Legal aspects of co-branding

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Legal aspects of co-branding

Co-branding is a term used to define a strategic and temporary alliance between several companies in order to increase their profitability and improve their positioning thanks to the power and value of each of the brands.

This marketing strategy is believed to have been born in the 1950s thanks to a partnership between Renault and Van Cleef and Arpels Jewelers. Renault launched a car model in which the jeweler had designed an exclusive steering wheel with precious stones. The result of this successful co-branding was that Renault was able to stand out on the market with its unique and exclusive car model.

After this alliance, many brands and companies began to form alliances with others to join forces and offer the market an innovative product.

Since this successful alliance, co-branding has become a common practice in the market, either for a specific sales promotion or to establish a long-term commercial strategy.

To carry out co-branding, the first thing to do is to analyze the product and prepare a report highlighting the main values of the brand in question to present it to potential brands or collaborating companies.

The latest great collaboration that has revolutionized the market is Omega X Swatch creating a collection of 11 watches inspired by space, which are named after planetary bodies. 

Types of co-branding

We must bear in mind that there are different types of co-branding depending on the objectives and needs of each company:

  • Value co-branding: this alliance is based on brand values and involves two brands that complement each other, so that each extols the values of the other. In this way, they can enhance consumer trust and increase their impact on the public.
  • Complementary competence co-branding: In this type of co-branding, each brand brings its best to innovate with advanced joint solutions. The result is that a new product is launched on the market that is only possible thanks to the collaboration of both brands.
  • Knowledge co-branding: this type of collaboration occurs when both brands have a similar target audience, but one of them wants to leverage the impact of the other to expand territorially and broaden its distribution and sales channels.
  • Co-branding of ingredients: when two brands share the same values and market, they can collaborate to launch new products. 

Legal aspects to consider in co-branding contracts

A co-branding contract is a marketing agreement whereby two or more companies decide to join to support each other and gain strength in the market by boosting the profitability and value of their brands.

The co-branding contract is an atypical contract, as it is not regulated by any law. 

At the contractual level, co-branding could be equated to a trademark cross-licensing agreement. The aim of this agreement is to obtain a mutual benefit, trying to achieve a win-win scenario.

The collaborating companies join forces to gain access to a new audience or new markets through the use and exploitation of their respective brands. Co-branding is a very common option for large consumer brands, but it is also useful for small companies that need support to make their products known to the public. It is worth noting, in this sense, that the co-branding contract does not usually include consideration between the parties, as they are compensated by the exchange of trademark licences.

Main legal problems in the Co-branding Agreement

Once we have described what co-branding is, its types and the main aspects to take into account, it is important to also describe what some legal problems may be within this collaboration contract.

It requires greater control

If it is not always easy to ensure coherence between the brand strategy and its activation in marketing or communication actions when it is a single brand, it is even more difficult to do so when two companies join forces. The possibility of errors is also multiplied, so it is necessary to reinforce the analysis and control of each of the advertising actions that are carried out jointly, whether at the level of packaging, sponsorship, or other actions.

It can confuse the consumer

As we have said, for the union to work, there must be an affinity between the two brands. Otherwise, customers may feel disappointed or surprised by this union, so there is a risk of alienation or loss of confidence in the companies that have opted for this strategy.

Letslaw is a law firm specialized in digital law, marketing, e-commerce, and new technologies.

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