6 REASONS WHY TRADEMARK REGISTRATION IS CRUCIAL FOR YOUR BUSINESS

01 
Feb 2019

You are contemplating whether or not to register a trademark? Or if the mark for the goods/services you’ve been using on the market needs protection? Does the investment pay off?

We present 6 reasons that will settle any doubt. Trademark registration is crucial for protecting your business. The best proof of that is the statement made by Don Keough, Coca-Cola CEO from 1981 to 1993:

“I define my role as president of Coca-Cola Company very simply: it is to protect and enhance the trademarks of the company.”

Unfortunately, our clients’ practice has shown that the negative consequences of postponing or neglecting the issue of trademark registration are unfathomable. In this blog post, we will illustrate just some of the common unfavorable situations.

# 1 Trademark Facilitates Communication with (Prospective) Clients

The purpose of a trademark is to encompass (protect) everything that your company represents, not just the goods/services you offer, but also the entire brand, reputation, the relationship your company nurtures with its customers, employees, etc. All the positive things you are trying to present on the market can be combined into a logo, a mark.

Trademarks that protect a non-verbal mark, i.e., in the form of a picture or a drawing particularly facilitate communication with (prospective) clients around the globe. For example, Audi’s ring circles or Apple’s apple mark are easily recognizable and, more importantly, can be remembered by anyone around the world, no matter the language they speak.

#2 Trademark Helps Clients Reach You More Easily

In a heavily overcrowded market, building a business that is distinguishable from a ton of competitors and that has earned people’s trust is a serious task. In fact, during the startup phase of each business, without having a built brand, companies are forced to look for clients. When a company builds its reputation, clients start to come on their own. Trademarks largely contribute to this.

How many times have you seen a product you have been using for years by a manufacturer and were satisfied with the goods, and said to yourself: “It definitely has to be a good product, as Company X makes it.” This is a huge privilege for companies with an established reputation on the market. Oftentimes, they don‘t even have to advertise new products. The quality that has surrounded the product for years and has provided positive connotations to consumers at the very mention of the company name is more than sufficient.

With a trademark, your company indirectly benefits from the luxury of no longer having to waste valuable time and resources on bringing new clients.

There is another important segment in the context of competitors on the market.

Namely, when another company uses your mark in order to mark their identical or similar goods/services, while you have already established a brand, this competitor’s company takes your effort and time invested in the brand building.

Let’s say you have been building a brand for two years, that is, the process from point A – when you bring and look for clients, to point B – when clients come on their own and are interested in your goods/services, without you spending any time and effort for this purpose. The competing firm, using your mark, skips the path from point A to point B, only thanks to your mark, and immediately picks the fruits already ripe at point B. The mark should provide protection and reward to your commitment while building the brand. With a trademark, you show both yourself and the others that you appreciate everything you invested in order to get your business up to point B.

Interestingly, trademark design can make a sole influence on the selection of products on the market, even if you do not have an established brand. For example, when buying a gift, for example, a bottle of wine you have not tried before (and the wine bottled in such a way you cannot try it) how many times have you relied upon the design? Nice design and logo play a key role at that point because you want the gift to look nice. It does not come as a surprise that world-renowned companies carefully take care of the appearance of the trademark, which is practically an inseparable part of the product it designates. This is why the so-called “suggestive” and “allusive” character of the trademark has been frequently spoken of.1

#3 Trademark Adds Value to Your Business Appeal on the Market

Apart from new clients, a trademark will make your business attractive to future employees. An established brand stimulates people to apply for a job. Essentially, no one knows how a job will turn up until they start working, and despite this, people usually know where they would like to work. This is because ambitious people are attracted to the idea of working in well-developed and successful companies. The more your company is successful and popular in the market, the more ambitious and successful people will want to be part of your team.

#4 Did You Know Trademarks Not Only Protect the Value, but also Carry Their Own Value?

It is evident that trademarks mainly serve to protect your business. However, a trademark even has value past your business, i.e., its own individual worth. It adds value to your brand’s goods/services. What do we mean by that? How many times have you heard someone say “you are paying for a branded name”, or “you are paying just for the brand”?

Let’s take Gucci handbags for example. Although we do not question the high quality of the product, it is known that a certain part of the price is paid for a brand name or the brand. Since it’s a Gucci bag, and not some no-name, you pay more. That increased amount of the price is a fee to the manufacturer for the established brand. On this particular Gucci example, we can show how much this giant takes care of its intellectual property right. Gucci has not only registered a trademark but has also patented the Gucci bag!

The brand you have created may be of interest to a larger company in order to “acquire your brand”, in which case you can essentially sell your trademark in a great manner, by selling the company. At that point will the trademark play a key role in benchmarking the price in this business. The trademark can also be subject of a license or stock, which also shows its incredible value, apart from the value of the business overall.

