WIPO Magazine, Issue No. 2, 2002

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10WIPO Magazine/February 2002THE ROLE OFTRADEMARKS INMARKETINGIP ANDBUSINESSPeter Drucker, a well-known managementguru, said that a “businessenterprise has two basic functions:marketing and innovation. Marketingand innovation produce results;all the rest are costs.” These twobasic functions guide the underlyingdesire of a business to make amonetary profit in the process ofproviding quality products and servicesto customers. Intellectualproperty plays a role in both ofthese functions, and specificallytrademarks are of primary importancein the marketing process.Every product in the market facescompeting products that are oftenalmost identical, similar or goodsubstitutes. Meeting or exceedingcustomers’ expectations is a challengingtask, especially when tastesand preferences continuouslyevolve in a competitive marketplace,with many similar productscatering for the same need. Onlybusinesses that can meet thesechallenges can expect to developand retain a loyal clientele.Distinguishing Productsfrom OthersTo develop trust, confidence andloyalty in its products, every businesshas to develop and maintain adistinct identity, image or reputation.Only then is it able to distinguishitself and its products fromthose of its competitors. It mustalso, at the same time, provide amechanism for linking the providerof a product to the valuable businessassets of trust and goodwill.Businesses achieve this mostlythrough a distinctive trade nameand one or more trademarks.These play a pivotal role in themarketing strategy of differentiatingproducts from those of rivals andin developing longer-term positive– and often emotional – relationshipswith customers by communicatingan assiduously nurtured imageor reputation. Every businessmust woo customers to move themquickly from brand awareness, viabrand recognition, to brand preferenceand finally to brand insistence,a point at which the consumerrefuses to accept alternativesand is willing to pay an even higherpremium for the desired brandedproduct.The popular terms used in marketingjargon, “brand” or “brandname” are interchangeable with“trademark,” the term used in intellectualproperty legal circles. Ofcourse, a product brand or a corporatebrand is a much larger conceptthan a mere trademark, asbuilding a strong brand and establishingthe brand equity of a businessis a bigger challenge thanchoosing, registering, or maintainingone or more trademarks. Strongbrands and successful brandinggenerally refers to successes interms of contribution to marketshare, sales, profit margins, loyaltyand market awareness. However,the ultimate success of a brand isalso judged in terms of the totalvalue derived by the customer fromthe product to which it relates.Designing a TrademarkBusinesses often use a portfolio oftrademarks for diversifying theirmarket strategy to meet the expectationsof different target groups inthe same or different countries.Building a strong brand image is noeasy task. Use of trademarks foreffective marketing of products requiresan excellent knowledge oftrademark law and practice at thenational and international levels –seeking professional guidance becomesnecessary, as this is a specializedtask. However, a few basicelements must be kept in mindfor the design of a good trademark.Trademarks shouldwwwwwbe inherently distinctive,be easy to memorize and pronounce,fit the product or image of thebusiness,have no legal restrictions, andhave a positive connotation.A brand/trademark may be a word,letter, symbol (logo), number, color,shape or, where the legislation ofthe country so allows, sound orsmell, or a combination of one ormore of these elements.Nokia US$35 billion(estimated market value)© Nokia
11WIPO Magazine/February 2002Interbrand 2001 Annual Survey of the world’s most valuable global brands(top three brands in US$, based on estimated market value of the brands themselves)Coca Cola $68.9 billionMicrosoft $65.1 billionIBM $52.7 billion© Coca-Cola CompanyRegistered trademark of Microsoft Corporation in the USA and/or other countriesCourtesy: IBM Deutschland GmbHBrand ValueThe value of brands varies acrosssectors of the economy and withinthe same sector as well. Accordingto a recent survey of businesses insome developed economies, it representsjust over 10 percent of thetotal value of the firm in the industrialsector, around 40 percent inthe financial services and the automotivesectors and as much as 70to 90 percent in the food or luxurygoods sector.In absolute terms the value of abrand, excluding the value of itsother intellectual property and intangibleassets, may be a phenomenalsum. Results from theInterbrand 2001 annual survey ofthe world’s most valuable globalbrands in the box above clearlydemonstrate this point. As such,trademarks/brands are extremelyvaluable assets, which need carefulhandling, care, nurturing andprotection; otherwise they may losevalue, be stolen or simply be destroyedor lost.Protect your TrademarksA major step in eliminating wastefulexpense and reducing risk is toregister the trademark early so thatit is legally secure and others cannotfree-ride on it. This is oftendone well before test marketing thenew product to avoid incurring expenseon advertising and other promotionalactivities, only to discoverthe brand name is not available.Some countries do provide a degreeof protection to unregistered trademarks,but in most countries protectionis contingent upon successfulregistration. Many countries allowregistration without prior use,but the trademark may be cancelledif it is not used in the marketplacein relation to the product for a certainperiod of time. It is easier todeal with the willful free-riding,known as counterfeiting of a trademarkand with gray market products(so-called parallel imports) ifthe trademark is validly registered.Informed businesses take activesteps to educate employees, dealers,distributors, newspaper editors,publishers of encyclopedias and thepublic that their trademark identifiestheir specific products aloneand therefore should be used in aproper manner.Another major step that must betaken by every business is to annuallyreview its portfolio of trademarksto check whether timely actionhas been taken to (1) registerall trademarks in use or proposedto be used in the domestic or exportmarkets, (2) record licensing ofa trademark if required under thetrademark law; (3) adequately controlthe quality of the product providedby a trademark licensee orfranchisee; and (4) renew trademarkregistrations.The next article in IP and Businesswill discuss the role of industrialdesigns in marketing.¨
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WIPO Magazine, Issue No. 2, 2002

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