What's a Trademark?
Trademarks include words, phrases, symbols, sounds, colors, and combinations of any of those. Of course, your business can have multiple trademarks. Let's use NBC as an example. There are the letters NBC, the peacock logo, and the chime. We associate all of those with the television network.
The goal of any trademark is to distinguish your products and services from those of others. Once you invest in building up goodwill through your marketing and sound reputation, you don't want anyone else to be able to confuse consumers into accidentally buying their products or services, rather than yours.
Let's go a bit deeper. The word trademark is actually an umbrella term that includes brand names, slogans, and logos. Here's another example. Nike is a brand name, "Just Do It" is a slogan, and the swoosh symbol is a logo. When we see any of those, we know that the product comes from Nike, Inc. And, we can expect and trust that there will be a certain quality standard upon which we can rely on those products.
I'm often asked about the differences between trademarks and service marks. Service marks are specifically for services. "Trademark", again, is more of an overall umbrella term. It's sometimes used to reference both products and services.
And what about those symbols? So the little "™" symbol indicates products, And, the best practice is to use an "℠" symbol to signify services like, say, consulting or software development. Keep in mind that both "™" and "℠" are best used for unregistered trademarks. That means that your trademark hasn't been granted registration (here in the US) by the United States Patent and Trademark Office. If you're outside the United States, then your country will have its own trademark registration office.
So why should you use the "™", the "℠" or the ®? The key reason is to tell the world that your word, logo or slogan is, in fact, a trademark that uniquely identifies your products and services. This helps to establish what are called "common law" rights in your mark, which gives you certain limited protections, even before a trademark registration issues. Once your trademark or service mark has been federally registered (again here in the United States with the US Patent and Trademark Office), it's a good idea to begin using that ®. That provides notice that your trademark is registered, and the federal registration grants you nationwide rights.
Here's an Assure ™ Action. If you have a pending trademark application, but your registration hasn't issued yet, you may want to limit the first run of product labels. That way, when your registration issues, you can update the graphics from a ™ to a ®.
What is Trade Dress?
Here's an opportunity to solidify your IP expertise, Allies. In addition to trademarks, you may also have trade dress. What's that?
It's actually legally defined as the overall look and feel of a product and can include things like packaging, architecture, specific decor, and generally themes of a product or a setting.
Let's say you see a small teal colored box with a crisp white bow wrapped around it. Anyone thinking Tiffany?
How about a curvy glass bottle full of soda? Does Coca-Cola come to mind?
A plain white screen with six letters in the center, and each of those letters is presented in blue, red, yellow or green. Feeling lucky? Yes, that's Google!
Funny story here. I once walked into a Grand Lux Cafe restaurant and I just about had a nervous breakdown with a worry that this restaurant was knocking off the Cheesecake Factory. The colors, the decor, the setup, they all look just like Cheesecake Factory! Turns out it's a sister restaurant owned by the same company, but it's a great example because, even without seeing the Cheesecake Factory name, all the clues told me where I should be. That's strong trade dress.
What's the Difference? Trademarks, Copyrights, Trade Secrets and Patents
Okay, Allies, we've introduced trademarks and trade dress. Let's give a quick reminder on the differences between trademarks, copyrights, trade secrets and patents.
So trademarks, as we just covered, are sounds, colors, words, symbols, designs, and combinations of them that distinguish your products and services from those of your competitors.
A copyright is a creative work, so we organize them between creative copyrights and business focused ones. Creative copyrights are things like songs, movies, books, artwork, sculptures. By contrast, business focused copyrights are things like architectural designs, training materials, or software code. We'll talk more about copyrights later in this series.
A trade secret is confidential information that provides you with a competitive business advantage. So you are familiar with famous trade secrets like the KFC secret recipe, the Coca Cola formula, or even the Google algorithm. Trade secrets can also be information that you might not have considered within your own business, like your customer list, pricing plans, advertising or marketing strategies, and your expertise. They're the things that you've invested in, and built over time. You generate revenue from those investments because they remain secrets in your organization. We'll publish an episode on trade secrets in this series.
Finally, patents protect innovations, like the light bulb, or pharmaceuticals and similar novel innovations.
Now that we've established the trademark fundamentals, and distinguished them from trade dress, copyrights, trade secrets, and patents ... what does all of this mean for your business? Good question. I have the smartest Allies of them all!
Trademark Value in Business
Over time, you market yourself, your company, its products and services. All of that investment in ads, social media and networking grows your public reputation. In trademark speak, that's your "goodwill". Once you build that goodwill, it's worth protecting. Trademarks do just that. Again, they distinguish your products and services from those of your competitors.
