ScaleUP The Value of Your Business with a Trademark

By Samuel C. Gold, Esq.

Are you looking at your balance sheet and seeing that your business is worth $250,000, and wondering how and why after so many years of hard work t isn’t worth more?  Well, you know, it may very well be worth A LOT more. You may not realize the fortune or potential fortune in the company you have created, nurtured and grown.

Many business owners often overlook the goodwill of their businesses and the immense value that has become associated with use of the business’ goods, services, and public image – the “brand.”  This type of asset is known as a trademark (for product-based businesses) or as a service mark (for service-oriented firms). From here on out, we’ll refer to them as simply trademarks.

Trademarks identify a business. They represent the source originating power of the mark in the mind of the consuming public. Trademarks are seldom thought of as consumer protection, but the main question concerning an infringing mark is whether it causes consumer confusion.  In other words, if another business uses a name, logo, or style, like yours, that could spell trouble to your bottom line, and you may lose your right to protect your marks by not protecting them. By doing nothing, you are telling the “offender” that it’s okay to copy or infringe upon the trademark that you paid to create.

There is no legal requirement to register a trademark with the U.S. Patent and Trademark Office; however, there are several important reasons to do so. First, registration can validate the mark in the eyes of the public. Second, even though the registration process may take 9 months to a year or more, the registration is retroactive to the original application date. Which means if you file for a mark at any time before another company does, it establishes you/your mark first. It is known as “first use,” the ultimate decider of trademark rights. So, in the world of trademarks, it’s a race to file the application, not just getting the application approved. Translated to terms that make more sense, “first use” means the mark claims continuous use in commerce.

Filed applications and ultimate registration, therefore, establish a powerful legal right.  it is important to note that while first use is important for new companies, business names and logos often gain trademark rights by a history of usage, regardless of registration.

If you don’t use your mark (even a registered one), you risk abandoning it. If you fail to renew a mark, you face abandoning it. Also, if you know a competitor is using a similar mark, but you don’t police it, you could lose your right to the mark regardless of whether it is registered. Yet just having a registration announces to the world that you own it and wards off potential infringers. it is one of the things that helps to establish your “brand image” in the marketplace.

The type of trademark name you have is also important.  If your mark merely describes your goods and services, you may have a hard time acquiring trademark rights either on your own or through the registration process.  Names that are “arbitrary” or “fanciful” are the strongest, unless you have used the mark for a very long time.

For example, Kleenexis a trademark of a facial tissue brand.  It slightly suggests its purpose, but if you asked a person on the street who never heard of the brand to tell what it is, he/she would have a hard time identifying what it.

For a business called Joe’s Dry Cleaning, the mark would be weak, because the same person on the street would tell you it’s a dry cleaning business.  No one person can hold the rights to the term “dry cleaning” or everyone with a dry cleaner would be excluded from the market.

Made up names are often stronger because they are not common words we use every day.  Look at Google and eBay, both made up and both strong names. And both have a specific meaning in the marketplace that is attached to the underlying brand.

Remember that a skilled trademark attorney can tell you about the strength of your specific mark under various circumstances.

Internationally, the United States and many other countries have joined the Madrid Protocol treaty. This development made it much easier for domestic and foreign businesses to register a mark in multiple countries with one application, vastly streamlining the previous process by filing country by country.

Back to where we started:  When you look at that balance sheet, know that your business is likely worth a lot more. There is value in good will, in name recognition, in customer service, etc.  How much value can you give to your business name and logos? It can be virtually limitless. If you decide to sell, that goodwill, gained by use of your trademarks, should drive the price tag higher.

Note:  Businesses based outside the United States opening branches or operations in the United States must realize that any trademark rights acquired abroad do not automatically transfer to the United States.  Consultation with an American trademark lawyer is the best route.

Samuel C. Gold, Esq., has practiced trademark law for nearly 15 years. Mr. Gold has been a member of the Florida and Wisconsin bars since 2002. He is also admitted to practice before several federal courts, including the U.S. Supreme Court.

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The foregoing is intended as an overview and not legal advice, nor does it create an attorney-client relationship.  However, contacting an attorney to steer through the maze of bureaucracy to register and defend a mark may very well be necessary to consult an attorney.

ScaleUPCheckUP™’s blog, website, newsletter and other forms of communication contain general information about legal and related matters. The information is not legal advice and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter you should consult your attorney or other professional legal services provider.

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