the image above, was orinally protected by two

trademarks, one displaying a lying gecko and the other by a standing gecko. By know the

severe use of Geico`s Gecko in print advertising and television commercials, the protection is

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extended, but not limited to, the Gecko`s colors and the british accent the Gecko speaks. This

also shows that applying is not the only way of obtaining trademark protection. If a trademark

has been used extensively and therefore is generally well known by the public, it will

automatically acquire trademark status in some countries.

3.4. Usage of Trademarks to Highlight USP in Cosmetics

Trademarks can also be used to provide a products unique selling position. Especially in

cosmetic industry this is often done, by the usage of technical terms. While at first glance one

might wonder how the terms such as IQ and scanning relate to hygiene products, they are

nonetheless frequently used. Companies such as Beiersdorf uses the trademark “Hydra IQ” on

the products for the product line Cashmere moments, under the brand of Nivea (Nivea, 2011).

The company Schwarzkopf & Henkel uses the trademark „scan repair komplex“ on their Hair

repair product line, under the brand Schwarzkopf (Schwarzkopf, 2011). These are only two of

endless similiar examples. As the variety of hygiene products is endless and their chemical

compositions varies only minimal, a stronger differentiation needs to be achieved through

branding. By including technical terms the product implies scientific prove. For example by

using the term „scan repair komplex“ (Schwarzkopf, 2011), the consumer will percieve the

product as being able to scan the hair for damage and repair the precisely targeted damages.

From a chemical point of view, chemical compounds will not scan but simplay react with

other chemcial compounds until those connection points are saturated.

3.5. Sebamed pH 5.5

Sebamed pharmaceuticals has positioned its products as especially caring for the skin, by

using chemical compositions which match the neutral pH value of the human skin. The

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continous usage of the trademark sebamed ph 5.5, as shown in the image below, on all of the

brands skin related products, reminds and consolidates the idea that sebameds pH 5.5 products

match the pH value of the skin and therefore do not damage the skins natural protective acid

mantle (Sebapharma, 2011).

Image 16 Sebamed american trademark (Sebapharma, 2011)

Although most people have come across the term pH-value once in their life, and might be

aware that it refers to whether a liquid is acid or alkine, it is unlikely that they will know the

exact pH value of the skin. To overcome this problem sebamed provides a brief explanation

of the effect that pH-value 5.5 has on the skin on the back side of their products and a detailed

description and graphical representation on their website. Also the german trademark, as

shown below, uses the words „klinisch geprüft, ärztlich empfohlen – clinical proven,

recommended by doctors“ (Sebapharma, 2011) supporting the medical significane of the pH-

value.

Image 17 Sebamed german trademark

Sebamed also owns the web domain www.ph5-5.com, ensuring that if a consumer decides

to research pH value 5.5, sebamed will be displayed three times out of the top four results in

the search list, as can be seen in the image below.

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Image 18 Google search for pH 5.5 (Google, 2011)

And even when only searching for the term pH value, sebamed will show up on the first

site of the search list. This shows, that even though it is unlikely that sebamed owns the

trademark on the term pH 5.5 by itself, as it is not distinctive and consists of an indication for

quality, sebamed has through its active use of the term on products and in advertising

managed to acquire a certain legal protection for the term.  

While a wide known trademark is a powerful tool, there is a a danger of a trademark

becoming generic. Once the trademark is used to refer to a general product class, it will no

longer satisfy the requirement of distinctiveness and trademark protection will exhaust. This

then allows competitors to use the orignally trademarked term on their own products. Two

famous examples of this occuring are Aspirin and escalator, who have lost their trademark

status in several countries (Folsom & Teply, 1980). In Germany, where Aspirin has not lost

ist status as a trademark (Folsom & Teply, 1980) Bayer AG is still the only company allowed

to label their pain medication as such. This provides an advantage, because consumers are

unlikely to know the chemical compounded „Acetylsalicysäure“ making it harder for

competitors to produce and sell a generic substitute, as they can not advertise it as a cheaper

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Aspirin. Generic in a pharmaceutical sense refers to products, which are “drugs that are

comparable to brand/reference listed drug products in dosage form, strength, route of

administration, quality and performance characteristics, and intended use.“ (FDA, 2011)

Since generic drug companies can launch their products without costly research and

development, extensive testing and FDA approval, they will not need to recover these costs

and are able to sell at a lower price.

A simple measure to decreases the threat of a product becoming generic is by attaching

the word brand to the trademark. For example Tempo brand instead of Tempo. Also a

company can educate its consumers on trademarks protection, although such education does

not neccesarly prevent them from using the term as generic. Nestlé for example, in an attempt

to guard its intellectual property rights directly confronted its consumers on “informing their

100,000 facebook friends: `We welcome your comments, but please don't post using an

altered version of any of our logos as your profile pic -- they will be deleted.` “ (York, 2010).

