Most of you know that inventions are protected by Patents, but names and logos are protected by Trademarks. While registration is often administered by the same government agency, there is no connection or overlap between them. Unless you are really smart enough to try yourself, patents cost over $18,000 to file in USA with assistance of your intellectual property lawyer. And often much more if extensive discovery and filings are needed. They immediately become part of a company’s intellectual property portfolio and are often used to help value a startup or take over business because no one else can use that invention without licensing it or waiting many years for it to expire. So you can value it simply by sizing the potential market for such products.
Trademarks on the other hand are often filed by the individual owners themselves, though a lawyer is strongly recommended for all business registrations because of the comprehensive checks needed up front, as well as the ongoing worldwide filing and protection issues. Even so, it is not unusual to get a properly registered federal trademark for $1,000 or less. And with some basic maintenance and small fees the life can go on for years and years. Which is why “Mickey Mouse” is a 50+ year old trademark!
The interesting thing is you don’t have to invent anything to register a trademark. It doesn’t even have to be unique or one of a kind, other than in name. So when someone invented a new way to package potato chips and felt it needed a new name, they called it Pringles® and protected the name with a registered trademark. Others can now copy their idea, as long as they don’t call it Pringles.
So what is the value of a trademark? This is where it is very tempting to shoot off and just talk about some megabrands of the world, since we all intrinsically get the power and value of names like Google, Kellogs, Nordstroms, Amazon.com, Ford, Tesla, 7UP, and many, many more. But brands are not trademarks and trademarks are not brands. (See The Difference Between a Trademark and a Brand) A trademark is just a name (or logo) that is short hand for the brand, and a brand is a promise of an experience. So they are tightly aligned, but reality is most tech, scientific and industrial trademarks will seldom be thought of as brands –at least not until they cross over into the consumer space.
For many years Motorola was a radio communications brand. Well known in its field, but not to the general public. Then it became a big chip company and brand extension was fairly easy, as it often is for good brands and trademarks. Today it is known as a mobile phone brand as well. How much was the brand worth when Google bought them? Despite Google’s big money and massive reach, using an existing known brand was a much more effective way to proceed. Did you know smooth sounding name Motorola was coined from Motor Car and Vitrola (old radios). Yes, their original business plan was to make car radios, something they haven’t done in years. So the trademark stretched over different technologies.
We are fortunate that in recent years we have two separate formal market research studies looked into valuing trademarks – in advance of them being household names. So now we have the data to back up what all good marketers intuitively knew – the value of trademarks.
The first study was published by Elsevier under the title Trademarks and Venture Capital Evaluation and is a comprehensive study of all the literature to date on how trademarks affected the valuation of a company both before and after a liquidity event. The surprise finding is that when plotted over time, the valuation curve has an inverted U shape, since the value of a trademark decreases after acquisition or IPO. But prior to that it is mostly a growth curve and very significant in valuing a company, especially those with multiple registered trademarks.
The second study was the direct effect of trademarks on IPO’s as summarized by the Journal of Business Venturing. It reported on the findings of a multi university research study on how founders protect their businesses with registered trademarks that can be the cornerstone of a stunning level of long-term success for startups.
According to the study, businesses with trademarks gain a number of advantages, ranging from business health, venture capital investment, and even IPO success.
We find that the number of trademarks held by an entrepreneurial firm is associated with a greater VC investment amount spread over a smaller number of financing rounds; a greater probability of successful exit; higher IPO and secondary market valuations; greater institutional investor IPO participation; smaller post-IPO equity market information asymmetry; and better post-IPO operating performance.
Even long ago, in their seminal work “Positioning: The Battle for the Mind” Ries and Trout devoted a whole chapter to naming, because “Your name is your most important weapon in the battle for the mind.” These studies above formalize those values for even the smallest companies. For the big brands, there are plenty of talks about the value of the CocaCola name for example. Or in the case of Ford Motor Corp a very specific example is when they took a big $4billion loan from the government. They symbolically surrendered their big blue oval logo from the corporate board room to the care of the major underwriting bank. Then they made a big fuss of getting it back when they paid off the loan. Today Ford claims to be one of the biggest brands in the world. Who knows how much, but certainly a lot more than $4 billion.
For registration, names have to be non-generic and unique within their International Trademark Class in their target filing country. As a result, in most fields, the dictionary has been combed over extensively and you probably need a new word or construct. Isn’t it about time you called your naming agency or consultant to check your names and see which ones can be registered as trademarks? Complete naming projects shouldn’t cost anymore than your first brochure and webpage. The resulting name and trademark can be the start of very valuable branding intellectual property.
Finally, the other side of not getting a clear registered trademark can be an awfully expensive mistake. Apple Computers Inc (as they were known before) lost a name lawsuit fight with Apple Records when they introduced computers with music capabilities. Not only did they lose the big lawsuit in U.K., they also lost the subsequent insurance lawsuit fight in USA. $53 million later they had clear rights to their own name! Luckily by then they could easily afford it – they even claimed victory since it didn’t cost them more than this.
And your name doesn’t even have to be registered to be yours. You have common law rights in many cases, but the are a lot harder to protect and promote. Microsoft named their first browser Internet Explorer, even though there was a very similar product out there already. Yes a small guy. By time he sued Microsoft he was even bankrupt, but his lawyer stayed by his side and eventually Microsoft paid $7 million to keep the name! Let these be lessons on why you may want a very unique name, especially for international business.
PS Now you know why our company slogan is “The Power of ®”
All articles copyright Brighter Naming. You are welcome to link to these articles, but not to copy them in any manner whatsoever.