“This is the first attempt to standardise the criteria for trademark evaluation,” says Olivier Laidebeur, European Trademark Attorney at Office Freylinger, of what he now believes to be an essential service for companies. There are international treaties governing trademark registration, defence and enforcement. So what of the value of a trademark? As Laidebeur points out, “there is no single way to conduct a trademark evaluation: to determine its value. This is part of the proposal for the new standard. We have been evaluating trademarks for a number of years, and there are yearly indicators, such as the Interbrand rankings, measured in monetary terms.” Trademark evaluations tend to be carried out by taking a number of factors into account: different methods use different combinations of marketing, financial and legal criteria. It is the latter that seem the most problematic as they are the most intangible and difficult to quantify, as well as being the least “international”. As Laidebeur elaborates, “the concrete ways we even define these criteria are not always the same. This is normal: a single, local trademark is not going to be the same as an international one. It will not have the same value, nor can it be evaluated using the same criteria as an international brand.”

This leads neatly into the second problem, which is the definition of “brand” versus the definition of “trademark”. Laidebeur sets the parameters thus: “brand is a marketing concept. Rankings such as that produced by Interbrand are evaluations of brand. These cover more elements than just trademark, which is a legal concept. It is just a registered right. A brand integrates one or more trademarks.” As an example, the name of a company and its logo can be separate trademarks, but they are part of one brand, along with all the intangible values of the public relationship and perception with these elements. This perception is not a legal element, but has obvious marketing value, and “here there is already a difference in approach.” For “normal” trademarks and brands, the legal assessment, combined with a financial assessment, revenues and earnings, is sufficient to establish the trademark value, according to Laidebeur. For international trademarks, however, more is needed, but what exactly? “Well that has yet to be defined!” he admits. This leads into other problems: “take Chanel or Dior, for example. What gives these names sex appeal? There is clearly more to them than just their financial capacity.” Once again, public perception comes into play, but there is another aspect. “We have no idea what criteria other trademark evaluators are using because we are not obliged to disclose them: we can say what methods were used, but cannot say that the evaluation was done according to specific standards.”

A meaningless isolated price?

So why is there a difficulty with these mooted specific standards? “It was not really accepted by those in the United States,” says Laidebeur. “They want to keep their methods secret, and they are not part of the international committee of trademark evaluation.” As for the reasons behind American reticence, he believes that “it is mostly a business question. There may be technical question based on accounting methods employed: there is a gap between American and European accounting standards, and therefore we are not going through the same processes and using the same bases.”

Back to the draft for standardised methods of trademark evaluation: “I believe it is sufficiently broad to include both approaches because we are not actually defining the criteria themselves, just the requirements they should have. This will allow different practices to be accommodated.” The value of a trademark cannot be expressed, in an especially meaningful or accurate way, as a monetary figure, not least because there is not really a buyer’s market for them. “The actual value will fall between two extremes, one very low and one very high,” says Laidebeur. “The price of a trademark will depend on external factors and not just on intrinsic ones.” As an example, he cites the sale of the Orangina trademark to Cadbury Schweppes: while he estimated the value of the Orangina trademark at around the 150 million euros mark, the actual price paid by Cadbury Schweppes was approximately one billion euros. And therein lies the seemingly arbitrary nature of trademark values. The aim of the draft is to enable a better anticipation of selling price, and that it “should at least fall into the range we have established, and not completely behind or outside the scope we calculated.”

While such evaluations are carried out reasonably frequently, Laidebeur also states that evaluators rarely receive all of the information they require to conduct a real assessment. “It’s rare to get all of the accounting elements, and almost never does one get price premium information, the difference between certain branded and non-branded goods or services. Admittedly, this can be straightforward with certain consumer goods: basic washing powder against premium, for example.” For other consumer goods, the value of the trademark is somewhat more difficult to quantify, however. And certainly more complicated. A situation which, in turn, becomes even more difficult when one delves deeper into the trademark value of services: “we had an evaluation for a marketing agency. What is the added value for a trademark for a marketing agency? It will trade on its name. So are earning and benefits accrued this way the actual value of the trademark?” This is, as Laidebeur points out, not the sole value. The people in the agency are paramount. If key staff leave that agency for another, clearly some of the value will go with them, yet the trademark remains: what happens to the value?

“It is very important to have a trademark evaluation today,” insists Laidebeur, in spite of the difficulties in pinning it down. To that end, a workshop will take place on 9 October to discuss the draft proposal pertaining to trademark evaluation. “The first part of the workshop will explain the proceedings behind the preparation and drafting of this standard, and will be presented by CRP Henri Tudor. The second part, Office Freylinger will present, showing the various methods and our comments.” The phase has been reached where “national bodies will have to explain if they agree with the draft standard or not. What are now required are remarks on the practical aspects.”

The Intellectual Property hub?

The draft standard has been prepared by several national groups, mainly comprised of accountants. They are specialised in accounting and evaluation, but, as Laidebeur says, “this country is one of the few national groups to have included Intellectual Property lawyers, and because the draft does not yet take into account the legal assessments of this, things could become interesting. If something cannot be trademarked, then the strict financial value will be turned on its head by legal requirements.” These will be explained in further detail, with suggestions for modification, through the workshop. Comment from external institutions regarding what parameters should be incorporated into the standard will also be taken into consideration. Laidebeur stresses again that “this is not an explanation of trademark evaluation, but the methods behind it.”

There is no legal requirement to follow the standard in general, but Laidebeur believes that it will enable value to be established more reliably in the future: clients will be able to choose between evaluators, but if they use their own methodologies, while entitled to do so, it is at their own risk. The standard can be a commercial tool, but also a seal of quality for the provision of these types of services. So where are we going? “More and more people will need trademark evaluation for accounting reasons, for strategic reasons and also for cost-saving reasons.” Other factors, especially here in Luxembourg, “are questions regarding evaluation because of the new law concerning the 80% tax exemption on revenues from trademarks, when licensing or selling them. Obviously, when a trademark is licensed or sold it needs a value.” Furthermore, a trademark evaluation can have strategic relevance, giving companies an indicator of how they can progress. Finally, Laidebeur believes that “in Luxembourg we have that input from the surrounding countries, and those further afield, which gives us the technical capacity and know-how to provide really good services in this field. Luxembourg, as an Intellectual Property hub, has the right tools to develop in this way.”