Unknowingly infringing on another company’s trademark
An infringement occurs when a company uses an identical logo, name, or any other intellectual property for its goods or services without obtaining consent from the registered trademark holder. By choosing not to register your own trademark and doing business by the use and promotion of your business names and logos, you could be infringing on another trader’s registered trademark without even realizing it. This could have an expensive and detrimental effect on your entire business.
If the trademark owner is able to prove infringement, company accused of trademark infringement is likely to receive any of the following:
a court order to stop using the accused trademark;
an order requiring the destruction or confiscation of products including the accused
trademark; an order for monetary relief, including defendant's profits, any damages sustained by the trademark owner, and the costs of the action;
an order that the defendant, in certain cases, pay the plaintiffs' attorneys' fees.
Read more about examples of trademark infringements and How to get around trademark infringements.
Suffering complete rebranding
Registration of an identical or a similar trademark by a competitor may result in a cease and desist action taken against the entrepreneur. In the absence of a registered trademark, rebranding may become the only feasible option, resulting in substantial losses incurred in virtually re-starting the whole business. Trademark registration can be therefore viewed as a safeguarding mechanism against this potential risk.
Becoming a victim of copycats
Having copycats is inevitable. When a new business idea is executed successfully, other businesses naturally imitate and emerge. Even worse, if you don’t register a trademark for your intellectual property, somebody else eventually will. If that happens, you will find yourself in the situation described above, where your competitor will have a legal advantage to enforce their rights.
Trademark acts as a main deterrent for copycats, and it is the ® symbol that communicates a strong signal that the company is willing to protect its own intellectual property. In addition, trademark registration protects against identical and similar brands, providing the registered trademark owner with the legal rights to issue cease & desist letters to running businesses and oppose new applications for trademark registration. It is, however, the responsibility of the owner to monitor and challenge these identical and similar trademarks.
Not finding good partners or investors
People want to invest money into businesses with minimal risk and serious growth potential. There is a risk associated with building a business based on brand names or logos that you cannot legally protect. This makes your business a less attractive opportunity for investors.
An evaluation conducted by the Economist uncovered that over 20% of the market value of the ten most valuable brands is derived from the brands themselves. Similar studies went even further, claiming that this figure can be as high as 30% (Millward Brown). As a result, brand protection in the form of trademark registration provides positive monetary value, signalling a positive message to investors. Trademark registration is also increasingly becoming a key requirement for obtaining funding from investors as well as from crowdfunding platforms.
Not being able to expand to new markets
Trademark registration is especially relevant for those ready to expand their business and start offering their goods and services globally. By not registering your trademark, you are limiting the ability of your business and brand to expand and capping your revenue potential. One of the biggest issues business owners face when expanding their business internationally is brand squatting, somebody else registering a brand owner’s trademark first in another country to later sell it for profit or to leverage the brand’s success. In order to prevent this from happening, it is best not to delay filing trademark registrations abroad, particularly in countries where you intend to launch a product or service in the near future.