by Kelly Phair McCarthy

The Coca-Cola script writing, the "G" on the side arm of your Gucci sunglasses, the red tab on the pocket of your Levi's -- these are all recognizable trademarks. Without these marks of distinction, the glasses will sell for $10 instead of $300, and the cola and jeans are just that -- cola and jeans. Companies like Coca-Cola, Gucci and Levi's take a "no holds barred" approach to trademark prosecution and maintenance because they are the keys to surviving in a hostile market full of counterfeiters and knock-offs.

For some industries the brand is everything -- a priceless asset of the company. In other industries, while the company's trademarks remain important, they are not necessarily the organization's main assets. Even so, a company will often take to a trademark portfolio with an "all or nothing approach" and this practice frequently leads to either insufficient protection and loss of valuable rights or runaway fees and a blown budget.

In a down economy, intellectual property protection is often a casualty of budget cuts. Cost-conscious companies, especially early-stage companies, should know that a certain level of trademark protection is necessary to build a foundation of brand recognition. Failure to protect a brand from the beginning can lead to astronomical costs cleaning up messes later down the line.

Reaching the correct balance of adequate protection and reasonable fees can be hard. Finding the right middle ground is a different formula for each company. Size, resources and the nature of the business are important considerations. The ultimate strategy should be a prosecution and maintenance system capable of growing in step with company growth.

Stay Organized and Always be Wary of Trademark Squatters and Counterfeiters

In harrowing financial times, it can be easy to put brand protection on the back burner. This is especially true for actions required in international jurisdictions. However, this risky practice can result in opportunistic third parties taking advantage and perhaps shutting a company out of emerging markets and jurisdictions. Companies that do not take timely actions in the brand protection area often spend exorbitant sums later attempting to fix problems which could have been avoided by simply getting trademark applications in place where required. In many jurisdictions, without registered trademark rights, companies have no recourse against counterfeiters.

Organization is the key to cost effective trademark protection and prosecution. Dividing marks into three categories and determining where to file can guard against runaway filing and save a company healthy sums of money. Whether administering a portfolio in house, or working with outside counsel, the main goal should always be to achieve the greatest amount of protection in the most cost-effective manner.

Dividing the Marks

Most companies have at least one trademark, whether it be a company name or a product brand, that is the organization's franchise player. It is name or brand on which the company's reputation and market recognition is based. These are the Flagship Marks. Recognizing the Flagship Marks and understanding the need for protecting them is the first step to optimized security. Next come the Secondary Marks. These marks or names are used by the company less frequently but tend to produce some market recognition. Cross-product slogans or names attached to component parts fall in this category. The last category can be termed, Minor Marks. These marks include one-off slogans, technical names etc.

Substantial time, effort and money should be focused on the Flagship Marks and a company should try to achieve trademark protection in the majority, if not all, of the locations worldwide where the product is sold or the company operates. Remaining resources may be spent on protection of the Secondary and Minor marks.

After dividing the company's marks into categories, a regular audit of the trademark portfolio must be conducted to determine if the marks need to be upgraded or downgraded in status. Marks no longer in use should be downgraded and classified as inactive. Foreign and domestic outside trademark counsel should be instructed to incur no further costs or fees in relation to the maintenance of inactive marks.

Where to File

Defining a company's core markets is a threshold question in determining where to file for protection of its trademarks. For the Flagship Marks, a company may consider the locations where the marks are currently in use, where manufacturing is currently taking place and jurisdictions where use of the marks is anticipated. While a Flagship Mark will be filed in as many locations as possible, a company may hold back with the Secondary Marks and only file in locations where sales are strongest or where there are large risks such as counterfeiting. For the Minor Marks, a company may consider filing only in the jurisdiction where the company is located or it may refrain from filing for protection of Minor Marks entirely.

It is important to keep in mind that the majority of the world employs a "first to file" system whereby the first party to file an application for a trademark is the first who obtains rights to use the mark. When determining where to file the applications, more countries may make it onto the list because of the "first to file" factor. In locations where a company is worried about a particular competitor or a counterfeiter, this factor plays an important role.

Still, when choosing locations, it is advisable to temper optimism with realism. An emerging company may have ambitious growth goals but a realistic prediction of where the company will be doing business five or ten years out is the best approach for where to file decisions. While Coca-Cola reaches the four corners of the earth, a small, new company may not have the need to register a trademark in Tuvalu, Kiribati or Trinidad & Tobago -- just yet.

Utilizing International Trademark Treaties

There are a number of international treaties and regional agreements that not only aid in the process of trademark filing but which can also potentially cut costs.

• The Madrid Protocol and The Madrid Agreement
  The Madrid Protocol is an international agreement that allows companies in member states to file a single trademark application in the home country and have that same application filed in any number of the other member countries. While there are some drawbacks, this does cut down drastically on initial filing costs as work does not need to be duplicated when filing in each individual jurisdiction.
  
  
• Community Trademarks
  If a company's core markets include the European Union, a Community Trademark application (CTM) may be the most cost effective and expedient way to achieve protection in that region. By filing a single application with the Office for Harmonization of the Internal Market (OHIM), protection may be granted in all of the countries of the European Union.

Filing U.S. Trademark Applications

Most of the world operates on a "first to file" system, but the United States employs a "first to use" standard for trademark ownership. If a company is already operating under a certain name or if a product is currently being sold, certain trademark rights accrue based on that use. If an action is required to stop a third party use or infringement of a mark, a Federal registration is required to make certain claims and receive certain damages. Federal registrations are always recommended for Flagship Marks. However, while a Federal registration is recommended, in cash strapped times, a company may rest easy knowing that trademark rights are accruing without one.

Spending Money in the Right Places

There are ways to save money while at the same time meeting a level of brand protection required for a growing business. Staying organized, communicating regularly with your attorney and carefully thinking through branding issues can help a company come out on the other end of a down economy with brands intact and ready for the next upswing.

If you have any questions about this article, please contact Kelly McCarthy at Sideman & Bancroft.

This publication is for informational purposes only and is not intended to provide legal or tax advice, or to create an attorney-client relationship.