By Ralph N. Gaboury, Associate, Duffy Sweeney & Scott, Ltd., [email protected]
Today, branding is crucial. Businesses spend millions of dollars per year on branding and re-branding their products to gain (or keep) a competitive edge in the marketplace. Between otherwise similar products, branding frequently is the only differentiator, and can be the determining factor of which product will dominate a particular market (think Clorox brand bleach versus its virtually identical store-brand alternatives).
Many businesses of all sizes have caught on to the power of branding and are either launching new brands on their own or hiring consultants to assist them. Although launching or updating a brand may be a sizeable investment for most businesses, it often pays for itself many times over in the form of increased market share and competitive advantage.
That is, unless the business is sued for trademark infringement by another company that already owns the new brand. This happens all too frequently because the business failed to "clear" the new brand.
What is Brand "Legal Clearance?"
Brand or trademark "legal clearance" is a two-part analysis conducted by an attorney (generally, "brand," "trademark," and "mark" have the same meaning):
Step 1) Risk Analysis
Is someone going to sue you for using the brand?
Step 2) Value Analysis
Is the new brand worth anything?
Risk Analysis Of these two, the "Risk Analysis" is the more important. The overall process involves a search of trademark records held at the Patent & Trademark Office, as well as each of the 50 states and several other sources, such as databases that compile trade publications, label, and brand usage data. The attorney searches these sources to determine whether another business already owns the trademark, or something similar enough to it that consumers may become confused. If the attorney discovers something similar, then he/she will have a conversation with the client as to the potential risk posed by the owner of the mark that has been discovered – which may be negligible.
Value Analysis An important consideration for any business investing in a new brand, is to what extent that brand will enhance the value of the business if the owners decide to sell the business, seek financing, or sell that particular business line. There are many factors that play into this, but one factor frequently overlooked is to what extent the business will be able to claim "exclusive" ownership of the new brand. In other words, although the business may be safe in using a particular trademark from a risk perspective, will the business be able to enforce that trademark against a competitor who decides to copy it?
For this analysis, the attorney looks at the proposed trademark in conjunction with the types of products or services planned. If the proposed trademark literally describes the product or service – such as "Discount Liquor Warehouse" – then it will be difficult or impossible for the business to stop others from using the same mark, even for identical goods or services, significantly reducing its value.
Bottom line – if you can’t enforce the brand, the value of it will be minimal in connection with any sale of the business or other transaction.
Get the Trademark Attorney Involved Early Even those businesses that understand the importance of legal clearance for new brands frequently consult an attorney after the business has paid a consultant thousands of dollars to finalize the new brand – only to find out that the brand is already in use, or would be nearly impossible to enforce against competitors.
It is far better to involve legal counsel early, by submitting a "short list" of brand names being considered before a final decision is made. That way the attorney can let both the business and the consultant know at the outset which brands on the list are problematic, thus avoiding unnecessary costs for the client in advertising and design fees, as well as saving the consultant from unnecessary embarrassment at having to literally "go back to the drawing board" for a new brand.
