What’s in a name - or logo, design, shape or packaging?
Executives often underestimate the value of their marketing tools when assessing their company’s worth. Indeed, the brand under which a company’s products or services are offered is often overlooked by the company in favour of the products or services themselves. This mindset can result in expensive mistakes and lost opportunities, particularly in the context of valuing assets, dealing with aggressive competitors or even assessing the return on an advertising campaign.
The worth of a trademark can be as high as the value its owner places on it. A trademark can be a word, logo or design that distinguishes a company’s products or services from those of its competitors. In addition, few people know that a trademark can also be applied to a particular shape or mode of packaging products such that a company's customers recognise its products simply by seeing them on the shelves, even if they cannot read its name on the label.
When properly used and protected, trademarks can add tremendous worth to an enterprise and can be both used as a marketing tool that gives a company an advantage over its competitors and considered a valuable asset by the company's lending institution.
In fact, in addition to awarding a company a monopoly on the use of the trademark in relation to its products or services, a trademark can:
- generate income in the form of licensing revenues;
- serve as collateral for securing loans; and
- be an important asset when valuing a company for the purpose of a merger, acquisition or equity financing.
The worth and level of protection of a trademark often depend on how its owner has used it and whether it has been registered. Indeed, a trademark need not be registered. For example, an unregistered word or logo that has been used extensively in relation to a particular set of products or services can function as a trademark if the owner can prove that the public uses the word or logo to distinguish its products or services from those of others. However, these unregistered trademarks are often difficult to enforce or value because the owner must first prove that the trademark has reached the required level of distinctiveness, an exercise that is often imperfect and expensive, particularly as a survey to prove the public’s knowledge of the trademark may be required.
On the other hand, the simple exercise of registering a trademark with the Canadian Intellectual Property Office provides numerous advantages which far outweigh the costs of registration (which in any event are quite low). The registration of a trademark in Canada creates a presumption of validity of the trademark, such that its owner need not expend the time or resources in first proving public knowledge of the mark. In addition, a registered trademark provides its owner with a Canada-wide monopoly on the use of the trademark - or any confusingly similar trademark - in relation to the products or services for which the mark has been registered and used. An unregistered trademark has value only in the territory in which it has been used; therefore, a Canada-wide monopoly can rarely be enforced, which means that the mark is devalued compared to one with a nationwide ambit of protection. Other statutory benefits of registration also exist, all of which can benefit an owner in terms of stopping infringers, and also indirectly in assessing and often increasing the monetary value of the goodwill associated with the trademark in the preparation of financial statements or otherwise.
In conclusion, do not underestimate the worth that a registered trademark can add to a company’s portfolio.
This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight
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