As explained in the article from Advertisement Age (AdAge.com), some facebook users had

begun to use the Nestlés logos to depict environmental damage. Nestlés comment resulted in

an intense debate between Nestlés facebook friends and Nestlé. With the comment “Thanks

for the lesson in manners. Consider yourself embraced. But it's our page, we set the rules, it

was ever thus“, Nestlé provided for even more anger among its fans. Linking an article from

about.com to inform consumers about the importance of trademarks and branding, was at this

point in the discussion a weak strategy (York, 2010). This shows that there can be a thin line

between protecting a companies trademarks and irritating consumers. Consumers, who in the

end buy the products, ensuring the companies success. On the other hand, it is important for

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companies to enforce their trademark claims legally against competitors as otherwise the

trademark protection can be lost.

But the best trademark in the world would not be able to provide financial success for a

company, if the products and services the company provides do not satisfy the consumer in

the long run.

4. The power of Trade Secrets

The problem with intellectual property rights is, that there time of protection is finite.

Trade Secrets can on the other hand last for eternity, if a company is able to keep them a

secret. Thus, if there is no possibility for competitors to discover the technique or identify the

components which constitue the trade secret and the advantage is long lasting, trade secrets

will povide the best option for intellectual property protection. How powerful a trade secret

can be to create a unique selling proposition can be seen in the following analysis of the Coca-

Cola Company:

4.1. The Coca-Cola Example

Invented in 1886 and selling only nine drinks a day in their first year (The Coca-Cola

Company, 2006-2011a) the Coca-Cola Company has come a long way. Today “Coca-Cola is

the most popular and biggest-selling soft drink in history, as well as the best-known product

[and Trademark] in the world.” (The Coca-Cola Company, 2006-2011b). So what makes

Coca-Cola so special? When examining the product one will find that it is nothing more than

syrup added with carbonated water. One of numerous blind tests experiements on the taste

difference and brand bonding was done by Samuel M. McClure et. al. The study examined

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consumers preference in a blind test between Coca-Cola and Pepsi Cola and brand-cued

preference. While the blind test, where testers where asked to choose between a cup of Coca-

Cola and a cup of Pepsi-Cola without knowing which was which, resulted in consumers

choosing both brands equally. The brand-cued preference test, in which the consumers again

had two choose between to cups, one which was explicitly labeled Coca-Cola and the other

left anonymously, but also containing Coca-Cola, the same was then repeated for Pepsi-Cola,

yielded a different result. When presented with the labeling Coca-Cola, testeres showed a

strong preference for the labeled cup, even though the other one also contained Coca-Cola.

When presented with the labeling Pepsi-Cola, testeres chose both cups equally. This clear

preference in the brand-cued test shows a strong bias toward the Coca-Cola brand. (Samuel

M. McClure et. al., 2004). While showing that Coca-Cola is not unique in ist taste, the study

also provides an answer to the original question: What makes Coca-Cola so unique and

preferrable over other Cola`s? The answer is simple, consumers have a strong brand loyalty

towards Coca-Cola.

Coca-Cola has build this brand loyalty and brand equity by contionously communicating

that the formula for the syrup used to make the drink, is so unique and valuable that it needs

to be kept a well protected secret. Nummerous myths surround the the protetion of the

formula, such as that the formula is only known by two CEO`s of the company, and each only

knowing half (Mikkelson & Mikkelson, 2011). On just how much the trade secret contributes

to the brand, was discovered in 1985 when the Coca-Cola company made what is often

refered to as Coca-Cola`s big mistake or how the Company itself puts it: „April 23, 1985, was

a day that will live in marketing infamy.” (The Coca-Cola Company, 2006-2011c). According

to the Coca-Cola Company the following occured: April 23, 1985, was the day that Coca-

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Cola introduced a new reformulated Coca-Cola labbeling it the New Coke, as it had

previously lost market share to its rising competitor Pepsi. By changing its secret formula and

trade secret, New Coke had been developed and proven successful in a series of blind tatste

tests involving nearly 200,000 people. But when introducing it to the market consumers did

not only refuse to buy it, but began hoarting old Coke. “A man in San Antonio, Texas, [even]

drove to a local bottler and bought $1,000 worth of Coca-Cola.” (The Coca-Cola Company,

2006-2011c). Protest groups were formed and the number of callers to the Coca-Cola

company spiked from 400 to 1,500 per day: demanding the „real thing“. Only three month

after the launch of New Coke, in June 1985, the Coca-Cola company reacted and announced

that the old and original Coca-Cola would return. This announcment send a relief through the

public and „led [to] two network newscasts and made the front page of virtually every major

newspaper” (The Coca-Cola Company, 2006-2011c). In the next two days 31,600 phone calls

where made to the Coca-Cola company, showing just how much consumeres cared. The only

mistake the Coca-Cola company made when launching it`s New Coke was not anticipating

that taste was no longer the key driver in the purchase decision making process, but the

personal bond consumers percieved with the original Coca-Cola and the underlying trade

secret. This is the point when a trade secret is no longer a simple secret but has become the

unique selling point of the product and the foundation of a powerful brand. While the idea of

the valuable trade secret worthy of protection remains intact, the actual differetation of the

formula from competing coke products is no longer required, as the perception of the trade

secret has become more valubable than the actual secret.

