IP is a Shield and a Sword Protecting Differentiation

2024 airbnb clubcard competition intellectual property tesco May 29, 2024
IP is a Shield and a Sword Protecting Differentiation

It’s true that becoming known as a business involves standing out. 

That means we should position our business in a way that differentiates us from what already exists in the market. 

What is less known is the role IP plays in enabling a business to be associated in consumers’ minds with what it’s offering. 

Business is a competitive arena so you should expect copying. 

Competitors will exploit any weakness in your IP position to derive a financial benefit from whatever competitive advantage you achieve. 

Whether you introduce a patented innovation in the market, or a novel design, or an app that solves a problem well or otherwise adopt a fresh new approach that succeeds, IP is key in maintaining your unique differentiation for as long as possible to reduce the impact of competitor copying. 

The longer your differentiation strategy remains unique, the more chance you have of being uniquely associated in consumers’ minds with your differentiator. 

There are two ways in which IP is relevant: IP is both a shield and a sword. 

On the one hand IP is used as a shield to fend off legal actions. And on the other hand, your IP rights may be used to attack others who copy you to ride off your coattails. 

To use the protective effects of IP as a shield involves securing ownership of IP you use. You must first establish that the IP doesn’t rightfully belong to others, and then take whatever legal steps are available to obtain ownership of it. 

So, in the context of brand names, the starting point is to check that your name won’t infringe on others’ rights. Then if the name is available, register it as a trademark. 

Unregistered trademark rights are weak and don’t provide as effective a shield as registered ones. 

To ensure your IP can be used as a sword, involves choosing legally effective IP. 

In the context of brand names, this is about ensuring the name is effective from a brand protection perspective. 

Names can be weak or strong. 

As I explained in A Million Pound Mistake Clubcard was a poor name. It didn’t function as a trademark. 

Clubcard wasn’t just weak, it was inadequate. That’s why it did nothing to fend off the impact of competitor copying. 

I mentioned that TESCOCARD would have been a better choice because competitors would not have been able to refer to their cards as TESCOCARD. So Tesco would have uniquely benefited from its innovative loyalty card scheme when it first launched it. 

However, although TESCOCARD would have been a legally effective name, it would have been a weak one. 

That’s because in due course competitors would have been able to mimic the TESCOCARD name by adding ‘card’ at the end of their own names. That would have been enough to signal to the market that they were also offering a loyalty card scheme similar to TESCOCARD. 

So, the benefit Tesco would have derived from its considerable advertising budget would have been relatively short lived. Competitors could have copied Tesco’s differentiation strategy by also offering loyalty card schemes and calling them Asdacard, Lidlcard, Sainsburyscard etc. 

You need a strong name when you introduce an innovative concept like the Tesco loyalty card. There is no other way of preventing copying of mere ideas or business models than through the name. 

A strong name would give you a much longer period of exclusivity. 

It’s doubly important to use a strong name where a patent or other IP registration isn’t available to protect the innovation itself, which is the situation Tesco faced with loyalty cards. 

However, even patented innovations need strong names so that once the patent expires the brand name preserves the unique associations consumers have to the brand’s product. 

For a name to do its job of protecting a business against copying, it must be strong. 

A strong name is worth enforcing against competitors in legal proceedings. 

Let’s say Tesco had chosen the name LION for its loyalty card. Competitors would not have been able to also introduce cards using the name LION or anything similar to it. Hence Tesco would have enjoyed a much longer period of exclusivity for its loyalty cards. 

Even once loyalty card schemes became a commonplace differentiator, Tesco might have continued to be uniquely associated with its loyalty card. The competition might have mattered less by then. 

For example, there are multiple businesses that have copied AirBNB’s business model – Vrbo, the Plum Guide, Homestay etc. However, as AIRBNB is a strong name, they’ve not been able to use a similar name to signal to consumers that they’re offering a similar solution. Therefore, most  AirBNB customers are oblivious to their existence or don’t appreciate they offer similar services. 

While people assume that a good name is one that is meaningful (that is, one that explains what a concept is all about) - hence why Clubcard was chosen by Tesco’s marketers - it’s actually a poor approach to naming. The more meaningful a name is, the weaker it is, and the less advisable it is to rely on as a sword to attack competitors. 

Overall, most businesses respect other people’s IP rights. So, just having a strong name has a protective effect because it deters competitor copying. 

In conclusion, if IP is well chosen and properly protected, it will contain and enhance the value of a business that succeeds.