MAKING THEIR MARK
Electronics companies seek recognition,
attention and protection amid a stampede of trademarks and branding campaigns
SiPix Inc.,
a digital-imaging start-up with a mere 12 months of operation under its belt,
already owns a fistful of trademarks—its name, of course, variations on it,
plus its Internet domain name and any obvious variations. Most importantly, the
Milpitas, CA, company has registered trademarks for the products and
technologies it hopes have the greatest chance of becoming stars in the
burgeoning universe of digital-imaging appliances, including StyleCam, a
2.6-ounce digital camera, and PocketColor, a palm-sized color printer.
Thousands of miles away from SiPix—literally and figuratively—Armonk,
NY-based IBM Corp. has launched a new branding campaign of its
own, one designed to showcase IBM microelectronics at use in third-party
consumer devices such as PDAs, cellular phones, game systems and digital
cameras. The idea is for OEMs such as Nintendo Co. Ltd.,
Kyoto, Japan, to put on their products' packaging a logo that features the
words "IBM Technology" underneath a graphic that plays off IBM's
traditional "eight-bar" blue-and-white-striped corporate logo.
SiPix and IBM are facing different trademark
challenges. SiPix is hoping to attract attention in a noisy consumer
marketplace where, as a newbie, it has little clout. IBM is trying to put a
recognizable face on its OEM business, leverage its leadership reputation with
consumers and impart a sense of freshness to what otherwise could be seen as an
old-fashioned logo or a tired brand.
But their larger goals are the same. Both companies
hope to make their products ubiquitous, the way "Intel Inside" worked
for the giant chip maker, or the way Coca-Cola is universally acknowledged as
the most successful trademark in the world. As Jim Burdett, senior partner at
the Washington DC offices of Venable LLP, a law firm that handles trademarks,
observes, "If every brick and mortar that Coca-Cola owns were destroyed,
the brand's strength would still be there." Now that's a trademark.
Hurdles to clear
It's getting harder to make that kind of a mark in any
industry, electronics included. The U.S. Patent and Trademark Office (USPTO)
received about 296,000 applications for trademarks in 2000, the second year in
a row that applications increased by 27%. That growth is expected to continue
(see chart, page 42). Some CEOs and marketing managers complain that we're running
out of words, phrases and symbols that haven't already been used. And after the
creative hurdles have been cleared, companies face increased costs to develop
and defend trademarks—even as they struggle to measure how trademarks bring
value to the bottom line; to articulate how and where trademarks should fit
into an overall intellectual property portfolio; and to determine how business
trends such as globalization will influence the picture in coming years.
Legally, a trademark is a word, phrase, symbol or
design, or combination of those elements, that identifies and distinguishes the
source of goods or services of one party from those of another. Companies
aren't required by law to register trademarks with the USPTO—they can simply
put a "tm" after a mark and begin using it. But registering can give
a legal leg up if the mark is challenged in court (to say nothing of the little
"R in the circle" companies can use once they've registered).
"There are certain advantages going into court
that come along with a [registered] federal trademark, plus you can deposit it
with [U.S.] customs to stop infringing gray-market goods from coming into the
country," explains Jessie Marshall, a trademark administrator in the
office of the commissioner for trademarks at the USPTO in Arlington, Va.
"The mere fact you've put 'tm' after a mark
doesn't by itself establish superior rights. You want to register to make sure
you've got priority," says Kirk Ruthenburg, a partner in the Washington DC
offices of Sonnenschein Nath & Rosenthal. "Registration isn't an
iron-clad guarantee [of victory in court], but it helps."
In awarding trademarks, the USPTO is limited to
deciding if there would be a likelihood of confusion among relevant consumers
of each product or service. "Domino is registered for pizza and
sugar," says Marshall. "They're both food items, but it's clear in
consumers' minds that they're not coming from the same company."
But many firms are more sensitive than the USPTO in
detecting possible infringement, which is why many trademark cases wind up in
court. Lexis, a legal database company (owned by Reed Elsevier Group, the
parent company of Cahners Business Information, which publishes ELECTRONIC
BUSINESS ), for example, sued the high-end automobile maker of the same name
when the latter entered the U.S. market, but lost because the court said the
likelihood of consumer confusion was small. "We find that companies are
trying to be more proactive about similar-sounding names and variations on
their trademarks," says Ruthenburg. "They're defining brand
protection in a broader way than they used to, and enforcing trademarks more
than they used to."
"A trademark attorney should work
hand-in-glove with marketing to determine branding strategy."
—Jim Burdett, senior partner, Venable LLP
On the flip side, companies also must guard against a
trademark that's so successful it threatens to become generic. If companies
aren't aggressive enough in protesting when people use "Xerox" for
"photocopy" or "Kleenex" for "tissue," they can
lose the trademark on that word or symbol, warns attorney Burdett.
The 'secret sauce' test
How do companies go about deciding what to trademark?
"Any time companies are going to be using some sort of mark or phrase
affiliated with their products that they want to keep distinct in the minds of
consumers, they ought to trademark them," says Ruthenburg.
