Updated: Jun 12, 2019
When entrepreneurs are preparing their business plan to show angel investors, we strongly encourage them to think about their exit strategy. One of the topics that comes up more and more often during pitches is the ownership of the IP and of the trademarks. Investors look at the long term implications of protecting the brands they invest in and this article aims to shine some light on what that means at an operational level.
A company's name, as well as the names of the products it sells, are valuable because they allow for differentiation on the market from competitors. These should be protected to avoid anyone else using them, either for their own benefit, or to damage the company they are competing against. This behaviour has been seen in the domain name industry, as this tactic was used by unscrupulous individuals who bought domain names and sold them back to the companies who use them to do business on a daily basis.
A trademark gives the owner the sole right to use it, and gains value over time as the brand gains recognition on the market. Sometimes, brands become so well known that they become verbs for an action - think of:
"Jet Ski" instead of "personal water craft",
"Kleenex" instead of "facial tissue",
"Google" instead of "search engine",
"Kärcher" instead of "power washer",
"Sharpie" instead of "permanent marker",
"Velcro" instead of "hook and loop fasteners",
"Post-it" instead of "slightly adhesive paper note",
"Powerpoint" instead of "presentation and graphics program"
and so on...
You can read all about companies that have successfully scaled and are immensely valuable, with brands that you know very well, in our reading list.
What can be registered as a trademark?
A trademark can consist of:
shape of goods
shape of the packaging of goods
This means that as long as the trademark falls into one of these categories accepted by the trademark office, and can be represented by the accepted formats, the company can submit it as an application without having to represent it graphically.
The signs that make up a trademark must be capable of distinguishing the goods and services of one undertaking from those of another undertaking.
Can a design be protected?
Yes, a company can register and protect their designs.
Design protection is what builds the case for the value of business assets in companies of all sizes, not just large ones. In fact, companies are bought and sold for the value of their assets, and this goes a long way toward increasing the overall value of the company.
EUIPO’s (European Union Intellectual Property Office) research shows that small and medium enterprises (SMEs) that own designs have 17% higher revenue per employee than SMEs that do not own any IP rights.
Almost any industrial or handcraft item can be eligible for design protection. For example, a company could register:
Packaging of Products
A Product / Set of Products
Parts of Products
Drawings and Artworks
What are the "classes"?
Trademarks are registered including classes of goods and services. The "Nice Classification" is a system of classifying goods and services for European Union (EU) trade mark applications, which consists of 45 classes.
The Nice Classification assigns goods to classes 1 to 34, and services to classes 35 to 45. Each class is represented by a class heading, which gives general information about the type of goods or services covered. For example, the class 25 heading reads ‘Clothing; footwear; headgear’ and the class 15 heading ‘Musical instruments’.
Each class contains a set of terms within that class to better define the goods or services to be protected by the EU trade mark application. When indicating the goods and services in an EU trade mark application, applicants are strongly advised to use the Nice Classification terms in order to avoid delays in the registration procedure caused otherwise by the need to translate the terms submitted. Use of these generic terms will also improve the search capabilities of the EU trade mark databases and thus ultimately result in greater transparency.
The Nice Classification can be searched using TMclass, an interactive search tool that is available in all the official EU languages, as well as in Chinese, Japanese, Korean, Russian and Turkish.
It is worth noting that the original list of goods and services included in an EU trademark application can only be limited, not extended. In other words, you may not add any goods, services or classes to the application as originally filed.
How should companies get started?
We advise companies and individuals to seek out more information by consulting the above mentioned websites, and they can get a quote from platforms such as this one: click here