Over the years, co-branding has established itself as one of the most widely used marketing strategies among companies. Through this approach, many brands are able to position themselves in the market and gain consumer recognition of their existence.
In this article, we delve into the secrets of co-branding, revealing everything you need to know to launch a product or service with two or more brands that come together to create something unique and groundbreaking. Discover the keys to making the most of this approach that’s revolutionizing the market, and learn the essential factors you should consider before embarking on a successful collaboration.
What Is Co-Branding?
From a legal perspective, co-branding cannot be viewed solely as a marketing or communications initiative, since behind every collaboration between brands lies a complex web of industrial and intellectual property rights, contractual obligations, and legal risks that should be identified and properly addressed from the outset in order to avoid potential conflicts in the future.
As a starting point, it is essential to understand what co-branding is. It is a temporary strategic alliance in which two or more companies work together and integrate their brands to develop and launch a shared product, service, or campaign. This collaboration is based on creating a joint offering that aligns with the essence of each brand, while each brand retains its own identity. It is not simply a matter of placing two brands side by side, but rather of developing a shared proposition that leverages and enhances the strengths of each.
The growing prevalence of this strategy can be seen in numerous collaborations, such as the one that recently took place in the world of the Bridgerton series, which has led to various co-branding initiatives through agreements with brands from different sectors. Specifically, these include the launch of limited-edition personal care products (Dove), jewelry collections inspired by the series (Pandora), themed food products (Jeni’s Ice Cream), and capsule collections in the cosmetics sector (NYX Cosmetics). These types of initiatives reflect the commercial scope of co-branding and highlight the need to analyze its legal implications.
The Main Forms of Co-branding
In practice, this strategy has given rise to various forms of co-branding, depending on how and for what purpose the brands involved are used:
Ingredient co-branding
It occurs when a brand incorporates a component, material, or technology from another brand into its own product—which serves as a guarantee of quality or innovation—in order to add technical value to the product or service. A clear example of this type of co-branding is the collaboration between Milka and Oreo, in which Oreo cookies are incorporated as the main ingredient in Milka chocolate bars.
Co-branding in Communication
It involves the joint use of brands for communication or promotional activities, without necessarily being integrated into a common product or service. It typically takes the form of temporary collaborations aimed at advertising campaigns or joint marketing initiatives to increase visibility and sales in the short term. An example of communication co-branding would be McDonald’s and Coca-Cola; these brands have carried out many joint advertising campaigns over the decades. In these campaigns, they have worked together to promote the experience of enjoying a meal at McDonald’s with a Coca-Cola. Although they did not create a product, their collaboration on advertising and promotions has been consistent, featuring both logos in ads and in-restaurant promotions. Another example is the collaboration between Samsung and Iberia in the “Welcome Aboard Galaxy Note 8”campaign, which rewarded the loyalty and trust of Spanish passengers traveling on an Iberia flight with a Samsung Galaxy Note 8 smartphone .
Product or Service Co-branding
It occurs when companies collaborate to develop innovative products or services—or special editions—that incorporate a specific design, technology, or other creative elements; the goal is to create differentiation and added value through innovation and creativity. In this case, the brands are used together on the same product or service, typically in a visible way on the product itself or in its commercial presentation. The collaboration between Lego and Ferrari to create a series of Lego sets that allowed users to build scale models of Ferrari cars, such as the Ferrari F40, and the collaboration between Disney Pixar and Waze—in which iconic movie voices were used to guide users, creating an immersive experience and joint promotion—are clear examples of this type of co-branding.
Legal Nature of Co-branding
From a legal standpoint, co-branding should be classified as an atypical business collaboration agreement, as it is not expressly regulated in the Civil Code or in commercial law. Its validity is based on the principle of the parties’ freedom of contract enshrined in Article 1255 of the Civil Code, provided that such an agreement is not contrary to the law, public morality, or public order.
However, this type of contract includes elements typical of other legal arrangements, particularly trademark license agreements, but also collaboration agreements. Unlike a trademark license agreement, in which one company grants another company the right to use its trademark in exchange for financial compensation, co-branding involves active collaboration between two or more brands in the design, production, and/or promotion of a product or service, with the aim of creating added value and offering a unique experience to the consumer. In the context of collaboration agreements, co-branding is a type of collaboration characterized by the fact that companies jointly use their brands on the same product, service, or advertising campaign.
