Trademark Costs: Trimming the Sails in Rough Economic Waters

• Author: Robert Doerfler/Matthew D. Asbell
• Profession: SVP Worldwide/Ladas & Parry LLP
• Pages: 61-83

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CHAPTER 4

Trademark Costs

Trimming the Sails in Rough Economic Waters

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Robert Doerfler

SVP Worldwide

Matthew D. Asbell

Ladas & Parry LLP

During tough economic times, businesses often must make critical decisions

about their trademark portfolio. The choices may be determine d by a priority

to generate profit while maintaining long-term viability of the business. The lofty

standard of ‘‘best practice’’ to an in-house legal department becom es subject to the

limited immediate resources of a sluggish economy. The trick with any trademark

portfolio is not so much to cut back, but rather to be vigilantly efficient with your

resources in good times and in bad. When the chips are down, brand equity may be

all you have. For many companies, it is the primary company asset, but particularly

in bad economic times, brand equity can significantly help carry you through. A

brand is a trademark, or family of trademarks, that influences consumers’ choices

and sets apart your unique business from that of your competitors.

The value of a company is maximized when the goodwill associated with the

company’s trademarks and other intellectual property provides a competitive advan-

tage in the marketplace. When efficiently maintained and enforced, your trademark

portfolio is your primary asset generating brand equity. This is predicated on the as-

sumption that the commitment of customers to a brand creates a marketing asset that

can be developed. Brand equity is developed through the skillful use of trademarks

to define the products in the minds of customers, and the successful positioning of

trademarks in the marketplace enhances the equity. Unlike other types of intellectual

property, trademark rights exi st in perpetuity provided they ar e continuously used

and maintained. In order to benefit from a trademark portfolio, the properties must

be well documented and protected.

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Trademark rights are created either upon adoption (‘‘first to use’’) or upon filing

(‘‘first to file’’), depending on the country in which they are sought. While some juris-

dictions, such as the United States, provide for common-law rights based on use of a

distinctive trademark, a majority of territories require the filing of a trademark appli-

cation, and subsequent registration thereof, to acquire trademark rights. These ‘‘first-

to-file’’ countries are often viewed as the genesis of trademark litigation war stories of

bad-faith trademark applications filed by competitors, coun terfeiters, and unsavory

business colleagues, all of whom may beat a client in the race to the trademark office

for protection.

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And you often cannot anticipate innocent infringement: the indepen-

dent adoption of an identical or confusingly similar trademark, especially where the

selected mark is only a common term or variation thereof.

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Registrations evidence or provide certain exclusive rights in connection with the

exploitation of the trademark. They provide a relatively clear description of the metes

and bounds of these intangible rights, which can otherwise be difficult to identify. They

help identify the parameters of the subject matter in both geographic and substantive

terms. In many countries, registration of a trademark is a prerequisite to enforcement.

A trademark registration serves two primary purposes. The first is to provide the

registrant withevidence of its trademark rights

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; the second is to provide notice to third

parties of existing rights. A trademark registration will save considerable expense and

time in the defenseof a trademark because it acts as titleto the trademark for the speci-

fication of goods listed in the registrationin the jurisdiction or territory wherethe regis-

tration is granted. Otherwise, you will spend significant resources trying to prove your

trademark rights to the authorities at a time when, quite likely, time is of the essence

and any ambiguities may jeopardize your ability to act efficiently and protect your

brand. For instance, when Chinese Customshas stopped a suspicious container,which

they can hold for only a limited amount of time, and they need to confirm the authen-

ticity of potentially counterfeit goods, the lack of documented trademark rights could

leave Customs without lawful authorityto seize the counterfeit goods. Here, a window

of opportunity to stop the distribution of goods bearing your company’s brand would

be missed and your market affected. Further, as notice to third parties, a trademark

registration announces to the world your claim to a particular trademark. This allows

third parties who diligently screen their own trademark development to identify po-

tential risks thatthey may wish to avoid and reduces the amount of litigationassociated

with the trademark. A registered trademark in some common-law jurisdictions also

enjoys additionaldamages in litigation if the original trademark owner can show thata

third party knew about a valid trademark registration and yet adopted a confusingly

similar or identical markin spite of the existing registration.

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Companies that do not have a formal process in place for developing and manag-

ing trademarks may not be fully capturing and capitalizing on the value of their intel-

lectual assets. Every day, marketing and sales teams are creating new ways to promote

their products or services. Many of those ideas are unique, and a sense of propriety

may often develop over a concept that is adopted and developed in the marketplace;

however, without a procedure to oversee the adoption, registration, use, and mainte-

nance of the trademarks, the value of the intellectual propertyis easily lost. These com-

panies are potentially missing out on significant business opportunities, and exposing

themselves to unexpected litigation or other costlyliabilities.

This chapter will address cost-saving techniques useful in trademark management in

the context of (1) evaluating and organizing a trademark portfolio; (2) selecting and

62 Intellectual Property Operations and Implementation