Welcome to the first of two blogs on trademarking for SMEs. This one covers WHY - the next one covers the HOW. For maximum benefit, read both.
First off - we're aware that many SME business owners don’t really know what “intellectual property” is – let alone why, or how, they should protect it. So let’s clear that up now...
The jargon bit...
Intellectual Property (aka IP)
relates to intangible assets that are created by the mind – such as brand names & logos, product or packaging designs, books, songs, inventions etc.
IP can belong to people or businesses & can have more than one owner at a time.
Critically, IP can also be sold or transferred (remember this – it’s important!)
Intellectual property rights
are legal rights that allow you to make money from the IP you own & to protect that revenue by preventing others from stealing or copying your IP.
There are different types of legal protection available
Registering a trademark – e.g. your company name or logo & colour/s
Registering a design – e.g. a distinctive packaging style
Copyright – e.g. a song, jingle or book
Patenting an invention – e.g. a new product or process.
They are not the same thing so, if you seek advice in any of these areas, make sure you choose a suitably knowledgeable adviser.
This blog is specifically about Trademarking because it’s the most common form of IP that Rock.Partners’ clients own & manage.
IP infringement
is when a person or company uses one of your trademarked assets without your permission - either intentionally or accidentally.
The misuse need not be identical - i.e. an exact copy of your brand name or logo - but can just be similar enough to cause confusion or risk damaging your brand or business in someway.
A risky business!
When it comes to trademarking, one of the most common questions we get asked by business owners is “do we really need to trademark our brand name or logo?”
We get it. So, let's be frank, there’s absolutely no legal requirement to trademark your IP & many businesses run perfectly well for years without having trademarked anything. When you throw in the perceived the hassle & cost of dealing with lawyers, it’s easy to see why many SME owners don’t bother with trademarking at all.
So why should you consider it?
Rachel Vigers, founder & director of Rock.Partners, puts it like this
“For many business owners, trademarking is low down on their to-do list & often falls right off it. But that’s a dangerous position for anyone determined to build a strong brand. Operating without having trademarked your distinctive assets is a bit like operating without business insurance – your business is exposed to significant risk”
Sounds a bit dramatic, no? "Significant risk" - really?
Yes. Really.
The nature & scale of risk depends upon the business & circumstances, of course, but the risk factors to be considered are both reputational & financial.
Consider this…
1. Confusion Costs
If another business were operating in a similar field to yours, under a very similar brand identity, this could be extremely confusing to customers/clients (both prospective & existing) or other stakeholders.
If prospects confuse another business with yours that could restrict your revenue potential.
You might hope your existing customers would be able to distinguish you vs another similarly-branded business but you can't guarantee it. And do you really want them to start comparing & considering a competitor anyway?
Even high street brands fall foul of the confusion challenge...
Saad Ashraf, from Rock's strategic partners The Trademark Helpline, used this example:
"Look at the case of clothing brand Jack Wills vs House of Fraser (HOF). Jack Wills had registered their trademark “Mr Wills” pheasant logo & used it extensively since 2007. In 2012, they became aware of a similar pigeon logo being used by HOF on their own brand LINEA. Jack Wills sued HOF, claiming the use of a similar bird logo on its clothing could lead to brand confusion. The court ruled in favour of Jack Wills, even mandating that HOF had to give JW a significant percentage of any profits earned from selling the infringing products."
Threatened revenue, compensation costs... is it worth the risk?
(Side note: as online business models* increase, and the competitive landscape expands, so does the risk of IP mis-use, whether intentional or accidental. If you're hoping to earn revenue from Amazon’s registry, trademark registration is mandatory. It’s not a pre-requisite for other online platforms and marketplaces, such as Facebook, Instagram, Twitter, Ebay or Etsy but, if you haven't registered your trademark, you can't practically protect it as you'll be prevented from filing any reports or complaints if you believe another trade is infringing your IP).
2. Reputational Damage costs
If two similar businesses are operating with similar brand identities, they can sometimes navigate the space by agreeing terms - e.g. one company agrees not to offer the specific services offered by the other, or one agrees to not work within a specific sector that the other specialises in. It's not ideal but, if the risk of confusion can be mitigated, it can work.
However, if one of those businesses, or one of their staff members, were to then do something that brought negative associations to their brand name, then the other, similarly branded business could suffer reputational damage by implication. That’s a problem.
Remember the Enron scandal of 2001? If not, just google "Enron". Seriously - over 20 years later, the name is still tarnished. Even today, no business would dream of calling their business Enron, regardless of whether they were in energy or not. So, at the time the scandal broke, any business that had even a remotely similar brand name, would've copped a lot of flack for it.
The fact that a business has done nothing wrong wouldn’t matter.
The damage has been done by another business & it’s tough to regain a good reputation, once lost.
Reputational damage can not only cause loss of revenue from both existing customers & prospects - but there's also the cost of all the marketing & communications activities to try to correct the incorrect associations and rebuild that reputation (which isn’t always possible - necessitating a painful rebrand).
