Have you ever heard the phrase "bet the company"? Most
people think of it as a business move or challenge that threatens a
core product or service. Most do not associate it with launching a
new brand. And yet the "bet the company" moment happens
each time an organization is created, launches new products or
services, rebrands itself, or extends its brand to different
areas/industries. These moments have one thing in common: a brand
that can succeed or fail based largely on its ability to be
protected under trademark law. When a critical new brand cannot be
protected or infringes another's rights, it compromises your
ability to send a unique and consistent message to consumers.
Launching a key brand can truly be a "bet the company"
moment.
Some assume that establishing a brand is similar to setting up a
new legal entity with a state. In fact, establishing a brand under
trademark law could not be more different. When setting up such an
entity, if no other party has the same name or "Doing Business
As" in that state, you generally get it. Under trademark law,
however, establishing a brand depends on whether that brand is
available for use and registration under a tough legal standard:
likelihood of confusion. This takes into account brands that are
similar and not just identical. There must not be a likelihood of
confusion between that brand and all the other brands that already
exist nationwide. Applying this standard involves a multi-factor
legal analysis that considers more than just the brands themselves;
the analysis takes into account, for example, the similarity of the
underlying products or services. Further, for organizations seeking
to provide products or services internationally, a similar analysis
must take place in every market where the organization intends to
act.
If an organization fails to meet the standard and infringes another
party's rights, the entity usually faces three options: (1)
move to a new brand, (2) pay licensing fees, or (3) buy the other
side out. This infamously happened to NBC in the 1970s. At the
time, NBC reportedly paid $1 million to design a new logo (for
which it was the butt of jokes on Saturday Night Live).
Then was sued for trademark infringement; the new logo was
virtually identical to the mark owned by Nebraska's chain of
PBS affiliates. To settle the dispute, NBC reportedly paid near $1
million in cash and equipment.
The same three options can confront an organization that fails to
properly apply to register its brand, when another party files
first. This happened with Apple's iPhone brand with Cisco (they
eventually settled their dispute). Also, Apple reportedly paid
millions in China alone, to solve a registration problem to ensure
that their iPhone mark covered mobile phones in that first-to-file
country.
When key brands must be changed abruptly after launch, the goodwill
associated with the brands is lost. This loss can be magnified by
bad press over the branding change. Most organizations do not have
the NBC's or Apple's reservoir of goodwill or resources to
quickly rehabilitate goodwill when it is lost.
The cost of trademark litigation is always a key consideration. For
an average trademark infringement suit that does not settle early
(where <$25 million is at stake), the median litigation cost can
run up to $775,000 inclusive of all costs. (See the 2011 Report of
the Economic Survey from the American Intellectual Property Law
Association (AIPLA).) It is important to note that this does not
include the cost to change brands or pay a monetary judgment for
damages. The overall cost of a trademark challenge/infringement
suit can be millions of dollars in a worst-case scenario,
especially in a case where an organization/executive is indifferent
to, or disregards, another's trademark rights.
Understandably, organizations are in a hurry to succeed and do not
want legal work to delay the business process. But a "bet the
company" legal moment occurs each time an organization is
created, launches new products or services, rebrands itself, or
extends its brand to new areas/industries. To succeed at these
"bet the company" moments, it is important to fully vet
and protect your key brands under trademark law's demanding
standard and not view this process as a simple filing of forms to
record a name.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.