But following that advice can be costly and time
consuming. Nvidia Corp., a Santa Clara, CA-based maker of
graphics and audio/video processors, started out obtaining trademarks for every
new chip, says director of corporate marketing Kevin Schuh. But the 8-year-old
firm has since evolved its strategy to focus on product families, which cuts
down on new trademark applications. Improvements to the firm's GeForce graphics
processor, for example, are given extensions. Since the company already owns
and maintains the GeForce mark, GeForce2, GeForce Ultra and GeForce3 Ti 500
don't need separate marks of their own.
Nvidia also names and trademarks internal chip
technologies that it wants to bring to the attention of OEMs and consumers—a
key step for electronics companies that often deal in subsurface arcana.
"When we do a product launch, we say, what's our 'secret sauce' here, what
underlying technology do we want to identify and call out in our product
messaging?" Schuh says. The GeForce chip, for example, includes features
that the company trademarked as Vertex Shaders, Pixel Shaders and the Infinite
Effects Engine.
While responsibility for those decisions naturally
begins in the marketing department, it shouldn't end there, trademark experts
warn. "There have been cases of the marketing people [coming up] with
schemes that infringe on others' marks and jeopardize their own," says the
USPTO's Marshall. "You're not required to have legal counsel, but nearly
everyone does, and very often it's from outside [the company] because trademark
is a small and complicated area of law."
To be effective, and to protect the company's overall
brand, trademarks should complement a well-articulated branding policy, which
in turn should be part of every company's overall intellectual property
strategy. "A trademark attorney should work hand-in-glove with marketing
to determine branding strategy," says Burdett. "A company like
Wal-Mart has something like 20 attorneys working alongside marketing on brand
strategy and how individual products are going to be pushed."
Protecting the house brand
Everyone's first priority should be protecting and
promoting what attorneys call the "house brand"—nearly always the
firm's name, and sometimes a few other key marks. In the electronics arena,
perhaps the best known example of a house brand is Intel and its "Intel
Inside" OEM campaign, which is so successful that it can "wash
out" other company's brands in consumers' minds, says Burdett. When
consumers react more strongly to the Intel Inside logo than to the logo of the
company that's actually selling the machine, you know you've got a potent
branding strategy. "Intel spent hundreds of millions of dollars to promote
that campaign with PC manufacturers, but in their minds, it was money well
spent."
In the 18 months that IBM worked to create and refine
its "IBM Technology" push, the sanctity of the main brand always was
foremost in people's minds. "There's only one master brand, and that's the
'eight-bar.' We try to evolve it and keep it fresh, but whatever we do is always
anchored to the core principles," says Mark Lefebvre, marketing director
for IBM's Microelectronics Division, in its Waltham, MA, office. In developing
a trademark for use by OEMs, the first priority always was whether the project
was consistent with, and tied to, the attributes of the master brand, he says.
Lefebvre had a little help in making that
determination. Multiple focus groups gauged consumer, business manager and OEM
reaction to the IBM brand. A dedicated legal team hammered out a tough
technology licensing agreement to protect IBM's interest and image. A
Technology Mark Council, chaired by Lefebvre, brought together managers from
the corporate identification department, corporate marketing and the technology
group, among others, to act as an intra-company foundation and management
system for the project. Any OEM considering using the logo gets guidance from a
pre-established set of criteria—including an assessment of that company's
leadership in its market, financial health and compatibility with IBM's core values.
"Trademarks in general aren't expensive to obtain—it's the
litigation that costs money."
—Kirk Ruthenburg,
partner, Sonnenschein Nath & Rosenthal
Lefebvre wasn't able to estimate how much all that
activity costs—as at many other firms, trademark expenditures are built into
the marketing budget and viewed simply as a cost of doing business. When
pressed to articulate a way for companies to estimate costs, attorney Burdett
suggests as a rough rule of thumb that firms should be willing to reserve 1% of
their total advertising budget for legal fees, including those associated with
the trademark registration and ongoing defense.
However much it spent, IBM's expenditures most likely
exceed SiPix's entire branding budget. A new company that's watching its
wallet, SiPix is taking some of the trademark responsibilities into its own
hands as a way to save money and speed the process. "A lot of the
trademark process doesn't take a brain surgeon to do," says Michael
Weizer, SiPix's director of product marketing. "We looked at the process
and said, how can we lower these costs?"
Rather than using lawyers to vet potential trademarks
before filing an application, for example, Weizer's office does a preliminary
search of its own by checking them against the USPTO's online databases and
running the names through several Internet search engines to see what pops up.
It's not until after Weizer has settled pretty solidly on a trademark candidate
and circulated it among the firm's international offices for approval that outside
help is called in—in the form of legal advisors, the trademark and copyright
search service Thomson & Thomson, or both.
Patrolling a small world
Like most other firms, SiPix expects its salespeople,
its customers and general word-of-mouth to let it know if another company is
infringing on any of its trademarks. But unlike many other companies, SiPix
doesn't supplement that surveillance by maintaining an ongoing relationship
with Cyveillance, Government Liaison Services, Thomson & Thomson, VeriSign or
other such search services, nor does it retain a legal firm to do the job.