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4.2. The KFC Example

Another famous example using a simple trade secret to create a unique selling point is

displayed by Kentucky Fried Chicken (KFC). This is done not only by labbeling the formula

of their spice mixture used to flavouring their products as „the secret Recipe“ (Kentucky Fried

Chicken, 2011b), but also embedding the creation of „the secret recipe“ into a personal story.

Using the american dream to set the atmosphere, the story of Colonel Harland Sanders, the

founder of KFC, and his wife Claudia, is told, who “carried the secret formula […] in his head

and the spice mixture in his car”, in order to protect his secret. Picturing Harland Sanders as

small american man, signals to the consumer that he is not an abstract, unreachable CEO, but

just a normal person like the reader. By refering to Claudia Sanders, with only her first name,

this perception is further encouraged. As humans feel more connected to people who they can

relate to, this helps build a realtionship between the target group and KFC and its founder.

In advertising KFC continously signaled that the secret formula is the reason that their

chicken is “finger lickin`good”. This provides the real unique selling propsition for the

customer. The secret formula is not just a formula, but a mixture so special it makes you want

to lick your fingers. Communicating in the tone of the target group, with not only using the

unsophisticated words “finger lickin`good” (Kentucky Fried Chicken, 2011b), but in addition

by misspelling the word licking, signals companionship with the consumer. Also the phrase

used, triggers emotions in the consumer, as the target group will asscociate it with memories

of childhood, when food was so good you just had to lick your fingers and were stilled

allowed to do so. Emotions are a very powerful tool in marketing, as a persons memories are

primarily connected to them. Finally KFC uses two methods to creates the image for a secret

so great that it needs extraordinary protectual matters. For one KFC agiana aims at the

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imagination of the consumer to visualize the protectual measures protection the formula. The

company providing a detailed description of security measures taken on ist web site:

Today, the recipe is protected by some pretty elaborate security precautions. One

company blends a formulation that represents part of the recipe while another spice company

blends the remainder. As a final safeguard, a computer processing system is used to

standardize the blending of the products to ensure neither company has the complete recipe.

(Kentucky Fried Chicken, 2011a)

The story allows the reader to visualize an image, which then increases the recall rate and

adds an extra emphasis to the point that KFC is establishing. Secondly KFC targets the visual

and accustic senses directly by providing a small video to a safe. The camera is zooming in on

the safe, as the safe doors slowely open, as shown in the image below.

Image 19 KFC`s secret safe video (Kentucky Fried Chicken, 2011b)

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Identical to the labeling of the spice mixture as „secret formula“ the video is using the

word „secret safe“, instead of just safe, stressing the idea of the secret. After the video ends

the viewer is presented with the following image:

Image 20 KFC Secret Safe – cause for action (Kentucky Fried Chicken, 2011b)

The text beginns with highlighting KFC´s ability to to keep their „Original Recipe for

finger lickin` good chicken [as] one of Americas best-kept secrets for more than 65 years“

(Kentucky Fried Chicken, 2011b). Note that the word „original“ in this context has a strong

implication that other spice mixtures for chicken a merely an intempted copy of the „original

recipe“, and will therefore not provide the „finger lickin good“ taste which KFC products

have. The text then continues with a call for action from the consumers side, asking him to

share his or her secret to be protected by KFC`s long lasting experience with security.

Although an anonymous deposit, will provide the company with only little information for

market segmentation, but with insight on the target groups beliefs and values. While not

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directly initiating an action to buy the product, it again targets the relationship between the

consumer and brand. Building brand loyalty is essential to build trust, which ensures that the

consumer will eat at KFC rather than at a comepitiors, as he feels strongly positively towards

the brand and the products.

Additionally to the marketing put in practice on the website, as analyized above, KFC

uses PR to promote the conception of the invaluable secret formula. Between 2008 and 2009

KFC created attention by transfering it`s secret recipe . The story caused a lot of media

attention, as many news channels picked up the story and many newspapers published

published articles on the subject. One of them was Fox News, which uses the article to

describe the security measures taken in extra detail: „The recipe [...] was placed in a lock box

that was handcuffed to security expert Bo Dietl, who climbed aboard an armored car that

whisked away with an escort from off-duty police officers“ (Fox News, 2008).

