Why Most Companies Have Too Many Licensors

Stephen Reily

May 20, 2001

If you looked to a corporation’s internal licensing department for evidence of trademark usage and enforcement, as well as development of products well-adapted to the brand, you would usually be impressed.

But if you scratched even lightly beneath that surface, and looked beyond the internal licensing department for evidence of the same principles elsewhere in the company, you would usually be appalled.  Throughout most companies there are multiple divisions authorizing, developing, sourcing and selling branded products without any trademark protection and with none of the brand discipline that governs the development of the company’s own core products.

How does this happen?  Why does a company allow so many employees, in so many disparate divisions and with so little oversight, to act as unsupervised licensors of its most valuable asset – its brand?  Often for good reasons, but frequently  with bad results, and always at a cost to its true licensing opportunities and the long-term value of its brand.

How Does it Happen?

The company opens a visitors’ center or museum, and needs a gift shop.  The manager of the gift shop dreams of becoming a profit center and starts attending gift and premium trade shows.  This person – often someone with no experience with trademarks or brand management – thinks not of how her work can support the brand but of how she can increase her own sales.  And before you know it, an internal division of the company with no marketing or trademark oversight is sourcing branded products from dozens of suppliers, none of whom execute licensing agreements and some of whom invariably start pirating the brand via independent distribution of the same products.  Even worse, few of their products comply with the brand’s customary trademark requirements, and even fewer support brand equity or help build its long-term value.

It does not take long before this independent retailer thinks of selling outside her own boundaries.  In the past this usually meant printing a mail-order catalogue and buying a cheap direct-mail list.  Today it usually means tacking an e-commerce link to the company’s own website.  Separately, her search for wholesale customers (again, to increase sales) leads her to one who either sets himself up as an exclusive representative of branded products, or sets up a “store-within-a-store” at some other location.

But the gift shop manager is not the only employee with the same temptations.  Sometimes a salesman wishes he had new premiums to offer his best accounts, or the accounts he hopes to gain.  So he independently sources some products and then needs to print a sheet illustrating them.  Again, none of these products, and none of their manufacturers, comply with traditional trademark requirements, and because the salesman has limited design skills and understanding of the company’s larger brand objectives, the products have nothing to do with the company’s carefully maintained and advertised image.  Before long, this salesman, too, hopes to reduce the prices he pays, or increase his divisional profits, by turning his four-color sheet of premiums into a small mail-order catalogue itself.

Add to this mix the company’s own internal or external website developers who think they have discovered a way to get rich quick; the brand manager who oversees the development of POS and promotional material; the HR assistant who needs handouts for the corporate retreat; the distributor who asks for the right to sell a co-branded product independently; and the business development staffer who needs gifts at holiday time, and you stop being surprised when you discover that a company has four, or five, or even ten people separately developing and distributing branded products.

The Costs

I am a licensing agent, so the immediate risk of these results to me is that it limits the licensing opportunities for the brand, and weakens the opportunities that remain.

But the risks to my clients are far greater than that.

As a legal matter, such unregulated efforts inevitably weaken the trademark that the company is probably paying attorneys tens of thousands of dollars a month to protect – the trademark that probably constitutes the company’s single largest asset.

As a financial matter, such efforts invariably lead the company into the mistakes made by all inexperienced (and many experienced) retailers: excess inventory and the resulting choice between painful write-offs or close-out sales of branded merchandise.  Someone will ask at a meeting who had decided that the company was destined to be the next L.L. Bean, and no one will have a coherent answer.

As a matter of brand management, these uncoordinated efforts to exploit the company’s intellectual property will take a toll that can never be measured – but one that the company should never have to bear.  It is difficult enough to build and maintain a brand in the face of competition from other consumer products companies.  But it will be increasingly difficult to do so if the company also faces a challenge from within, and it threatens the careful positioning of a brand to which the company has devoted dozens of employees, millions of dollars, and its future.

