In this guide for start-up businesses, Mathew Forde from Lewis Silkin explains why trademarks are so important for entrepreneurs to understand.
The oft-quoted maxim that “your brand is the single most important investment you can make in your business.” is a widely accepted truism, and yet many businesses fail to take the basic steps to safeguard that investment, the most critical of which concerns the registration of their trademarks.
What is it about trademarks that makes their registration so important to a business?
“A common misconception – and one that is held by many start-ups – is that a business name can be protected merely by incorporating a company or by purchasing an associated domain name. That is most definitely not the case”
A symbol of your identity
The term ‘trademark’ describes any distinctive sign which a business uses to direct customers to the goods or services of its business offering. These signs can take on a variety of forms: they can comprise a single word (think Adidas) or a short series of words (think Dunkin’ Donuts), or short phrases (think “I’m lovin’ it”), or symbols or figurative devices (think the Amazon swoosh or Apple’s apple) or a combination of any of these.
The function of these signs is to identify a business’s products and services so that consumers can distinguish that offering from those of competing businesses. In effect they function as markers to create a brand identity within the marketplace and, over time, help to shape people’s perceptions of the business, its products or services, its culture and, most importantly, its reputation.
Reputation and value
A business’s brand and reputation march hand in hand. If a business’s products or services are well received in the marketplace then the reputation of the business is suitably enhanced. The goodwill generated then attaches to the brand, which in turn augments brand value.
Over time this feeds into a positive escalation. Recognisable trademarks help to build a brand’s reputation by allowing customers to spot and recognise the brand in an increasingly crowded marketplace. An effective trademark can also influence the buying decisions of consumers and bring to mind positive, powerful messages about a brand’s reliability and associated culture by means of an emotional connection.
All of which is a somewhat round-about way of highlighting why a brand is such a critical business asset and probably the single-most important tradeable asset that any business can create. Building any business asset from a start-up position and the process of educating the target market inevitably takes time and investment, none of which any business can really afford to lose – which is why brand protection, through the formal confirmation of the right to use a trademark and the ownership of those associated rights, is so important.
How to protect the brand
A common misconception – and one that is held by many start-ups – is that a business name can be protected merely by incorporating a company or by purchasing an associated domain name. That is most definitely not the case. Securing a business name or a domain does not confer an automatic right to use that name or its associated domain to promote particular goods or services in any given territory. The securing of a name is not the same as the right to use a name and yet the two are often conflated and confused. Fundamental to any trademark registration is the conferring of an exclusive right to use that trademark to promote specific goods and services within the registered territory.
If a business fails to register its trading names and logos as trademarks within its trading territories and continues to trade then it runs a real risk that a competitor may register either the same or confusingly similar trading names or logos in those territories. If that happens, then, in a worst case-scenario, the business might be prevented from trading by the competing business or simply suffer the consequences of competing against a confusingly similar mark which is likely to devalue the business brand and render the domain names ineffective. In either scenario, this is likely to result in the business being compelled to rebrand, which could have hugely damaging consequences commercially.
Where to protect your brand
It is important to remember that trademark registration is a territorial protection. The registration of an Irish trademark will therefore only protect a business’s trademark in the Republic of Ireland. It will not protect that business’s marks in Northern Ireland or Great Britain or in any other territory. The decision about where to register a trademark is ultimately a commercial decision and one that will be governed by the market territories in which the business operates. So, for example, if a business sells goods or services to the EU, US and UK markets then it would probably make commercial sense to register trademarks in all of those territories.
When to protect your brand
Trademark registration systems operate on a “first come, first served” basis. As there is no need to have started using the mark, the best time to apply for registration is generally as early as possible – although early reservation will be subject to first use within 5 years in most territories.
There are effectively three standout reasons why it is important to register a trademark:
Avoid having to rebrand
Changing the name of a business can be a complex and expensive task. Having successfully established goodwill for a business, it will involve significant marketing costs to establish a renamed brand and re-educate the market.
Potential purchasers of a business and investors will always be interested in whether the business has protected the brand that supports and promotes its key products or services. Trademark registration not only enhances brand security, but also adds certainty to any future merger or franchising of the business, positively impacting its perceived value.
A registered trademark grants exclusive rights to use the trademark to promote goods or services in the territory in which it is registered. That protection can last forever subject to renewal every 10 years. As a trademark owner a business will have the right to prevent unauthorised parties from using the same or confusingly similar trademarks. By registering a trademark a business is effectively building a barrier to entry around its brand, making it much harder for market imitators to operate within its sales territory.
As we’ve learned, the registration of trademarks should be one of the first things a start-up business owner prioritises to safeguard their business. Doing so will create a brand identity within the marketplace and, over time, help to shape people’s perceptions of the business, its products or services, its culture and – most importantly – its reputation.