No business wants to be in this situation. Trademark and protect your assets to prevent it.
3. Rebranding costs
Confusion and reputational damage absolutely impact a business financially.
However, there is one more world of pain to navigate... a forced rebrand.
If an IP situation can't be salvaged, Saad spells it out bluntly
“changing a company’s name due to trademark conflicts can be disruptive and costly. It affects everything – from legal documents and contracts, to marketing assets & digital platforms, even email addresses & software logins. The impact on both client-facing & internal systems could put some small businesses out of business altogether. Even those that survive it have to deal with time lost, negative impact on productivity, customer confusion, revenue loss – it’s a huge hit to profitability”
Ouch.
The most common cases of forced rebrands are where one business has failed to protect their distinctive brand assets whilst another similar business comes along and trademarks something similar. Rachel recalls an example of this exact situation in her home town of Altrincham, Cheshire.
"An Italian restaurant, called Sugo Pasta Kitchen, opened up here in 2015. Despite it rapidly becoming hugely popular, the owners failed to protect the brand. So when, in 2017, a totally different company opened up a restaurant called Sugo Pasta in Glasgow & trademarked the name, all hell broke loose. Customers buying vouchers for the Glasgow restaurant found they’d accidentally bought them for the Altrincham one – over 200 miles away. The owners of Sugo in Altrincham ended up being sued for, as they put it, “using our own name”. Frustrating & expensive though it was for them, the Altrincham business was forced to completely rebrand. The business never really recovered (though I can’t put their business failing down to the legal issues alone!).
Make no mistake - it doesn’t matter how long each business has been established – it’s simply a race to registration. The first one there wins.
So, be the first one there.
As we said, lots to consider.
So, how are you feeling now?
Still teetering on the Trademark fence?
Whilst the risks are certainly significant, Rock won’t tell you what to do.
It’s your business, your decision to make.
What it comes down to really is the degree of risk & your appetite for it.
If you’re still hesitating, consider the following questions
1. How likely is it that another business would be operating in a similar field to you with a similar brand name to yours? (Remember this risk increases exponentially if you're trading online)
2. How much do you value your reputation? (Consider how long it took and how much it cost for you to build it in the first place)
3. Could you afford to re-brand if you were forced to? (Consider the time, effort and disruption, as well as the financial cost.)
Look at your answers. Evaluate. Now where do you stand?
On the positive side…
All talk of risk aside, registering your trademark brings some really quite helpful commercial benefits...
helping your brand to be DISTINCTIVE in its market place by preventing others that are similar from trading
DETERRING third parties from intentionally mis-using or copying your brand
enabling you to LEGALLY DEFEND & PROTECT your brand if they do
earning REVENUE, e.g. through licensing rights, price premiums or subsequently selling the trademark
FUTURE-PROOFING against trade-mark related issues if you come to expand into new markets or sell your business at a later point (side tip: investors also like to see trademarks in place)
Not just a big business thing!
Don’t be fooled into thinking the commercial benefits of trademarking only really impact big businesses.
Consider the case of Bentley Clothing vs Bentley Motors.
Bentley Clothing is a Manchester based SME fashion brand that won a legal dispute with Bentley over the use of the “Bentley” name for clothing. In a true David & Goliath moment, Bentley Clothing successfully protected its trademark against a huge corporation.
But a big commercial asset
Also, your business might be an SME now but what about the future? (Top tip – if you haven’t already, make sure you read our blog on Exit Planning too)
Rachel stresses
“If you've created your own trademark, it's considered a self-created asset and you can’t list it on your balance sheet. However, trademarks that are bought or sold can be listed on the balance sheet as an intangible asset. And that’s worth remembering if you come to sell all or part of your business… because that asset has a monetary value as well as buyer appeal”
For example, Green & Blacks chocolate brand was founded as an SME in 1991. They spent over a decade building the brand – trademarked of course – and then, in 2005, sold the business to Cadbury’s for £20m – with the brand recognition and trademark being a key factor in the business valuation.
Even if it all goes wrong and your business has to fold, protected trademarked assets can still be a source of hidden value (as long as reputational damage wasn’t part of the reason for the business failure).
When UK-based furniture SME Made.com went into administration in 2022, the trademark and domain names were still so valuable that Next purchased them for £3.4 million!
This is the world that Rock.Partners operates in.
This is the space in which we support our clients.
We can't always know what’s coming next but, hopefully you'll now agree that trademarking your distinctive assets is one way of mitigating your risk and securing future revenue streams.
If trademarking has now worked its way to the top of your to-do list, why not read our second blog on HOW to trademark your distinctive brand assets (and whether you can DIY it or not).
Contact details
THE TRADEMARK HELPLINE
Saad Ashraf Saad@thetrademarkhelpline.com
Rachel Vigers, Rachel@rock.partners
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