Tips to consider before embarking on a brand collaboration 2 min read
Brand collaborations can create exciting commercial opportunities for businesses. However, they involve a number of risks. These include, for example, the possibility that a collaborator may suffer unexpected damage to their brand which makes the collaboration no longer commercially viable. Therefore, it is imperative that businesses have an appropriate exit strategy in place, both legally and commercially, should this be required.
Before embarking on a brand collaboration with a third party, businesses should:
- conduct appropriate due diligence, to ensure that they are apprised of any known risks which may impact the perceived value to consumers of the collaborator's brand;
- ensure that they have a collaboration agreement in place which includes appropriate exit provisions and other protections, should they need to end the collaboration;
- consider how they can manage any other legal, commercial or logistical issues which may arise if the brand collaboration is unexpectedly ended; and
- carefully consider the scope of any IP licences to be granted to the collaborator, and seek expert advice as needed.
In-house legal counsel; marketing departments
Brand collaborations continue to be a popular commercial strategy for businesses, particularly in the entertainment and fashion industries. Part of their appeal is that they can enable a business to reach new customers by leveraging the brand reputation of their collaborator. Think, for example, of high fashion brands collaborating with streetwear brands or celebrities lending their name to food or beverage brands.
These collaborations can be highly effective from a commercial standpoint. However, they also involve significant potential risks for businesses. For example:
- if your collaborator sustains negative publicity during the course of your collaboration, your business could itself sustain brand damage through its association with the collaborator;
- if you need to exit a collaboration after any jointly branded goods have been produced, you may not be able to sell those goods, and further, any attempt to do so may amplify any brand damage; and
- if you opt not to proceed with a collaboration, or indeed to cancel a collaboration which is already underway, you may be at risk of breaching contractual commitments to the collaborator as well as manufacturers, logistics providers or other third parties, thereby exposing your business to potentially significant liability.
In light of the above, businesses considering a brand collaboration should take proactive steps to guard against these risks. Key steps your business can take include ensuring that you conduct appropriate diligence on any potential collaborator to identify any known risks, having an airtight collaboration agreement with appropriate legal protections, and having a plan in place to manage any other legal, commercial or logistical concerns which may arise.
It is worth noting that, even if your business conducts careful due diligence on a collaborator, it may not always be possible to predict how or why a collaborator may sustain negative publicity during the course of a collaboration. However, having an appropriate legal and commercial strategy in place can help to ensure your business can successfully navigate such issues if they arise.
Brand collaborations will also typically involve the licensing of IP, either by one collaborator to the other, or by both parties. As such, businesses should also ensure that the collaboration agreement:
- carefully defines the scope of any proposed licences, to ensure that they are not unduly broad or narrow, and reflect the intended commercial objectives for the collaboration; and
- makes clear the ownership position in relation to any newly developed IP as between the parties, to avoid any potential dispute as to such matters down the line.
If your business is considering a brand collaboration, seek expert advice on how to best manage these issues.