12 Reasons to Register Trademarks

Summary

A trademark registration is crucial to maximise your business’ value, to stop copycats, infringers and counterfeiters, to secure your business against a forced rebrand. Have a look at our list of 12 Reasons to Register a Trade Mark at the bottom of this article. The short of it is:

• it secures exclusive brand or name rights countrywide
• you get instant exclusive rights without use for 7 years
• your brand becomes an asset on your balance sheet
• it increases your company value and assures investors
• it is required to enforce your brand rights on online platforms (like Amazon, Instagram, Facebook, LinkedIn etc)
• your ownership becomes public record, discouraging others from using your brand
• it can easily be sold
• companies with registrations have more longevity
• no need to prove your rights in court and have the upper hand in court generally
• your rights are much more powerful
• you can claim a royalty fee from infringers instead of having to prove damages
• you get to use the REGISTERED® symbol

Why Register a Trademark?

We operate in a crowded online space with many competitors vying for attention.

Your brand is generally the first impression that a potential customer has of you and a final deciding factor in whether they choose your product or service over a competitor’s. In this context, most business owners understand by now that your brand, whether you call it a company name or trademark, can make or break your business.

When creating a business, product, or service, it is important to brainstorm names and check Google to avoid existing similar names. You should conduct a trademark search (for example using our online self search tool) to ensure that the name is not already in use or registered without appearing on Google (a brand name can be hidden yet protected for many years without use). This is essential to avoid any potential legal issues in the future.

Remember that registering a company with the name of our brand does not give rights to the brand (even lawyers get this wrong) – only a registered trademark does.

At the starting phase of a business the focus is on making your business profitable and the additional expense of registering a trade mark may not seem like a top priority. As your business and brand grows in value, the necessity of a registered trademark becomes more pronounced – and if you discover months or years after having invested time and money in building your brand and reputation that it is conflicting with an existing brand, you could be forced to rebrand and be sent back to square one, losing all of your customers and profitability.

So what is the benefit of a registered trade mark and at what point should you care?

The benefits of a registered trademark are most apparent:

1. when you are starting your business and need assurances that your are not putting your eggs (your valuable time, money, customer reputation and advertising spend) in the wrong brand basket – one that you could lose,
2. when someone is infringing your brand or claiming you are infringing theirs and
3. when your business is being evaluated for investment, purchase, licensing or securitisation.

Let’s discuss the 12 reasons to register a trademark further.

Your brand is your most valuable asset.

A brand or trademark is an asset – literally – and can be reflected as such on your business’ balance sheet. It’s a word, phrase or image (or sound or smell) that represents your business, goods or services and triggers associations in a targeted consumer. In legal-speak, it “attracts custom” – it determines whether people choose your product or service over a competitor’s. In other words it’s the reason a person decides to give you their money.

While intangible in nature, its effects are very tangible and real. The APPLE brand was worth $234 Billion in 2020 – that’s one third of the company’s total value, GOOGLE’s brand was worth 20% of its value, and MERCEDES a whopping 85% of the company’s total value.

A trademark is one of the most important assets of your company: registration is the necessary investment to protect it.

How is such value generated? A brand that runs with a smart strategy and delivers a great product will grow in value. You build a brand by communicating your unique value offering to excite customers, through advertising, websites, packaging, and sales pitches, and fulfilling that promise through the product and customer experience.

Registration increases a brand’s value and likelihood of success

Many business owners, particularly those conducting small operations or just beginning a business, wonder if intellectual property registration is worth it.

Spoiler alert – the numbers show that it is.

Registration is a prerequisite for any investment into or transfer of the asset. Prospective investors may forego financing if the scope of your rights to the brands and trademarks you retain are unclear or vulnerable to infringement. Without legal proof of ownership, it is hard to assign an appropriate value for the brand or trademark right in question, or to meaningfully collect royalties, because a lack of legal ownership leaves the assets vulnerable to being copied by competitors, or even legal disputes if another individual files for registration.

Filing for brand protection is likely to increase the overall value of the company once the associated rights are granted and, again, they become a listable asset on your company balance sheet.

