Lenovo's Brand Management Strategy – Promotion and Protection

Issue 21 By Ginny Han, China IP,[Comprehensive Reports]

To own a brand is not difficult, but to establish a brand is very difficult, and to build a brand with worldwide influence is even more difficult. With the acceleration of economic integration, today’s world has entered a competitive era of brand internationalization. To an enterprise, a brand does not merely reflect the product itself, but is more a comprehensive embodiment of the enterprise’s culture, influence and social value. On Dec. 8, 2004, Lenovo Group officially announced in Beijing that it had completed its acquisition of IBM’s PC-making business for US$1.25 billion, and taken ownership of the gold-lettered signboard “Think”, IBM’s long-time established trademark. As a leading enterprise in China’s IT field, did Lenovo encounter any problems in the course of its brand management? If so, how did it solve these problems if there were any?

With these questions, we arranged an interview with Mr. Yan An, manager of brand asset management at Lenovo’s Brand Communication Department.

The Integrated Management Mechanism of Trademark and Brand

As one of the most successful enterprises in China, Lenovo has unique experiences in exploring the most effective IPR protection mechanism. When it comes to IP, our first impression is that the protection of a patent right is more complicated than other IP branches. But Mr. Yan holds a different viewpoint. At the start of the interview, Mr. Yan expressed his view as to which is more complicated, a patent system or trademark system. He said: “For a long time, there has been a misconception in our mind that a trademark is simple. But in practice, a trademark is more closely and directly linked with business activities, and thus the forms it assumes in legislation, judicial work and practices are more complicated, various and unstable. In comparison with patent systems, trademark systems are more complicated and harder to make uniform. Up to now, great progress has been achieved in the unification of patent systems around the world, whereas advances made in the area of trademarks are quite limited. There has only been some progress in registration procedures by international organizations and conventions. If we seriously study the 30 years’ development of IPR legislation and judicial practices of various countries, we can easily find this phenomenon: the emergence of new changes in legislation, law enforcement and judicial cases concerning trademarks sees a much higher rate than that of patents and copyrights. This is the reason why to this day some of the most basic problems are still under debate, such as what a trademark is and what can become a trademark? Lenovo, in the course of its internationalization, needs to pay special attention to the large disparities among the relevant trademark systems and practices of various countries so as to “effectively circumvent risks and take advantage of the relevant legal systems for commercial interests”. Based on the above considerations, work around trademark occupies a very important position in Lenovo’s IPR protection scheme.

If it can be said that treating trademarks as a priority for IPR protection is one of Lenovo’s outstanding features, then another characteristic is it links up trademark protection with brand promotion. According to Mr. Yan, different from the traditional practice of delegating trademark management to the legal department, Lenovo developed its own unique style by establishing an integration model for the management of its trademark and brand. As a matter of fact, Lenovo’s Brand Communication Department, where Mr. Yan works, is mainly responsible for brand management, which is independent of the legal department. Lenovo thinks that there is a close relationship between its trademarks and brands, and the incorporation of both actually means that the Brand Communication Department is in charge of both brand promotion and trademark protection. By so doing, trademark management personnel will assume the function of brand management and be able to come up with professional views from legal and brand perspectives to most effectively reduce the communication links between the two and ensure that the operation of the whole brand is sounder and closer to the actual needs, so as to enable the naming and protection of a trademark to more closely meet the actual requirements. “This model has been in operation for several years, and we are satisfied with it”, Mr. Yan said, “because first, it can guarantee that the naming of new trademarks is consistent with Lenovo’s brand architecture under the premise of compliance with law; second, it can realize the integration of the following four in a smoother and more advantageous development: coordination of trademark protection, brand strategy, media promotion and marketing activities.”

The “Four-in-one” Brand Promotion Strategy

In the opinion of Mr. Yan, currently in the Chinese region, Lenovo has relatively sound brand architecture with its sub-brands reaching every level of the market. To be specific, “Lenovo” is the master brand name for Lenovo’s products, and under it there are some sub-brands. These sub-brands boast technological highlights or service features, and are developed for a specific consumer group. Meanwhile, Lenovo conducts or participates in a series of activities to strengthen the marketing promotion for its sub-brands. For example, among its desktop sub-brands, “Yangtian”, which is targeted at small and medium-sized enterprises, has the function of one-touch restoration and flash scanning of viruses. To publicize these highlights, Lenovo launched a campaign named “Lenovo Yangtian Science and Technology Olympics Express”. For the “Fengxing” series designed for computer game players, Lenovo sponsored the International Electronic Sports Tournament (IEST). For family users, Lenovo has the “Plan for Family Enjoyment and Dream Realization”. For Chinese rural consumers, it has a “Heavenly Pleasure Strategy for a New Countryside”. In this way, a solid chain of support is established for the building of its brands. “This will ensure that each of our brands has an outstanding feature and a good image,” Mr. Yan said.