We know the difference between Big Macs and Whoppers, Holiday Inn versus the Four Seasons, and a Toyota versus a Tesla. Each of those names mean something to us. They convey a set of values. Those values represent the brand's goodwill.
Let's go a bit deeper on goodwill. When advertising, you're likely trying to achieve some marketing objective. Here are some branding examples and their related goodwill.
Consumer reports and Lysol are trusted brands.
Bentley and Louis Vuitton are luxury brands.
Ben and Jerry's ice cream and Honest foods are brands dedicated to social good.
And Harley Davidson motorcycles is actually a "cult brand" because it's got lifetime devotees who will follow that brand, whatever they do over decades.
Do you see what I mean, Allies? We know something about those brands because the companies that own them invested heavily in building up a specific meaning associated with them. As a result, each of those brands have quite valuable goodwill. The way to preserve the brand investment in goodwill is by protecting them as trademarks, and assets in your portfolio.
Of course, those assets aren't traditional property like real estate. They're intellectual property. But they're assets nonetheless. Your business valuation - and should you want it, ability to attract investors and to exit your business profitably - will all largely be impacted by your IP assets.
So a quick recap, we've just covered why trademarks matter in business, and explained that your advertising dollars pay off in goodwill. You know that I LOVE to talk business, so you might be wondering, how can I monetize trademarks, Jo? Good question. Allies! The answer is up next, let's talk licensing and make you some money.
Monetizing and Licensing Trademarks
I'm an IP licensing geek. It's okay. I know it. In fact, I embrace it! And hopefully soon, you'll love it too ... because it's one of my favorite ways to help clients build recurring revenue.
In simplest terms, trademark licensing means allowing others to use the goodwill in your brands on their products or services so as to improve your bottom line.
Let's say you're a little outfit called The Walt Disney Company. You would own brands like Avengers, Frozen, Doc McStuffins, and a quaint little franchise named Star Wars. Then let's say you license those brands for use on things that you don't directly manufacturer, like toys, clothes and school lunch boxes. You might generate a cool $52 billion in worldwide sales on licensed merchandise. Do you love licensing yet, Allies?
I manage trademarks globally and in over 150 countries, so I know the power of an established brand to generate new revenue - both in the US and abroad.
Licensing leverages your brand in a few ways. For example, if your brand is well established in the United States, but you don't want to develop an international infrastructure, you could license the brand abroad.
Here's an Assure™ Action. There is no way to gain global protection for trademarks. So, if you enjoy brand success in one country, and want to expand into new markets, be sure to file trademark applications to protect your brands internationally before competitors grab up those rights.
Beside international expansion, you could grow your product and service footprint in other ways. Marie Kondo was well known for the Life-Changing Magic of Tidying Up book, but based on the popularity of her book, she leveraged that notoriety and goodwill into a Netflix series called Tidying Up with Marie Kondo. A natural expansion might be licensing her KonMari method for branding on storage containers, cleaning products, or other goods associated with home organization. All of this would be captured under the guise of trademark licensing.
Another example is licensing athletic brands. Your favorite sports team probably doesn't manufacture those jerseys or jogging pants that you love, but they earn a mint by licensing those brands.
Another way to leverage your brand is to expand through a strategic partner's marketing and distribution channels. This might be a co-branding or a cross-branding relationship. Think Starbucks in Barnes & Nobles. Or, Doritos brand shells at Taco Bell.
Brand licensing can also take the form of a sponsorship. This helps to increase brand recognition. By way of example, over several years, the NFL partnered with the American Cancer Society to raise awareness around breast cancer. Remember when players wore those pink uniforms? The partnership was likely intended not only to appeal to women, but also to enhance the NFL's goodwill with that female demographic. The benefit of gaining favor with women, and supporters of cancer survivors, may have been worth the NFL's investment in that partnership - even without any exchange of money from the charity.
By contrast, when Mercedes-Benz sponsors a sports arena, they're paying quite a good bit of coin to have their name seen and heard on NFL broadcasts. The takeaway, Allies, is that there are lucrative ways to leverage your trademarks via licensing arrangements, whether directly for income to raise your brand profile, or to simply do good.
Trademark License Revenue
There are various compensation arrangements for trademark licenses. For example, let's say you have a popular line of health foods. You can charge:
A percentage of sales to license your brand to a manufacturer who sells pre-made meals to grocery stores
Or, you could charge a flat rate royalty, let's say, to license your brands within a restaurant chain on healthy menu items. In that scenario, maybe your logo is next to those items on a menu that align with your popular brand of healthy foods.
