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The Costly Gamble

Why Registering a Trademark Before Establishing Brand Recognition Can Be a Waste of Money

In a competitive business landscape, entrepreneurs are often eager to protect their intellectual property, including brand names and logos, by registering trademarks. They are usually egged-on by professional advisors who assume it is one of the essential first steps.

Having spent years doing anti-counterfeiting work I would advise that rushing to secure a trademark before your business has achieved significant brand recognition can prove to be a costly gamble. While trademark registration offers valuable legal protection, it is crucial to weigh the potential benefits against the expenses and potential risks associated with early registration.

A common business objective is to establish a strong brand identity and gain recognition among the target audience. Just getting a trademark won’t do that. Before committing substantial financial resources to trademark registration, it is essential for your company to focus on building the reputation that the trademark will hang off. Put simply, if you have no reputation your trademark will remain unknown. If you have a dire reputation, then your trademark will act as a big red flag – one saying avoid this product/service!

In the early days spend your time, money and energy developing a unique value proposition, delivering exceptional products or services, and engaging with customers effectively. Anything else is nonsense. I spent years battling counterfeiters in Hong Kong and China and if I learned one thing it was that they only copied successful companies with quality offerings. Companies with mediocre or rubbish offerings were never counterfeited – so the money they spent on trademarks was wasted.

Another issue is that your start-up may undergo various iterations as you explore your market niche and refine your business model. Registering a trademark too early can be problematic if you decide to pivot your offering, expand into new markets, or rebrand yourself entirely. In such situations, the previously registered trademark may no longer align with your new direction, necessitating costly rebranding efforts and potentially rendering the initial trademark registration obsolete.

Trademark registration involves several expenses, including application fees, lawyers’ fees (hooray!), and registration maintenance fees. For a start-up company with limited financial resources, these costs can burden its cash flow and divert funds from critical business operations. Allocating those resources towards product development, marketing initiatives, or improving customer experience might yield more substantial returns during the early stages of a company's growth.

Next to consider is the trademark registration process. This provides legal protection against potential infringement. However, without a well-known brand, the risk of infringement is significantly reduced. Competitors are less likely to target an unknown brand, as the associated legal costs if their actions are disputed may well outweigh the potential gains. Therefore, registering a trademark before establishing brand recognition might provide a false sense of security, leading to unnecessary expenses without significant benefits. Putting it another way, if you are too small and/or too lacking in real life presence then potential objectors to your mark may not bother challenging it, thus luring you into a false sense of security. Their enforcement action will still happen but only after you have sunk a lot of time and energy into a mark you suddenly find that you can no longer use.

In today's dynamic business environment, agility and adaptability are crucial for success. Start-ups and emerging companies often need the flexibility to adjust their branding strategy to meet changing market demands. By delaying trademark registration, your businesses would retain the freedom to evolve a brand identity without being bound by the limitations of an existing trademark. This flexibility allows companies to respond more effectively to market feedback and align their branding efforts with their evolving vision.

Instead of investing in immediate trademark registration, businesses can focus on other cost-effective methods to protect their intellectual property. Utilising copyright protection, which provides automatic legal rights to creative works, including logos and written content, can offer initial protection without the financial burden of trademark registration. Additionally, leveraging nondisclosure agreements (NDAs) and maintaining trade secrets can safeguard proprietary information during the early stages of a business.

In conclusion, while trademark registration is undoubtedly important for long-term brand protection, rushing to register a trademark before your company achieves significant brand recognition can be a waste of resources. Prioritizing the establishment of brand identity, cost considerations, and the ability to adapt to market changes are crucial factors to consider. By evaluating the potential benefits against the risks and expenses, businesses can make informed decisions regarding trademark registration and allocate their resources effectively during the early stages of their journey.

Please email James O’Connell for further advice.