Resulting from these marketing activities KFC has established a unique selling

proposition. In the same manner as the Coca-Cola company, it is no longer essential for

KFC`s formula to be unique, as long as it can maintain the perception of uniquenes of its trade

secret.

5. Survey regarding consumers percetion on intellectual property rights

and their usage in advertsinig

Primary research was conducted to identify the consumers perspective on the use of

intellectual property rights in advertising. The survey consisted of 14 questions and was

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conducted anonymously, to ensure that participants felt comfortable to answer honestly.2 The

questionnaire was distributed via facebook, and send to friends and family members by email,

with the request of not only filling out the questionnaire, but distributing it further. The

number of people contacted directly was 637, while the total number of people contacted is

higher due to the indirect approach. With a total of 67 people responding in the two weeks

that the survey was online, the response rate was 10.51%.

The pre-testing phase, with only a limited number of participants, showed that questions

had to be designed in a simpler form in order to increase the understanding. Further it showed

that the targeted group had little knowledge and understanding on the subject matter of

intellectual property.

5.1. Questions & Analysis

1) How would you rate your knowledge on the following intellectual property rights:

The intent of this question was to get an understanding of the consumer’s knowledge on

intellectual property and intellectual property rights. This is important, because a person well

educated on the subject will perceive the mentioning of intellectual property rights in

advertising at a different level. My secondary research indicated that consumers generally

perceive intellectual property, especially the word patented as „that the invention has been

recognized by the government as being better, safer, more efficient or generally more hi-

tech.“ (Grossman, 2003, p. 6-7). While this is not the case, as “Whoever invents or discovers

any new and useful process, machine, manufacture, or composition of matter, or any new and

2 The Questionnaire and the answeres are displayed in Appendix 1

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useful process, maschine, manufacture or composition of matter, or any new and useful

improvements thereof, may obtain a patent.” U.S. Patent Act, Ch.10, §101. The requirements

of new and useful, do not neccessarly make an invention better or more efficent. This shows,

that according to the secondary research, the consumer knowledge differs form the legsilation

and over-evaluates the innovativeness of intellectual property rights.

Further this question was used as method to ensure that the respondend had an

understanding of the primary rights included under the term of intellectual property. This

refers back to the pre-testing period, which indicated that people were less faimilar with the

term intellectual property and more familiar with the terms copyright, trademarks, patents and

trade secrets.

Therefore the survey was expected to receive results mainly in the area of low

understanding. Though it has to be anticipated that humans have a tendency to over-evaluate

themselves and therefore perceive their knowledge to be higher. The results from the survey:

19.4 % of the respondents rated their knowledge on copyright as low, 28.4% as high,

while the majority with 52.2% repsonses claimed to have a medium knowledge on copyrights.

For patents the responses accounted for the following precentages: with 31.3% describing

their knowledge as low, 50.7% as medium and 17.9% as high. For trademarks the responses

yielded a similar reslut: 40.3% describing their knowledge as low, 44.8% as medium and

14.9% as high. Alone for trade secrets the resluts were significantly different: with 65.5%

rating their knowledge as low, only 19.4% as medium and 14.9% as high.

This indicates that people felt most comfortable with the term copyright. One reason for

this could be, that people targetet primarily have the same demographic when it comes to age

and life style. Ranging between the ages 18 and 30 years, they fall in the category of

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Generation Y and are aware of copyright infringements, especially in the music, video and

gaming sectors, which has significantly increased with the internet. As companies try to

decrease infringement, high amounts of advertising spendings have been used to inform the

consumers that copyright infringement is a crime like any other. These infomercials targeted

especially Generation Y, as they have been the main infringers, simply because they possess

the technical abilities to do such, were for example the Baby Boom Generation and

Generation X feel less comfortable with the new technology, such as the internet. In other

words, the normal consumer is most likely to commit a copyright infringement, than any other

intellectual property infringement, due to the fact that in this area he obtaines the highest

personal gain. Patents on the other hand, are seldom infringed by consumers, but mostly by

competitors, as they have the financial means to produce, market the infringed product

themselves and have the financial foundation to cover upcoming lawsuits. Also if an

individual would infringe a patent for personal use, this would barely create a financial loss

for the company, explaining why companies feel no need to inform consumers about patent

infringement. Interestingly respondent percieved their knowledge on patents higher than their

knowledge on trademarks, even though the consumer is confronted with more trademarks

than patents each day, and although trademarks can be found on nearly every product. Even

the company MUJI, which stands for Mujirushi Ryohin and literally translates to "No brand

quality goods”, originally pursued a no-brand approach, has become such a widely known

brand, that it has acquired trademark protection. A logical reason for this could be, that patent

infringement suits between companies often raise the publics attention as they are thoroughly

covered by the media.

