Craft Beer Names Prove Challenging

“Bottoms Up!” a common toast, can be heard around the world on a frequent basis. One of the reasons is because beer is the world’s favorite alcoholic beverage, and also the third most consumed beverage overall, after tea and water. According to Nielsen Scarborough, more than 110 million people in the United States alone drink it. In 2015, U.S. beer reached about 197 million barrels and $105.9 billion in sales.

While beer has been around for ages, the craft beer trend has changed the dynamics of the beer industry. According to the Brewer’s Association, the number of craft breweries rose from 2,401 in 2012 to 4,225 in 2015. Craft beer production is expected to increase yearly with 25.4 million barrels in 2015 to an estimated 37.4 million in 2020. Craft brewing accounted for 12.2% of share in the beer industry in 2015 and grew 12.8% to reach $22.3 billion. This growth rate is significant as overall beer sales only increased by 0.2%.

The top five leading craft beer brands in 2015 included Samuel Adams, Sierra Nevada, New Belgium, Shiner, and Lagunitas. While these are established craft beers that are widely known, the proliferation of craft breweries adds more craft beer brands to the mix. The trend is so popular that people are crafting beer from home, with an estimated 1.2 million home brewers. As a result, the number of different flavors available today is astounding. With these new flavors and brands comes the task of creatively naming them. However, the large number of breweries and new beers present challenges in the industry.

Too often, craft breweries find themselves in the midst of a trademark battle over a name. What they thought was a fun and creative name that would help consumers associate with a particular brand and flavor often becomes a legal nightmare. The more the craft brewing industry expands, the more likely trademark issues will continue. Many trademark conflicts involve geographic names or brewing terms that have already been used or that may cause confusion. Therefore, craft brewers have to be especially inventive in a crowded space.

While creating unique flavors gives each brewery a competitive edge, creating a unique name is proving to be a challenging task. However, without a creative name, craft breweries will find it difficult to gain recognition. Therefore, they must think outside the box to come up with as interesting names as they do flavors.

Due Diligence: A Necessary Component of the IP Valuation Process

The details in due diligence can make or break an IP value proposition. While IP due diligence often involves the same considerations of traditional business valuations, it also includes considerations specific to IP, such as verifying IP rights.

IP due diligence can be a long and tedious process. However, it is a necessary process for the most reliable and accurate IP valuations. Therefore, IP analysts must ensure they review all aspects of an asset that would affect the value proposition. The following are discrete analysis components of IP due diligence that analysts must factor into a valuation.

  • Performing initial interviews
  • Analyzing historical financials
  • Understanding the IP
  • Verifying IP ownership
  • Commissioning independent counsel review
  • Reviewing enforcement history and ability
  • Performing market analysis
  • Evaluating the regulatory environment
As indicated, the due diligence process involves heavy-duty analysis in a variety of areas. Within each of those areas are a host of other factors an analyst must consider. For instance, in verifying IP ownership, the analyst must consider a number of factors such as title, options & warrants, reversionary rights, and royalty obligations. In order to analyze these factors, an IP analyst may have to review a number of documentations such as patent filings, assignment agreements, inventor notebooks, employee agreements, and others.
Those analysts who consider all components that affect IP value provide solid valuations that can stand up in court, help generate capital, and assist in the buying or selling of IP.

Five Distinct Areas for Copyright Due Diligence

Performing due diligence is a critical part of the IP valuation process. It involves an in-depth review of a company’s intangible assets. Understanding all the aspects of an asset, including administrative aspects, provides the best and most accurate valuations. We discuss  five distinct areas of copyright due diligence next.

Each type of IP involves its own distinct areas of due diligence as they each bring value in different ways. For copyrights, the following areas are paramount when it comes to due diligence.

  1. Verify the nature of the copyrighted material. An IP valuation analyst must learn whether a copyright exists to protect a particular asset. Creators of copyrightable work must satisfy several requirements. If these requirements are not met, then the creator’s asset may have no value. For instance, copyright law excludes ideas, procedures, processes, systems, methods of operation, concepts, principles, or discoveries. However, it protects the expression of such items. Some clients may not always understand the distinction. Therefore, it is important for a valuation analyst to uncover such discrepancies and understand exactly what is being valued. Further, a valuation analyst must understand the strength of the copyright in order to associate an appropriate risk and discount rate.
  2. Verify the nature of the rights to value. Copyrights represent an established bundle of rights. Each right may have its own value proposition. The IP valuation analyst must determine which set of rights is the focus of the engagement. The methods that the analyst uses and the magnitude of the value proposition will generally vary based on the nature of the right under consideration.
  3. Consider administrative issues that can impair copyright value. An analyst must consider various administrative issues such as whether the work is registered, factual, made for hire, or is in the public domain. Further, the analyst must determine whether fair use erodes value, whether the copyright provides notice, and whether it is covered by the Visual Artists Rights Act of 1990. These are just a few of the administrative issues an analyst must consider.
  4. Consider special factors for software. Software presents a unique scenario among IP types in that it may simultaneously receive patent and copyright protection. When determining a software copyright value, an analyst must consider several factors. These include the ease in avoiding infringing activity, the consideration of the Rule of Doubt, and the complete or partial disclosure of the source code.
  5. Consider special factors for semiconductor designs or masks. A number of caveats exist under the Semiconductor Chip Protection Act of 1984. An IP valuation analyst must understand these caveats and whether a semiconductor design or mask meets these caveats. Whether the asset meets these caveats or not can greatly affect an asset’s value. Therefore, an analyst must account for these stipulations or risk providing an improper value conclusion.

As you can see, copyright due diligence is no simple task. It is imperative that an analyst review all aspects, administrative issues, caveats, and more for the most accurate valuation.