Should you trademark when you first start out?

Tyler Cassack (00:06): The crown jewel of a startup is usually its IP, and trademarks are among those key assets. Startups typically spend a whole lot of energy, time and other resources developing and thinking about their name, logos and maybe even slogans. One of the most frequent questions that we get from founders is whether or not they should be spending money on trademarks when they first launch their startup.

I'm Tyler Cassack, and I'm here with Michelle Nelles to answer three common questions that founders often struggle with. One: what to trademark? Two: whether to file trademark applications? And three: how to trademark?

Tyler Cassack (00:40): So, Michelle, what's a trademark and what makes a strong trademark?

Michelle Nelles (00:44): A trademark is a word, or a design or a slogan that's used by a company to identify its product or service. So, for example, if a company wanted to use, let's just use an example like the word “Pear” as their trademark, they might have a unique pear design that they might incorporate with that word, that would be their logo.

That might be like the key part of their branding. And then they may also have a catchy saying that they could use in their marketing as well. That could be another trademark. So, when you consider what to trademark, you really have to think about the most critical parts of your branding, what you want to protect others from using the most.

And of course, due to limited funds, you know, for a startup and even for bigger companies, frankly, you may be starting with just kind of a core name and maybe a logo, and maybe move on to some of those other marks later. Another thing to keep in mind, Tyler, is that a business or corporate name registration is not the same as a trademark application.

So, you have to use a name in commerce to actually have trademark rights. And by simply filing a business name, reserving your company name, you don't have those trademark rights. That's different from a trademark application where if you've actually filed an application with an IP office, with the trademark office, there is a legal advantage in that country, even if you haven't started to use that name yet, by filing that trademark application.

And that is unlike a business name. So, it's something important to remember. Now to the other part of your question about what is a strong trademark, the key thing, of course, is it has to be distinctive. It has to act as a source identifier to be a valid trademark. And you want to choose something that's unique.

Obviously, the more unique, the stronger the mark. So, if you use very generic words, you know, “Software Company” or something like that, then that's obviously not going to be a strong trademark. It's not a good idea to use the names of people, you know, “Sam’s Software” or something like that. It's really important that you don't pick a trademark that is confusingly similar to another because that can lead, of course, to a cease and desist, to a lawsuit, to having to change your name.

So, to avoid this, running a trademark clearance search is definitely a recommended course of action before you land on your final name and get into the trademark process and what have you. Invented or coined words are generally very strong trademarks, and example of that would be a pharmaceutical name. You don't generally want to describe clearly what your product is.

And, you know, sometimes people will say, well, I don't like a coined name. I don't want something that's super unique where no one's ever heard of it before. You know, maybe you could use a word that’s suggestive of the goods or is suggestive of something else, but not actually what you're offering. And that could be a good trademark.

So, for example, if you had a business that was operating in, let's just say, the train or transportation area, if you were to pick something like “Bullet Train”, that wouldn't be the best because it's really descriptive of something that's inherent to train service. Let's say like “fast bullet”. You can have a hard time registering, it’d be very hard to protect.

Michelle Nelles (04:06): And if your logo has both words and also design elements, then you could consider filing for two trademark applications. One for the wordmark, and one for the design. Wordmarks give the broadest protection. So, if your budget allows for only one, probably you'll just want to proceed with the wordmark application first.

So, Tyler, should startups file trademark applications when they first start out?

Tyler Cassack (04:34): So, while it can be an expensive upfront investment at a time when startups are running up expenses, trademark searching and filing early has a lot of benefits. One, it helps you avoid legal disputes. Trademark infringement claims lead to costly legal disputes that can harm a startup's reputation and financial stability. It could also result in you having to change your name after launch.

It's better to choose a name that looks like it'll be free and clear from third-party objection upfront. So the cost of a professional trademark search is worth it to land on a name that's likely going to be clear. Filing a trademark application also puts a stake in the sand, which will deter others from adopting a similar name. When others do their trademark search, they'll see your trademark application and they'll know that you have rights to that name first.

Two, it also helps protect your brand. So, although you can eventually establish a common law trademark right by using your mark and marketplaces you've operated in over a number of years, registration is very advantageous. It provides exclusive rights to you, the registered owner, across the country where you register, even if you're not using that in that particular region. For example, you can stop somebody from using a confusingly similar name in BC, even though you're only operating in Ontario.

Third, it can be helpful for investors and just your general credibility of your company. So often, investors are looking to see if a company has taken proper steps to protect its IP, showing them that you clearly own the startup’s IP and branding gives them a little bit more confidence in your company when they're making their investment in you.

And then four, it can also increase your business value. So registered trademarks are assets. They can be bought, sold, traded, licensed, so on and so forth. And so having these assets can increase your startup's value.

Tyler Cassack (06:17): So, the next question we get a lot is, “How do I trademark?” So, Michelle, can you tell us a little bit about that process?

Michelle Nelles (06:23): Sure. So, as we mentioned before, the first step, hopefully that you've done your search and so, you know, you haven't filed for something that you're going to have an issue with. The trademark offices do actually do their own trademark searches, at least if they’re trademark registers. Having said that, that could be 2 to 3 years down the road from your application process.

So, if you wait and just say, well, the trademark office is going to do it for me, you could very well have an issue with cease and desist or have to rename your business, as you just mentioned. We strongly suggest searching first. Now, another thing to keep in mind is that the trademark rights are, of course, by country, so that means that you have to investigate whether you have freedom to use and you can register in each country.

And that's expensive, of course. So, we suggest choosing your most important country or countries, moving forward with that. And the good news is that you could file an application in just one country initially, and then you could use these different processes that are in place to file your later applications within 6 months of the first and effectively backdate your filing in those later file countries to the first filing dates.

So that’s a good method to try to minimize costs and manage cash flow a bit. So, when it actually comes time to filing the trademark application, there will be some kind of specifics that will be required, including the goods and services that you are actually planning to put into market with this name. And then after filing, depending on the country, some offices are very fast, others can be very slow, even 2 to 3 years.

But in the meantime, you've got your application with your stake in sand as you said, you can use “TM” on your marketing and then eventually when you get your registration, you can flip that to “R”. But in any event, it's still very important to file early.

As far as term goes, once you actually get that registered trademark, most countries have a 10-year term so you can renew those trademarks every 10 years if you want to. You know, they could go on forever. Some countries will require that you prove use when you renew. The US currently is one of those countries. In Canada, you actually don't technically need to show the office your use at the time. So, they can be assets that, relatively speaking, have a very long shelf life.