When do you actually need a Trademark?

It seems no one has an actual answer to the question of when a Trademark is actually needed. All online resources simply state that a Trademark protects your brand, and that you should have one. Nobody addresses the fact that Trademarks seem quite expensive for startups and won’t be necessary until a certain point. So what is that point?

Trademarks aim to reduce the confusion of consumers as to the source of goods and services. Trademark law does not want multiple businesses with different spellings of the same name using the same logo. This would prevent consumers from being able to attribute characteristics with a brand, such as trust and quality.

For our purposes, Trademarks make it more difficult for copycats to benefit from your earned goodwill by creating a similar name and having consumers attribute your positive characteristics with the copycat. This leads us to the real underlying question: when are you likely to experience a copycat?

When are you likely to experience a copycat?

According to a study done by the Lee Kong Chian School of Business in Singapore, copycats are most likely to enter a market when the cost of entry is less than the potential profit from market demand. You can view the study for the technical analysis of the factors contributing to copycat entry. However, the primary considerations are as follows:

  • copycats almost always have a lower cost of production
  • copycats gain benefit from resembling your brand
  • copycats lose benefit when your product or service improves over time, and therefore has lower long-term value in current states
  • A copycat’s primary barrier to entry is its entry costs vs existing demand after your initial share of the market is obtained

This means a copycat is going to look at how much of the market is left and how much it will cost them to enter. 

You are in a good position to forecast this information. If you are selling a product, you have a reference point to use as the cost of entering the market. You must not use your cost of goods sold, though, as the copycat can produce it for a lower cost.

You can also gauge your market demand. Are you selling locally? There may be a market to steal in another local area. If you are selling nationally, someone could view your success and determine that you haven’t saturated the market yet. 

This analysis describes a logical approach, that may leave room for variance. For example, copycats may not have enough information to do this analysis, and they may not be as smart as you. This may be more likely since they weren’t able to come up with your business idea without stealing it. So here is an alternative approach:

When will you create the perception of success?

Copycats want to copy successful businesses to make easy money. They will look for companies that seem successful. So when will your company seem successful?

When you pay for advertisements

Companies that can afford ads are doing well, right? They must have determined that there is enough of a market to spend money advertising to and still make a profit. Furthermore, the companies that pay extra for higher visibility in places like search results are more likely to be copied.

When your company grows/hires

Growth is an indicator that business is going well. Hiring is an indicator of growth. If you can hire, you seem to be making more than your break-even amount and seem to have determined that more employees will increase your profits. 

When you go viral or gain attention

If your company gets attention online it will be a massive sign to copycats. Attention is king: even good companies will fail without attention. Make sure you are aware of how much attention you are getting organically.

How does this tell us when to file for a Trademark?

We now know that a Trademark is necessary to make it harder for a copycat to siphon your brand good will and steal your sales. We also know when copycats are most likely to target you. Let’s tie it all together with a legal point and a practical point.

Legal Point: You can’t sue for Trademark infringement without a registered Trademark.

This means you will want to obtain a registered Trademark before you intend to sue for infringement.

Practical Point: Advertisements cost more than a Trademark.

Considering these two points, along with the prior discussion, we can use advertising as a pivotal point.

If you can afford advertisements, you can afford a trademark. If you start paying for advertisements, you are more likely to be copied. If you are copied, you need a Trademark to sue the copycat.  Therefore, you should file for a Trademark before you pay for ads.

Conclusion

You should register for a trademark before you start paying for advertisements. If you are ready to register, or would like more information, contact an experienced trademark attorney today.

About Me

I started my law firm straight out of law school as a business law firm in Ohio. I went back to school and acquired my patent license while growing my firm. After practicing law for 4 years, I decided to transition my practice into exclusively patent law. Then, I decided to transition out of solo practice and join a team of attorneys and paralegals. Now, I run the business law and patent law departments of Doucet Law.

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