Are Trademarks valuable?
A trademark is a type of intellectual property and is used to protect a brand from use of a confusingly similar brand by another.
It's the brand, a type of 'intangible' property or iP, that grows in value. It becomes valuable as 'good will' accrues through consistent and continuous use of the brand in commerce. The value of a trademark is only in how well the trademark protects the brand and that depends on how the owner uses the trademark.
Brands are extremely valuable!
The value of the google brand is estimated at more than $150 billion. That's the value of the good will in the brand. The top handful of brands are worth more than a trillion dollars!
The term 'good will' is a foreign concept to many business owners. It's the value of an important type of intangible property, and it should be recognized on your company's balance sheet. It can make getting loans easier or justify a higher valuation when seeking equity investors.
Trademarks that aren't associated with a brand being used in commerce have no good will and no value. However, by consistent and continuous use of a mark in commerce, the brand that the trademark protects accrues good will, which can drive sales and increase profits if done right.
Want to know what your company can do to protect it's branding investment? Then, book a session with Chris Paradies of Paradies Law.
Benefits of Trademark Registration
why register a trademark?
Trademark Benefits Case Study
I keep my eye on legal cases that break new ground in IP law. In SEBASTIAN BROWN PRODUCTIONS LLC v. MUZOOKA INC., et al., an assignment of a pending application for a trademark was voided with drastic consequences for the trademark owner.
An individual filed an 'intent-to-use' application for “Muzook” as a mark. An intent-to-use application is filed with the United States Patent and Trademark Office when the mark has not been used in interstate commerce, yet, but the applicant has a bona fide intent to use the mark.
The filing date of an application for registration of a trademark with the trademark office is taken as the date of first use under "constructive use" doctrine, even if an intent-to-use application is filed. This "constructive use" is the most valuable benefit for registering a mark, because it means an applicant doesn't have to prove your date of first use and continuous use in commerce from that date of first use.
Shortly after filing the application for registration of the mark, the individual signed over the rights in the trademark to a company. (I always recommend filing trademark registrations in the name of the company, not an individual.)
The agreement used to sign over rights is called an assignment. In this case, if the assignment was valid, then the company bringing the lawsuit would have had an earlier date of "constructive use".
If the assignment is not valid, then the company is not given the benefit of constructive use, and it must prove its first use in commerce and continuous use after its first use.
However, an intent-to-use application is not freely assignable, under Title 15 U.S.C. § 1060(a)(1) of the U.S. federal trademark laws.
An applicant may validly assign an intent-to-use application only two ways.
The first way is by assignment after a proper allegation of use is filed with the office, which converts the application from 'intent to use' to actual use.
The second way is by assignment “…to a successor to the business of the applicant, or portion thereof, to which the mark pertains, if that business is ongoing and existing.”
There is no other way. Allegation of use is done properly by filing a statement of use and a specimen of use that shows how the mark is being used in interstate commerce for the goods or services identified in the application for registration.
In the Moozika case, the owner didn't do the right thing. Instead, the individual that filed the trademark application took measures to try to keep its trademark and business idea confidential, which seems completely reasonable. However, there was no ongoing business, at all, and the court held the assignment void. Since the intent-to-use application was not validly assigned, the application, itself, was never effective, as if it had never been filed. As a result, the assignee of the trademark could not rely on "constructive use" to establish an earlier date of use, and the business lost its right to use the mark.
This shows the power of filing for a trademark, the right to preempt others from use of your mark from the filing date, but this was lost by not filing the mark with the business as the owner from the very start.
What Are the takeaways?
So, what's this all mean for me?
People don't know that they cannot freely assign intent-to-use applications. The owner listed on an application for a mark should always be the company that actually intends to use the mark. Most often, the owner should be a company, and the company should be formed prior to filing the application for registration of the mark.
You can't register a trademark just to poach it and sell it to someone else at a higher price. If you want that in legalese, see McCarthy on Trademarks and Unfair Competition § 18:13 (4th ed.)("...buying and selling of ‘inchoate’ marks which as yet have no real existence...” is prohibited under U.S. trademark law).
Trademarks are very different than domain names. So long as a domain name is not a prior registered trademark of someone else, anyone can purchase it and hold it for sale later, even at a higher price. There is no requirement that a domain name be used, in commerce or otherwise. The only prohibition for domain names is against 'bad faith' purchasing, which is sometimes referred to as cybersquatting or domain squatting. Bad faith is shown by a preexisting trademark owner's trademark registration and intent by the squatter to hold the domain name for ransom.
An application for trademark registration should only be filed if it is in use or soon will be. Its unlawful to file a application for the purpose of selling a trademark to someone else at a profit, which is considered trafficking. Many countries and most U.S. states don't even allow a person or company to file a trademark application until the mark is actually being used in commerce, but the U.S. federal trademark office allows an application to be filed if there is a bona fide intent to use the mark in the future. There is a benefit to allowing trademark owners to file an application before actual use, getting approval for registration before use reduces uncertainty.
While allowing for intent to use applications to be filed, U.S. trademark law adopted an anti-trafficking rule. This explains the severity of the result when a trademark application is filed improperly, with an intent to poach and resell the mark. Violating the U.S. anti-trafficking rule "...voids the assignment as well as the underlying application and resulting registration.” See Oculu, LLC v. Oculus VR, Inc., No. SACV-14-0196-DOC, 2015 WL 3619204, at *7 (C.D. Cal. June 8, 2015).
A pending application for a trademarks has no intrinsic value, because a trademark's value depends on the value of the good will in the brand that the trademark protects. Trademarks protect brands. Increasing good will in the brand is what creates and grows the value of a business. Trademarks are merely a necessary cost that helps protect the value in brands. The cost of a trademark should be far less than the eventual value in the brand.
Renewal & Incontestability
Trademarks must be renewed periodically. At five years, ten years and every ten years, thereafter, a registrant is required to make a statement that the mark is being used in commerce and pay a fee. After five years, a trademark owner also has an opportunity to file a statement of incontestability, if the mark has been used continuously in commerce without any disputes about the right of the owner to continue to use the registered mark. Filing a statement of incontestability is cheap insurance. So, if possible, it should be done. Why?
The benefit of incontestability is that the registration, itself, is conclusive evidence for the owner's rights, including:
- validity of the registered mark;
- registration of the mark;
- ownership of the mark; and
- exclusive right to use the mark with the registered goods or services.
In practice, this means that any infringer has fewer ways to challenge your mark, which can make it easier to settle any dispute without resorting to litigation or limits the issues to be resolved if litigation is unavoidable.