The trademark as a business asset: the numbers, protection and two proposals

Legal Insight

April 2021

Ioannis Psarakis, Lecturer, LL.M (III), PhD Cand.

(Republished from www.startup.gr)

Ι. Does the mark have any value?

What can the GDPs of Switzerland, Hungary and Luxembourg have to do with the trademarks of Amazon, Apple and Google? Both the sum of the former and the latter amounts to $934 billion. 

The importance of trademarks - especially in the modern economy - is much greater than we might think. "Speaking in numbers, according to a recent survey by the EUIPO (European Union Intellectual Property Office) in cooperation with the EPO (European Patent Office), companies that invest in intellectual property rights (such as trademarks) show a 55% increase in their revenue per employee ratio. 

The reasons why a trade mark is beneficial to a company vary. It is certain that trademark registration ensures that a certain connection with the consumer is established and maintained. Moreover, the business itself, knowing that it now has an exclusive right to the trade mark in question - on which costs and its progress in general will necessarily be "built up" - acts not only with much greater security but also with an additional incentive for continuous improvement. Very illustrative is the phrase that has been coined in science, which speaks of 'securing business performance'. Moreover, as noted in the explanatory memorandum of the new law on trademarks (Law 4679/2020), 'the lack of adequate legal protection for industrial property rights constitutes a disincentive for research, since without it no one can economically exploit the new knowledge created and therefore has no incentive to invest in research and innovation'. 

Thus, in the light of the above findings, the special treatment reserved for undertakings in order to protect their trade marks from possible infringements is justified. 

By 'trade mark infringement' we mean, for example, a situation in which a specific indication has been registered as a trade mark - intended to distinguish specific products - and yet a third party puts the same goods on the market bearing the same indication (this is the case of 'counterfeit products') or even a situation in which the indication and the products are merely similar (e.g. in the case of 'counterfeit goods'). e.g. slightly different products, with a slightly different indication), but which - taking into account other criteria - are likely to confuse the consumer as to the origin of the goods from a particular undertaking. These are typical cases of trade mark infringement, but not the only ones. In the case of marks with a reputation (which is what we call marks with a high degree of recognition), the scope of the infringement is even wider. 

Protection can be granted preventively, judicially, extrajudicially or even unilaterally .

II. The Ideas Powered for Business SME Fund

In general, intellectual property rights - including trademarks - play a decisive role in the development of a business. In particular, businesses that aim to enter a certain market dynamically are greatly facilitated if they invest in their image (which is how they appear in the competitive arena), while ensuring that no third party infringes it. At the same time, securing exclusive rights of use provides a secure environment for developing and planning business activities. But even for financing purposes, trademark registration is not without significance. 

Recognising this reality - and with the adverse consequences of the coronavirus pandemic pressing in - the EU has already launched a programme to subsidise intellectual property actions, focusing on small and medium-sized enterprises (SMEs). The "Ideas Powered for Business SME Fund" is a €20 million grant programme set up to help European small and medium-sized enterprises (SMEs) access intellectual property rights (e.g. by providing a 50% discount on the basic application fees for EU and national trademarks and designs). For 2021, 5 time periods (cycles) have been announced within which proposals are to be submitted by the potential beneficiaries. The next available cycle (period 3) starts on 1.5.2021 and ends on 31.5.2021. Applicants are to receive notification of grant decisions in case of a positive outcome in June-July. 

According to Internal Market Commissioner Thierry Breton, the aim of the action is to capitalise on innovation and creativity, which is expected to help the recovery of SMEs. Close to this, we note that free personalised support from Intellectual Property Pro Bono Services to Small and Medium Enterprises-SMEs is already available.

III. What if I don't register?

Something that is not widely known is the following: the fact that an indication is not registered as a trademark does not mean that it does not enjoy any protection. Indeed, an indication is not only protected as a trade mark; it is also protected as what is called in legal science a mere "distinctive sign". The main difference is that the precondition for such protection, precisely because in the case of a simple distinctive sign there is no registration, is 'establishment in the course of trade'. According to settled case-law, establishment (or prevalence) in trade is established when a not insignificant part of the trade circles considers that the sign in question distinguishes a certain undertaking.

