Businesses understand that intellectual property ("IP")–trademarks, copyrights, patents, trade secrets, know-how, etc. – is among their most valuable assets. But do they know the extent of their IP? And is that IP fully protected? An audit can help answer these questions.
What Is an Audit?
An audit is a review of all IP used by a business, whether owned by that business or licensed from a third-party. An audit provides the business with an overview of its IP assets, which in turn may reveal areas where protection is lacking or warrants expansion, and where internal policies relating to IP can be improved, among other things.
Each type of IP covered by an audit will raise its own unique issues. This article will focus on three benefits of an IP audit in the context of trademarks – the names, logos, and other matter that businesses use to identify their goods and services in the marketplace.
- Bring Your Portfolio Up to Date
A trademark portfolio should evolve over time along with the business it represents. A trademark audit provides an opportunity to evaluate whether and how a trademark portfolio may need to be supplemented to reflect the business' current activities and priorities. Below are a few sources of gaps in protection that an audit might identify.
Perhaps the most common cause of a gap in protection is the creation of new trademarks. Where a business has not been diligent about routing new trademarks through legal review, trademarks may be introduced into the marketplace without having been cleared for potential conflicts with third-party trademarks and/or registered. An audit can alert the business to such gaps so it can take appropriate remedial measures.
The introduction of new types of products under existing trademarks can also lead to gaps in protection. Trademark rights are not rights "in gross"; that is, they exist in connection with the specific goods and services with which they are used. Similarly, trademark registrations are limited to specific goods and services. This means that as a business expands and new products are introduced—for example, a manufacturer of kitchen appliances expands into manufacturing televisions—the business' real activities may outgrow the scope of its registered rights. Such instances may warrant filing new applications to supplement the business' rights and fill in the gaps.
A third consideration is whether the trademark portfolio is reflective of the business' activities outside the United States. Trademark rights are territorial, meaning that rights established through use/registration in one country are generally not enforceable in other countries. Rather, trademarks must be protected on a nation-by-nation basis (though regional protection, in the case of the EU, may be available). Thus, as use of a trademark expands into different geographic markets, a business should consider registering its trademark under the national laws of those markets. A trademark audit can help identify which trademarks are candidates for registration abroad.
- Identify Trademarks You Didn't Know You Had
It is not always the case that a business consciously sets out to create a trademark. Product design features and other subject matter that are incorporated into a product may take on trademark significance even if the business does not initially so intend. Thus, an audit might uncover non-traditional trademarks that the business has developed but does not realize it owns.
Although the word "trademark" generally calls to mind a word or logo, the federal trademark statute – the Lanham Act – defines "trademarks" much more broadly, as "includ[ing] any word, name, symbol, or device, or any combination thereof" that is used to distinguish one's goods from those sold by others. 15 U.S.C. § 1127. (The Lanham Act defines "service marks" similarly in the context of service providers; for simplicity, we will continue using "trademarks" to refer to both trademarks and service marks.) This broad definition allows for recognition of a variety of non-traditional trademark formats, well beyond words and logos.
Non-traditional trademarks can take many forms, such as product packaging (a/k/a trade dress), product design, colors, sounds, and even scents. Some well-known non-traditional trademarks include NBC's chime theme, Tiffany & Co.'s "robin's egg blue" packaging, and the shape of a Coca-Cola bottle. Provided that the subject matter is non-functional and is distinctive (or capable of acquiring distinctiveness), it can be protected as a trademark. Thus, in addition to any traditional word or design trademarks, a manufactured product might incorporate color schemes, on-board sounds, arbitrary shapes and/or other design features, each of which may be eligible for trademark protection in its own right. For any potential non-traditional trademarks identified in an audit, the business and its trademark counsel can then determine the appropriate strategies for protecting and exploiting them.
- Establish and Improve IP-Related Policies and
A trademark audit offers outside counsel a peek inside the operations of the business, making it a valuable opportunity to establish and improve internal policies and workflows to better ensure that an organization's trademark rights are protected. The exact scope of review will vary depending on the nature of each business, but typical areas of focus would include (a) reviewing standard contracts (e.g., employee, independent contractor, license agreements) with respect to development, ownership, and use of IP assets; (b) understanding the interplay between different teams (e.g., marketing and engineering) and their roles in developing and using new trademarks, and establishing a process for clearing new marks with legal; and (c) implementing guidelines and best practices for use of the trademarks themselves and accompanying trademark notices ("TM" vs. circled "R") to ensure consistency across the business and preserve its rights.
The above illustrates some of the common areas of inquiry and potential benefits of a trademark audit, and is by no means intended to be exhaustive. Just as each business is unique, so too is what the audit process may reveal. To truly understand what unique issues they may be facing, businesses should be aware and take advantage of this valuable tool.
This article first appeared on CBIA's website and is republished here with permission.
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.