How To Avoid More Lawsuits, AND Make More Money

Benefits of Trademark Registration 

Every company has intrinsic intellectual property- allowing those elements to remain as simple common law rights exposes a company to a higher risk of liability. 

Benefits can be broken down into two categories: 

  1. Registration significantly cuts down on your company’s risk of being on the defensive end of a lawsuit 
  2. Trademarking raises the monetary value of a brand

The Benefits Of A Federal Trademark Registration

Perhaps the most important benefit of registering a federal trademark is that it makes the registrant the exclusive owner of the mark in the jurisdiction it is registered in. In other words, if you register your trademark in your state, you only have lukewarm rights to the name if anyone else in the state uses your name. If someone registers a “similar enough” name to raise a likelihood of confusion with the United States Patent and Trademark Office (USPTO), their trademark will automatically trump yours, and you are almost guaranteed to lose any contest. In a best case scenario, you will be spending a significant amount to even engage such a fight. When a business has trademark protection with the USPTO, no one else will be able to register that same mark or use it on their own products or services without the registrant’s permission. 

In other words: register federally. Registering within your state does not typically accomplish what you intend, and typically leaves the business owner with a very false sense of security.

Trademarking Will Cut Down On The Risk Of Unforeseen Lawsuits

If someone is using the company’s mark without its permission, trademark law gives the company the grounds to sue them for damages and seize any infringing goods. If they have the potential to cause losses for the business, the business can also prevent them from continuing to use the mark. This strengthens the brand and can save the company from future cases of trademark infringement. Most importantly: the formation of any brand identifier (name, logo, slogan) creates automatic common law rights. Enforcement of any common law right is significantly costlier, and riskier to litigate. Therefore, any business valuation will decrease the value of a company that relies upon common law rights.

Arguably the most important takeaway? Trademark lawsuits are not something a business typically sees coming- regardless of the size of the company. If you haven’t trademarked your name, anyone who has trademarked a name that is even remotely similar to yours automatically has superior rights, and has every right to legally force you to stop using the name (known as “enjoinment”).

In other words, you can be proceeding with “business as usual”, and one day, wake up to a cease and desist from a company that you didn’t even know existed. You didn’t necessarily do anything wrong, but they can still bring a legal action against you, or (more often) put you in a position where you have to negotiate, and pay, to continue using the name.

Obviously, there are costs associated with a lawsuit. The unforeseen costs, however? Much more expensive, in their own way- if your customers or clients suddenly can’t find your business because you had to abruptly change your business name, image the reputation costs associated. Moreover, think of the ancillary costs involved, such as hiring a new graphic designer, copywriter, etc.

So, when looking at the question of what value a trademark adds to a business, protection again liability from lawsuits is critical, but on the flip side….

Trademarks raise the actual value of a company in several ways.

  1. Protecting the company’s brand: Trademarks can protect a company’s brand, preventing others from using the same or similar names or logos. This protection can increase the value of the company’s brand by establishing a unique identity that customers associate with quality and reliability.
  2. Enhancing the company’s reputation: Trademarks can enhance the reputation of a company by providing a level of assurance to customers that the company’s products or services are authentic and reliable. This can increase customer loyalty and help attract new customers.
  3. Increasing the company’s market share: Trademarks can help a company differentiate itself from competitors, making it easier to capture a larger share of the market. This can increase the company’s revenue and profitability, which can contribute to its overall value.
  4. Providing licensing and franchising opportunities: A strong trademark can create licensing and franchising opportunities, which can generate additional revenue streams and increase the company’s value.
  5. Enhancing investor confidence: Trademarks provide investors with confidence in the company’s brand and its ability to protect and maintain its market position. This can increase the company’s attractiveness to investors, leading to higher valuations and increased access to capital.
  6. Raised value in a sale: While we often don’t think about selling a business until the opportunity arises, we should always be prepared. You never know what opportunity will fall in your lap! Among other reasons, because trademarking cuts down on the liability mentioned above, a valuation of a company with a registered mark will be higher than one without a registration, simply because the risk is lower.

Overall, trademarks raise the value of a company by establishing and protecting its brand, enhancing its reputation, increasing its market share, providing licensing and franchising opportunities, and enhancing investor confidence. But, there are two critical components to keep in mind: first, your competitors will recognize the same value, so timing is critical. Second, there are strategic ways to secure this value for your company, which we outline in detail here. At the end of the day, strategy is key. It’s critical to seek the advice of a qualified attorney to ensure that your trademark is registered properly and provides the protection you need, and the value you can achieve for your company.

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