This week we passed on some of the most popular questions we receive about US trademarks to expert Diana Palchik to answer. With her company Beauty Mark, Diana provides strategic trademarks and consulting services to brands in the beauty and wellness space. Diana has also worked with The Clean Hub to bring our members a webinar on ‘Protecting Your Brand In The US’, so if your a member and haven’t already checked it out, you can do so here. Alternatively, find out more about our membership program, including how to sign up, by clicking here.
WHY ARE TRADEMARKS SO IMPORTANT?
This is an important question from both the legal and business perspectives. I recently did a webinar on this topic with an angel investor in the beauty space, whose viewpoint may interest many independent beauty companies. From the perspective of investors, potential acquirers, and licensees, your product is actually your company and the goodwill associated with its branding, so the goal is to maximize the value of your company’s assets. Trademarks are intangible assets. Trademark-related problems reduce a trademark’s value.
In the beauty and wellness space, trademarks can account for as much as 80% of a company’s value.
They need to be protectable, meaning that you need to be able to prevent others from using confusingly similar marks to maintain your unique branding position. If your mark is infringing another company’s mark, your company is a lawsuit risk, which affects its valuation. Valuation of unregistered marks is also lower because they are harder to enforce.
From the consumer perspective, trademarks are how consumers identify your company’s products, differentiating them from the products of your competitors. That means that trademarks are an important mechanism of communication with customers in the marketplace. Involuntary rebranding as a result of infringing another company’s mark involves problems beyond the costs of purchasing new labels and ad copy. There is significant expense from loss of goodwill and the effort needed to build new associations in the minds of the purchasing public.
DOES THIS IMPORTANCE DIFFER BETWEEN LARGE COMPANIES AND SMALL BUSINESSES AND START UPS?
Trademarks are equally important to both types of companies. The difference is that large companies typically have larger budgets to protect trademarks and also to correct trademark mistakes. It is critical for startups to correctly navigate the trademark process right at the outset, long before they launch. Many startups play roulette with their trademark strategy, mostly due to entering the landscape without an adequate roadmap.
AT WHAT STAGE DO YOU NEED TO BE AT BEFORE APPLYING FOR A TRADEMARK?
Trademark applications should ideally be filed ahead of a new launch, such as a 12-18 month lead time. Possibly longer.
WHAT IS THE MADRID PROTOCOL AND HOW DOES IT WORK?
The Madrid Protocol is an international treaty. Member countries cooperate by giving trademark applicants from other member countries the ability to file trademark applications using a special process. That process can reduce the costs and administrative burden of obtaining a registration in another member country.
Filing a trademark by using Madrid Protocol procedures is one option, but not the only option, for filing an international trademark application. There are advantages and disadvantages.
The main advantage is that there can be significant savings if filing in more than a handful of countries. If filing in only two or three countries, I usually advise against using the Madrid Protocol due to its constraints. One such constraint is called “central attack.” It means that all the other country applications/registrations are tied to the home country registration for five years. If the home country filing is invalidated for some reason within that period, so are all the others.
IS THERE ONE PARTICULARLY COMMON REASON WHY AN APPLICATION MAY BE REJECTED? IF IT IS, WHAT ARE THE NEXT STEPS?
There are actually two very common reasons for applications being refused. One is that the mark is likely to be confused with another mark, and the other is that the mark merely describes the underlying products or services. It is possible to significantly reduce the likelihood of these types of refusals by conducting proper due diligence concerning competitor marks and, in the case of descriptiveness refusals, simply staying away from certain types of names.
These types of refusals can sometimes be overcome by modifying the goods or services description in the mark. They can sometimes be overcome with carefully-crafted legal arguments presented to the Trademark Office. Unfortunately, legal arguments are not guaranteed to succeed. They involve lawyer time and expense that the applicant had hoped to avoid. Many times an applicant simply abandons the application and looks for a new name. The best time to conduct due diligence of a proposed product or service name is before buying domain names and before launching the product or company. The reality is that most first-choice and second-choice names are already taken. People expect this to be the case with domain names, but seem to be more optimistic about trademarks. Name selection will likely require a list of candidates that are narrowed down by eliminating the ones that turn out to be unavailable or too descriptive.
Working with an experienced trademark lawyer has been statistically shown to substantially increase the likelihood of successfully getting through the examination process.
DO YOU HAVE ANY TIPS ON HOW TO CUT THE COSTS OF AN APPLICATION? IS THIS WISE?
Many smaller companies without trademark expertise attempt to minimize the up-front fees. Up-front is not really the place to try to cut. Most of the time up-front fees are going to be fairly similar if you are getting competent legal advice.
However, it is certainly possible to significantly reduce the likelihood of additional fees. One way to do this is to correctly search and file at the outset so that additional fees are less likely to be incurred due to the issuance of a substantive refusal. Responding to a substantive refusal letter will usually add several thousand dollars to the costs. Likewise, if the trademark is not properly filed, additional fees may be incurred in preparing and filing a new trademark application that would otherwise not have to be filed. That can add another several thousand dollars. If the mark was not properly researched and is opposed by a third party with pre-existing rights, this can potentially add tens of thousands of dollars to the trademark costs to fight it out, and of course rebranding carries its own significant costs.
My other suggestion is to learn the right way to perform initial screening searches, as that can reduce your legal fees. That way, you can perform your own knockout searches to eliminate names that are clearly unavailable and contact a lawyer for deeper searching only after you have a name for which you couldn’t find any conflicts.
Diana Palchik launched Beauty Mark to provide strategic trademark consulting and registration services to beauty and wellness brands. In addition to her trademark work, she regularly handles commercial agreements and is highly experienced with technology transactions. A former legal counsel at Mary Kay headquarters, Diana has been practicing law for over 17 years. She has a business degree in international business with an emphasis on marketing from a top-ranked business school and has worked at the regional office of a national retailer as a business analyst, graduating from its executive training program.