What are trademarks, and why does my business need to register them? The mission and focus of EmergeCounsel are to help entrepreneurs create, grow, protect, and sometimes fight for value. So I was surprised when I discovered that the most fascinating, strategic, and potentially greatest value-driving area of my work is trademark.
What are trademarks?
Trademarks include words, numbers, number and word combinations, slogans, designs, images, colors, sounds, smells, and/or three-dimensional configurations. Mcdonald’s, Google, 7up, Philips 66, Seagrams Seven Crown, Nike (including the famous Nike swipe), the NBC chime, and the shape of the Hershey’s Kiss are all examples of trademarks that have an extraordinary amount of value.
Service marks are the same as trademarks except that they protect services. For example, Arthur Anderson, Allstate, and Kaiser Permanente are examples of services that are protected. The term service mark is often referenced as its most commonly known term, “trademark.”
Although using your mark in commerce can trigger “common law” protection, my discussion involves trademarks that are actually submitted and approved by the United States Patent and Trademark Office (“USPTO”). USPTO trademarks enjoy Federal and potentially international protection, provide a legal presumption of validity to the registrant and allow the use of Federal law and Federal court for enforcement.
Trademarks add significant value.
Trademarks are relevant to balance sheets in a class called intangible assets. Almost every company has hard or tangible assets such as cash, the copy machine, and accounts receivable. Many also have some sort of intangible assets, including patents (e.g., the design of a drug), trademarks/service marks, copyright (e.g., authorship/publishing rights), and trade secret (e.g., McDonald’s Big Mac secret sauce).
According to David Haigh, the founder of Brand Finance, an IP valuation consultancy, “(t)he single largest source of intangible value in a company is its trademark…(Because until recently, the trend was towards patent…This is) a major sea change that has come about over the last couple of years.” Look at the evidence:
- The Google trademark is valued at over $44 Billion (or 27% of Google’s overall market cap)
- The Microsoft trademark is valued at $48 Billion (approximately 10% of Microsoft’s overall market cap)
- The Walmart trademark is valued at $32 Billion (approximately 5% of Walmart’s market cap)
- The GE trademark is valued at $30 Billion (approximately 5% of GE’s market cap)
While most trademarks do not command that type of valuation, trademarks have proved to have significant financial value to even the most nascent of startups. First, studies have shown that investors pay a premium for early-stage companies that have registered trademarks. Furthermore, the more trademarks possessed, the stronger the valuation (de Veies, 2012).
Why? Trademarks are synonymous with brand and brand protection. They trigger a number of subliminal messages such as authenticity, origin, quality, reliability, prestige, and advantage – that scramble for consumers’ attention. Nothing better influences purchasing behavior.
Besides protecting brand itself, trademarks:
- Efficiently protect messaging- trademarks have the power to convey brand and differentiate from competition in very few words or symbols and with a maximum of legal protection.
- Make it easy for a customer to find the business and identify its services. Because trademarks allow exclusivity, it is very easy for consumers to filter out the competition to find the business.
- Make it efficient to clear any competitive trademarks from the internet. Although domain registration is basically first come/first serve, the exclusivity aspect of trademarking allows for enforcement, including potential cease and desist mandates and other injunctive relief.
- Are actual assets that can be bought, sold, licensed, or even used as a security interest to grow businesses.
Should you trademark and when?
I, without reservation, suggest formal trademark protection as the first part of most business intellectual property strategies. The process is both relatively cheap and efficient. Many trademark applications that I handle are well under $1000 including EmergeCounsel attorney fees and USPTO filing fees. Things that increase costs include search fees and competitively filed marks.Also, businesses need not wait until you bring goods and services to market to file for a USPTO trademark, as the USPTO allows for protection for marks that the registrant “intends to use.”
However, before filing, it is important to have the brand relatively set. For example, suppose you are called XYZ Bicycle and think of changing the name within the year, depending on traction. In that case, you don’t want to spend money on an XYZ Bicycle trademark (or any brand recognition strategy) until you have the name of your brand nailed. For this reason, I almost always encourage my clients to strategize before acting. In strategizing, it is important to map out your brand, how it relates to your business, and what value you ultimately see in it. I have built and managed brand, and love providing intellectual strategy sessions as a cost-efficient and organized method. (Look for my blog on trademark/intellectual property strategy).
Trademarks are a crucial asset of almost every business. Formal USPTO trademark legal protection is extremely cost-efficient and aids in your ultimate strategy. However, it is important to strategize before acting. Contact EmergeCounsel today for a free consultation!