The Answer

How can companies avoid this result?  How can they use consumer products to build brand equity without posing it any threats, and without distracting themselves from the core business at hand?

By building an internal Intellectual Property Department, one that – among other functions – will oversee the development of all products bearing the name or image of company’s core brands.  Next month I will explain how such an office can work, and how, of course, it can maximize its performance and potential by working with an outside licensing firm.

From the May 2001 issue of The Licensing Journal

IMC Licensing Logo Mark

Related Articles

  • The 3 Licensing Trends We’re Watching in 2021

    We saw many new product trends take flight in 2020, and they are here to stay in 2021 and beyond.…

    Julie Brown

    February 22, 2021

  • Opportunities in Gaming Licensing

    Recently on our podcast, we had an exciting conversation with Lauren Fields Conlon, VP of Licensing and Merchandising at Loaded…

    Emily Wickerham Randles

    January 27, 2021

  • Licensing During Disruption: How Licensing Can Serve the Auto Industry as it has Served Others

    Disruption: The Only Constant Did you ever think you would buy toilet paper on your phone? Neither did supermarkets. Did…

    Stephen Reily

    May 1, 2017

  • A product launch hits close to home: Introducing the new line of AT&T mhealth Baby Monitors

    As a licensing program manager, I always get excited for a new product launch at retail.  Licensees, licensors, agents, manufacturers,…

    Julie Brown

    March 28, 2016

  • Connect and Share with New AT&T Baby Monitors, Available Exclusively at Babies “R” Us

    Baby’s Journey and AT&T Enter the Baby Monitor Category to Provide Parents a New, Convenient and Secure View into Baby’s…

    Julie Brown

    February 16, 2016

  • When Products do the Talking: Volvo Life Paint Says it All

    At this year’s Cannes Lions International Festival of Creativity only one campaign won two Grand Prix Awards (in Design and Promo/Activation), and…

    Stephen Reily

    July 15, 2015

  • My 3 Lessons from CES: How Tech Makes Great Products Happen

    This year’s CES (bigger than ever, and more interesting than usual) failed to offer one show-stopping piece of technology, but…

    Stephen Reily

    January 8, 2015

  • Do you buy “Charmin” or “Toilet Paper”? Category Managers Know, Even if You Don’t

    When you make your shopping list, do you think about buying a category or a brand? Even if you think…

    Stephen Reily

    November 4, 2014

  • Lowe’s OSHbot: The Robot Holiday Sales Associate

    When Orchard Supply Warehouse, a California based home improvement and gardening retailer, was purchased by Lowe’s last year, its employees…

    IMC Licensing

    November 4, 2014

  • Why Mobile Matters this Holiday Season

    My friend called me from Target last week. “I am standing between the Halloween costumes and Christmas decorations, what is…

    Emily Wickerham Randles

    November 4, 2014

  • Are you ready to buy a Chiquita-brand orange?

    Chiquita Brands, a former IMC client, found itself in play this year, with competing offers from the Ireland-base Fyffes, the world’s…

    Stephen Reily

    October 30, 2014

  • Private Label Means Growth – Even for Brands

    Only a decade ago, it was not easy to use the terms “private label” and “brand” together. But private label…

    Stephen Reily

    October 13, 2014

  • 4 Keys to a Knockout Private Label Program

    Gil Phillips, Vice President of Corporate Brands at Kroger told the Cincinnati Enquirer about their house brand strategy, “We’re not offering…

    IMC Licensing

    October 7, 2014

  • Retail development isn’t just about getting into Walmart

    Every business that has ever developed a product dreams of getting on shelf at a Walmart or Home Depot. Big…

    IMC Licensing

    September 18, 2014

  • New channel strategies: Sometimes disruptive innovation is a where, not a what

    Our CEO, Carla Dearing, recently wrote about what makes an innovative product disruptive. Thanks to technology, we assumed for many years that…

    Stephen Reily

    September 4, 2014

  • McDonalds and Starbucks: How Both Get Coffee Pricing Wrong (and Dunkin Doesn’t)

    Kraft Foods recently entered into a license agreement with McDonald’s to deliver McCafé Coffee to a supermarket near you. While…

    Stephen Reily

    September 3, 2014

  • From Budget Friendly to Premium: Will Consumers Buy Into a Premium Priced McCafe?

