Let me tell you the story of how Volkswagen lost the rights to the most prestigious brand in the world.
In 1998, Rolls Royce, the famous car manufacturer, was losing money hand over fist and they were on the brink of collapsing. So their controlling company, Vickers, decided to sell off their Rolls-Royce Motors division. The most likely buyer was BMW, who already supplied engines and other components for Rolls-Royce and Bentley cars, but BMW’s final offer of £340 million was beaten by Volkswagen’s £430m bid.
A little-known stipulation in the ownership documents of Rolls-Royce dictated that Rolls Royce plc, a company which makes aircraft engines would retain certain essential trademarks (specifically, the Rolls-Royce name and logo) if the automotive division was sold. VW did not realize this when they made the bid and tied up the deal. After the deal was done and the champagne had stopped flowing, VW realized that it had bought the IP rights to the Spirit of Ecstasy hood ornament and the shape of the radiator grille, but that it hadn’t actually bought the right to the Rolls-Royce name. Of course, they needed the name to be able to call the cars Rolls Royces, so they could do nothing without the name. In other words, they got the hood ornament and radiator grille, but not the rights to the trademarks. This meant that they could build cars that looked like Rolls Royce vehicles, but they couldn’t actually call them Rolls Royces!
Now, BMW, who’d had previous dealings with Rolls Royce, swooped in and bought an option on the trademarks, licensing the name and “RR” logo for £40m.
The situation was tilted in BMW’s favor, as they could withdraw their engine supply with just 12 months’ notice, which was insufficient time for VW to re-engineer the Rolls-Royce cars to use VW’s own engines.
BMW and VW arrived at a solution. From 1998 to 2002 BMW would continue to supply engines for the cars and would allow use of the names by VW, but this would cease on 1 January 2003.
From that date, only BMW would be able to name cars “Rolls-Royce”, and VW’s former Rolls-Royce/Bentley division would build only cars called “Bentley.” So for little more than a tenth of the price, BMW could get control over Rolls Royce purely because they had done their homework when it came to who actually controls the trademarks – the naming rights to the product.
So, if you see that your invention is going to work or become a success, or even earlier, you should consider filing a trademark application to protect the name of your company, product, or service that you intend trading.
In fact, you could even file it before you’ve made your final product, provided that you have the intention to use the trademark and you actually end up using it on the goods or services within a certain time after filing the trademark.
Usefully, trademarks are registerable for periods of ten years and may be renewed indefinitely, thereby providing you with a perpetual right to protect your reputation from imitators trying to use your name in selling their inferior goods.
The Coca-Cola trademark has been around for more than a 100 years and it will continue going for as long as the company survives. The Coca-Cola trademark is their most valuable asset, as I’ll explain a bit later. This means that it is one of the most powerful tools that you could have in your IP arsenal and trademarks are considered in many industries to be the most important asset a company has.
Think of a leading university such as Harvard or Oxford. What are they selling? Education? Sure, but many other universities sell education. A network? Yes, but you could also get that at other universities. In fact, what Harvard and Oxford are selling, is their name – the fact that you can use their name to say that you have studied at one of the most incredible institutions on the planet, which in turn lends legitimacy to you.
On the other end of the scale, many tech startups use existing technology that they’ve repackaged and put on the net with a funky name.
Airbnb is an example – renting out a room in your house is nothing new, but their cool name gives a good description of what they’re doing and has attracted a great following. The same applies to the TripAdvisor website. There isn’t much new to what they are doing, but they have gained a reputation for hosting reputable reviews of hotels and destinations, which makes their name very valuable in a business sense.
So it would be unwise to discredit the rights to a name which can underpin your company.
Definition of a trademark (What is a trademark?)
A trademark is a mark that distinguishes your goods or services from goods or services of others. Provided certain requirements are met, trademarks may be renewed indefinitely, thereby ensuring the continuity of your brand.
This is used to great effect by car manufacturers, but also by pharmaceutical companies. Eli Lilly put the world’s most successful anti-depressant, Prozac, on the market in 1977. The patent expired many years ago, which means that anyone is free to manufacture the active ingredient, fluoxetine. Although Prozac’s patent protection expired many, many years ago, but they have built such a reputation in the brand that everybody still asks for it by name, even though the generic products are exactly the same. Generic products are pharmaceuticals, which are made by generic companies once the originator’s patent protection has run its 20-year course. But if you’ve built up a strong trademark, then people may still want to rather buy the trusted name that they know. This is why trademarks can be so effective in building out your business in the long term and the short term.
