Trademarks are the Most Valuable Asset for Startups. Here’s How to Protect Them.

Startup founders work tirelessly to build their businesses. They often invest significant resources to come up with the perfect business name, acquire a domain, create a brand, and publicly market a product. However, many fail to take the necessary steps to protect their investment of time and resources by registering and enforcing their trademarks.

That’s a big mistake, because a startup’s brand is one of its most valuable assets.

Let’s look at what brands are, why they’re valuable, and how to protect them.

What is a brand?

A trademark is a form of intellectual property (“IP”). According to the United States Patent and Trademark Office (USPTO), a trademark is a “word, phrase, symbol, design, or combination of those things that identifies your goods or services.” In more practical terms, your branding is how customers recognize your company in the marketplace and differentiate it from competitors.

For example, the Nike brand name and its “swoosh” symbol are part of the company’s trademark. The same goes for McDonald’s and its golden arches and Apple and its iconic logo.

A trademark differs from other forms of intellectual property such as patents (which relate to inventions) and copyrights (which relate to creative works).

Also see: How to keep your startup’s secrets private

Why are brands valuable?

The value of a brand reflects the goodwill associated with that brand. In this sense, a brand tends to increase in value when the underlying company increases in value.

There are several reasons why a brand is one of a startup’s most valuable assets. A brand can:

• Identify and differentiate the company and its products or services from competitors.
• Create instant recognition and convey quality.
• Enable a brand to expand into new markets and product offerings by leveraging brand power.
• Help attract talented employees who appreciate working for a company with a strong brand.
• Be perpetual as trademarks, as long as they are reasonably renewed, do not expire like patents and copyrights.

In addition, brands – particularly the number of brands a company owns – have a positive impact on a company’s profitability and valuation. In Management Science’s “Valuation of New Trademarks,” researchers found that the number of new trademark registrations positively predicts company profitability, stock returns and an underreaction by analysts in their earnings forecasts.

Related: Why startups need to protect their innovative assets

How do you protect a trademark?

Every startup has a name, a brand and a domain name. But that doesn’t mean it has an enforceable brand. In fact, not every trademark can be registered with the USPTO. Also, not every trademark is legally protectable.

It is important that you seek legal counsel early in your process to ensure your trademark IP can be protected. The last thing you want to do is invest time and money in a brand you’ll eventually have to abandon. Start by considering whether one mark is too similar to another because the USPTO will not register a mark if there is “likelihood of confusion” with another registered mark.

One way to determine if there is “likelihood of confusion” with a similar mark is to conduct a trademark search in the United States Patent and Trademark Office’s electronic trademark search system. If a name doesn’t appear in this system, it doesn’t guarantee someone else doesn’t own the brand, but it’s a good place to start. Other simple searches can be done on Google, relevant State Department websites, and a domain registrar such as GoDaddy.com.

If there are no obvious concerns about your trademark, the next step is to file a trademark application through the USPTO’s Trademark Electronic Application Service (TEAS). While it is possible to file your trademark application, as a trademark is such a valuable asset, working with an IP legal advisor is best. The risks of applying alone are too great with regard to the IP of a startup. A trademark application may seem simple, but many nuances play a role in deciding and describing the types of goods or services for which you are using your trademark in your application. Trademark protection only applies to the goods and services that you specify in your application.

Once a trademark is registered, it is important to monitor whether it is being infringed upon and take action to stop the infringement. It is also important to maintain and renew your brand so that its registration does not expire.

Are there reasons for protecting brands less?

in one Harvard Business Review Article argues Georgetown University law professor Madhavi Sunder for a less protective approach to trademarks, especially when it comes to trademark enthusiasts who use a trademark in different ways. “[C]Companies should realize that their fans want to bring their fictional worlds to life,” Sunder wrote. “Fan engagement extends both the lifespan and value of work. Fans make the work relevant to themselves and others. Their love and devotion is what creators live for.”

Sundar advocates a “more measured approach to enforcing intellectual property rights in fan experiences.” He cites the example of Warner Brothers allowing Quidditch leagues (the game made popular by the Harry Potter books) to thrive worldwide rather than demanding that they be phased out.

In the technology world, particularly on the Web 3, we are seeing brands taking a similar, more lenient approach to brand protection. For example, many NFT projects are Creative Commons projects, where the creator of the NFT cedes all IP rights to the buyer. In other situations, such as B. at Bored Ape Yacht Club, buyers of Bored Ape NFTs do not receive rights to the underlying IP of Bored Ape Yacht Club, but can monetize their individual Bored Ape NFT at their own discretion.

That’s not to say your startup should be lax about protecting its brands. However, it’s worth noting that companies take different approaches to increasing the value of their intellectual property – and in some cases, a less protective system that taps into a brand’s community can make sense depending on a company’s goals.

Don’t wait to protect your startup’s IP

There are many legal issues that startup founders must address, but protecting a company’s intellectual property is one of the highest priorities. Many startups fail or at least struggle because they don’t properly identify and protect their potential IP assets from the start. When protecting a brand, proactive planning and research can go a long way in securing one of your most valuable company assets.

Related: How and why startups must protect their intellectual property at all costs