Co-branding can be formalized through a joint venture or a cross-licensing agreement. In the first case, the companies form a new entity to develop and market the joint product or service, temporarily licensing their respective trademarks to that entity until the collaboration ends. In contrast, under a cross-licensing agreement, no new company is created; instead, each company grants the other a license to use its trademark exclusively for the joint project. Once the co-branding arrangement ends, the licenses expire and the rights revert to their respective owners.
Key Legal Considerations Before Launching a Co-branding Initiative
Before launching a co-branding strategy, companies must carefully analyze the legal implications that may arise from the joint use of their trademarks. Beyond the commercial benefits that may be derived, this arrangement requires precise contractual provisions to prevent risks, avoid conflicts, and ensure the consistent and secure exercise of the relevant rights.
In this context, it is crucial to identify some key aspects that must be considered before launching a product, service, or advertising campaign as part of a co-branding strategy, namely:
- Verify the legitimacy of the trademark licensors’ rights, ensuring that the chain of title is complete and free of conflicts, and confirming that the licensors are indeed the rights holders or, if not, that they have the necessary licenses to grant licenses. This verification requires thorough due diligence, as there have been cases in which collaborations have failed due to incomplete chains of title and ownership conflicts.
- It must be verified that the trademark is registered in the class corresponding to the goods or services intended for sale, since registration only grants protection with respect to the classes granted. Otherwise, there will be no exclusivity in that sector, and third parties may register or use an identical or similar trademark to offer the same goods or services. Furthermore, there is a risk of infringing on the rights of third parties, since there may already be an identical or similar trademark registered in that same class.
If there are doubts regarding ownership or incomplete licenses, the collaboration may be subject to disputes with third parties or even infringement claims brought by them.
What a License Agreement Should Include
A license agreement of this type must:
- Indicate who holds the industrial and intellectual property rights to the results of the collaboration.
- Assign responsibilities regarding third parties.
- Regulate the defense against trademark infringements by third parties.
- Finalize the allocation of revenues and costs.
- Establish terms for termination and, if applicable, inventory management once the collaboration has ended.
On the other hand, in this type of license, it is very important to set forth detailed rules governing the use of the parties’ trademarks. In this context, many companies have brand manuals or corporate identity manuals that establish guidelines for the proper use of their distinctive signs and ensure consistent use of the brand across all media and communication channels.
In particular, when it comes to this type of agreement, it is important to pay attention to several aspects:
- Having a brand or corporate identity manual. These manuals establish technical guidelines for the use of the brand, including aspects such as the logo’s structure, corporate colors, typography, proportions, its placement on various media, and the correct ways to refer to the brand. Likewise, they typically expressly prohibit certain practices, such as modifying the logo, altering its colors, or using the brand in a fragmented manner or in contexts that could cause confusion in the market. They may also regulate its use on websites, social media, domain names, or promotional materials and may require distributors to clearly indicate their status as such. In this regard, it is advisable to include an express obligation in the license agreement to comply with the brand or corporate identity manual, if one exists, in order to ensure consistency in its application and preserve the identity of the distinctive sign.
- The establishment of prior approval mechanisms through which holders of industrial and intellectual property rights can review and authorize the intended use of jointly owned industrial and intellectual property before such use is implemented in the market. In this way, trademark owners can ensure the proper use of their trademarks on products, services, or advertising campaigns that will be marketed jointly.
- Establishing quality standards with the intention of requiring the licensee to guarantee them, thereby ensuring the quality of the product, service, or campaign that is the subject of the co-branding arrangement. Any deficiency in the quality of these elements could seriously damage the reputation and prestige of the licensor’s brand.
- Effective use of trademarks is essential to preserve their validity and avoid potential cancellation requests due to nonuse. For this reason, the contract must specify what would happen if any of the trademarks were no longer used or if the owner lost its rights during the term of the agreement, as well as determine who would bear the consequences and whether any compensation would be due between the parties. Furthermore, since co-branded products or services are not always part of one of the owners’ core business activities, it is particularly important to generate and retain sufficient evidence of each trademark’s use. Such evidence may include contractual references, graphic material related to the product and its packaging, promotional campaigns, sales data, or internal communications that demonstrate actual and continuous use in the marketplace.
Ultimately, co-branding is aneffective strategy for strengthening brand recognition and positioning among consumers by combining the brands’ values and reputations into a joint offering. However, its success depends not only on creativity or commercial impact, but also on the collaboration being structured through a carefully designed agreement, tailored to the specific needs of the parties and precisely regulating the rights, obligations, and limitations regarding the use of the brands.
Arancha Máiz, Attorney in the Legal, Business, and Contracts Department.