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Intellectual property for start-ups in a post-COVID world: part two – trade marks

DATE 26th November 2021

This series of articles explores the effect of COVID-19-related disruption on start-ups’ management and monetisation of intellectual property (IP), giving practical guidance to start-ups to improve their position in the market in the future.

Managing start-ups’ trade marks in a post-COVID-19 world

For IP-heavy companies, trade marks can be an incredibly important commercial asset. For start-ups in particular, whose value is often largely based on their product’s commercial potential but also their brand equity, protecting those assets through a trade mark filing programme is essential.

Even under normal circumstances, there can be uncertainty around what trade marks protect, how they can secure and add value to a start-up and how they are best managed. Now, in the wake of COVID-19, start-ups also need to understand how ‘normal’ management of trade marks needs to change, given the transformation their companies, and their markets, are experiencing during this unprecedented time.

What’s stayed the same?

Before the COVID-19 disruption, strategic management of trade marks would have been based on certain assumptions, for example, that funding was reasonably accessible, that brands’ priorities were largely based on their commercial circumstances alone and that markets were relatively predictable. Now, none of this can be taken for granted.

However, start-ups which need to conserve cash, reprioritise and make choices to keep their business going, can still achieve a level of trade mark protection by pivoting their strategy.

Not everything has changed in the way start-ups should think about trade marks.

Trade marks are still badges of origin

A trade mark distinguishes the goods or services of one business from another. Trade marks include (but are not limited to) single words, a string of words, logos, colours, smells and sounds. Trade marks play a fundamental role in consumers’ recognition of goods and association of those goods with a particular business. Organisations can own an unlimited number of trade marks, including primary brands, secondary brands and multiple logo(s). Unlike most IP rights, if trade marks are used and renewed, they can last indefinitely.

Trade marks must still satisfy certain requirements to be registrable

A trade mark must be distinctive and cannot be descriptive in respect of the goods/services covered.

Trade marks can still be registered or unregistered IP rights

Whilst it is not compulsory to register a trade mark, it is advisable to do so where possible, as there are many commercial and legal benefits, including:

  • Giving notice of the trade mark holders’ rights to third parties, thereby deterring competitors from using identical or similar words, logos, slogans and colours
  • Reducing the cost of enforcement
  • Adding value to the business’s asset register
  • Providing leverage in disputes and commercial negotiations
  • Licensing to third parties to generate royalties or to use as security to raise finance

Before adopting a trade mark, it is still prudent to check it is available for use

Trade mark searches help evaluate the infringement risk as well as the likelihood of successful registration of a trade mark. Difficulties may arise should a trade mark conflict with one registered earlier, and potentially spark an expensive and commercially embarrassing dispute, which might prove fatal to a fledgling brand. Searches can be brief and narrow in scope or more comprehensive, to identify similar marks covering similar goods and services.

What’s changing?

Post-COVID-19, there continues to be a strong incentive to register trade marks. However, different commercial drivers, changing markets and alternative access to funding mean that start-ups may have to conserve cash and make strategic choices. Start-ups can prioritise the following actions now:

Proceed to a trade mark filing without arranging searches

In some jurisdictions, the trade mark offices will issue a report highlighting any existing trade marks the examiner feels may be confusingly similar. Relying solely on this report will save on cost but increases risk.

Register key trade marks only

Lots of brand assets can be protected by trade marks, for example, a company name, a product name or a logo. To help reduce costs in the short term, one option is to identify all of the assets and protect just one or two immediately, with the remainder in the next 12 months.

It is worth bearing in mind that unregistered trade mark rights can be acquired in the UK. Simply using a trade mark will generate goodwill in that mark. However, unregistered trade mark rights are more difficult and expensive to enforce. As such, a trade mark registration should be obtained as soon as practical.

Limit the goods and services associated with a trade mark

A trade mark application must designate specific goods and services for which protection is sought. Ordinarily, businesses will list the goods and services they currently offer as well as goods and services they may offer in future, and finally, the goods and services they want to prevent others from using or registering.

A trade mark application that covers fewer classes goods and services will reduce costs in the short term but with a lower level of protection. Further applications can be filed later, covering additional goods and services. This strategy may not reduce the costs overall as multiple applications are required but it will assist with cashflow.

Delay obtaining trade marks abroad

Trade marks are territorial rights. As such, it is advisable file trade mark applications in the countries where they are going to be used, and where it is prudent to stop others from using them. However, the first trade mark application begins a six-month priority period, wherein trade marks filed elsewhere during this time are back-dated to the original filing date. This will help to spread the costs of trade mark filings over six months, and will ensure your rights are effective in all territories from the date of your original application.

Please note that the above information is not intended to be comprehensive and should be discussed with a qualified trade mark attorney.

Author: Rachel Garrod, associate trade mark attorney at Appleyard Lees IP LLP.