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Since the question only asked consumers to rate their knowledge and did not provide a

means for testing, if the consumers percieved knowledge is in line with the actual definitions

of intellectual property rights, there is a chance that consumers overestimated their

knowledge. On the contrary, the pre-testing included a question asking the consumer to define

interllectual property rights, which resulted in frustration among the participants as they had a

hard time answering it. Therefore this questions was rejected from the survey.

A further indication that participants overestimated themselves is provided by the fact that

knowledge on trade secrets was rated suprisingly low. As the concept of trade secrets is

protected by law, but only by the keeping of the secret, and hence does not require legal

understanding, it seems uncoherent that respondents felt less comfortable with it. Although

the question does not directly ask for the participants legal knowledge on the subject matter,

such would automatically be implied by a person familiar with the topic.

2) Do you perceive the term intellectual property rights as something positive or

negative?

This question requires the respondend to evaluate his personal perception of the term

intellectual property rights and providing an explanation for his choice. Based on the

information gap stated in the previous question, a positiv result was expected. If it can be

shown that the information gap leads to a more positvie perception of the subject, this

reinforces the power of using intellectual property rights in a companies marketing strategy.

The results matched the hypothesis, as 88.1% chose a positive association and only

11.9% believed that the term was negativly charged. Further participants who rated their

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perception of intellectual property rights as negative, will be likely to evalute all other

questions equally negatively.

3) Which three characteristics would you relate most to a product with intellectual

property rights in comparison to a product that does not have intellectual property

rights?

The intent of this question was to see which characteristics consumers really anticipate with a

product protected by intellectual property. Based on the secondary research the participant

was confronted with the following choices: Better, Safer, More efficient, More high-tech,

More innovative, Higher quality, More expansive, Government certified and None of the

above. Further the participants were asked to limit their choices to a maximum of three, to

prevent them from choosing every characteristc. While nearly all of the characteristics are

positiv for the company, as they can be seen as a sales argument towards the buyer, the option

more expensive is negative for the buyer, yet positive for the company. Similar providing the

option of none of the above, was necessary to ensure that the participant had the option to

declare that none of the positive attributed matched, and products protected by intellectual

property rights do not provide any advantages.

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Figure 1 Response Percentage for Characteristics, which consumers asscociate with patented products

The graph displayed in figure one shows the distribution of responses to the question

which three characteristics consumers asscociate most with the patented products. With

58.5% of the respondents valuing it as a characteristic, more innovative is the main quality

that differntiates a patented product from a none patented product in the eyes of the consumer.

Secondly, 41.8% of respondents felt, that patented products possessed a higher quality and

thirdly, 32.8% of the respondents percieved patented product as safer. The percentage of none

of the above, 9% of respondents choosing it, leads to the assumption, that consumers believe

patented products to be of a higher standard than non patented products. Thus, it is advisable

for companies to use a reference to patents in their communication, as it will allow to position

the product higher.

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4) Do you believe that the amount of intellectual property rights relates to the

innovativeness of a company?

A very simple question to identify if there is a perceived correlation between

intellectual property rights and innovation, yet a very important question for marketing

intellectual property rights. If the results would render a yes as an overall response, than

simply collecting a wide portfolio of intellectual property rights, without high qualitative

potential of every single intellectual property, can be used as a marketing tool. One of the

companies following this strategy is IBM, who has been the leader in patent applications in

the United States for the last ten years and is frequently communicating its position

(Auchard, 2005). The results matched the hypothesis, as 74.6% answered with yes and 25.4%

answered with no. This supports the idea, that consumers percieve the reference to intellectual

property rights as a statement for quality, as the term innovativeness implies positive change.

5) Do you believe an innovative company offers the best products?

This question relates to the previous question, to show whether innovativeness is

percieved as the best. 55.2% of the respondents said yes, 44.8% disagreed. With such a

minimal difference this tendency could alter with a greater sample of responses. According to

the data collected it is a benefical goal for a company to position itself as innovative, as their

products are percieved as better and hence allow for charging a premium price. Further the

question is limited to the perception of the company rather than a single product, which could

yield a different response, if the question was refering to a single product.

6) What are the top three innovative companies for you?

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This question provides a base line for which companies have managed to position

themselves as innovative. As innovation is measured in the eyes of the consumer, brand

loyalty and brand awareness will have an influence on the choices made. Also respondents are

more likely to include companies they are employed by, as such relationship can increase

brand loyalty, if the employee is satisfied with his job. Therefore the answers are not

descriptive for actual innovativeness but based on personal perception.

