by Timothy J. Engling

Growing companies have a diverse group of interests and goals, with common threads of good reputation and quality as key areas. Growth companies are often built on a foundation of people, patents, and pride. Protecting that pride has a price, and you must often balance that with the use of limited funds. From guarding the goodwill built in your products or services to being collateral for a loan, registered trademarks can provide lasting value for your growing company that provides either products or services.

A trademark is that word, name, phrase, symbol, logo or design that sets your goods or services apart and distinguishes you from all the rest. The “loud and proud” protection of goodwill being built in your mark serves many valuable purposes.

Trademarks are a way of attracting customers and building consumer goodwill, wherein your customers will identify quality goods and services to provide repeat business. Registering a trademark helps prevent others from using confusingly similar marks to cash in on your hard-earned, strong reputation and customer loyalty. A registration will minimize sales being improperly pirated.

The trademark process and ultimate registration have numerous important benefits:

1. A registration is an asset that delineates the rights in a trademark by recording and securing exclusive rights to the registrant. A federal registration can be licensed or sold as property, and assignments, liens, and security interests can be federally recorded.

2. The registration process reduces risk for use-based or intent-to-use applications in two stages: first with USPTO examination about four months after filing and second after allowance with publication for public opposition. An intent-to-use application can gage risk before a mark is even used in commerce. There is less risk in using a registered mark than one with untested and limited common law rights.

3. Only federal registration permits use of the circled “R” symbol, ®, adding a professional appearance and showing that your mark is important enough to protect, enhancing your brand. Without federal registration, only “TM” may be used, which is merely an assertion that the user believes it has trademark rights.

4. Constructive notice, whereby the public is deemed notified and aware that the trademark is in use, begins the date the mark is federally registered. Constructive notice may hinder parties from challenging your registered mark by limiting excuses.

5. With actual knowledge, competitors may avoid adopting conflicting marks. When adopting their own marks, competitors should search federal records or internet search engines to avoid selecting confusingly similar marks or otherwise would adopt a new mark at their peril with inferior rights and possible infringement.

6. A registration will block registration of confusingly similar marks. The Trademark Office should reject confusingly similar marks from later registration, protecting your image.

7. Federal law allows for incontestability – the highest status of trademark protection. After five years of registration with proper conditions, no one can assert prior use, nor can the registration be challenged on numerous other grounds.

8. Registration permits jurisdiction in U.S. federal court, where a judge may grant injunctions, award damages for infringement and – in some cases – recovery of legal fees and defendant’s profits.

9. A federal registration is presumed valid in legal proceedings with other evidentiary benefits. It provides evidence of ownership and the owner’s exclusive right to use the mark on registered goods and services. It helps prevail in trademark disputes.

10. Beyond federal court, a registration recorded with U.S. Customs may protect you by preventing the importation of infringing or counterfeit goods. Customs can seize counterfeit goods, impose fines and detain imported goods that infringe.

11. A federal trademark registration can also serve as a basis for obtaining priority and registrations in foreign countries.

12. Finally, the cost is reasonable for these benefits. Typically, the cost for preparing and filing a federal trademark application in one class is about $1200, and trouble-free prosecution through registration is about half that amount.

The value of registering a worthy trademark typically exceeds the cost. The association of quality and trust with a particular brand is valuable.

All aspects of production, support, distribution and sales have products and services that you may want to differentiate from others. Protecting the goodwill built in such goods and services will help with recognition of quality and result in continuing business. A trademark registration will prevent others from trading off the goodwill built in your name and reputation, but more importantly distinguish your hard work to become a success.

Obtaining intellectual property protection is important. Often, a company’s value is based on its intellectual property. As such, it is important that you develop a sound strategy for protecting your intellectual capital as early as possible. Registering trademarks should be an early milestone in a prudent business model.

Trademark registrations may foster investment in a growing company. Investors are generally more attracted to those companies distinguished by a favorable risk/reward profile and scalability. As noted above, risk is reduced with this trademark asset, which can help throughout the growth of your company and its sales.

Federal trademark registrations add value to companies that provide either products or services, and are an area where investors evaluate risk, worth, and prudent company procedures. Proper care of trademark resources can help ensure the long-term sustainability of your business or investment. Thriving companies should register their trademarks to secure these strong and valuable benefits. Thus, registering a trademark benefits both your company and its investors.

© MICHAEL BEST & FRIEDRICH LLP