    I have something I have to get off my chest. I don’t drink coffee. There I said it. I don’t…

    IMC Licensing

    August 24, 2014

  • 5 Top Licensing Trends for Restaurant Brands at Retail: Which Chains Should be in Supermarkets Now?

    Licensing restaurant brands into supermarket products is nothing new.  Brands like Marie Callendar’s (in pies and frozen dinners), TGI Friday’s…

    Stephen Reily

    August 11, 2014

  • Disruptive Innovation: Products That More People Want

    Less is more.  So the theory goes with “disruptive innovation.” A new product is disruptive innovation if it has something…

    IMC Licensing

    July 16, 2014

  • 5 Ways to Evaluate a Potential Licensee

    Licensing a company to expand your trademark into other product categories can be rewarding to your bottom line and strengthen…

    IMC Licensing

    July 15, 2014

  • Consumers Followed Their Noses: How Fragrance Ended Up Everywhere

    Is there any product that doesn’t come in a scented version?  Today you can buy not just scented candles but…

    Stephen Reily

    June 12, 2014

  • The Omni-Product Brand

    For 15 years IMC has been helping the owners of global iconic brands find ways to grow through new products…

    Stephen Reily

    April 3, 2014

  • Backing into Innovation: Capturing New Consumers for Hearing Aids

    While I was at International CES earlier this month I had a chance to meet with leaders of the hearing aid business…

    Stephen Reily

    January 28, 2014

  • Lean In to Cause Marketing?

    When it comes to business, the talented male professional is perceived as “boss” while the talented woman professional in the…

    IMC Licensing

    January 17, 2014

  • CES 2014 – Innovative Partnerships, not Products

    Last week I was one of the 150,000 people swarming around Las Vegas for International CES.  While the show has never…

    Stephen Reily

    January 15, 2014

  • What an Omnichannel World Means for Brand Licensing

    If you want to develop great products that actually sell at retail, you are probably already thinking about how to…

    Stephen Reily

    January 2, 2014

  • Starbucks, Kraft and the $2.7 Billion Divorce

    Last week’s LIMA Bottom Line featured an article I wrote about the recent resolution of a long-running dispute between Starbucks…

    Stephen Reily

    December 23, 2013

  • 7 Most Inspiring Products for Old People are Great New Products for You, Too.

    IMC’s hometown hosted the Louisville Innovation Summit last week  Aging care is a growth industry for Louisville (headquarters for companies like Kindred,…

    Stephen Reily

    November 18, 2013

  • More than Just a Hill of Beans

    Kraft Foods recent announcement of its intent to test market McCafe packaged coffee adds a deep, new wrinkle to the already interesting…

    IMC Licensing

    November 15, 2013

  • Licensing at Tiffany’s: Not a One-Way Street

    On vacation this summer I needed to get my sunglasses repaired.  While waiting, I was surprised to look in the…

    Stephen Reily

    September 16, 2013

  • What Licensing Agencies Can Do For You: A Tale of Chocolate Cereal

    One of IMC’s most deliciously licensed products is Kellogg’s Rocky Mountain Chocolate Factory cereal. The coco-brown box features the names…

    IMC Licensing

    September 4, 2013

  • What does the Local Food Movement mean for Food Licensing?

    In my hometown of Louisville – a city proud of its food culture in a state proud of its farming…

    Stephen Reily

    August 8, 2013

  • Licensing by Litigation: A Bad Business Plan

    Two large-scale lawsuits in the licensing world have recently been stopped by injunctions.  After spending millions of dollars on legal…

    Stephen Reily

    August 1, 2013

  • Paula Deen and Food Licensing: Why Didn’t She have More to Lose?

