Trademarks in Marketing Strategies

January 6, 2014 by

Peter Drucker once said that “Any business enterprise has two – and only two – basic functions: marketing and innovation; all the rest are costs”. Marketing and innovation are the driving forces behind a company’s continued growth. This is particularly true for technology companies since they are under high pressure to aggressively pursue new innovations that anticipate customer needs. However, innovation is nothing without the ability to commercialise new products properly.

Marketing and trademark strategy

Marketing and trademark strategy

Intellectual property rights play an important role in this process, and trademarks in particular are of major importance in the marketing process. However, in discussions with clients I have noticed that the value and purpose of brands and trademarks are often misunderstood.

Brands as future drivers of success

Successful marketing starts with an astutely created brand identity. Every business has to create and maintain a distinct identity, image and reputation in order to receive the customer’s trust and confidence in the business’s products or services.

Brands are about creating an emotional connection and building a relationship with customers. The aim of any marketing strategy is to create a distinctive brand that customers associate with the quality of particular products or services. Strong brands promise a consistent level of quality and satisfied customers are more likely to buy the same goods or services again, and to refer other potential customers to that brand. In order to design a strong brand you should know who your customers are.

The value of a brand, excluding its other intellectual property, can be enormous. Brands are assets of significant value and in many cases they are a company’s most valuable asset. The results from the 2013 Interbrand survey of the world’s most valuable brands illustrates this point: Apple is the most valuable global brand (US$185,071 billion) followed by Google (US$$93.3 billion), Coca-Cola (US$79.2 billion), IBM (US$$78.8 billion) and Microsoft (US$59.5 billion).

Because of the value that trademarks and brands can hold they need to be carefully managed and protected against theft, or loss of value. This is a strategic task not an administrative one.

Designing a Trademark

A brand is essentially a source indicator for a particular product or service. To be effective, a brand needs to resonate with customers, differentiate the brand from competitors, and represent what the company stands for. It may comprise of a word, symbol, colour shape, design, logo, or even a taste, smell or sound or a combination of these elements.

The brand design must be capable of distinguishing the goods or services of one business from those of another and not be confusingly similar to any already existing trademark. 

Therefore, when choosing a trademark it is best to choose something that is not common to the industry and something that does not merely describe the kind, quality, quantity, origin or other characteristics of the product or service. Broadly speaking, a brand design should:  

  • be distinctive
  • be easy to memorise
  • be easy to pronounce
  • fit the image of the product/service
  • fit the image of the business
  • have no legal restrictions
  • not be descriptive or laudatory

There are many reasons why the registration of a mark will be refused (e.g. application made in bad faith, offensive mark, use would be contrary to law).

Timing is essential. A trademark should be registered before test marketing a new product or service. Otherwise there is a risk that a brand strategy is developed and advertising expenses incurred only to discover that the trademark is not available.

Protecting one’s own rights is important, but it is equally important not to infringe the rights of other trademark owners. A proper trademark search should be conducted before the trademark is submitted for registration. The main infringement risks arise in the context of the infringement of well-known but unregistered trademark. 

Trademark protection is territorial so that registered trademark in New Zealand does not necessarily provide trademark protection outside New Zealand. In choosing a brand design the long-term business plan should be kept in mind. For instance, are there plans to enter an overseas market?

Registered and unregistered well-known trademarks

There are essentially two types of trademarks: Registered trademarks and unregistered well-known trademarks. Registered trademarks can be designated by the symbol ®. It is an offence to use the ® symbol without having formally registered the trademark.

An unregistered well-known trademark is one that has gained a reputation in the market place through intensive use. The symbol ™ can be used in respect of an identifier to indicate that it is used as a trademark.

Trademark and Domain Names

Many entrepreneurs think that if they have registered a domain name and use the URL they are using a trademark. That is wrong. Having the URL is not the same as having proprietary rights to a trademark. The use of a domain name is merely an informational part of an Internet address and does not, by itself, qualify as trademark. In order to qualify as a trademark the domain name must function separately as an indication of source. 

Trademarks and Registered Company Name

The same applies to a registered company name. A registered company name is simply that: a name of a limited company registered on the Register of Companies. Trademarks on the other hand, are property that prevents others from using confusingly similar trademarks on the same or similar goods or services in a given country.

The importance of trademarks to business is constantly increasing and its value should not be underestimated. Trademarks are key business assets that need to be managed, just like any other important asset of a business. A well-managed trademark portfolio will help maintain a business’s competitive advantage, attract investment, and may result in income from licensing arrangements.

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