By David French
I visited a wine tasting opening event for a make-it-yourself wine business in Shawville, Québec recently. While reclining in comfort, I considered the question: “Do intellectual property rights matter for small businesses in little towns?” IP rights refer to patents, trademarks, copyrights, secrets and a few other subtle types of non-tangible property rights. Everybody’s always interested in patents because they think patents are a ticket to getting rich. But this happens so rarely that I would like to skip to the most important IP right: trademarks.
What is a trademark? Before answering this question, there is a key issue that is worth considering: After you spend all your money on advertising and promotion, including printing letterhead and handing out business cards, what do you have left in terms of value? The answer is people’s impressions and memory of you and your business. And how are people going to remember you and your business? That is where a trademark comes in.
A trademark is a brand or label which people learn to trust. When they see this word or symbol, they immediately recall the good experiences they have had in the past buying that product or signing up for the service that is connected with the symbol. In technical terms, a trademark is a word or logo (and more recently in Canada a distinctive sound) that is used by a business to indicate that the products or services that it is delivering to the public come from a specific source. That source is the owner of the trademark. That is the technical definition.
The practical consequences are that a trademark is a badge which the public uses to make repeat purchases, confident that they are going to get the combination of quality and price that they have come to expect is associated with that badge.
More significantly, a trademark can have a much higher philosophical meaning. Good businesses, businesses that succeed, have as their number one goal delivering value to their customers. Companies and businesses that operate on this basis maintain a level of quality combined with price that makes their products or services useful and attractive for their customers. A good trademark, functioning properly, is an indication of the commitment by the supplier that they are going to continue to deliver that value to their customers.
That is why famous brands such as Coca-Cola, Sony, and H.J. Heinz are so respected.
Turning now to practicalities, a trademark can be important to a small business in a small town for all of the above reasons. But there are also issues associated with trademarks that every enterprise should appreciate.
Trademarks can be registered in Ottawa at the Trademarks Office (actually located in Gatineau). Without a registration, the Courts will respect and enforce a trademark in the local territory where it is being used. It is necessary, however, in such cases to file evidence with the Court showing that the trademark is known by local citizens. This can be a nuisance. If the trademark is registered, the Mark is presumed to have a reputation with customers. More significantly, a registration for a trademark effected at the national Trademarks Office reserves the exclusive right to use the Mark throughout Canada. This has its advantages and disadvantages.
One of the advantages is that it allows a company that starts off small to grow over time with a trademark which has been reserved to its exclusive use throughout the nation. Without a registration, two companies operating in different parts of the land might adopt the same Mark. As they grow in their territorial coverage, eventually a collision will occur: two businesses will be trying to sell the same product or service using the same Mark in an overlapping territory. This cannot be tolerated in a sensible marketplace. The public will get confused. Accordingly, the principle is: the first party to adopt a trademark with respect to specific goods or services gets to be registered federally in Ottawa.
Accordingly, if you want to reserve your Mark for future expansion, then register your trademark federally. It should not cost you more than $2,500 to $3,000. And it will make your business more valuable when you sell it to a successor.
Turning to the disadvantages of this system, you should be very careful when you adopt a name for your business or a Mark for your products or services that you are not transgressing on the trademark rights of someone else. It is therefore highly recommended that in the beginning, when you start your business and choose your name and Mark, that you search in Ottawa at the Trademarks Office to see if your name or Mark, or something that is confusingly similar, has already been registered. It is also advisable to find out whether someone else has started to use the Mark somewhere else in the country even if they have not registered it. This is because the first to adopt the trademark in Canada has priority to acquire an eventual trademark registration.
Checking for non-registered prior users is not as simple as checking at the Trademarks Office, although that is a quick and inexpensive first step. Here is the link to do a search: Canadian Trademarks Office database. I prefer to use the Advanced Search screen. But a lot can be done to check for unregistered trademark usage. There are agencies that carry out these searches. They charge anywhere from $200 to $1,200. If you are the cautious type, you may want to have the more sophisticated screening searches done before you invest in promoting a name that one day you may have to abandon because you have received a letter from a lawyer advising you that “your” trademark has already been reserved by being registered by someone else.
One Pink Lady too many
I had an uncle who had a business in the needle trade in Montréal, back when that was an important industry. I cannot remember what his original trademark was, but after he had been in business for some years he got one of those terrible letters in the mail. Someone else had adopted his leading brand trademark first. Initially, he resisted. But his lawyer told him he was in the wrong and would eventually lose. He decided to switch to a new trademark: “Pink Lady.” You know, as in Pink Lady lingerie.
Well, in the needle trade when you change your name it is taken as a sign that you are in financial trouble. So he had to travel all across Canada visiting all of his distributor/customers and invite them to his hotel room to have a Pink Lady celebration drink in honor of his new company name and trademark. A Pink Lady is a kind of alcoholic beverage made with gin, lemon juice, and grenadine with a creamy top.
After that trip, Uncle Al could never face a Pink Lady again.
Are trademarks an important issue for small businesses in little towns? You bet they are. Ignore this issue at your peril.
David French is the principal and CEO of Second Counsel Services, which provides guidance for companies that wish to improve their management of Intellectual Property. For more information visit www.SecondCounsel.com.