In simple terms, even if the indication is not registered in the trade mark register in the statutory procedure (in order to establish the right to the trade mark), it can still be protected as a (mere) distinctive sign. The question therefore arises: "then what is the point of registering my indication as a trademark"? 

Given the possibilities it offers, it is strongly recommended to register a trademark. The explanation is simple and to some extent tautological: the basic consequence of trade mark registration is that trade mark law now applies. This fact attracts a number of facilitators to provide protection, increasing the chances of winning in any litigation. To a large extent, they (i.e. the facilities) also greatly assist the work of the lawyer. But the latter also has an influence outside of court, in the following sense: in the event of a trademark infringement, the greater the chances of winning in a potential lawsuit - a fact that even if the other side's legal adviser does not admit it, he will acknowledge and take into account in the negotiations - the more favourable the content of a possible settlement will be for the interests of the signatory. 

Another possibility offered by the trade mark - and one of great practical importance - is that it ensures the exclusive use of the trade mark before the company has even put its product on the market (and in principle up to five years). Otherwise, if a trade mark were not registered, protection would be conditional - as we have already stated - on the sign having already become established in the trade. However, this is extremely difficult (if not impossible) to achieve if the product has not yet been marketed.

The trade mark is therefore particularly useful for companies which aim to operate with various products, but in stages; or even for companies which are still in the process of being established or even in the R&D stage. Indeed, there are often cases in which companies have not yet launched their product, but have already developed the label it will carry; and on this they have based a significant part of their further course and strategy (e.g. marketing policy). 

By registering the trade mark, therefore, these businesses can ensure that their design will continue without any unexpected twists and turns. Because if a trade mark has not been registered (and the product has not been put on the market either, or if it has been put on the market but has not become known in trade in the sense mentioned above) and in the meantime a third party has established a right to the particular (or even a similar) indication, there will be a great deal of upheaval in the design, since it (i.e. the indication) will have to be modified so as not to infringe the - in the meantime - established right of the third party.

But let us give a simple example: a start-up company wants to launch a social networking platform. It is still at the MVP (Minimum Viable Product) stage. In order to be able to protect the name of the platform - without registering a trademark - a sufficient period of time must elapse while the service is already on the market for it to become known to the public. However, if the platform takes advantage of this opportunity and registers its trademark, the protection sought will be granted, and - if the registration is ultimately accepted - already from the moment the application for registration is submitted. 

It is worth noting something that has already been mentioned above: the registration of a trade mark can also have favourable effects at the financing stage. Indeed, taking care of the procedures for obtaining a right to the trade mark is perceived by the potential investor as a sign of the seriousness of the project, of its foresight and organisation (see the case of angel investors here). Moreover, it is advisable to avoid announcing at any stage of the discussions that it will be necessary to change the trade mark of, for example, the service provided by the start-up, due to the establishment - in the meantime - of a third party right to the same or even a similar indication.

IV. Conclusions 

The above leads to the following two main findings:

1. The trademark is an important growth tool for a business. At the same time, it is a key asset with great potential. Based on data and studies, it generates profits. The market itself recognises this: according to official data from the European Union Intellectual Property Office (EUIPO), since 2008 there has been a steady increase in the number of applications for EU trademark registrations. In 2020, 176,992 applications were filed, more than double the 87,498 filed in 2008. Moreover, the costs of registration are far from prohibitive (whether for a national trade mark or an EU trade mark). Especially for small and medium-sized enterprises, the costs can be reduced significantly (both at the advisory level and at the registration level) for the reasons set out above.

2. However, a trademark also needs protection. As with any asset, appropriation is unfortunately often attractive. Moreover, it is possible that the infringer may not be aware that he is infringing a third party's trade mark (for example, because he is unaware of its existence). Immediate identification of issues that may damage the trade mark provides the business with a safe environment on which to build its efforts, endeavours and innovations. And protection is not only judicial; although - especially if the most conciliatory routes are not successful - this will be the most common case.