It can be your most valuable asset
by Intellectual Property Attorney Bill Honaker, the IP Guy
Forbes reported in 2017 that Apple’s trademark was worth $170 billion, representing 21% of the company’s market value. With Apple hitting $1 trillion in market value, it’s now worth around $210 billion. Other top valued trademarks are Google, Microsoft, Facebook, Amazon, and Coca-Cola. All having trademarks worth billions.
But it’s not just the business name that can be protected. Products and services also have trademarks. Each of these adds value to your business. Forbes recently reported that the value of businesses is shifting from physical assets to the value of intellectual property. Trademarks can be one of the most valuable assets in your portfolio.
How do you get trademarks?
In the United States, merely using your trademark gives you rights. They’re called Common Law Rights. These rights only extend to the geographic area in which you use your trademark. But, if you register your trademark with the United States Patent and Trademark Office, you expand your rights to cover the entire United States.
The Burger King Case
This was the result in the famous Burger King case. In 1953, the national franchise, Burger King (The National Burger King) opened the first “Burger King” restaurant in Jacksonville, Florida. By 1957, they had thirty-eight restaurants operating in Alabama, Kentucky and Virginia.
In 1957, Gene and Betty Hoots opened a non-franchised “Burger King” in Mattoon, Illinois (Mattoon Burger King). In July, 1959, they registered their trademark, “Burger King” under Illinois state law.
In July, 1961, The National Burger King opened their first restaurant in Illinois. That same year, The National Burger King obtained Federal Registration for their trademark.
Mattoon Burger King then sued National Burger King for trademark infringement to prevent them from operating in Illinois. The court held that the national chain’s federal trademark registration of “Burger King” gave them the right to use the mark in Illinois, except in the Mattoon market area. This was the only area where the Mattoon Burger King owners had actually used the mark prior to The National Burger King’s federal registration. The Hoots’ trademark rights were only valid within their market area, which the court determined to be a 20-mile radius.
As the Court stated, “The owners of the federally registered trade mark, ‘Burger King,’ have the incontestable right to use the mark in commerce, except to the extent that such use infringes the rights acquired by the continuous use of the same mark by others, prior to the federal registration.”
The Hoots had Common Law trademark rights, but these were limited to their area of use, a 20- mile radius around Mattoon. The National Burger King’s Federal Registration was good throughout the United States, except for the one area where the Hoots had used it first. Clearly Federal Registration is more valuable.
What is the purpose of a trademark?
Trademarks are synonymous with brands, the term more commonly used these days. A trademark is generally defined as, “a symbol, word, or words, legally registered or established by use ,representing a company or product.” A service mark is the same, except it represents a service, not a product.
Every business has a trademark. Your trademark is likely the most valuable asset your business owns, and it needs to be fully protected. At a minimum you have a trademark in your business name. Having a strong, properly protected trademark is money in the bank. It represents everything that is good (or bad) about your business.
A client recently sold its business for $60 million, and the buyer was mainly interested in the company’s trademarks. This is not uncommon. The trademarks were a symbol of the company’s quality products, service, marketing, and management. The purchaser was able to immediately take advantage of these customer-recognized traits of the business.
Why register a trademark?
The most valuable trademark protection is federal trademark protection. Federal trademark protection gives you a number of important benefits.
A trademark is eligible for federal registration if the mark is used in interstate commerce, which is generally defined as commerce between the states. Therefore, a mark used in more than one state is eligible for federal registration.
Federal registration of a trademark is obtained by filing an application for registration with the United States Trademark Office. The United States trademark office examines the application. If it meets all of the requirements, it is registered. The registration is good for an initial five years, and then additional ten year periods, upon the filing of renewals.
There are numerous advantages to federal registration:
- Your trademark is presumed to be valid, which gives you an important advantage in court.
- It is considered valid throughout the United States. Instead of being limited to the geographic area of use under common law, use is conferred throughout the United States.
- After five years your mark can become incontestable. Basically, incontestability shields the mark against challenges to validity based upon descriptiveness.
- Federal registration allows use of ® to identify the mark as a registered mark. The ® is recognized by most as a symbol of your ownership.
- The federal courts have jurisdiction over disputes involving federal registered trademarks.
- Your registration protects itself. The mark is easy to find when others are considering choosing a mark. It is publicly shown on the USPTO website. A quick search will lead most sophisticated businesses to your mark, and they will likely pick a different one. Few businesses want to pick a trademark that will just get them into litigation.
To get the most value from your trademark, select a strong one that is unique for your goods or services. You do not want to get close to trademarks owned by others, since it may result in unwanted litigation. Once you’ve selected your mark, federally register it. It is likely the most valuable asset your business owns, and it deserves to be protected at the highest level.
About the Author:
Bill Honaker, “The IP Guy” is a former USPTO Examiner, a partner with Dickinson-Wright, and author of the forthcoming book, Invisible Assets – How to Maximize the Hidden Value in Your Business. To download a sample chapter, click here.