Out of a total of respondenses 173 selections 51 companies were identified as innovative.

The actual response rate for the question was lower than for the questionnaire. A response rate

of 9.57%, , as only 61 people responded, for the most innovative company. A response rate of

9.1%, with 58 responses, for the second most innovative company and an even lower response

rate of 8.47%, with 54 responses, for the third morst innovative company3. While most

companies were mentioned only once, a few were selected multiple times, indicating a strong

tendency. Overall Apple was chosen 48 times, meaning that from the 61 people who

answered the question, 78.68% percieved it as the most innovative. Google was overall

percieved as second most inovative, with 47.68% of the responses and Microsoft can be

identified as the third most innovative company with 26.22% of the participants percieving it

as such. Interestingly, when comparing the individual categories of most innovative, second

most innovative and third most innovative, as a respondent did not chose one company more

than once, the results match the overall results. Out of the 61 people, 32 identified Apple as

3 The number of the respondents for second and third most innovative company siplayed in

the text are lower than the numbers displayed by the analyzing tool in the Appendix, as four

people answered with a question mark (?), which was calculated as a no response in the text.

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most innovative, 11 out of 58 as second innovative and 5 out of 54 as third innovative.

Google was only 7 times claimed to be the most innovative company, but 20 times to be the

second most innovative company and twice to be the third most innovative company.

Microsoft on the other hand was not identified a single time as most innovative, only 5 times

as second most innovative, but 11 times as third most innovative company.

Other companies which were chosen more than once are: included BMW – 13.11%, Sony

– 8.19%, Phillips – 6.55% and Bosch, Toyota, Siemens, Intel, Facebook – 4.91%.

Although companies such as McDonalds, Nivea, Nestlé and P&G were identified, the

results show that all top companies chosen are from the technology industry, which could

indicate that consumers percieve companies from this sector automatically as more

innovative.

The top three results match a study published in 2010 by the Bloomberg Businessweek

and based on research done by the Boston Consulting Group. The study done by the Boston

consulting group focused on a different target group, sending 21 questions to CEO`s from

companies located around the world and asking the executives to identify the most innovative

companies outside of their industy. The 1590 responses were then factored in financial

performance of the indiviual companies, leading to and overall weights of the different factors

being 80% based on respondents answeres, 10% based on stock return, 5% based on three-

year revenue and 5% on margin growth. (Ihlwan, 2010, p.38-40). Although the executives

were asked to rate businesses from outside their industry, the assumption can be made that

they will take a more business related perspective when answering the question.

Interestingly, IBM, which constantly communicates itself as the number one patent applicant

in the United States (Auchard, 2005), is identified as fourth most innovative company by the

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survey conducted by the Boston Consulting Group (Ihlwan, 2010, p.38-40), but only

identified as innovative once in the survey conducted for the thesis.

7) Do you think the quality associated with a product is derived from the product itself

or from the marketing?

Based on secondary research, the question was intendet to show that consumers believe

that the quality associated with a product is derived from the product and thus underestimate

the power of marketing. Based on the principle of economics, that people are rational and

make well informed decsions, this would then conclude that the usage of intellectual property

rights in product development affects buyers purchasing decisions positively.

The results did not match the hypothesis, as only 47.8% percieved the quality to be

derived from the product itself and 52.2% from the marketing. This is derived from the fact,

that consumers are not homo economics, but make their decisions according to the principles

of behavioral economics. The fact that respondents were able to identify this, could be

partially derived from the fact that many of the respondents have an educational background

in business management and economics. The results show that marketing plays an essential

role in positioning a product, as the quality has to be communicated to the consumer. Thus

communicating intellectual property rights can be used as an effective method to signal

quality.

8) Would you choose to buy a patented product over a product that is not patented?

The question is phrased in an incorrect way, as a patented product will have a monopoly

position on the market, in order to get an understanding if the consumer values patented

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products over none patented products. Apparently the results showed that only 43.3% of the

participants valued patented products higher and 56.7% did not. Based on the results, the

assumption can be made that soley marketing a product by its intellectual property rights does

not provide for a sufficient sales argument. Therefore a company can either market

intellectual property rights as a support of the products quality, as mentioned above. Or the

company can use it to signal itself as the sole producer of the innovative product, even though

it might be that only a part of the product is patented and substitutes exist and thereby

decreasing consumers intention to seek alternatives.

9) Patent protection means that the company which ownes the patent is the only one

allowed to produce and sell this product. Do you think that a product that was originally

patent protected, remains the better choice for the consumer once copies come out?