"It's a small world. It would be hard for someone to come out with [an
infringing] product that we wouldn't have heard about," says Weizer.
"Luckily, we haven't had to deal with that yet."
Executives at Aura Communications Inc.,
a Wilmington, MA, fabless chip company, felt the same way, until they were
forced to go after a company they believed was infringing upon their corporate
identity and Aura brand. Executives were aware from the company's inception
that there were other Auras out there—20 or so, by COO and CFO Chip Marshall's
estimation—and the firm was keeping an eye on their activities.
"If you can't prove that there's
confusion going on, you don't have the ability to make a strong case in
court."
—Chip Marshall, COO and CFO, Aura
Communications Inc.
Though Marshall is prohibited by a settlement agreement from talking in
detail, he can say the case centered on the issue of keeping similar marks in
distinctly separate markets. "Historically, the legal term 'confusingly
similar' has applied to consumers, but under more recent law it can include
employees and the supply chain in addition to what we would normally think of
as a customer," Marshall explains. That interpretation "is important
to us as a start-up. Our trademark and trade name are very important in
employee hiring and in the supply chain because we don't have a large,
established customer base yet."
Aura executives and the company's outside legal team
started noticing, and documenting, a series of confusions taking place between
the company and another Aura. "If you can't prove that there's confusion
going on, you don't have the ability to make a strong case in court,"
Marshall says. "When somebody calls up the wrong company looking for a
job, or an employment agency sends candidates to the wrong company, or somebody
in the supply chain says 'you didn't pay your bill' and it was the other guy's
bill, that's confusion."
Aura filed a temporary injunction against the
offending company and eventually settled the case out of court, Marshall
reports. "We're hoping it was a fluke. The whole thing was pretty
surprising, but we had it over with pretty quickly. If you can make a strong
case, the system works."
Early and aggressive intervention makes cases like
Aura's easier to deal with, legal experts agree. "If you take proactive
steps at the outset and have an active monitoring program, you can get those
cease-and-desist letters out there early on," Ruthenburg notes. "The
earlier you catch it, the easier it is to avoid litigation. Trademarks in
general aren't expensive to obtain—it's the litigation that costs money."
The international quagmire
If litigation is one big unknown in the trademark
equation, international protection is an even bigger quagmire, and one that's
far less easy to navigate. As more and more businesses of all sizes seek to do
business globally, trademarks take on a new level of contentiousness—and
importance.
Trademark registration is good only in the United
States, points out the USPTO's Marshall. Companies in countries that have
signed onto the World Intellectual Property Organization's "Madrid
Agreement" trademark protocol—49 countries as of Nov. 9, 2001—can register
a mark with that organization and receive protection in all signatory
countries, but the United States has not yet signed the WIPO treaty. The
European Union does maintain an EU community mark, which somewhat eases the
process of protecting a brand in Europe. But for the most part, American
companies currently must file trademark applications on a country-by-country
basis worldwide, a process that's costly, confusing and at times not entirely
effectual.
Unfortunately, it's not one that can be ignored,
experts say. "Southern Asia is a notorious problem," says Burdett, by
way of example. "If you don't register your brand there, some pirate will,
and you'll be forced to do business under another brand."
If executives find the prospect of registering in,
say, 125 separate countries a bit daunting, Burdett suggests prioritizing by
filing first in countries where the firm has manufacturing facilities or plans
to do the lion's share of its business, and to start by registering the most
important trademarks first.
That's the approach Nvidia is taking. Company policy
is to register product families in as many countries as possible, and then
relegate individual chip technologies—which aren't as likely a target for
pirates—to a secondary category for now, says marketing director Schuh.
"We sat down with legal and set up a list of first-level trademarks for
our top 10 countries. The second level has maybe 20 additional countries, then
the third group is another 40 or 50 countries," says Schuh. "It's
expensive, and it's a big pain to file in every one of those countries."
With all the expense and hassle of trademarks, both
international and domestic, how can companies be sure they're getting something
back in return? Tough call, say executives and legal experts.
In trademark lawsuits, lawyers sometimes try to value
a trademark by estimating how much revenue an infringing company earned by
using a trademark illegally. Nvidia figures its branding strategies are working
when phrases it has trademarked are picked up and used in the press (in
reviews, for example), in OEM literature and packaging, and by consumers. IBM
often conducts focus groups and surveys of customers, noncustomers and OEMs—as
it eventually will do to test the efficacy of its IBM Technology campaign.
In the end, insiders agree that trademarks are an
inexact science, but nevertheless inexpendable. "The names we choose to
trademark are our 'blue power crystals' for our product," Schuh says.
"They bring marketplace attention to our technologies."
Tracy Mayor writes
frequently on technology and parenting. Contact her via e-mail at tmayor@mediaone.net.
© 01/2002 Electronic
Business, http://www.eb-mag.com