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Why trademarks matter to start-ups, and the secrets to getting them right



Startup

By Jacqui Barrett

Trademarks do more than identify your brand, they provide several business and legal benefits at relatively low cost. Yet many start-ups make elementary mistakes, such as leaving trademark registration too late, which can haunt for years to come.

A recent David and Goliath case highlights why trademarks matter. Stylkea, a niche small business providing stick on panels for customising Ikea furniture, received a “cease and desist” letter from the Swedish retail giant in 2017.

The case is currently tied up in the legal process. But Stylkea took steps regarding trademarks which offers some protection, including having the Stylkea trademark approved by IP Australia in 2018.

Ikea is currently appealing the trademark with IP Australia – as is Ikea’s right – but this could take up to 18 months. In the meantime, Stylkea is free to trade and build its business.

We cannot say for sure whether Stylkea will prevail against Ikea. But a trademark registration could prove to be one of the most important moves this small business has made.

Trademark benefits for business

Trademarks minimise marketplace confusion and differentiate products: for example, a trademark may enable consumers to differentiate among goods which may otherwise be difficult to distinguish (e.g. Teflon for non-stick coating).

Trademarks play a fundamental and powerful role in branding: your brand may be a critical factor driving a consumer’s purchasing decision, and may attract a premium.

They are economically efficient communication tools: a single word or phrase, a design, a slogan or product configuration can convey much information when used as a mark. They embody intellectual and emotional cues about the source of the product, reputation for quality, types of products and more.

Trademarks transcend language, borders, and cultures. Practically anything perceivable by the human senses can operate as a trademark: words, symbols, devices, shapes, scents, tastes and touch. Consider the following:

  • Music: Dogs go wacko dogs go wacko for schmackos– Registration 1472688 (AU)
  • Sounds: Citigroup Limited A five note melody– Registration 1982649 (AU)
  • Voices: Compare the market Limited “Simples”– Registration 1533136 (AU)
  • Olfactory: Eucalyptus Radiata scent for golf tees (AU 1241420)
  • Tactile: German Reg. No. 30259811 in Braille

Trademarks are property, an asset to the business, which may be bought and sold, pledged (as a security interest) or licensed – for example merchandising, endorsements and sponsorships, co-branding promotions, sweepstakes, and contests.Trademarks provide long-term competitive advantages and may appreciate in value.

Importantly, trademarks are weapons against unfair competition. In most countries, trademark statutes include prohibitions against deceptive and misleading advertising.They can be an effective tool to combat unfair competition in conjunction with consumer protection laws and unfair competition laws. Trademarks are relatively easy to explain and understand, and courts are more inclined to grant remedies when unfair competition is present.

Secrets to making trademarks work for your business

Registering trademarks may protect your brand across an entire region or country, not just a geographic area of actual use. There are no guarantees – even global brand Adidas recently lost a trademark claim in the EU, with a court ruling the three stripes design ‘wasn’t distinctive enough’ to be protected.

But there are some things to remember about registrations and how they may work across borders:

  • All countries recognise registrations, but not all countries recognise common law rights
  • In many countries, the first to register a mark enjoys superior rights over all others – consider this additional incentive for not delaying your trademark registration
  • Registration may be mandatory for certain goods and services in certain countries (for example, tobacco in China):
  • Obtaining a registration in one country may assist in obtaining registrations in other countries (Paris Convention)

Business may also benefit by maintaining their trademarks – they are not “set in stone”, and can evolve to stay current and add value. Trademarks have a potentially infinite lifespan if used and if registrations are renewed. Consider these long-enduring registrations: Vegemite registered 1923; Quaker registered 1895; Pepsi registered 1902; HMV logo registered 1906.

As business evolves, you may also consider how trademarks can be leveraged to provide value beyond core business and assist expansion or acquisition. Companies who made such a change include: Virgin, which expanded from “sound records” to include “air travel services”; and Armani, which expanded from “runway apparel” to include “perfumes and eyewear”.

Finally, vigilance is important for your trademark. The internet provides a forum for potential infringements and other unauthorised use of your marks.

Areas of vigilance include domain names, social media pages and usernames, META tags, embedded or hidden text, keyword advertising, counterfeit and grey market goods.

The most important step towards vigilance is owning a trademark registration. This will help your enforcement efforts.


Jacqui Barrett is a partner in the corporate and commercial practice at Hall & Wilcox.