The Opinion of a Small Business Owner In Regards to Trademarking

I thought this would be interesting to post this because so many of us will go on to create our own businesses in the fashion industry. Yes, I believe trademarking a brand is important in order to protect itself from piracy and confusion in the market, but at what stage? I think we tend to hear a lot that we need to apply for trademark protection at the creation of our brand, but is it necessary? I for one did not even know there were common law protection of a brand or that "a work is copyrighted automatically once it is in tangible form" (Page 506) until I further explored the law. I asked my employer, Winky Wu, her opinion on the matter because she is in the process of trademarking her own fashion accessory brand Winky Designs. I wondered why she decided to file for protection now as opposed to when she first created her business almost two years ago. I believe this holds a lot of insight into the minds of small business owners and the importance of the allocation of funds for an emerging brand.

Winky Wu:

Winky Designs is actually still not trademarked but we are technically in the process of getting the application started.  People will always tell you that you should get a trademark done but I think it's overhyped, it's like someone telling you that you need to buy life insurance at the age of 10.  In both cases, the reasons why it's not very practical is the same 1) the costs outweigh the benefits especially when you are so young and 2) your risk of negative consequences are actually quite low.

 

1) The Costs Outweigh the Benefits:

 

• Trademarks are expensive:  To trademark in the US, the application fee is $325 per class (for example, scarves, watches and handbags are in 3 different classes, so if I was to trademark our name across all the product categories that we are in, it would cost us $975 in application fees plus legal fees of hiring lawyers or a trademark company to help us do the research and fill out the applications).   When I first started the company I had limited funds, and I just decided to use my resources in more productive ways. According to the United States’ Small Business Administration (SBA), approximately 90% of all small enterprises fail within the first two years of operation, so when you are starting out, you don't even know if you're going to make it long enough to have anything worth trademarking.  So why not wait and see how the business goes before spending that money?
• Trademarks are limited by country:  This USPTO trademark protects you in the USA only, and so if you want to protect your mark internationally you need to pay additional certification fees and international application fees are also very expensive (e.g. $200 per class per country). Winky Designs sells in 3 classes across 25 different countries, and so in order to "truly" protect ourselves we would really have to break our bank!  It's a tough decision, you just need to balance out the costs vs. benefits of trademark protection and see how much you can afford.  
• Trademarks take a really long time: Before even doing an application, you need to do some research to see if there are any conflicting marks out there. Then you need to do the application and submit it.  The total time for an application to be processed may be anywhere from almost a year to several years, depending on the basis for filing and the legal issues that may arise in the examination of the application.  While your application is being processed you have no protection (so if your idea takes off, someone can copy you before your trademark even comes through).  I think you might be able to retroactively take action but by then it might be too late.
• Even if you had trademark protection, would you actually take action against an infringing company? We all know that trademark registration is supposed to "protect" you, but if people want to copy you, they will do so anyway (look at all the fake designer products out there!).  The trademark just gives you a good case to take legal action to stop the copycats, but you still need to hire lawyers, go through the courts etc. which would cost a LOT of money and the process could drag out for years. If LV and Gucci (with tons of money) can't protect themselves, how will I be able to afford it as a small startup business?  Realistically, IF someone were to copy the WD mark, the most I could do is send out a threatening legal letter and if they didn't stop, I'm not sure that I would actually take legal action unless WD was really taking off and we had some financial backing.   I would probably be better off spending my time & money to come out with fresh new designs, differentiating on quality and encouraging buyers to buy the real deal (rather than taking legal action).

2) Your risks are actually quite low:

 

• Common-law protection:  As long as you are actively using your mark in "commerce" (meaning that you are selling the goods/services with your mark on it), you are actually protected through common-law in most countries.  All you have to do is show that you were first to use the mark within a geographical area (amongst other factors) and that consumers associate that distinctive mark with your company - that's why we put "TM" after our logo (you put R with a circle around it once you are actually registered). Since Winky Designs sells everywhere and is protected through common law in so many countries, if someone did infringe on our trademark, we could legally take action without an actual trademark registration.  Since you get some "free" protection anyway, I decided I didn't need to pay for trademark registration yet until I got bigger.
• Who wants to copy you anyway? As a new brand, you don't actually have enough brand value/recognition to be worth copying.  If you have a great idea or design, it is more likely that people will copy the design/idea (which is protected by a patent), rather than copying your name/logo (which is protected by a trademark).   I always joke that if my brand got big enough to be worth copying, then that's when I'll really know that we've "made it" and it's a good problem to have.
• Infringement on someone else's trademark: There is also risks that your mark is infringing on someone else's registered mark and they might take action against you (which is actually a real risk). In most cases, they will send you a C&D (Cease & Desist) to ask you to stop using their mark or they will take further action.  At this point, you are likely to stop, rebrand yourself, or sell the goods in another country where they don't have protection.  If they decided to litigate, the most they can go after is the profits you made on your sales (which as a new business, may not be very much ...so it might not be worthwhile for the opposing party to take action against you since their legal fees is likely higher than what they could get from suing you). 

 

Final thoughts - this is by no means the "right" answer, most professionals will tell you to trademark when you start a new business - but from a practical/financial point of view, I didn't think it made sense for my own company for the 7 reasons I listed above!  For a new business, your future is uncertain, you have limited funds, and you have free protection already - so why trademark?  I will however, suggest that any new business owners should do the research to make sure they're not infringing on someone else's mark before they start using their name/logo.  I just went on the USPTO website and searched for "Winky" (it's a public database), and I looked up "Winky watches" and "Winky designs" on Google which gave me a pretty good idea that I was free and clear to use my name before I started.