Six Things You Should Know About Trademark

Trademarks are essential assets for any business, particularly startups, as they serve to protect a company’s identity reputation, and its products.  Trademarks play a crucial role in safeguarding a company's brand from unauthorized use, counterfeiting, and unfair competition. Startups must recognize the significance of their trademarks—not only as identifiers of their products and services, but also as valuable assets that can enhance customer trust, build brand loyalty, and even serve as leverage in business transactions.

In this article, we discuss six important aspects of trademarks that every startup should know to protect their brand and maximize its value.

1. Trademark is a Startup’s Identity

Let us play a little game. “When you see the following, what comes to your mind? A swoosh mark, a leaping panther, three ascending bars or even a double capitalized “r”? Your guess can be as good as ours. The first being the logo of NIKE, then PUMA, Adidas and Rolls Royce. The function of a trademark cannot be overemphasized. Just as you could guess the above-mentioned logo because of their distinctiveness, so can a random startup be recognized too. A trademark represents a company, even if the name of the company is there. This is the case with popular brands that can simply be associated with the services they offer.

2. Trademarks are Valuable Assets

An asset is a valuable item or property owned by a person or company. Trademarks are intellectual property assets (IPAs), the same way your houses, cars and telecommunication devices are. Assets can be used as collaterals when applying for a loan. A traditional asset used for this purpose is either a piece of land or a house. However, in recent times, trademarks can be used as collaterals to secure loans due to their economic value. The worth of popular brands is mouth-opening and astonishing. Do you know that according to statista.com, Nike’s brand value is worth around 34.4 billion dollars, while Adidas is worth approximately 12.07 billion dollars?

3. Serves as a Quality Assurance

Why would you rather buy an ‘Adidas’ instead of an ‘Abibas’ or a ‘Nike’ as opposed to a ‘Nika’? I guess it is because you trust the brand to be original. One of the things a trademark does for a startup is the assurance that customers repose in the startup. Where customers trust a startup, there is (high) demand for its products, which generates revenue for the company. As such, trademarks are economic tools that a company can employ to make profits.

4. Prevention of Unfair Competition

As you may know that some dubious persons may try to make profits off the goodwill of a trademark by making counterfeits or knockoffs, a trademark can help in the prevention of this fraudulent act. A trademark registration gives the right to file an infringement suit against an infringer and to recover damages up to the tune of the profits made on the sale of products for which a trademark was used without prior consent. The law is very conscious in the protection of trademarks, even when they are unregistered but have been in usage over a long period, provided the public recognizes the usage of such a trademark.

5. Trademarks are Multi-functional

They can be used for more than a product. The law allows you to register your trademark under various classes. Under the Nice International Classification System (the international classification of goods and services applied for the registration of trademark), there are 45 classes under which a trademark can be registered. Classes 1 – 34 covers registration for goods while Classes 35 – 45 covers registration for services. As such, it is possible to register a trademark to produce goods and provide services. An example of a company that has its trademark registered under different classes is LVMH (Moet Hennessy Louis Vuitton).

6. A Trademark can be Used by Two Businesses

Quite amazing, right? A trademark may be registered and used by two different companies provided that the products of both businesses are distinct and cannot be mixed up. What this means is that members of the public must be able to differentiate between the products of the parties as they are not confusing and there is public knowledge as to their origin (i.e. that both products are from different sources). An example is “Mac” which is registered under the class for electronics as well as cosmetics by two distinct owners. However, a company that is the first to register its trademark may prevent any other company from registering the same again as it tends to be more detrimental to the first company as the new company can benefit from the goodwill of the first company.

Key Requirements for Filing a Trademark Application

The general requirements are that a trademark must be distinctive and non-descriptive. Distinctive, in the sense that it must be identified as different from other trademarks, and non-descriptive such that it does not describe the function of the trademark or the purpose for which the company with the trademark carries on business.