Making your intangibles, tangible. Part 2: Trademarks.

In this four-part series we’re discussing how to increase the value of your company by better quantifying and protecting your company’s intangible intellectual property.  Of the areas we’ll cover, a registered trademark is arguably* the first thing that an investor or prospective buyer will want to know with respect to the valuation of goodwill: are the company’s trademarks protected or is the company infringing on another’s right?  After all, goodwill and brand recognition is what the investor or purchaser is buying into.  No investor or purchaser wants to be forced to rebrand a product line because trademark rights weren’t fully investigated or protected by the target company.

So if you want to learn about making your trademark rights tangible, read on!

*If you, or your company, owns or came up with inventions that comprise the business operations, then patent rights will probably be the first question an investor or buyer will ask about. Stay tuned for learning about making tangible inventions and ideas (patent rights).

What is a Trademark?

Trademarks function as indicators of the source and quality for both goods and services, and they serve as the prime element in advertising. A trademark can take on numerous forms, including letters and words, logos, pictures, slogans, colors or a combination of those things.  A trademark can even be a sound. The key is that when the consumer sees (or hears) the trademark, they immediately associate the mark with the source (the company) of the goods or services. Accordingly, an effective trademark is distinctive; it’s easily identifiable and intimately associated with a company’s goods or services. Over time, effective marks create and bolster corporate and brand recognition, goodwill, and value.

How do I Acquire Trademark Rights?

Trademark rights emerge once a mark is used in commerce.  You gain some rights by using your goods in commerce, even without a registration (called “common law rights”).  Common law trademark rights are geographically limited to the area in which the mark is used, and the extent of trademark protection from infringement is difficult to quantify or prove under basic common law rights. When a mark is registered with the U.S. Patent and Trademark Office (“USPTO”), federal law (under the “Lanham Act”) imparts additional rights.

Why Register?       

Although “common law” trademark rights emerge from the simple use of a mark in commerce, obtaining a federal registration of your trademark provides the tangible benefits of trademark ownership. The most prominent benefit derived from federal registration is the national recognition and protection. Again, common law trademark rights are geographically limited to the territory in which the mark has actually been used, while federal registration provides exclusive rights to use the mark anywhere in the United States (subject to those with preexisting common law rights).

In addition to wider geographic protections, federal registration puts other parties on notice of the existence of your mark in commerce, and deters and prevents companies and individuals from trying to use or register confusingly similar marks in the same class of goods or services. The USPTO maintains an active and searchable database of all federally registered trademarks (the Trademark Electronic Search System or TESS) which most companies around the world use to vet and formulate their marks. In creating a brand name and generating customer recognition it is crucial companies with similar goods or products establish their own distinctive marks and not unknowingly use a similar mark.

Federal registration of a trademark and the ability to use the ® symbol with your mark is also a powerful stamp of approval that the Courts and even the U.S. Customs Department may rely upon in assisting you to defend your trademark. Where a federally registered mark is filed with the U.S. Customs and Border Protection, that agency can deny entry of goods that are labeled with an infringing mark.  Additionally, a registered mark is presumed by the court to function as a trademark and not confusingly similar to other registered marks; and after it has been used in commerce continuously for five years, the mark becomes “uncontestable,” which serves to eliminate numerous defenses otherwise available to a potential infringer. Finally, where you prevail in ligation against an infringer, federal registration will allow the Court to award damages and costs for infringement and possibly even attorneys’ fees, which would not otherwise be available.

But what’s most important?  As the title of this blog indicates, simply having a federal registration that you can point and hand to a potential buyer is a powerful thing. The registration has a date certain on it. With common law rights, when you started using your mark in commerce is difficult to prove.  A federal registration means that you’re no longer relying on an amorphous common law right, you have a tangible registration that you can hand to a prospective buyer.

How much does a Federal Trademark Registration Cost?

Trademark law is based on “classes” of goods and services. The idea is that someone using the trademark “intellegentista” for manufacturing computers should not be able to prevent another company from using the mark “intellegentista” for offering educational seminars and associated services to train primary school teachers. Because these companies serve two different markets and different customers—which customers are unlikely to be confused by the fact that there are two different companies—the two registrations are likely permissible. Accordingly, the USPTO charges per mark, per class of goods (there are 45 different classes of goods and services).

Currently, the prices per class of goods or services ranges from $275/class for on online registration, to $375/class for a paper registration (not every type of mark can be filed electronically or qualify for $275/class fee). Click here for a current list of prices.

So now you know what a trademark is, why your should register one, and what the hard costs are for registration.  Registering your trademark rights will protect your asset and increase your company’s value.  Clearly, when a product or service is available for purchase, consumers often choose to purchase based on an association with a trade symbol or logo as distinguishable from other brands and competitors. Customers choose items because they “like the brand”; because they remember the trademark associated with that product from advertisements or prior use, and they seek out the particular good or service because it has been labeled as such. Creating goodwill through high quality products or well-performed services is undoubtedly a main priority at many companies; you should take the time to protect the goodwill asset you’ve created. And when it comes time to sell your company or otherwise value your brand, having a registered trademark makes tangible your company’s “goodwill” and goes a long way toward increasing the valuation of your company!

The article provided above is for general information purposes only and should not be relied on as specific legal advice. This article does not form an attorney-client relationship. If you have any questions about this article, please feel free to contact Peter J. Smith at peter@apexlg.com

This article was authored by guest blogger McKenzie Holden, an upcoming 2L at Seattle University School of Law and summer associate at the Apex Law Group.

Share