This first part of the question ensures that the consumer has an understanding of patent

protection, while the second part tries to identify if a pioneer product remains superior,

simplay because it was the first. The results show that only 35.8% believed that this was the

case, while 64.2% disagreed. This indicates that simply advertising that a product was the first

does not influence buying behavior. Further it shows how essential it is for a company to use

the term of protetction to build brand loyalty. A company, who is actively doing this, is Nestlé

with its Nespresso brand, by using its term of protection to build the ultimate coffee

experience and ensuring that consumers will not switch to competitors once its patents begin

to expire in 2012 (Mulier, 2011).

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10) In which way does the following advertising statment: "Life Liberty and the

Pursuit of more Patents *** Averaging 2 patent applications per day" - AT&T

(American Telecom Company) influence your opinion on the company?

This question intended to measure, whether a reference to a companies patents strategy

has a positive or negative influence on the companies image. The results showed that 56.7%

of participants felt positively influenced and 43.3% felt negatively interesting. This is

especially interestingy, as the advertising refers to quantity and not quality of the patents.

Given the results it can be assumed that the sole advertisement of a company´s patent

applications can be used as a method to positively increase the companies image.

11 & 12) Which advertising statement would convince you more to buy the product?

The participants were asked to choose between two advertising statements, intending to

show that using a reference to patents is more powerful. The first choice was between:

a) "440 Patents creating the perferct chemistry - because you are worth it" - L'Oreal

(Cosmetic Brand)

b) "Maybe she's born with it. Maybe it's Maybelline" - Maybelline (Cosmetic Brand)

The second choice was between:

a) "Your lips are soft and sensual. Your lips are sassy and sensational. Your lipstick is so

terrific it's even patented." - Charles of the Ritz (Cosmetic Brand

b) "Enjoy the stay. Love the shine." - Estee Lauder (Cosmetic Brand)

In both cases the respondents showed a high tendency towards the advertising statement

not refering to patents. With 62.7% respondents choosing Maybelline over 37.3% choosing

L`Oreal and 74.6% choosing Estee Lauder over 25.4% choosing Charles of the Ritz. This

56

strongly conflicts with the hypothesis of the question. A factor that could have influenced the

choices is the lack of visuals. As several factors influence the purchase decsion, such as

design layout of the product, brand loyalty and even product placement at the selling point,

these factors are neglected in the question. Another point to be considered is the fact that the

question can only ask for the intent to purchase and does not measure buying behavior. As

stated previously, patents need to be used to support the unique selling point of the product, as

simply claiming a product patented is not sufficient. Further both L´Oreal and Charles of the

Ritz are longer than the competing advertising sentence and might therefore not sound as

“smoothly and sexy”. Finally, participants were confronted with only two options in

comparison to the massive amount of advertising they are confronted with on a daily basis.

Therefore, even though a direct comparision lead to an unfavorable results, the usage could be

a means of catching the consumers attention to stand out from the “noise”.

13) Which advertising statement would convince you to buy products from this brand?

This question is closely related to the previous two questions, but focused on advertising

of patents for brand building purposes. The participants were asked to choose between the two

following choices, which both have been used by the same company:

a) "At the top? YES. Bosch is leading in patent applications." - Bosch (Technology)

b) "Bosch. Invented for life." - Bosch (Technology)

The results found that only 23.9% would choose option “a” and 76.1% would choose

option “b”. Similar to the results of the previous two questions, which could also indicate that

although advertisement of patents is already commonly used there is still room for

improvement, as it has not been analyzed as thoroughly as for example advertising using

57

emotions. Another difference could arise, when comparing different industries, as consumers

awareness and purchase decision will alter as the price and value of the product changes. For

example, a consumer will spend less thought on buying a necessity good, such as shampoo,

than he would buying a luxury good, such as a car.

14) What words could a company use in its advertising to show that it uses intellectual

property rights without using the words: patent, copyright, trademark?

The question was used to identify which words a company can use in advertising, by

asking the consumer directly. This was the question with the lowest response rate, 7.22%, as

only 46 people answered it. The word chosen the most was innovation which was identified

13 times out of the total of 124 choices made, meaning that 36.95% of participants believed it

to suggest intellectual property rights, if used in advertising. The second most chosen word

was unique, with a rate of 32.6%, the third most commonly identified word was protection,

with a rate of 23.91% and the fourth most commonly chosen word was only, with a rate of

21.73%. In addition to the above, the words: exclusive, first, honesty, new, original, ours,

own, certified, where chosen by 6.52% of the respondents. Relating to questions 11 to 13,

these words provide companies with the possibility to make their patent advertising more

“sexy”, by substituting the word patent with one of the above.