The value of a trademark (Why should I register a trademark?)
You are in the process of building the reputation of your product. However, competitors may try to imitate your product if it is a commercial success. To ensure that the buying public does not confuse your goods or services with those of your competitors, registering a trademark is a cost-effective way of protecting your name and reputation. The biggest brands in the world undergo an annual valuation to see what they’re worth. Recently, the Coca Cola brand was valued at $67 billion dollars! That means that if all their factories burn down, all their vehicles get stolen, and all of their machines get stolen, they will most likely be able to get a loan of nearly $67 billion to build it all, by mortgaging the Coca Cola brand to a bank as security for the loan. It’s not that simple of course, but it gives you an idea of how powerful a brand can be. Like other assets, IP can be mortgaged and can be used as collateral against a loan if it is strong and valuable enough.
Duration of Trademark protection
As I mentioned before, once your trademark has been registered, it needs to be renewed every ten years to stay in force. However, provided you continue renewing your trademark registration and using the mark, your rights to the trademark may last indefinitely. Most countries have provisions that allow the mark to be removed from the register of trademarks if it isn’t used for a certain period of time, usually 3-5 years or thereabouts.
What do I need to register a trademark?
Provide your patent or trademark attorney with a copy of your intended trademark – be it a simple name or slogan, or a stylized logo. They would also require details of all products or services that you intend applying the trademark to. This is necessary, as one has to file a separate trademark application in each of the international classes relating to your product(s) or service(s). Trademarks are registered at the trademarks office in your country and foreign trademark registrations may be obtained should you wish to market your product in foreign countries.
How do I know if someone else has registered the same trademark?
To be considered registerable, your trademark must be capable of distinguishing your goods or services from those of your competitors. There are many, many sites where you can log in to conduct trademark searches for free. Trademarkia runs a site which has integrated many of the trademark databases of various countries into one search interface, which makes it a very easy tool to use to see if there are any ‘blockers’ that can prevent you from registering, or even USING, your name. You could also do a Google search for TESS, the US Trademark office website, or the equivalent in Canada, the UK, Australia, Europe or many other countries. Make sure you use variations of the name that you are interested in. Let’s say you want to register the name “Connection” as a clothing brand. Well, make sure you search for variations such as “Konnection” or “Connexion” or “Konnexion” or “Conexion”. You get the idea. When you’ve got a mark with two or more words, like Fashion Connection, make sure you search for the words linked together as one, as in FashionConnection, or swapped the other way around “ConnectionFashion” or as abbreviations such as “FashConnect” or “Connect Fash”. This is why searching trademark is a specialist skill, but it is something that you can master with time.
While you can do it for free on your own if you’re cash-strapped, I would always recommend contact a patent or trademark attorney to conduct searches on your behalf through the records at your trademarks office, or the trademarks office of the country that you’re interested in obtaining trademark protection for your brand. This will provide an indication of whether there are existing trademarks that are identical or similar to yours. Foreign trademark searches may also be conducted at the same time, if required. The attorney can also provide you with a good indication of whether your name will be registerable, and also whether you will be infringing on someone else’s trademarks when you launch your website, product, service, or start using your business name.
Company names and trademarks
This point brings us to company names and trademarks. Listen carefully to what I’m about to say: A company name registration is independent of a trademark registration. This is extremely important to realize. Do not think that because you have registered a company or a company name that you have a trademark. They are two completely separate things. Even though it might be the same government body registering them, or different government bodies, the trademarks register is completely separate form the company names register. I’ve seen many business close down or be forced to change their name because they have managed to get a company name registered, not knowing that there was an earlier trademark registered by someone else. The trademark is the only legal monopoly you can have on a name. So they can force you to change the name that you are trading under! Don’t underestimate the importance of this piece of information.
Getting a killer trademark
Check out your trademark situation before you even register a company or put a new product on the market, even before you register a domain name. Do this with each country you want to launch your product in, before you enter those markets. Preferably, you can do your searches in the many free trademarks databases that I mentioned in the various countries before you start out with any branding exercise.