    Paula Deen, as a brand with great licensing potential, seems almost beyond repair.  While I can imagine strategies that would…

    Stephen Reily

    July 30, 2013

  • What’s Your Innovation Reality?

    What’s Your Innovation Reality? I was recently reviewing some notes from a talk I heard almost two years ago –…

    Stephen Reily

    July 24, 2013

  • Just Married

    Often times we describe a licensing partnership much like a marriage. The Licensee and Licensor meet, are engaged by signing…

    Emily Wickerham Randles

    June 27, 2013

  • Purina Tidy Cats® and Glade™ Tough Odor Solutions: A perfect match

    The partnership between Purina Tidy Cats and Glade Tough Odor Solutions has developed a scented cat litter which has customers…

    IMC Licensing

    June 20, 2013

  • Integrating New Products with Licensed Properties

    Integrating New Products with Licensed Properties Demands on new product development have greatly increased over the last decade with increased…

    IMC Licensing

    June 17, 2013

  • The Humanization Of Our Pets: Key Survey Findings

    The cliche is that pets look like their owners- but will they use the same products? The theory at IMC…

    IMC Licensing

    June 10, 2013

  • What Do Pet Owners Want Next?

    The pet industry is one of our favorites, and not just because most of us at IMC have pets of…

    Stephen Reily

    June 5, 2013

  • Sharing the Love of Brands with Your Pet!

    Pet owners are passionate about their furry little friends and they spend over $50 billion annually to prove it.  They…

    IMC Licensing

    April 4, 2013

  • What Makes Martha Stewart Such a Bad Partner?

    I’ve read lots of articles about Martha Stewart’s recent bout of litigation, but none of them addresses why someone would…

    Stephen Reily

    March 21, 2013

  • 2013 Housewares Show: Forging New Partnerships

    The 2013 International Home and Housewares Show in Chicago is the largest housewares-only fair in the world with 60,000 home goods professionals…

    IMC Licensing

    March 14, 2013

  • A Tale of Two Cracker Barrels

    When I saw that Cracker Barrel, the southern-fried restaurant chain, had recently licensed its brand to John Morrell Group, a…

    Stephen Reily

    February 6, 2013

  • The Slow Death of Commission-Only Deals

    Truly successful brand extensions are the result of pairing leading consumer brands with products that enhance the brand’s reputation and…

    IMC Licensing

    November 26, 2012

  • Why Licensing?

    As advertising as we know it is faced with a rapidly changing environment, brand owners and brand managers are looking…

    IMC Licensing

    November 1, 2012

  • Reinforcing Your Brand Through Licensing

    Some licensed products are very much like the brand’s core product itself. They may be used the same way (like…

    IMC Licensing

    October 15, 2012

  • A Primer on Licensing

    Wherever industry regulars gather, they’re sure to discuss the world’s largest licensor; the world’s citizenry buys more than $23 billion…

    Stephen Reily

    July 27, 2012

  • Working With Licensing Agents and Consultants

    Licensing agencies and consultants can play a central role in the development of an effective licensing program. Whether your company…

    IMC Licensing

    November 22, 2010

  • Why Use an Agency for Licensing?

    Even if your company has an in-house licensing director or staff, there are several reasons to hire a licensing agency…

    IMC Licensing

    May 10, 2010

  • National Brands, Private Label and Licensing

    During a panel discussion about product innovation at the 2009 Grocery Manufacturers Association’s Merchandising, Sales and Marketing Conference, one participant…

    IMC Licensing

    April 15, 2010

  • Licensing 101

    As an agency that develops and manages licensing programs for our clients’ trademarks and brands, we often get asked Why…

    IMC Licensing

    November 8, 2009

  • Retail Strategies Beyond the Top 10

    Every day the list of victims of the faltering economy grows longer.  Circuit City (#32 on National Retail Federation’s, Top…