Trademarks expand and strengthen an already existing brand and tend to positively contribute to continued company growth.

Registration confers significant advantages regardless of company size. While the legal benefits when faced with infringements or litigation are certainly indispensable, the primary motivator is to enable transactions of a company’s intangible assets. Legally validating your ownership rights enables the licensing and assignment of trademarks, to receive royalty rates and can be used to attract investor interest.

Investing in registration early on in your business may also provide you with more institutional support. According to a survey by WIPO (the World Intellectual Property Organisation) 57% of incubators consider intellectual property ownership an important or very important factor for selection of tenants. Companies that register their trademarks, especially those with larger portfolios, are more likely to attract investors, and have a higher value assigned by potential investors compared to similar companies.

Small companies are consistently behind on capitalising on trademark benefits: only 30% of small companies have applied for trademark registrations, as compare to over 90% of large ones.

Registration may also increase the chances of survival and longevity of your firm. Companies that owned at least one trademark registration had a 16% lower chance of exiting the market within five years than their counterparts that did not, all other variables equal.

A 2013 study on the empirical effects of trademarks has shown that applying for a trademark, on average, extends the lifespan of a company by 6.6 years.

Further, a 2009 study focused on evaluating the financial impact of trademarks on company branding in the United States found that “on average, each additional brand association trademark is associated with $7.8 million of future cash flows, a .05% increase in future ROA, and a .3% increase in the future stock returns of a company. In addition, the findings confirm that by improving consumers’ awareness of brands, firms enhance the future cash flows generated by brand associations.

My company is registered – does this count?

The only way to become the assumed legal owner of trademark assets related to your brand is through a trademark registration.

It is a common myth that an incorporated business name, or registered domain name, is enough to protect your brand. While these may assist as evidence of commencement of use at a certain date, neither of those, however, confer actual rights and legal exclusivity in a trade mark without substantial proof of reputation. Such a reputation generally takes substantial marketing and advertisement spend over at least 5 -10 years of use. Until such time you are vulnerable – and even once your reputation is established, your protection is whimsical and your rights never completely ‘exclusive’ in comparison to the powerful arsenal of rights and benefits gleamed from a registered trademark (as derived from the Trade Marks Act, international conventions and practices of online social media platforms and marketplaces worldwide).

Trade mark registration is the instant track to exclusivity, security and powerful arsenal of tools at your disposal to stop and discourage others from messing with your brand and business. The only way to become the assumed legal owner of trademark assets related to your brand is through a trademark registration.

Let your public trademark do the work for you.

Trademark registration turns your ownership of the brand into public record – which means it will be discovered by others when conducting standard due diligence before adopting a proposed brand name. The corollary being that a competitor might assume that a confusingly similar brand is available for use if your brand is not reflected on the South African Trade Marks Register. It is wise to put up that public warning sign on your property.

Your registered trademark will likely block a competitor’s confusingly similar trademark application on examination at the South African Trade Marks Office or you may given the opportunity to oppose it while still having the upper hand (before the other brand obtains their registered rights).

If a competitor successfully registers a confusingly similar trade mark before you do (even if you started using it first), he will be presumed to be the rightful owner and, because you were not on record as owner of a confusingly similar mark with legal representation, you may only become aware once it is too late.

It can be very expensive NOT to register your brand.

Even if you are able to defend any of your existing (unregistered) common law rights you may be prevented from expanding your brand reputation further to new consumers, new goods or services, new areas and new trade channels because the competitor’s registration already occupies every other use of the brand that can otherwise be made in South Africa (other than those you had previously painstakingly carved out for yourself).

A trademark dispute that runs its full course in court is likely to cost upwards of R400’000 – and possibly much more. Common law (unregistered) trademark rights carry the expensive (or impossible) burden of having to prove your existing reputation and actual financial damages suffered (while a royalty / license fee can be charged with registered rights). Even if you win, you only recover 40% of your legal fees. A trade mark application offers a more than 99% discount on such costs, being R3,290 in South Africa.