This is important, because your company may have built up a substantial reputation in a name that you came up with, that may be attacked or eroded by competitors who may not even have a registered company, but merely a trademark. By registering and enforcing a trademark, your competitors can be stopped from using your brand, product name or company name, while you can use the trademark to grow and perhaps franchise your business.
Or you could register a cool-sounding name and see if anyone in the market wants to buy the name from you or license it from you. Make sure though, that you always have the intention to use the mark commercially and also make sure that you use it within a few years of registering it so that I won’t be taken off or expunged from the trademarks register.
George Eastman, the founder of Kodak, was also the guy that invented the word “”. He wanted something distinctive that had a strong sound to it and could be pronounced in nearly any language. He understood the fundamentals of a good trademark. The more distinct a trademark, the stronger it is. It also makes it more immune from attack. A made-up, unique, word is also going to be less likely to get you involved in clashes with other companies who use a similar name or similar words.
You never want your trademark used generically, which is where the product and the name are synonymous, because then the mark becomes used as a noun. A lot of trademarks suffered that fate. Words like “cellophane”, “escalator”, “aspirin” and “rollerblades” started off as trademarks. Xerox had to go to great lengths in the 1960s and 1970s to stop people from saying that they are going to “Xerox a document”, rather asking them to say that they were going to make a copy using a Xerox photocopier. As soon as your trade mark becomes a common everyday word, you will lose the rights to it. Don’t fall into this trap, even if it is flattering is people start using your brand as a verb.
See why I said that IP is the Ultimate Business Multiplier? In addition, you may be marketing several product lines, each with its own name or brand that are different from your company name. Registering trademarks for each of these names or brands will allow you to protect such names or brands, independently of your company name.
Trademark Health – Global Brand Integrity Management
If you’ve gone to the trouble of registering a trademark, you must make sure that you make the most of it and use it correctly. There are many pitfalls that can trip you that you may not be aware of, so I thought I’d include a best practices discussion about how to work with your trademarks. Here are a few things you can do which can ensure that your trademark survives the long-haul and does what it’s supposed to do: distinguish your goods and services from those of others wherever you sell your product or service. In other words:
Make sure you mark your trademark as being a trademark. If it has not yet been registered, include the letters “TM”. If has been registered, us the little ® device. Do not use the ® device if your trademark has not been registered in the country that you are using it. This is a serious misstep and may case you to lose all rights to your trademark and be sued.
Make sure you have a so-called Corporate Standards manual that lists your trademarks and the ways in which they should be used. This should be made available to all your employees as well as any companies that you license your trademark to use on their products or services.
In your communications can advertising, make sure you retain the distinctiveness of your brand by making it stand out from the words around it. This can be done by writing it in bold, uppercase, italics, or in some other font or style.
Make sure you don’t inadvertently or knowingly ‘genericize’ your trademark or brand. This means that you should use your mark as an adjective and not a noun (e.g. if you were Google, make sure you tell people to “Search it using Google”, not “Google it”. While it may be flattering to have your name become part of common vernacular, this is one of the worst things that could possibility happen to your brand as it immediately loses the possibility of distinguishing your product or service. This has happened to many famous brands such as Xerox, Cellophane, Vaseline, Rollerblades, Escalator and many other brands. This is the reason why you sometimes see ads in the newspaper saying something like: ‘Not all 4x4s are Jeeps’. This is an attempt by the Chrysler Motor Corporation to stop ‘genericide’ and the resultant loss of their trademark monopoly for the word Jeep as applied to 4×4 vehicles.
Make sure that you use the trademark as you registered it. If you’re using different variations, then make sure you protect those as well.
Make sure you file and get your trademark registered in the countries in which you are doing business.
Once you become aware of someone illegally using your trademark, take action as soon as possible. Otherwise it is arguable that you have agreed to their use and you will not be able to take action against them and others if you wait too long.
Selling your trademark
Trademarks can be transferred through assignment – in other words, trademarks may be bought or sold like other commodities. Alternatively, you may wish to license your trademarks to another manufacturer, who will then pay royalties for the use of your trademarks. A trademark, like a patent or a registered design, may even be hypothecated to serve as security – this means that, if your mark is sufficiently valuable, you can use it as security (just like any other asset) and get a loan.