In addition to channel licenses like we just described with grocers or restaurants, there are more granular territorial restrictions that you could apply. So, continuing with our example, perhaps the manufacturer can only sell to grocery stores in the Northeast, and the restaurant chain can only use your brand on their healthy menu items along the West coast. As those markets expand, you can renegotiate for more revenue!
Another layer might be time restrictions, so perhaps those licenses only last for one year, or you might include minimum royalty requirements such that if the license isn't profitable, then your brand is not locked up while there might be more lucrative sales opportunities elsewhere.
An Assure™ Action here. Start small, Allies. Allow a licensee to prove their ability to sell and maintain quality products before you expand the scope of that license. Otherwise, you could leave money on the table.
A quick note for those who want to license services, you can set up a certification program that has standards to replicate your systems using your proven techniques. You might even test licensees, or have other measures to ensure that your methods are deployed in the manner that supports the ongoing goodwill in your brand. Just be careful not to exert too much control, because that could be deemed a franchise (with governing federal and state regulations).
An example of certification is Zumba fitness. Zumba coaches are trained in that unique methodology. The trainers are not directly employed by the company that owns the Zumba brand. But, once they know how to deploy the program, and provided that they maintain certain standards, they have a license right to use the Zumba brand for some period of time at your local gym. Certifications help build recurring revenue because you can require ongoing training to maintain the certification license. And, each time a coach comes back for additional training, that's new monetization. We love recurring revenue!
License Agreement Watch-Outs
There are a few things to consider before you license a trademark. First, ensure that you actually own it. If you'll license brands, logos or slogans in the United States, it's important obtain a federal trademark registration, which affords you the nationwide right to use those assets in connection with your products and services. Likewise, if you intend to license the brand abroad, you'll want to obtain trademark registrations in those additional countries.
Also, avoid "naked licensing". If your grandmama was like mine, she probably had some standards. The same holds true for brands.
Establish meaningful quality control standards.
State them clearly in your licensing agreements.
Regularly check for compliance, whether directly or by authorizing a third party to do that on your behalf. In particular, actively police the use of your trademarks online. Even a simple Google search can help you keep apprised of how your brand is being used, so you can take quick action against unauthorized uses and infringements.
Include an audit right. In any licensing agreement, you'll want the ability to inspect the licensees' books and records to make sure you're receiving the correct payments and royalties. If not, you should be made whole and paid what's due to you.
Without these measures, you could lose your goodwill, and your trademark rights altogether. And, if you encounter an infringement, consult an attorney about how best to approach the infringer to protect your brand rights.
We've learned -
Brands, logos and slogans are all trademarks;
We know the differences between trademarks, trade dress, copyrights, trade secrets, and patents;
Companies build goodwill through brands; and
How to monetize trademarks for recurring revenue through licenses.
Now that you're an expert, here's an Assure Action™ so you can use what you've learned to make money in your business.
Inventory of your trademarks.
Have you filed federal trademark applications to lock in your nationwide rights?
Who loves your products or services? How might you leverage your brands, slogans and logos to expand into new markets with that audience?
Which brand partners and strategic licensees could leverage the goodwill in your brands to sell their products and services to your customers?
Need some help? Let's collaborate!
We help clients build recurring revenue through licensing successful brands, software, expertise, and business content. Our Assure Architect™ strategy framework identifies what to license, highlights target customers, develops pricing models, and establishes a go to market sales plan. It's easy to get started. Reach out to us via our website. Or, connect with me, JoAnn Holmes, directly on LinkedIn.
More goodies to come on our podcast! Next up, we'll talk Copyrights for Coders and Consultants. Be sure to subscribe to Your Business Ally™ in your favorite podcast app, so you have access to every episode.
And, if you've learned anything that would be valuable in your business, take a moment to share the love with another business leader who could benefit from more revenue through trademark licensing.
We always appreciate your support, Allies. Until next time, Set Your Agenda, and Here's to Your Success!
JoAnn Holmes ("Jo") is the founder of HOLMES@LAW. The firm helps innovative midsize companies grow recurring intellectual property revenue, negotiate successful business contracts, and implement profitable legal strategy. Learn more about our Assure™ strategy services to monetize IP, establish a sound legal foundation, and streamline smart business decisions. Our Business Ally™ contract subscriptions help clients stop leaving money on the table, and protect your bottom line.
Holmes, How … about the Disclaimers?
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