COVID-19 & the Continued Rise of Intellectual Property Assets

Author: Kevin Yen, J.D. Candidate, 2023

Intellectual Property (IP) assets have always held plain and clear value as product differentiators. As companies like Prada and Nike have discovered over the years, a shoe is not just a shoe when it has a logo on it. For other companies like Kobo, who obtained Border’s ebook customers after the bookstore closed shop in 2011, IP asset transfers are a quick way to acquire customer data.¹

As COVID-19 national infection rates grow increasingly worse by the day, retail bankruptcy rates are rising at a similarly alarming pace. Since the virus first gripped the nation in March, well-known retail companies—including Sur La Table, Pier 1 Imports, and Brooks Brothers—have filed for bankruptcy at an extremely high rate.² According to The Fashion Law, Chapter 11 bankruptcy filings in the first half of 2020 alone have already exceeded the count of any single year since 2012.³

 How will this affect online and retail markets?  

Within e-commerce, trademarks are a particularly valuable commodity because consumers are more likely to purchase from brands they trust.⁴ Some retailers may opt to close their retail outposts and keep their inventories by switching to an online-only sales format, similar to Brookstone and Sharper Image.⁵ Others, like Barneys New York, will live on in name only by completely shutting down and liquidating all inventory.⁶ Occasionally, seemingly dead brands like Toys-R-Us, are given a second chance by new ownership and management to win back customers with brand-new stores.⁷ While traditional malls may be on the decline, pandemic bankruptcies may also present an opportunity for mall giants to further consolidate their holdings at a discounted rate. For example, Simon Property Group – in collaboration with the Authentic Brands Group, which already owns and licenses over 50 well-known brands – recently added Brooks Brothers and Lucky Brand to their portfolios.⁸ An important caveat to IP asset consolidation is that unlike 20th century conglomerates, IP conglomerates go unseen by the vast majority of us. The unseen nature of IP assets lends itself to new methods of assessing antitrust risks, such as looking at consumer substitution patterns over market share and determining how to factor in online competition.⁹ It remains to be seen how this may affect regulation and enforcement of modern antitrust efforts. 

More so than ever, an integral part of company strategy in every industry has been maintaining the organization’s IP assets. In fact, a recent report by the World Intellectual Property Organization estimates that “intangible assets now represent 80% of corporate value.”¹⁰ Whether parceled off and sold in order to preserve a company’s existence or used to secure capital and enhance credit, a technique used by Ford in 2006 as part of a financial bailout, IP assets’s versatility in generating value for companies places an onus on company management to preserve them.[11. Id.]

For some, the shuttering of the stores and brands we grew up with may be a symbol of the times. Yet the mass transfer of IP assets that accompanies this dramatic shift in ownership may not be such a negative thing for the retail environment as a whole. The industry was far from healthy prior to the pandemic, with retail mainstays like JCPenny and Souplantation already struggling with large amounts of debt and changing consumer trends, and COVID-19 served only to magnify these issues. This dramatic shift in IP assets may help corporations economize and maximize efficiencies, ultimately resulting in a marketplace of more streamlined vendors each playing to their strengths.

We welcome your thoughts at iptech@lawmail.usc.edu.