Seedcamp has teamed up with JAG Shaw Baker (a technology focused law firm based in London) to produce a series of short articles highlighting some of the key intellectual property (IP) issues that affect startups. By underlining some of the common issues and providing practical advice, this Understanding Intellectual Property series will touch upon the protection of IP, ownership, data protection and privacy, infringement and web / domain name issues.
Our first ‘Understanding Intellectual Property’ article explained some of the frequently encountered ownership issues and provided guidance on how to ensure your startup obtains full ownership and control of its IP. Once ownership has been established, the next step is to understand what rights might protect your business and how such protection might be achieved. For example, while some rights will arise automatically (such as copyright) other IP rights require registration and the payment of official fees (for example, registered trade marks and patents).
In our experience, companies with a comprehensive understanding / awareness of IP protection tend to fair better as they are more likely to recognise issues early on. Unfortunately, there is no one-size-fits-all, off-the-shelf strategy that can be applied to startups – that is especially true when disruptive or new technologies are involved. Instead, it is necessary to develop an appropriate IP strategy tailored to your business. The next few articles will help you to do that by providing an overview of the key IP rights and providing some direction to help avoid the common mistakes. The focus of this article is brands and trade mark protection.
Brands and trade mark protection
The importance of trade mark protection will be, in part, dictated by the nature of your company’s business. For some startups (such as those providing consumer products/services, luxury goods or where brand loyalty is especially important) trade mark protection may well be the most important IP right to the business. Trade mark protection is, however, vitally important to every high-growth / venture-backed / technology business and should not be overlooked.
In the UK, your brand may be protected by both registered and unregistered rights. A registered trade mark affords the best level of protection: it prevents third parties (whether competitors, counterfeiters, or other third parties) from:
a) using identical marks in relation to identical goods and services;
b) using identical or confusingly similar marks in relation to identical or confusingly similar goods and services; and
c) where the mark has a reputation, from taking unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
In the absence of a trade mark registration, an owner might be able to rely on its unregistered rights attaching to the trade mark by bringing an acting for ‘passing off’. Passing off does not protect the trade mark itself, but does protect against a misrepresentation of the ‘goodwill’ (i.e. the attractive force that generates sales revenue) attaching to the trade mark.
The main problem for startups is that it usually takes a number of years to build-up a goodwill that is protectable by an action for passing off. As a result, a startup’s brand is most vulnerable in its first few years. Trade mark registrations may seem expensive but it is almost certainly better than being forced into a rebrand 18 months down the line. Registered protection is therefore always recommended. Unregistered rights should be thought of as a secondary or additional layer of protection and not relied upon in lieu of registered rights. Investors too will expect to see trade mark registrations covering the core elements of the brand in each of the markets that are essential to the business.
In order to formulate a trade mark registration strategy, you will need to consider the following points:
What is capable of registration? It is possible to register “any sign” (for example, words, logos, slogans, domain names, colours, etc.) provided it can be represented graphically and is capable of distinguishing the goods or services (i.e. the trade mark must be distinctive enough to differentiate it from other brands). There are a number of other exceptions so it is worth seeking advice from your lawyer / trade mark attorney if in any doubt.
What mark is best to register? As businesses will often use several marks (words, logos, slogans, etc.) it is important to formulate a strategy and establish what element of the brand you should seek to register. If money is no object it is advisable to register each mark and element of the brand separately, in each jurisdiction. This is, however, vastly expensive and clearly not practical for all startups. As a general rule, the broadest protection is obtained by registering the brand name as a word in block capitals (examples include “GOOGLE” or “APPLE”). If funds are available, the next priority is likely to be your company’s logo. To obtain the broadest protection it is usually advisable to register the mark in black and white and not in colour.
Which goods and services? When filing a trade mark application it is a requirement to specify the goods and services to which the mark will be used. Careful thought is needed to establish which goods and services the application should elect. If the specification is too broad the mark may be susceptible to revocation; too narrow and the trade mark will not offer the necessary scope protection. Your lawyer / trade mark attorney can help you formulate a strategy.
Trade mark searches. Before filing the trade mark application we would always recommend having your lawyer / trade mark attorney perform some basic trade mark searches to identify any major issues or obstacles. This pre-emptive step will sound out the availability of the mark for registration, identify obvious infringement risks and highlight any major issues. This information will help formulate a strategy to navigate the issues and avoid wasted fees pursuing trade mark applications that eventually fail.
Where should you seek to register a trade mark? Trade mark protection is, by its very nature, territorial. In other words, to benefit from registered trade mark protection your brand will need to be registered in each jurisdiction which is important to the business. This includes core markets in which your startup provides (or will provide) goods / services and any jurisdictions where its products are manufactured. In formulating a filing strategy the following should be considered:
a) the trade mark registration process in the UK is fairly simple. All being well you can expect to register a trade mark within 12 months or sooner from the filing date;
b) if your company operates (or will operate) in more than one EU member state, it is usually more cost effective to apply for a Community trade mark (CTM) rather than individual national applications. A CTM comprises a single application that, once registered, protects the mark in all 28 EU member states; and
c) if you intend to file trade mark applications in a number of jurisdictions at once it may be most cost effective to use the ‘Madrid System’. The Madrid System allows brand owners to make one application to a number of contracting countries (including the US, China and Australia) in one go.
When is the right time to make an application? It is important to file an application as soon as possible and ideally before your business officially launches. As explained above a startup’s brand is at its most susceptible for the few years after launch. Registering a trade mark will dramatically reduce the risks.
Costs: Costs and fees for trade mark registrations will depend on many factors and you should speak to your lawyer or trade mark attorney to obtain an estimate.
a) the official filing fee for a UK trade mark application is £170 per mark plus £50 for each additional class. The fees of your lawyer / trade mark attorney in advising and submitting the application will be charged on top;
b) the official filing fee for a CTM application is €900 for one mark in up to three classes and €150 per additional class. Again, lawyers’ / trade mark attorneys’ fees need to be added;
c) official filing fees in the US depend on the type of mark and the basis for registration. Specialist US advice is also usually required; and
d) if you intend to file in several jurisdictions at once, it may be more cost effective to submit applications through the Madrid System (explained above). Costs will entirely depend on which jurisdictions you wish to designate.
Trade mark creation, management and protection are therefore critical to any business seeking to obtain and maintain brand loyalty and ensure commercial success.
JAG Shaw Baker is a firm dedicated to advising entrepreneurs, companies, and investors in high-growth industries. The firm advises on all aspects of venture and growth capital, as well as other corporate finance transactions, corporate structuring, intellectual property and growth and exit strategies. It also acts as general counsel for high-growth companies.
Seedcamp is Europe’s leading pre-seed and seed investment fund and mentor network, and provides its startups with an ongoing Learning programme, known as Seedcamp Academy. Sessions are provided on a variety of topics; from marketing, to product development, to fundraising, to legal. Ambitious startups with disruptive products/services and global aspirations are invited to apply.
This article contains general information only. It does not constitute legal advice. You should consult a suitably qualified lawyer on any specific legal matter or issue.