If you are here (meaning at passionistasinc.com), it means you are smart, entrepreneurial, spiritual, fun, passionate, and on your way to millionaire status. So basically you’re my kinda lady, and I’m honored to have you in my circle.
Because you’re my girl, I thought I’d talk about money right from the beginning. According to the millionaires and billionaires among us, to make it to that status, you need several streams of revenue. If you are a business owner, you often seek that additional revenue via new product creation, but what if you could generate that cash by re-purposing the products you’ve already created. Enter intellectual property (“IP”).
Yes, registering your IP protects you from infringers (i.e. people trying to pass off their goods as yours), but these rights also create ways of making money, big money. So in this 3 part series, I will discuss the different forms of IP and the ways you can “bring home the bacon” using these rights. In this first installment, we’ll discuss trademark.
IP and Money Part 1: What is Trademark?
A trademark or mark is a word, letter, number, design or combination that indicates the source of goods or services and distinguishes a producer from competitors. Under the federal trademark registration process, a mark owner files a registration application with the United States Patent and Trademark Office (USPTO) once she has used the mark to sell something or intends to use it to sell something in the near future. The application is filed for a certain class or classes of goods or services.
Once the application is filed, a USPTO trademark attorney evaluates the application to make sure it meets certain legal requirements. If the mark passes that evaluation, then the federal government grants the owner the exclusive right to use the trademark in a particular class or classes of goods or services. Furthermore, the owner can sue anyone using her mark to pass off their product as her product in those classes.
My favorite illustration of trademark law in action comes from the movie Coming to America. In the movie, Prince Hakeem of Zamunda (aka Eddie Murphy) moves to Queens, New York in search of his queen and starts working at McDowell’s restaurant. McDowell’s is strangely similar to McDonalds. McDonald’s has the “golden arches” while McDowell’s symbol is the “golden arcs.” McDonald’s has the “Big Mac” on a sesame seed bun while McDowell’s signature burger is the “Big Mic,” no seeds. Even, the color schemes of the two restaurants were the same.
In the movie, the similarities were comical. In real life, McDowell’s would be guilty of trademark infringement. A customer would likely confuse McDowell’s for McDonald’s because they are in the same industry (fast food), and because McDonald’s is the originator and owner of the mark.
With trademark rights, the money-generating asset lies in trademark goodwill. When you use a mark to identify your business and provide services or products that delight your customers, you develop a good business reputation. That reputation is your goodwill, and it attaches to your trademark.
Goodwill relates to the recognition of your mark among consumers and the extra earning power that it generates. In other words, because customers recognize your name and brand, they will want to buy from you and are willing to pay a premium for what you have to offer. Goodwill is the reason a black leather handbag from JCrew might cost a few hundred dollars while a black leather bag from Louis Vuitton costs a few thousand dollars. The goodwill associated with the Louis Vuitton brand and trademark commands a higher price even if the handbags are made in the same factory with the same materials.
Trademark and Making Money
There are two main ways to generate additional streams of income from your trademark and the goodwill you’ve acquired. The first is franchising. When you franchise you allow someone to set up and run his or her business under your mark. Generally, in a franchise arrangement, the mark owner oversee the way her offer is marketed, provides support and implements strict rules to ensure that her offer can be replicated by someone else without variation in quality. In return, the person running the business in the mark owner’s name pays a fee. The franchise model is typically seen in fast food restaurants. However, franchising is a viable option for small businesses as well if they think creatively. Take a look at some of these options.
You don’t have to be an internationally known snack company like Frito-Lay to get down with licensing. It’s a viable stream of income for small business owners too. Recall that Kim Kardashian licensed her trademark to a video game company and now generates millions in revenue because of it. More importantly, licensing exposed her brand to a new audience which means new customers and money for her other products.
Next Up on IP and Money, we’ll discuss patents.
Have any creative ideas for licensing your trademark or any questions/comments about this post? I’d love to hear from you. Please post your ideas, comments, and questions in the comment section below.
The information is provided to you for educational and informational purposes only. It is not legal advice, and the author is not your attorney. This information is to be used at your own risk based on your own judgment. If you need legal advice, please contact a lawyer licensed in your state.