Brand value – why online retailers acquire IP rights?
It was reported yesterday that online fashion retailer Boohoo has agreed to buy the Debenhams brand and it is understood that the agreed purchase price is around £55m. This follows Boohoo’s acquisition in August 2019 of the highly respected UK brands Karen Millen and Coast in an £18.2m agreement. No physical stores or space were included in either deal. Boohoo has stated that it does not intend to operate stores, and we understand that core parts of Debenhams are not being acquired by Boohoo, so what is Boohoo buying?
The majority of the purchase price is for the intellectual property owned by Debenhams. This is similar to the deal with Karen Millen and Coast where Boohoo stated it acquired the online business and all intellectual property rights. There has been a shift away from traditional bricks and mortar high street retail to online shopping, accelerated by the Covid-19 pandemic, but the purchase price of Debenhams is evidence that brands, and, particularly long standing and credible brands, remain highly valuable.
The recognition of brands as a valuable business asset is not new. Various “brand ranking” tables are produced according to the perceived value of global brands. Goodwill has been recognised as a legal concept in UK jurisprudence as early as 1901 when it was defined as “the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom.”
It is generally accepted that a business is worth more because of the position of the brand in its market. Historically, the value of a brand has been regarded as an intangible asset – the extra worth of a business over and above its physical assets and accountants have only valued this if the business is seeking investment or is to be sold.
More recently some brands have been valued and included as an asset on the balance sheet of a business. Goodwill and trade mark registration often coexist but there are many advantages to a business in obtaining registered rights. Not least, registered IP rights are pieces of property that can be licensed, mortgaged or sold. Evidence in enforcing goodwill in passing off cases can be onerous and expensive. Enforcement of rights is often easier on the basis of a registration where ownership and scope of protection and clearer. A trade mark registration can include an expanded range of goods and services when compared to rights at common law, provided there is an intent to use the mark on the expanded goods.