According to a report by a well-known company Brand Finance (Brand Finance Global 500 2018), the most valuable brand is Amazon, estimated at $ 150.8 billion, which went 42% up from the year before, when it took the third place. Behind Amazon is Apple with a brand value of $ 146.3 billion (which held the second position from 2017, although this giant also went 37% up). Interestingly, in 2018, Google was dropped from its first position in 2017, with a brand value of $ 120.9 billion. The reason for this may lie in the fact that Google had an increase in the brand value of only 10% in 2018, which caused Amazon and Apple to outgrow it by 3 to 4 times.2

How much can a brand’s value grow over the years is perhaps best shown in the fact that, according to the 2011 Brand Finance report, Google was on the leading spot with $ 44.3 billion, in order to take only the third spot in 7 years, despite having increased its value by three times.3

#5 Registration Fee vs. Trademark Value

Under example #4, we saw the kind of value a trademark can add. Surely, we agree that these are some of the more extreme examples, but also, a trademark adds great value to smaller companies. When comparing costs of registration (which we wrote about in our blog post entitled Trademark Registration – Everything You Wanted to Know but Couldn’t Ask) to the trademark value, brand protection and security a trademark offers you on the market, it is evident that every dime invested in the registration pays off manifoldly. In particular, bear in mind that the trademark will keep you away from costly and uncertain legal processes, in case of unfair competition on the market.

#6 Trademarks are Forever!

Trademark is protected for an unlimited period of time, provided, of course, you have paid the extension fees.

Thus, by registering a trademark, you ensure protection for a period of 10 years, as this protection can be extended, unlike patents, for example. Many famous trademarks have been protected for over a century.

For example, Coca Cola registered its first trademark back in 1893.4

PROBLEMS THAT MAY OCCUR IN THE ABSENCE OF TRADEMARK REGISTRATION

People often decide to register a trademark when they recognize the purpose of the protection it offers, or when they experience an unpleasant experience due to the absence of trademark registration.

#1

Let’s say you have been using a certain mark for your goods for a long time, but did not protect it, or register a trademark. In the meantime, a company that is your direct competitor appears on the market and registers the same or similar trademark for the same or similar goods. Two identical or similar marks for the same or similar goods may mislead consumers on the market. You want to prevent your competitor from using the mark that you have been using for years and which helped you build a reputation and gain consumers’ trust. However, the problem is that they did register that mark, and you have not. You can, of course, seek judicial protection, but the issue is that you must initiate highly uncertain court proceedings and challenge the trademark registration. Challenging a trademark in such situations implies you acknowledge your competitor has registered a trademark against the principle of conscientiousness and honesty or that your trademark is a “well-known trademark”. Both situations put you in a position to spend more significant resources (money and time) than you would spend on trademark registration.

#2

In practice, we often encounter cases where former employees, upon termination of their employment, apply for trademark registration for the mark or business name that was used by their former employer. And in this situation, it is possible to challenge the trademark, but this requires high costs and to indulge in complicated court proceedings, which could all be easily prevented by prior registration.

We must point out that this often happens in smaller companies. Those companies usually consider that, being that they are not large, do not have the need to protect their business name or logo that represents that company. The trouble is, when an employee leaves the company and starts working individually by establishing, for example, their own company, while using the logo of the company where they used to work on the market. Therefore, the fact you are a small company does not in any way mean you do not have the need to register a trademark. In fact, the size of the business is not at all influenced by the need for protection, which is probably one of the biggest misconceptions in practice.

#3

The following situation poses particular issues:

Company A uses a trade name different than the business name.
Company A has registered a trademark by priority claim as of July 07, 2017. A mark is protected by a trademark that contains a single word, i.e., trade name of Company A.
Another competing company – company B, was registered in the Business Registers Agency (December 12, 2012) under a business name that contains the trade name, i.e. the trademark of Company A.
Question: Did the trademark infringement occur?
Company A would now want to sue Company B for trademark infringement. What could Company A expect in such a case?
Company A would definitely have to provide material evidence of market confusion that occurs with, for example, customers, suppliers or partners.
Even when there is no doubt of similarity between the marks of Company A and Company B, which can lead to the confusion between the participants in the market, it is certain that Company B would use defense by invoking Article 41 of the Law on Trademarks. This provision stipulates that the trademark holder (Company A) cannot prohibit another person (Company B) from marketing the goods/services under the same or similar mark, if that mark is a business name or a name that has been obtained in a conscientious manner before a recognized date of the trademark priority claim.
We conclude that it is highly likely that the trademark protection procedure would be unsuccessful, since company B has a previously registered business name. If the trade name of company A was by any chance protected by a trademark prior to 2012, it would be easy to prevent company B from using the trademark of company A in its business name.
This example shows to show not just the importance of trademark registration, but the importance of doing it as soon as possible.

If you have already decided to register a trademark and are interested in proceeding forward, please, do read our blog post entitled Trademark Registration – Everything You Wanted to Know but Couldn’t Ask. For the dilemma about whether to register a national or international trademark, feel free to read our blog post, International or National Trademark Registration – What’s Better for Your Company?

J. Cross, “Language and the Law: The Special Role of Trade Marks, Trade Names and other Trade Emblems” (1997) 76 Neb L Rev 95, in Lionel Bently and Brad Sherman, “Intellectual Property Law”, Oxford University Press, Fourth Edition (2014), page 814
2. Brand Finance Global 500 2018, posted on  February 1, 2018, available at http://brandfinance.com/knowledge-centre/reports/brand-finance-global-500-2011/
3.  Brand Finance Global 500 2011, posted on July 11, 2011, available at
http://brandfinance.com/knowledge-centre/reports/brand-finance-global-500-2011/
4. Application no. 70022406, filed on May 14, 1892, applicant: The Coca Cola Company. Trademark registered on January 01, 1893

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