If you lose you may be forced to rebrand. The cost of a rebrand can be devastating to a business:

– loss of existing consumer brand recognition and online brand searchability;

– costs of conducting name validation and linguistic research, brand research, audience research

– developing new brand strategy, brand identity, brand story, brand guidelines and conducting brand audit

– creating new taglines, copywriting, website redesign, obtaining new domain names, trademarks, social media handles, signage, marketing materials, stationery, logos, packaging, letterheads, business cards, collateral, promotional items

– new advertising campaigns and marketing to promote the new brand, new photography and videos,

These costs can run into the hundreds of thousands or hundreds of millions, depending on the size of your business, and in certain cases can be detrimental.

An application can provide instant rights and leverage

Lodging a trade mark application can provide 7 years of exclusivity in the whole of South Africa without using the mark. This buys ample time to plan your business, obtain investment and launch – so it is good practice to lodge an application for a great name just to put it on ice.

Securing brand ownership provides leverage and a hedge against idea theft when pitching business ideas to potential partners and investors – something that is, unfortunately, very common. If someone does want to use the brand they would then be required to license or purchase it from you. As a case in point, when Facebook rebranded to META it paid another company with existing registered trade mark rights 60 million US Dollars (945 Million Rand) to acquire rights to the name.

Once you do use it, you can keep rights to it forever if you keep on using it and renew your trade mark every 10 years.

First to apply usually gets the rights

The filing date is crucial. A 10 minute time difference between two people filing an identical brand, one at 11.55pm today the other at 0.05am tomorrow, can determine who gets to use and who gets to lose (and rebrand). If you are the late filer (and didn’t conduct a search) you may only find out about the conflict 7-10 months later on examination of your mark. If you did not file a trade mark application at all you may only discover the conflict many years later after substantial investments and marketing of your brand. Losing the reputation and customer goodwill can be the demise of a business.

Certain unregistered common law trademark rights can be obtained through bare use without registration. However, these only arise with a protectable reputation amongst consumers which can take a long time or substantial advertising spend to manifest. Additionally, such unregistered common law rights are always limited to the exact goods or services, design, geographical area, trade channels and customers to which the reputation can be proven. With registration such rights are instantly upgraded to all imaginable goods or services that fall within the categories covered, in every corner of the country, for any conceivable design (assuming you filed a word mark to protect the name broadly), and for all consumers interested and market segments related to the goods or services listed.

It’s a Global Market: Amazon Marketplace, LinkedIn, Facebook, Instagram

The internet has made the world smaller. Brand names are becoming scarce – there are a finite number of combinations of words and letters that can form a brand name. A Harvard Law Review study found that more than 70% of common English words have already been trademarked.

Particularly in a post-pandemic world, markets and Trade Marks Registers are increasingly crowded. World population grew by 30% in twenty years and more individuals are working remotely, starting side-business and creating multiple income streams. These all require a brand visible in a forest of attention-seeking competitors.

Local companies are no longer just competing with South African businesses. The market is global. Goods and services are sold on international platforms like Amazon, Instagram, Facebook and LinkedIn to consumers worldwide. Most of these platforms will not act against infringers or counterfeiters of your brand without a trade mark registration number (or sometimes an application) in at least one country.

The risk of identical international brands encroaching on your customer base or preventing you from expanding globally once you are ready is something to bear in mind. It is prudent to conduct searches of trade mark registers in all countries of interest – or at least the big markets like the European Union and the United States and filing trade mark applications there too (which will probably set you back at least R25,000 in the EU and around R10,000-R20,000 in the US).

Filing in South Africa for a start is cost effective (R3,290) and will in many cases make the administrators of international platforms responsive to your requests instead of just being ignored.

We’re passionate about brands at BrandLaw, so if you would like to chat some more about the above or explore how we can help you register or otherwise protect your brand please get in touch!

For convenience, we present the full printable list of benefits that derive from a registered trademark below.

12 Reasons to Register a Trademark

1. Country-wide rights

Registration provides instant, country-wide rights, covering all potential consumers for your goods or services.

