The $67 billion question Featured

7:00pm EDT January 31, 2007

Can you name something that refers to a liquid, exists only in the ozone, must be continually defended, and is worth more than $67 billion? It’s the brand name Coca-Cola, one of the most well-known brands on the planet.

Brand names are often more valuable than the combined physical assets of a company, a key reason that companies fiercely police their brands. Words like “aspirin” and “elevator” were once brand names owned by successful entities.

“The initial cost of brand protection may seem daunting for many companies,” says J. Todd Timmerman, administrator, Intellectual Property Law Department, Shumaker, Loop & Kendrick LLP. “But it pales in comparison with the value that a brand may ultimately possess.”

Smart Business spoke with Timmerman about how to establish, police and protect a brand name, and why it’s money well spent.

What is a brand?

A brand, or trademark, is whatever in the marketplace distinguishes goods or services originating with one source from those originating with another. It can be a word, a design, a symbol or a combination of these elements, among other things. Using our Coca-Cola example, consumers are familiar not only with the product’s name, but also the design elements on its cans, slogans like ‘The Real Thing’ and others.

What steps should a company take prior to adopting or using a brand?

First, you must ensure that when you choose a brand, you’re not going to infringe on the rights of others. To determine this, you should conduct a thorough search of all available records in the United States. The search should include the federal trademark register, all 50 state trademark registers, as well as common-law databases. Many law firms have access to online searching tools and also regularly call on searching companies that specialize in these kinds of searches. Both sources can generate reports very quickly and efficiently.

Second, adopting a protection and registration strategy concurrent with the use of a new mark is extremely important. All trademark rights in the United States arise as the result of use. These rights can be expanded or enhanced by federal or state registration, but those registrations are also tied back to use. A company should take steps to preemptively protect the mark by seeking a federal registration of the mark, or one or more state registrations in areas where they might conduct business — not to mention international registrations.

How can federal registration protect a brand’s future value?

Common-law rights are based on the use of a mark and extend geographically as far as the trademark has a reputation.

For example, let’s look at two companies named ABC Corp. — one initially based in Florida and another in Washington state. Over time, if both companies’ rights expand, they could find that one has rights in certain areas of the country, while the other has rights in the other parts, and neither has the right to invade the territory of the other. This is why a federal trademark registration is so important. It takes what could be a local or regional right, and expands it to what essentially amounts to a prior nationwide right, even absent nationwide use.

What could result from an incomplete search or a failure to register?

If you are forced to change your brand after the public has come to know you or your product by a certain name, a number of substantial expenses come into play. A name change usually involves new signage, collateral materials and — most likely — a public relations campaign to let the public know you are assuming a new brand.

You could also be liable for monetary damages from an infringement suit, as well as disgorged profits that you’ve earned with the brand. At the very least, you could be forced to pay off the original user of the brand name.

How can a company protect established rights in a brand?

It is extremely important that companies continually police their brands. A grass-roots policing program can be used where the sales force keeps its eyes open for potential infringers or misuse of the brand. There are also services that monitor the Internet and the marketplace for brand abuse.

Once infringements are identified, they must be addressed. If you allow infringement to continue, you may ultimately be stripped of your trademark rights. This can be an expensive and painful process. You are generally much better off dealing with infringements promptly, rather than letting them linger and putting your company in a position where it has to explain its delay.

J. TODD TIMMERMAN is administrator of the Intellectual Property Law Department of Shumaker, Loop & Kendrick LLP. Reach him at (813) 227-2243 or ttimmerman@slk-law.com.