It is very important for an enterprise to build its own brand architecture, but the promotional effect of its product names cannot be ignored. Mr. Yan has much to say about this. Besides the competency for registration, the most fundamental requirement for a trademark, the acceptability of a trademark and the convenience for its market promotion deserve much consideration. “Zhaoyang”, “Xuri”, “Kaitian” and “Qitian” were named prior to 2004. Since 2005, all names are half descriptive. For example, “Jiayue” (family enjoyment) is targeted at family users, while “Tianjiao” is targeted at students. Lenovo’s main products, high-end laptops, employ “Tianyi” for their name. This kind of naming maintains Lenovo’s tradition of using “Tian” (sky) in its brands, while the use of the word “Yi” (an easy and comfortable life) conveys a positive attitude toward life. In the course of naming each of their brands, they have noticed that the promotional effect of brands and try to make their brand names more three-dimensional and more pertinent.

In the international market, the promotion of Lenovo’s brands is mainly focused on the sports field. For example, in 2004, Lenovo signed up as the top sponsor of the 2008 Beijing Olympic Games; in October 2006, Lenovo announced its “Yangtian Tomorrow Superstars Plan”, the first plan related to NBA, immediately after it became the top global official PC partner of NBA. In February 2007, Lenovo announced a top sponsorship agreement with the AT&T Williams team competing in the Formula One World Championship. When asked about whether Lenovo would use sports marketing as its way to promote its brands in the international market, Mr. Yan said, “Lenovo has no mature pattern for international market promotion due to such limits as market share and development time. Now we do international market promotion by modeling on the Chinese pattern.”

Brand Protection vs. Infringement

At present, Lenovo possesses more than 2200 registered trademarks worldwide with 200 to 300 new trademarks registered every year. If trademarks under application are included, the trademarks that Lenovo owns worldwide will reach 2600 to 2700 (including the circumstance where the same trademark is registered in different fields). After more than 20 years of development, Lenovo has accumulated substantial experience in IPR protection. But when it comes to the issue of infringement, Mr. Yan still has headaches. He told us that due to changes in Lenovo’s trademark in 2003, “Lenovo” was snatched in many countries in 2005 and 2006 particularly. Lenovo eventually solved these problems through objection procedures. In complicated cases, as in the Ukraine, Lenovo managed to get the problem solved by resorting to judicial procedures.

With the reinforcement of trademark protection after 2007, the phenomenon of Lenovo trademarks being snatched is gradually declining. According to Mr. Yan, currently the main problems encountered by Lenovo are infringements and trademark disputes. There are three types of infringements: counterfeit products, unauthorized stores, and fraudulent acts in the pure sense. Presently, counterfeited Lenovo products are chiefly external enclosures and digital products, focused on mouses, keyboards, storage devices, hard disks, flash disks and handwriting pads. There are more complaints with mouses; among the mouses returned for repair, nearly 30% to 40% are counterfeit products. In certain specific markets, it is likely that 20% of flash disks bearing Lenovo trademarks are counterfeit products. More surprisingly, Lenovo has never manufactured a handwriting pad product. However, some companies have manufactured handwriting pad products under the Lenovo brand. Mr. Yan said, “We received a report in 2006, showing that handwriting pad products made under the Lenovo name had a market share of 8%. Such a high market share of the fakes does deliver blew to us and causes heavy losses to our brands.”

According to Lenovo’s estimate, currently there are several thousand stores in China selling Lenovo’s products without authorization from Lenovo. Mr Yan said that presently Lenovo has no other solution, but to work together with the administration for industry and commerce to crack down on these stores. These unauthorized stores have caused heavy losses to Lenovo’s brands and consumer trust. However, some law enforcement personnel for industry and commerce fail to realize this point, thinking that it is good for Lenovo that these unauthorized stores sell Lenovo’s products and publicize Lenovo free of charge with their own shops. Mr. Yan said, “Actually Lenovo has suffered heavy losses with respect to its brands, image, service and sales teams. These seemingly invisible losses have terribly affected Lenovo.”

With respect to the third type of infringement, Mr. Yan said, “Presently, every year there are four to five fraud cases involving a lucky draw held under the name of Lenovo. We only calculate those comparatively major cases in our statistics where more than two persons are deceived and we have received feedback. Certainly there are some cases for which feedback is not available. Actually, we feel that four to five fraud cases each year are not a small number.”

Recognizing Difficulties and Advocating Brand Alliance

In response to such infringements, Lenovo took positive countermeasures. But, Mr. Yan admitted that difficulties exist for brand protection. First, expense is always a big problem for Chinese enterprises. Infringements do harm to brands and markets. However, it is hard to find a quantitative indicator to assess these losses. Therefore, the cost attributed to the crackdown on infringements and the illegal gains thereof cannot be ascertained. Second, when confronted with infringement, Chinese enterprises have to face a longer time cycle and more difficulties for dealing with the infringement as they lack knowledge of other countries’ laws.