    IMC Licensing

    September 25, 2009

  • Beyond Royalty Revenue: Measuring ROI from Licensing

    In recent surveys senior marketing professionals say that accountability for marketing services is more important than ever, and that they…

    Stephen Reily

    September 16, 2009

  • Trends in Inbound Licensing

    In the licensing industry, attention is typically focused on strategies to license a brand “out,” extending a brand into new…

    Emily Wickerham Randles

    August 19, 2008

  • The Licensing Professional – Not One Size Fits All

    I cannot count the number of times I have heard companies talk about whether they should hire a “licensing professional”…

    Stephen Reily

    February 19, 2008

  • Licensing Agency Compensation: The Inside Story

    One of the needless mysteries of the licensing industry is the topic of agency compensation.  Although talented professionals neither gain…

    Stephen Reily

    February 19, 2007

  • Food for Thought (on Food and Beverage Licensing)

    Food and beverage licensing is everywhere. A quick trip to the supermarket will produce Nesquik chocolate milk, Oreo ice cream, and…

    IMC Licensing

    August 28, 2006

  • The Bankruptcy Clause: Comforting but Useless

    An experienced reader of license agreements would know exactly where to find what I call the “bankruptcy clause” (about three…

    Stephen Reily

    March 1, 2003

  • When Trademark Licensing looks like Franchising: Avoiding Legal Risk

    If anyone doubted that trademark licensing has become an essential part of brand management, the recent Annual Meeting of the International…

    Stephen Reily

    September 8, 2002

  • The Risks a Licensor Poses to a Licensee: How Can They Be Limited?

    Most form license agreements assume that licensees pose greater threats to licensors than the other way around.  Aside from the…

    Stephen Reily

    August 8, 2002

  • Licensing to Preserve Trademark Ownership

    As all IP counsel know, registration of a trademark depends on that trademark’s use.  A trademark cannot be reserved indefinitely…

    Stephen Reily

    July 9, 2002

  • Trademarks Around the Edges

    Many years ago, companies that made a branded consumer product thought they did only one thing: make that product.  Their…

    Stephen Reily

    March 9, 2002

  • Watch What the Licensor Does, Not What it Says

    Hiring the best trademark counsel – and getting them to draft the best possible license agreement – will not alone…

    Stephen Reily

    March 9, 2002

  • How Accountants Will Change the Face of Trademark Licensing

    As the licensing industry frets about whether the biggest event of the year will be the performance of Harry Potter…

    Stephen Reily

    November 9, 2001

  • License Agreements: Partnerships Worth Getting Right

    Whenever you see a licensor and licensee in litigation with each other you should assume that something has gone wrong…

    Stephen Reily

    September 9, 2001

  • How Many People Does it take to Screw in a Trademark Licensing Agreement

    Because so many brand owners fail to appreciate how important licensing can be for their brand, many of those who…

    Stephen Reily

    August 9, 2001

  • Developing Branded Consumer Products like Consumer Products

    Last month I described how companies find themselves distributing or authorizing branded products that either weaken the protection of their…

    Stephen Reily

    July 14, 2001

  • Why Most Companies Have Too Many Licensors

    If you looked to a corporation’s internal licensing department for evidence of trademark usage and enforcement, as well as development…

    Stephen Reily

    May 20, 2001

  • Licensing Corporate Brands and Trademarks: Knowing What it Should Cost

    As someone who runs a licensing agency for the owners of brands and trademarks, I can be expected to argue…

    Stephen Reily

    February 19, 2001

Services

Licensing is a relationship not merely between brands, but among people. At IMC, we build and nurture both of those relationships while delivering top-notch customer care that treats — and protects — your brand as if it were our own.

About Us

We’re committed to fostering dynamic brand alliances. Often those alliances are born from one brand’s need and another’s ability to meet that need. The IMC team are experts at recognizing and creating those opportunities, but our real expertise is people. Standing side by side, as consultants, partners, peers, and as friends, we’re driven by a singular purpose: creating a smart idea.