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Startup founders work tirelessly to build their businesses. They often invest significant resources to develop the perfect business name, acquire a domain, create a brand and start marketing a product to the public. However, many fail to take the steps necessary to protect their investments of time and resources by registering and enforcing their trademarks.
That’s a big mistake because a startup’s trademark is one of its most valuable assets.
Let’s dive into what trademarks are, why they’re valuable and how to protect them.
What is a trademark?
A trademark is a form of intellectual property (“IP”). According to the United States Patent and Trademark Office (USPTO), a trademark is a “word, phrase, symbol, design, or a combination of these things that identifies your goods or services.” In more practical terms, your trademark is how customers recognize your business in the marketplace and distinguish it from competitors.
A trademark differs from other forms of IP, such as patents (which relate to inventions) and copyrights (which relate to creative works).
Why are trademarks valuable?
The value of a trademark is a reflection of the goodwill associated with that trademark. In that sense, a trademark tends to increase in value as the underlying business increases in value.
There are several reasons why a trademark tends to be among a startup’s most valuable assets. A trademark can:
- Identify and differentiate the company and its products or services from competitors.
- Create instant recognition and convey quality.
- Allow a brand to expand into new markets and product offerings by leveraging brand strength.
- Help attract talented workers who value working for a company that has a strong brand.
- Be perpetual since trademarks, as long as they’re appropriately renewed, don’t expire as patents and copyrights do.
In addition, trademarks — particularly the number of trademarks a business has — positively impact a company’s profitability and valuation. In Management Science’s “Valuation of New Trademarks,” researchers found that the number of new trademark registrations positively predicts firm profitability, stock returns and underreaction by analysts in their earnings forecasts.
How to protect a trademark?
Every startup has a name, brand and domain name. But that doesn’t mean that it has an enforceable trademark. Indeed, not every mark can be registered with the USPTO. Nor is every mark legally protectable.
It’s essential to consult with legal counsel early in your process to make sure that your trademark IP can be protected. The last thing you want to do is invest time and money into a mark you ultimately have to abandon. Start by considering whether a trademark is too similar to another because the USPTO will not register a trademark if there is a “likelihood of confusion” with another registered trademark.
One way to determine if there may be a “likelihood of confusion” with a similar trademark is to do a trademark search on the United States Patent and Trademark Office’s Trademark Electronic Search System. If a name doesn’t appear on this system, it doesn’t guarantee that someone else doesn’t own the trademark, but it’s a good starting point. Other simple searches can be done on Google, relevant secretary of state websites and a domain registrar, such as GoDaddy.com.
If there are no apparent concerns with your trademark, the next step is to file a trademark application through the USPTO’s Trademark Electronic Application Service (TEAS). While it’s possible to file your trademark application, working with IP legal counsel is best since a trademark is such a valuable asset. The risks of applying alone are too significant regarding a startup’s IP. A trademark application may seem straightforward, but many nuances are involved in making decisions about and describing the types of goods or services you use your mark for in your application. Trademark protection only applies to the goods and services you identify in your application.
Once a trademark is registered, it’s important to monitor whether it’s being infringed upon and take action to stop infringement. It’s also crucial to maintain your trademark and renew it, so its registration doesn’t expire.
Is there a case for being less protective of trademarks?
In a Harvard Business Review article, Georgetown University Law Professor Madhavi Sunder argues for a less protective approach to trademarks, especially when it comes to brand fans using a trademark in different ways. “[C]ompanies ought to be pinching themselves that their fans want to bring their fictional worlds to life,” wrote Sunder. “Fan engagement extends both the lifespan and the value of the work. Fans make the work relevant to themselves and others. Their love and devotion are what creators live for.”
Sundar argues for a “more measured approach to asserting intellectual property rights on fan experiences.” He cites the example of Warner Brothers allowing Quidditch (the game popularized by Harry Potter books) leagues to flourish worldwide instead of demanding they cease.
In the tech world, particularly in Web 3, we see brands taking a similar, more lenient approach to trademark protection. For example, many NFT projects are creative commons projects by which the creator of the NFT relinquishes all IP rights to the buyer. In other situations, such as with the Bored Ape Yacht Club, buyers of Bored Ape NFTs receive no rights to the underlying Bored Ape Yacht Club IP but may monetize their individual Bored Ape NFT as they see fit.
This is not to say that your startup should be relaxed in protecting its trademarks. But it’s worth noting the different approaches businesses are using to increase the value of their IP — and in some cases, a less protective system that taps into a brand’s community may make sense depending on a business’s objectives.
Don’t wait to protect your startup’s IP
There are many legal issues that startup founders must attend to, but making sure a company’s IP is protected is one of the highest priorities. Many startups fail or at least struggle because they fail to properly recognize and protect their potential IP assets from the start. When protecting a trademark, proactive planning and research can go a long way toward securing one of your most valuable business assets.