The importance of trade marks for domain names
A Taste for IP – Protecting Your Domains Names Using Trademarks
In 1987, Fernando (“Nando”) Duarte and his friend Robert Brozin bought a small shop in Johannesburg called Chickenland and changed it to start selling their own style of Portuguese/Mozambiquan style chicken. They renamed the shop “Nando’s”, and due to their good quality and amazing taste, it has now expanded to a chain with over 1,000 outlets across Africa, Australia, Canada, Egypt, Israel, Malaysia, Saudi Arabia, and the United Kingdom. They have developed a massive reputation for their peri-peri chicken and have built up a lot of goodwill in its Nando’s name. Importantly, the realized the value of the Nando’s name early on and protected it by way of extensive trade mark filings. It now owns an extensive international portfolio of registered trademarks surrounding the word ‘Nando’s’.
Their name and their global expansion plans were threated in the last 1990s, when a cybersquatter had registered nandos.com and nandoschicken.com before they had. In March 2000, Nando’s filed a cybersquatting case with the WIPO Arbitration and Mediation Center under the Uniform Dispute Resolution Policy (UDRP), based on their trade mark registration.
The panel hearing the case found in favor of Nando’s and ordered the respondent to transfer the domain names to the company. That is the power of having a trademark for your brand – you can stop other from misusing your brand, cybersquatting, or diluting the value of your brand. This is because a trade mark gives you the monopoly over the word and you can thus stop others from using it, even in the form of a domain name, if you had file a trade mark early enough.
What sorcery is this? Harry Potter and the Trademarks…
The growing importance of trademarks can perhaps best be illustrated by using an example that most of us are familiar with: Harry Potter, the main character in J.K. Rowling’s books for adolescents (and, as it turns out, many adults).
The rights to the Harry Potter name were bought by Warner Brothers, who made full use of the trademarks in every sense of the word. Trademarks, like other IP rights, can be licensed and these licenses can vary by term (i.e. how long the licensing agreement lasts), field of use (which areas of commerce they can be used in), or territory (which country they can be used in).
Apart from the billions of dollars made by the Harry Potter brand in bookstores, Warner Brothers made more than $90 million in the first three days of Harry Potter and the Sorcerer’s Stone opening. It also licensed toy manufacturer Mattel to make toys using the name, Hasbro got to make and distribute trading cards and electronic games, Electronic Arts makes Harry Potter computer games and video games, and Coca-Cola obtained a smattering of marketing rights associated with the film. All the money flows back to Warner Brothers, who in turn pay a royalty to J.K. Rowling, making her the richest woman in the United Kingdom and one of the richest people in the world.
Using Trademarks to Franchise Your Business
Most people are familiar with the word ‘franchise’. But what does it mean exactly? Essentially, it is a marketing concept – an innovative method of distributing goods and services. Businesses such as Subway, Curves Fitness Centres, 7-Eleven, Pizza Hut, and McDonalds are typical examples of well-known franchises. They are excellent examples of how IP can be used to expand a business and multiply it thousands of times over without the worry that someone will steal your idea or your brand.
How does IP fit into the franchise picture?
If you intend to expand your business to get franchisees on board, then what you’re actually selling to them are protected systems and intellectual property.
For franchisee, the major benefit for them is that they will have the opportunity to trade under a well-known trademark that you will have established and built a reputation in. What they are purchasing from you is the right to access and use your legal monopoly which resides in your trade mark and the trade secrets which form part of your business systems.
Typically, you would allow a franchisee to market and sell the franchised products and services, as well use their underlying patents and designs. You are also selling them other related IP, such as logos, copyrighted promotional material, a business system, a marketing system, various confidential know-how processes, and shop fit-outs. This is another example of how IP can act as a business multiplier – without these forms of protection in place, you simply would not be able to expand your business in this way and you won’t be able to stop copycats doing the same.
If you want to take your franchise overseas then you’ll have to ensure that you have the same types of IP rights registered in the foreign countries which you’re entering into.
Your local franchising council will have many publications available about franchising. You could also speak with your legal adviser or trade mark attorney about overseas expansion.