Your brand will currently only be known in a limited geographical area, for certain goods or services and a limited customer base. Common law (unregistered) trademark rights only extend to any existing reputation you can prove (which is itself difficult and expensive if at all possible). And any differences in geographical area, consumer type, design, trade channels and manner of use of someone else’s confusingly similar brand may prevent you from being able to stop them.

By registering you upgrade your rights to every imaginary corner of and potential consumer in South Africa and for all possible goods and services that could be covered in the registration (which can often be drafted broadly to cover everything in the specific class) – with no proof required other than the registration itself.

2. Asset

A trademark registration is a quantifiable asset that can be reflected on your balance sheet and that can be easily licensed, sold, securitised, mortgaged or transferred. It is also required for any franchising activities.

If you ever want to sell your business or seek investment, a registered trade mark is usually a necessity to facilitate ease of transfer and to assure investors (increasing the value of your business).

3. Sellable

If another company some day wishes to use your mark, they may offer to pay you for your rights in it.

Only a registered trademark can be sold separately from the ‘goodwill’ (a legal term denoting something similar to reputation amongst consumers) connected to the underlying business. In other words, an unregistered “common law” trademark can not be sold without the entire business to which it connects – though, again, a purchaser of your business may have doubts about your claimed rights to a brand if you cannot prove it by way of a trademark registration.

4. Value

Trademark registrations can increase your profits: the enhanced trademark protection granted by registering your trademarks raises firm profitability by 1.7% and firm value by 11.9%, relative to matched and industry year adjusted control firms; it is also proven that investors assign higher values to companies with larger trademark portfolios.

5. Longevity

Applying for a trademark registration prolongs the lifespan of a firm by 6.6 years on average; applying for a renewal of a trademark registration further extends that lifespan; further, firms that applied for at least one trademark registration have a 16% lower chance of exiting the market over a 5-year period than firms inactive with intellectual property rights, all other variables equal.

6. Visibility / Constructive notice

The mark will be reflected on the South African Trade Marks Register, officially notifying everyone that you own the mark.

Your trademark will be discovered by others if proper due diligence is conducted before commencing use of a confusingly similar brand.

In other words, it will discourage others from choosing a similar brand and can prevent conflicts before they even arise (or lead to you being offered a valuable sum to purchase or license use of your mark).

7. Rights without use

Protection for a registered trademark will begin on the date of filing (or date of commencement of use, whichever is earlier) while an unregistered trademark is only protected to the degree that its reputation can be proven – which can take years.

Even if you don’t use it, a registered trademark will be unassailable for 5 years from the date of registration (so probably at least 7 years considering it usually takes 24 months to registration).

So if you come across a great brand name that you may wish to use, it is great practice to file an application to ‘put it on ice’ while you develop the business concept around it.

8. Evidence of validity

You get ‘prima facie’ (on the face of it) evidence of validity of all the details reflected in the registration. No need to waste time and expenses in court proving ownership and exclusive rights – as is the case with an unregistered trademark.

9. Reasonable royalty

Instead of damages, you can claim a reasonable royalty from an infringer. This is the amount that would have been payable by a licensee to use your mark.

Without a registration you have to prove the actual damages / financial harm that you suffered which, unless you have clear evidence of damages, such as losing a contract or supplier, is often impossible to show or quantify.

10. The ® Symbol.

You can use use the ® symbol (or indicate that the mark is registered) instead of just the ™ symbol. Using the ® symbol without a registration is a criminal offence.

11. Foreign registration.

A South African registration can form the basis for filing applications in foreign countries (usually within 6 months) while maintaining the earlier filing date.

12. Enforcement and International Platforms.

The evidence of a registered trade mark is often required by customs (to stop any counterfeiting activities) and by online service platforms (such as Google, Amazon Marketplace, web and domain hosts, on social media, Facebook etc.) to be responsive to any take down requests of infringing marks, social media pages or handles, advertisements or domains.

We’re passionate about brands at BrandLaw, so if you would like to chat some more about the above or explore how we can help you register or otherwise protect your brand please get in touch!