5.2. Limitations to the Survey

The questionnaire was distributed via the social network “Facebook” and among family

members and friends. Therefore the sample collected is very likely to have targeted people

from similar demographics and psychographics, such as age, family lifecycle, education,

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social class and believes, opinions, values, interests, but with different geographics. Also the

demographics of the respondents were limited to european and american citizens. Thus the

reulst could change when conducting the survey with a sample from Asia. Further although

637 where contacted the number of replies was only 64. This could indicate, that only people

who felt comfortable with the subject filled out the questionnaire. Further, although the

questionnaire was designed in a simple form, a certain misunderstanding always has to be

taken into account. Additionaly a certain point of error could be attributed to the fact, that

some respondents did not take the time to answer thoroughly or did not answer honestly. In

order to improve the response rate, questions followed a multiple choice scheme. While this

does provide valuable information, it does not allow to receive detailed consumer insight.

Also in order to force participants to take a position, no neutral boxes where provided.

6. Conclusion

The analysis shows that reference to intellectual property rights can be a powerful

marketing tool, in order to build brand loyalty and establish a products unique selling point,

thus differentiating it from other competitiors. Examples were studied to examine on how this

can be achieved.

One method is, as we have seen, the donation of intellectual property rights, as it has been

done by IBM or builidng an educational institution teaching young professionals in the

required technologies, as done by the Robert Bosch GmbH, providing that the donation or

investment is big enough to catch the medias attention and thereby promote the companies

innovativeness to the public.

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Further companies can directly position their products as innovative through advertising

by either directly or indirectly refering to their patents in advertising or on the product

packaging.

A direct approach was taken by companies such as Charles of the Ritz using the

advertisement slogan: “Your lips are soft and sensual. Your lips are sassy and sensational.

Your lipstick is so terrific it is even patented” (Grossman, 2003, p.6-7). And by Alpecin,

indicating that the product is patent based, refering to the patents name and the patent number

on the product packaging.

An indirect approach, by using words such as “innovative“, “unique“ and “new“ is often

used by car companies, as individual car features often consist of an entire range of patents

and an indirect approach decreases the chances of infringing a competitors patent.

The example of Merz Pharma with the two brands “Merz Spezial“ and “tetesept“ was then

analyzed, to show how a company can combine both patent reference on products as well as

internet presence to convince the consumer of the high quality of the product. Further it was

shown that by combining a product related term such as “Hydro” with a technical term such

as “IQ” for a cosmetical product can highlight the products unique selling proposition.

The resreach showed, that especially in sensible areas such as the cosmetical and the

saftey technology industry, this helped to provide for further confidence in the products

qualities. Lastly the brand sebamed pH 5.5 was studied to show how a company can create a

trademark which is directly linked to a scientific term and thereby support the benefits of its

product through medical research.

Trademarks are essential for building brand loylalty as they allow consumers to identify

several products to belong to the same brand. An article published by the Frankfurter

60

Allgemeine Zeitung shows how companies have actively begun to build brands by no longer

using descriptive company names, but creative ones, which seek interest and create

asscociation. Further Unilevers usage of trademarks was analyzed to show how a company

can use trademarks to build different brands offering the same types of products, and thus

differentiating them from one another. The example of the Geicko Gecko was presented to

show how a powerful trademark can even become a advertising mascot and ultimately

influence consumers buying behaviors.

Also the usage and communication of trade secrets was studied on the examples of the

Coca-Cola Company and Kentucky Fried Chicken. This showed by simplay creating the

illusion of a invaluable and non comparable secret, by communicating its invaluable worth

and the protection measures taken to keep it, can help to establish a powerful brand and build

brand loyalty.

The final part of the thesis regards primary research conducted to obtain the consumers

point of view on intellectual properties and its usage in advertising. The survey showed, that

consumers felt knowledgable on the subject of intellectual property rights and related to them

positvely. Further the respondents felt that patented products possessed higher quality

characteristics, such as safer, more innovative and higher quality, than non patented products.

While the participants felt that a company with a big portfolio of intellectual property rights is

more innovative and therefore offers better products, they also indicated that they would not

automatically buy a patented product over a non patented product.

This was coherent with the choices made between an advertising statement highlighting

that the product was patented in comparison to an advertising slogan based soley on

61

emotional appeal. Nevertheless companies can still use advertising relating to patents, in order

to differentiate their advertising from the overall “noise” the consumer is confronted daily.

The study also showed, that companies such as Apple, Google and Microsoft are

percieved as most innovative, showing that they have managed to build a high brand loyalty

and providing an indication for the fact that technological companies, are generally percieved

as more innovative. This means that they will automatically benefit from the positiv

characteristics, which consumers asscociate with intellectual property rights and innovation.

For the last question the consumers identified words, such as innovative, unique, protection,

which can be used in advertising to indirectly refer to the interlectual property rights of the

product and thus increase the percived value of it.

Thus, the communication of a company`s intellectul property portfolio should be effectively

used, by combining several techniques described in the thesis, to build a unique and powerful

brand.

62

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8. Appendix

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