Trade Marks: A valuable business asset

Welcome to the fourth part of our “reasons to register a trade mark”. Parts 1, 2 and 3 are all available on the blog, so make sure you catch up with those. So, part 4…

“How can I make money from my trade mark?” is often the first question any entrepreneur asks when coming into the offices of Waterfront.  Well, alright maybe not the first question but it’s certainly in the top ten and, of course, we have the answers that should set you on the right path.

Where’s the value?

Trade Marks are valuable at first instance as they form an asset of your business, a property right.  However, greater value can be achieved when the trade mark is being used widely for the goods and services for which it is registered, thereby turning it into a recognised brand. The more time (and yes usually money) which is spent investing in the ‘brand’, the greater brand recognition and financial value it should achieve.

Should you be in a position to invest sufficient time and money in creating a recognised brand (even if such recognition is restricted to a specific market area) you may be able to add to the value of the trade mark by licensing it to another entity like “Virgin” or even the “Levi Roots Reggae Reggae” range (although of course any licence should contain strict guidelines with regard to the use of the trade mark and stiff penalties to be faced in the event that the trade mark or brand was denigrated in any way). A licensee would have the advantage of being able to use a recognised and respected brand and the licensor would receive payment for the benefit, by way of a fixed annual fee or perhaps a percentage of any revenue received by the licensee. The licence terms would be up for negotiation between the parties (something that we can also help you with!). If you build up a brand with sufficient reputation, maybe you too could own your own version of Necker Island…?

A trade mark/brand might also represent a type of business entity; a chain of shops; restaurant outlets; dance or workshop groups, which might be suitable for franchise – in other words, opening up other versions of what was initially started under the brand and replicating it through the management by others of ‘identical versions’ of the original.  McDonald’s fast food restaurant is probably the best known example of a successful franchise.  It operates in 123 countries through a network of franchises, which means the parent business in the United States sees money rolling in (franchisors usually receive money via a payment in respect of purchase of the franchise and a further percentage payment on turnover achieved by the franchisee) without being involved in the time consuming administrative and management issues of each restaurant. This model can help established businesses expand quickly and with minimal day to day management or large  upfront costs.

Making all the hard work pay off…

Most individuals who set up a business have one eye on the ‘exit strategy’. An idea of how they want to build up the business in order to make it valuable for sale. A registered trade mark will be listed as a business asset upon sale of that business. Therefore, if you have invested time and money in a ‘brand’ without registering it as a trade mark, you risk putting potential purchasers off as they have less comfort that the brand is valuable; this fact could then be used as a negotiating tool to devalue the business. Therefore, it is definitely worth the relatively minor cost of having a trade mark registered early on to ensure that the brand will remain a valuable asset, which can then be further realised at sale.

In summary

To sum up:  Some of the ways you could make money from your trade mark include:

1 – investing in its appropriate use in respect of the goods and services and building the ‘brand’;

2 – licensing the ‘brand/trade mark to other entities for a return;

3 – using your trade mark together with your business concept to build a franchise; and

4 – at the sale of your business a registered trade mark is likely to attract more value than a brand which does not have a registered trade mark.

If you need advice on making the most out of your trade mark, including licencing its use, or need advice on building your brand, get in touch with one of our solicitors in the intellectual property team on 020 7234 0200 or e-mail info@waterfront.law.