Carl J. Spagnuolo

December 2002

McHale Slavin Newsetter

Keep Your Eye On Your
Trademarks: Lessons from
the Automotive Industry

by Carl J. Spagnuolo
Entertainment, Trademark & Copyright Attorney



The prudent business owner or corporate officer keeps a finger on the pulse of their enterprise, carefully watching marketing trends, sales figures, profits, losses, and productivity levels. So often overlooked however, is a business’s intellectual properties, especially trademarks. These properties are easily taken for granted, or their importance is underestimated. Be aware of what you own and be aware that you may own something without even knowing it, or, as Volkswagen learned during its pursuit of Rolls Royce, spend ample time to determine what you are buying before you sign on the dotted line. To do otherwise could place you, your company, and your potential business transactions in peril. Just ask Volkswagen.

Volkswagen is one of Europe’s strongest and wealthiest companies. With ownership in its own brand, Audi and Porsche, among others, Volkswagen dwarfs German automotive legend BMW. But because of what became the automotive blunder of the 1990's, BMW got the better of its giant counter-part in a battle for the English luxury car company, Rolls Royce / Bentley. And it all happened because Volkswagen did not keep its eye on the trademarks involved in the transaction while BMW did.

Since 1931, Rolls-Royce and Bentley have been one company and the two marks have been indelibly linked ever since. Rolls produced luxury automobiles and aircraft engines. In 1973, Rolls-Royce suffered major losses and, as a result of a government bail-out, a corporate split was implemented, creating the Rolls-Royce automotive company separate from the aircraft company. For whatever reason, during that separation, ownership of the trademarked Rolls-Royce grill, the “Spirit of Ecstasy” hood ornament, and the Rolls-Royce name itself, became the exclusive property of Rolls-Royce, PLC, (the aircraft company). Rolls-Royce Motor Cars maintained ownership of the Bentley trademarks. In 1980, Rolls-Royce Motor Cars was acquired by Vickers Corporation. All was fine with Rolls Royce Motor Cars and Rolls-Royce PLC, (aircraft), for 17 years, after which time Vickers placed Rolls-Royce Motor Cars for sale on the open market.

BMW, long interested in acquiring an ultra-luxury brand, wanted Rolls-Royce. At the same time, Volkswagen was also looking to get into the ultra-luxury car market. But in April 1998, Vickers accepted a $575 million dollar takeover of Rolls-Royce/Bentley by BMW. Volkswagen, not to be out done, forced BMW into a bidding war for the marque and, in the end, cash-strong Volkswagen won the bid, offering $795 million. But alas, Volkswagen was in such a hurry to beat its German rival, that it overlooked the essential question of what exactly it would get for its $795 million. BMW, it seemed, already knew the answer.

BMW, having done its homework, knew that the aircraft company owned the valuable Rolls-Royce trademarks. No doubt, this is one reason why BMW stepped aside and allowed VW to "win" the bidding war for Rolls-Royce. BMW, already a partner with Rolls-Royce PLC (aircraft) in an aerospace venture, purchased the Rolls-Royce trademarks from the aircraft company for a mere $65 million dollars.

Volkswagen, after shelling out 795-large, discovered that they owned the tools, dyes, sheet-metals, buildings, assembly lines, automotive designs, and the rights to build one of the world’s most elegant luxury cars, so long as they didn’t use the grill, hood ornament, or the legendary name! They were indeed, all dressed up with nowhere to go.

A subsequent court battle resulted in what was deemed an equitable resolution. In January, 2003, for the first time since 1931, Rolls-Royce and Bentley will once again become two separate companies; Rolls-Royce owned by BMW and Bentley owned by Volkswagen. Volkswagen keeps the Rolls-Royce factory, and BMW will move its operations elsewhere. All this, because of three trademarks!

As if this story isn’t enough to urge any reasonable business owner or corporate officer to heed the advice of keeping a discerning eye on its intellectual property, tragedy repeats itself, this time at Ford.

In the 1960's, Henry Ford II became obsessed with beating Enzo Ferrari at his own game: Le Mans endurance racing. Henry Ford II, whose attempt to purchase Ferrari was scorned by its owner and namesake, Enzo Ferrari, became determined to beat Ferrari because of his refusal to sell. Ford set aside development money and a team of automotive race engineers and charged them with one duty: to deliver to Henry Ford a car able to defeat Enzo Ferrari at Le Mans. By the mid 1960's, Henry’s dream was realized when, in fact, his new Ford race car, known as the GT-40, (for it’s 40 inch height), became a 4-time Le Mans winner, over Ferrari.

Fast forward to 2002. Retro is in and its paying huge dividends to the American car companies. Chrysler’s PT Cruiser looks like a 1940's panel truck. GM is about to introduce a 50's style small truck. Ford, already a proven winner with retro after the restyled Mustang which captures much of the legendary 1965 styling cues, and the new Thunderbird, decided to enter the super-car arena with a slick, super-fast, retro GT-40. The new GT-40 has the same general shape as its legendary predecessor, and a potent new drive-train to make it every bit the winner that it once was. There’s only one problem: Ford never bothered to trademark the GT-40 name. Instead, in 1985, Safir Engineering, Ltd, in England, registered the trademark for its original Ford GT-40 after-market parts business. Safir now holds the trademark hostage, demanding a reported $40 million to license Ford’s name back to FORD! So, in 2003, Ford sets out to re-introduce its new incarnation of its one-time legend, amidst all the pomp and circumstance and glitter of a new car launch, but now named the "FORD GT," absent the “40.” It has all the charm of a bright smile with 2 teeth missing. But that’s the nature and power of a trademark. Beware!



McHale & Slavin, P.A.
2855 PGA Blvd, Palm Beach Gardens, FL 33410
561-625-6575
Copyright © 2002 - All Rights Reserved