OCTOBER 2003
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Trademark: The Ignored Asset
Part 1: What is a Trademark and Who Cares?
by William S. Wyler
Schwartz, Manes & Ruby
| This is part 1 of a three part series on the importance of trademarks, even for medium and smaller businesses and a basic explanation of the very much misunderstood law of trademark. |
Everyone in business thinks, studies and plans about how to protect corporate assets, reduce taxes, increase sales and a thousand other issues. Yet one issue which arguably involves the most valuable assets is usually not discussed or even considered. Trademarks are the ignored asset.
Many executives and managers, especially in small or medium sized businesses, simply don't think about their trademarks. If they do, they assume trademark matters are only for huge companies like IBM, Microsoft, or G.M. The nature of a trademark or service mark; why they are important and how they are protected, are all issues which are not only misunderstood, they are generally not even considered. In the day to day crush of business, tangible issues such as sales and cash flow tend to take up the available time.
The value of trademarks, on the other hand, is less tangible. That value, however, is real and very important. Imagine what would happen if "Kleenex" no longer belonged exclusively to Kimberly-Clark. If "Kleenex" became a generic word for "tissue", how would a customer know which Kleenex, on a shelf full of "kleenex" from different manufacturers, was the real "Kleenex"? How many customers would read the fine print to find Kimberly-Clark? Not many. Losing a trademark could, in a worst case, destroy a company. More often an unprotected or unprotectable trademark costs sales while helping the competition. "Elevator" and "refrigerator" were both trademarks which were lost.
What is a trademark or service mark? A trademark is any word, symbol, picture or slogan or combination which identifies a product, such as a type of hot dog or a make of computer. A service mark is a word, symbol, picture, or slogan or a combination which identifies the supplier of a service, such as a plumber or an accountant.
Trademarks run a spectrum from very strong marks to very weak marks to marks which can not truly be called trademarks. The strongest mark is a fanciful mark. That is mark which uses a made up word such as "Exxon" or "Adidas". Those words did not exist until the companies created them. The next strongest marks use words which already exist, but are not associated with the product, such as "Shell" for petroleum products. Shells clearly have nothing to do with petroleum. The next mark down the spectrum is a suggestive mark, which is a weak mark. Suggestive marks are marks which suggest the nature of the product or service but do not overtly tell what the product or service actually is. "Staples" and "Home Depot" are both suggestive since, even if you did not know what they sold, you could make a reasonable guess. Staples could manufacture staples, specialize in fastening things together or sell office supplies. Suggestive marks are entitled to be federally registered.
The weakest registerable mark is called a "merely descriptive" mark. This is a mark in which the mark itself describes the product or service, such as "United Parcel Service" (it is a parcel service) or "The History Channel". The product or service does not need to be described in order for the consumer to know what is being sold. This type of mark can not be Federally registered until it can be shown that the consumers already associate the mark with the product or service being offered. (see part 2 in the next issue).
Finally, there are generic marks. These can never be registered, no matter how long they may be used. An inventor can not create a wood and carbon writing instrument a give it the trademark "Pencil." Pencil is generic and can never be registered to anyone.
In order to be considered a trademark or service mark, the mark needs only to be used as a trademark or service mark. No registration, either state or federal, nor any other permission is necessary. The mark must merely be used as a trademark. or service mark. For instance, if a company uses its company name merely to provide an address or a contact for suppliers and other non-consumers, the name is not being used as a trademark. If the name is used to attract the attention of consumers, it is being used as a trademark.
Every company should review how it uses its company name, the names of the company products, the company slogans, and the company logos. Anyone who doubts the value of such a review should consider what would happen if a company could no longer assure that it would continue to have the exclusive rights to use of its marks. A review does not have to be done yearly. However, when there is a new company, service, product, logo or slogan trademark counsel should be consulted. A trademark or service mark search should be considered. A search not only helps to determine that a mark is available, it also prevents accidental infringement on another company's mark. The easiest time to change a trademark or service mark is before it is introduced to consumers, not afterward.
(Part 2: Trademark Registration - How and Why.)
(Part 3: What is Trademark Infringement)
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