What is a Trademark?

What is a Trademark?

It is a sign which identifies the products or services of a business and, may consist of words, slogans, logos, shapes, numerals, colours or any combination of these. In essence it is a badge of origin that allows customers to distinguish the goods or services of one trader from those of another.

In order to be registrable a trade mark must be:

• Distinctive for the goods or services in relation to which it is/will be used (i.e. it must not be exclusively descriptive of the kind, quality, quantity, intended purpose, value, geographical origin, or other characteristics of the goods or services)
• Not be generic or reasonably required for use in the relevant trade
• Not be deceptive, misleading, contrary to law or morality, or filed in bad faith
• Not identical or confusingly similar to any earlier marks for the same or similar goods/services

The more distinctive a trademark the greater the protection afforded to it will be. Examples of distinctive trademarks are ‘Kodak’ and ‘Xerox’. They are highly distinctive as they are invented words and mean nothing in relation to the goods or services in respect of which they are registered. The trademark ‘Staples’ is very distinctive (i.e. a good, strong trademark) in relation to clothing however, if used in relation to staples (i.e. stationary) it is descriptive and cannot be registered.

The reason that descriptive trademarks cannot be registered is because they are required for use by others in describing, marketing or advertising their products or services. Descriptive trademarks can therefore not be the subject of a monopoly (which is one of the benefits a trademark registration provides). There are exceptions to this rule and there are ways to add matter to descriptive trademarks in order to elevate them to an acceptable level of distinctiveness and seeking professional trademark advice is recommended.

Quasi-descriptive trademarks are inherently registrable although it should be borne in mind that they are generally weak trademarks in that the trademark rights given to them are not as strong as those afforded to highly distinctive trademarks, particularly when trademark infringement and trademark enforcement issues are considered.

Call us for a free trademark advice or email us with your query.

Why Trademark Registration is important

There are numerous commercial advantages associated with trade mark registration. Firstly, trade mark registrations can be used as negotiating tools in business deals as they can greatly facilitate the negotiation of licenses, franchises and the transfer of ownership. Secondly registered trade marks are ‘quantifiable’ assets in their own right thereby commanding a presence in a company’s balance sheet. This in turn enhances the value of a business for potential investors, lenders, purchasers and public offerings. Thirdly a registered trademark can serve as security for financial transactions thereby giving the trademark proprietor more options and greater financial flexibility.

However, and more importantly, the commercial and financial consequences in failing to obtain a trademark registration can be extremely damaging to a company. Here are merely a few possibilities:

1. Use of a trade mark may end up infringing a third parties right which could mean litigation, re-branding or even withdrawal from the market. This can be an expensive exercise as it could mean the re-packaging goods, changing stationary and redesigning letterheads, websites etc. In fact any goodwill that you may have accumulated in the name through use etc would have to be forfeited, which could be very damaging;
2. Very little protection (and absolutely none if there is no reputation) is given to an unregistered trade mark as one has to rely on common law rights (as opposed to statutory rights) to prevent another entity trading under or using an identical or similar name. Even if there is a reputation the legal requirements are notoriously difficult and very expensive to prove. As a result few passing off actions are successfully instituted. The reality is that for most small to medium sized businesses there will be no protection.
3. If someone registers your name as a trade mark (before you do) the worst case scenario is that the third party could prevent you using your name altogether (depending on the circumstances). They could certainly prevent you using it outside the area in which you have a reputation (e.g. if you trade in London you will not be able to trade in Manchester, for instance, under the same name (unless you are able to prove that your reputation extends to Manchester).
4. Failure to obtain a trade mark registration could severely hamper an owner’s ability to grow the business and expand into other regions. This is particularly important from a franchising or licensing perspective but is equally important in circumstances where a business expands into other regions or territories due to organic growth or acquisition.
5. A trademark registration is an intangible asset that adds value to a business. Failure to register a trade mark could have negative implications on the value of a business in the event of a business sale (unregistered marks are often "deal killers" when negotiating with third parties).

The above examples illustrate the commercial importance of protecting a trade mark. Failure to protect a trade mark exposes a company to unnecessary risk and for the sake of a few hundred pounds (i.e. the cost of a trademark registration) it really is not worth it.

Call us for a free trademark advice or email us with your query.