In view of this, Lenovo is seeking cooperation with large domestic companies and other companies needing IPR protection, such as China National Cereals, Oils and Foodstuffs Imp. & Exp. Corp. (COFCO) and Konka Group Co., Ltd. Taking advantage of the platform of the China Trademark Association (CTA), Lenovo now advocates an alliance be established for brand protection. The alliance, as desired, will be aimed to inform the relevant legislative and law enforcement departments of the enterprises’ actual needs by uniting with domestic companies and law firms, and providing Chinese enterprises with better services by cooperating with excellent agencies abroad. A dual-track mechanism will be arranged for domestic and foreign markets.

For the domestic market, first, in view of the serious counterfeit problems in China, the alliance will actively cooperate with local IPR law enforcement agencies and protect its members’ IPRs. Second, it will select three to five agencies from the several thousand domestic agencies to conduct collective bargaining and establish a uniform standard before recommending it to its members, ensuring the members can save costs while enjoying good services. Third, a mechanism will be established for regular communication with law enforcement and legislative agencies and precisely conveying the enterprises’ actual needs. Meanwhile, in the course of the amendment of the Trademark Law and Copyright Law, the issues arousing the most concern among enterprises will be placed on the alliance’s work agenda, and the legislatures will be kept informed of these issues so as to achieve the maximum interests for the enterprises.

In terms of the plan abroad, the first and the most basic work is to build a database with which one can research overseas trademark-related legislation, judicial decisions, typical cases, as well as the problems that need to be recognized in the course of trademark use. The scope of the database needs to be continuously expanded from the trademark area to other IPR areas such as patents, copyrights and commercial legislation. Second, a global office network will be built by spending a longer time selecting agencies and conducting collective bargaining, and establishing a uniform service standard to ensure that its members shall, when applying for trademark registration abroad, have access to risk assessment or instructional materials (instruction booklets) concerning the local use of IPRs, so as to make better use of the local legislation and law enforcement environment. In selecting agencies, the alliance shall, among fees and services, take into account the professional influence of various agencies in the locality.

When mentioning the original intention to establish the alliance, Mr. Yan said that any enterprise, large, medium-sized or small, is actually limited by its own IPRs personnel quality, scale, budget, and so on. On the one hand, it is impossible for an enterprise to establish a cooperative relationship within the country’s 31 provinces, autonomous regions and municipalities, as well as 2200 counties and districts, and to assert its claims before legislatures and law enforcement sectors. On the other hand, currently, the services abroad available to most Chinese enterprises are not good. First, fees are high. For example, in Indonesia, if an enterprise goes to an agency for trademark registration via normal procedures, the fees needed for completing the registration is US$550 to US$700 without any official opinions or rejection decision. But actually the fee can be reduced to US$300 or less. Second, Chinese enterprises lack experience. Often they cannot define their own actual needs, and thus are unable to obtain the services they really need from overseas agencies.

Normally, Chinese enterprises will, when confronted with infringement cases abroad, communicate with overseas agencies via their domestic agencies. Some enterprises may, out of cost considerations, directly negotiate with the overseas agencies by circumventing their domestic agencies. But the actual effect is not good. Even though the enterprise finds an agency that is less expensive, the services it receives may be quite poor. Moreover, if all actual expenditures are included, such as phone and material translation fees, the entire cost may be higher than that of contacting an overseas agency via its Chinese agency. In addition, nowadays China lacks a mechanism for Chinese enterprises to communicate with the law enforcement organs and legislatures regularly to inform them of the problems they have encountered in foreign trade. Thus, it is necessary and important to establish such an alliance.

According to Mr. Yan’s design, via the platform of the alliance, enterprises will achieve good results with less input, and thus can focus their attention on other matters. Second, if the cases encountered by Chinese enterprises in a foreign country reach 50 every year, the alliance will conduct collective bargaining with local law firms and negotiate the charges for each case and make payments annually or semiannually. This can not only improve the credit rating of Chinese enterprises, but also reduce their expenses. Finally, they will organize some special training programs with strong interaction to enable students from higher educational institutions, enterprises’ legal personnel and the relevant law enforcement personnel to understand the relationship between an enterprise’s brands promotion and trademark protection, and regularly hold high-level conferences to bridge the gap between the enterprises and the relevant ministries and commissions for law enforcement. These activities will be beneficial to the improvement of the work efficiency of the government and help meet the enterprises’ needs for their IPR protection. Mr. Yan advised that the alliance is now calculating its members and the result is expected to come out in December. Concrete implementation steps will be taken accordingly. Mr. Yan said: “Our objectives are to first, make the alliance pursue collective actions and convey a collective voice; and second, to have the alliance really fulfill its function.” 
                                                                               (Translated by Zhang Meichang)

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