Informed Investors Consider A Company’s Trade Mark Registrations

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by André Maré

An  interesting article in The Wall Street Journal  covers a study by Professor Siew Hong Teoh, professor of accounting at UCLA Anderson School of Management, which presents some great news for IP lawyers: “Trademark filings can serve as valuable indicators for investors.”

This finding should resonate with most trade mark practitioners, who have always intuitively believed this to be true but it is always rewarding when one’s gut feel is empirically proven.

The study states that: “When comparing companies based on how many trademarks they register in a year – relative to their total assets – it is the shares of the companies that register more trademarks that do better the next year, outperforming shares of companies that register fewer.’

It continues that “Companies that launch more new products and have more trademark registrations as a result, relative to their total assets, have significantly higher future profits.”

The article goes into detail about a metric called a company’s “trademark intensity – a ratio that represents the annual number of its trademark activities in a calendar year, divided by its total assets for the fiscal year that ended in the past calendar year.”

While it would be useful to understand how widely “trademark activities” are interpreted, it is clear that the study shows that (at the very least) increased trade mark filings leads to better returns.

There should be no real surprises here.  Companies that are well-managed, understand branding, understand the importance of protecting its brands, that understand the options and revenue streams that can be leveraged by commercialising its IP assets in licensing and similar arrangements will prosper, and generally outperform companies that don’t get branding and trade mark protection.

It is good to have tangible evidence of this point, particularly in language that investors and financial gurus will understand.

Let’s end with something related, but also a little different

One of the major problems with getting trade mark registrations is, of course, lack of availability – the trade mark registers of the world are overflowing. An  article that appeared in Bloomberg on13 April 2022, discusses this dilemma.

Simply put, it is becoming increasingly difficult to come up with trade marks that are available. In the article, the author, Kalle Oskari Mattila, discusses a US WiFi router start-up that considered 600 possible names before a branding agency finally came up with a name that was available: Eero. This is in fact, the first name of a well-known Finnish-American architect, Eero Saarinen. Names starting with a double E are apparently rare in the USA, and the domain name eero.com was also available. Amazon subsequently acquired the company and they kept the name Eero.

According to the article, American companies are going for Finnish names – examples quoted are Vuori, Levätä and Raaka. But why Finnish? Well, Finnish has a mere five-million speakers and we’re told that it’s a “treasure trove” for unique words. Finnish has similarities with just two languages, Estonian and Hungarian, and Finnish words are seen as neutral, with no affiliations for Americans. The author suggests that a Finnish brand name “is an easy pick if you want to be different in a large market that is English speaking”.  

One perceived advantage is that “when consumers don’t have a preconceived idea of a word, brands can use it as a near blank canvas”. The author cites as an example Raaka (raw), which is used successfully as a trade mark for a chocolate that the brand owner likes to think is “strong and wild”.  Another advantage is that there are fewer offensive connotations. The owner of the trade mark Taika (magic) says that the name “piques consumer’s curiosity, lingers in the mind and is positively weird.”

From here, it seems easier to just go back to trade mark basics and invent your own words with no initial meaning, in any language.

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This article was first published by ENSafrica (www.ENSafrica.com) on 7 June 2022.

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