News & Events

To register or not (Part I/II): 5 Reasons why you should not register your trademark

19/03/2021

Registering a trademark can be expensive. So before you simply go ahead and do it, you will learn in this and the next blog post when it makes sense to register, and when not.

You started your business a while ago, developed a great product or offer innovative and competitive services. Most likely you invested a lot of time and maybe also some money in the branding process, and now you came up with a great company name.

You do not want anybody else stealing your brand name and profiting from your reputation or trying to force you to pay to get it. Understandable: Your brand represents your company, serves as an identifier for your products or services, and ideally reflects the values that your company stands for. If you launch a new product or service in the future, your brand communicates trust to customers.

Essentially, a brand is a quality label, and a trademark enables you to keep up the exclusivity of your brand. But there’s also the business aspect: Trademarks are valuable business assets: they are tradeable and can be used to generate income through licensing. If you pitch your company to investors, they will be impressed by a portfolio of registered intellectual property, and if you did not register your brand as a trademark, it may raise questions. However, registering a trademark is not always a must, and here there are reasons why you should NOT register a trademark:

1. It can cost a lot of money

If you are a start-up, chances are that your financial situation is still not rock-solid and you have to make a thorough assessment before spending a substantial amount of money. Trademarks are not available for free, and depending on your planned use, they can be pretty expensive.

First, it’s important to know that trademarks are subject to the principle of territoriality. This means that a trademark registration will grant you protection only in the jurisdictions in which you registered in. Sometimes that’s fine, e.g. because you do not plan to leave the Swiss market. But let’s say you want to launch not only in Switzerland, but also in the European Union and the United States. Now how much could that be?

A Swiss trademark registration starts from CHF 550.-, and that’s the absolute minimum. It might be more if you want to expand the range of protection to more goods or services or plan to take the express route.

Then, for the EU and the US, you need to decide whether you want to have independent trademarks or expand the scope of your Swiss trademark via an international procedure called the Madrid System. An international registration with the Madrid system costs a minimum of CHF 2’010.- for the EU and the US. The prices above are without any legal fees, and since trademarks are complicated, you might want to consult with an expert beforehand, so over all you will likely pay at least CHF 4’000.- for your trademark registration in the three mentioned markets.

And the registration of your trademark is just the beginning: You are solely responsible to protect the scope of protection of your trademark. If you don’t do it, no one will prevent third parties from registering confusingly similar trademarks. To prevent the weakening of your trademark, you therefore need to fight off new registrations. Without such an enforcement of your rights, a registration is often useless, but the enforcement requires again substantial economic commitment.

2. Your brand might not fulfill the requirements for trademark registration

Before you try a registration, you should check whether your brand fulfills the registration requirements. This can prevent long procedures with high costs. Trademark offices do not register trademarks if there are so-called absolute grounds of refusal. To be registerable as a trademark, a brand cannot be:

  • descriptive: This is the most common absolute ground of refusal: Trademarks that are descriptive, i.e. because they contain information about nature, quality, type or place of manufacture, destination, or price of the goods/services, cannot be registered. Such signs belong to the public domain and should remain freely available to all competitors. Examples of non-registrable descriptive trademarks are “APPLE” for apples or “FAST” for cars.
  • deceptive: trademarks that are deceptive about characteristics of the goods or services cannot be registered. Such characteristics can be the origin, quality, or nature of the goods: It is for example not usually possible to register “SWISS” for goods that are not produced in Switzerland.
  • contrary to applicable law, public order, or morality: This means the sign should not offend moral, ethical, or religious sensibilities. You cannot, for example, register the name “Mohamed” for alcoholic beverages.

But even if your brand as a whole fulfills the requirements and gets registered: you should be aware that your mark is only protected as a whole, while certain elements of it still might be seen as descriptive. This can lead to the situation that the parts you like most about your brands are not considered distinctive, and you cannot prevent others from using them.

3. You might attract unwanted attention

Another question is whether your trademark is as unique as you hoped it is. Before filing, you should conduct a proper research to see whether there are existing marks with similarities. Be cautious if parts of your mark are registered already, especially if the existing trademark belongs to a large corporation. Chances are that such corporations monitor new registrations and thus they’ll notice your new brand.

Even if in your opinion the two marks are not confusingly similar, the other company might think differently. This often results in cease-and-desist letters and additional legal costs. If you are not prepared for this, it might be better for you wait with the registration and fly under the radar of trademark monitoring services until you are ready for potential legal consequences.

4. You are not settled on a specific market yet

Trademarks do not work globally. As mentioned above, you have to take the principle of territoriality into account, meaning you need to register in each market separately. Since each registration costs, a trademark should only be registered in specific jurisdiction once you know you actually (will) do good business there.

Let’s say you are a highly specialized tech company. Your innovative software is targeted at a very specific type of business. Therefore, even though you are based in Switzerland, you plan to market your product globally. However, you do not know yet which will be your key markets. Of course, you can register in Switzerland, the EU, and the US. But if the lion’s share of your turnover results in the BRIC states, these registrations will probably not be worth their money.

Also, it’s worth noting that contrary to a patent or design, a trademark doesn’t need to be new to be registered. This means you do not have to register right away, but can take your time and see in which markets a registration might pay off and in which it doesn’t.

5. The risk of not registering might be lower than you think

You may now think all well and good, but what if a trademark troll sees your brand, registers it and then tries to get money from you so you can use it? Or copycats, who simply put your brand on their own products to profit of your reputation? Or what if someone by coincidence registers a very similar trademark?

There are various legal provisions protecting you in such cases:

  • Against trademark trolls, what helps most are the costs of trademark registrations. It usually simply doesn’t pay off to randomly register the trademarks of others, because it’s too costly. Also, there’s a requirement to use trademarks: If, after a certain period, the use of a trademark cannot be demonstrated for the goods/services it’s registered for, the owner of the trademark cannot prevent others from using such signs.
  • Against copycats, there’s competition law, preventing others to take measures that are likely to cause confusion with your goods and services (e.g. by labeling it with your brand, even if that’s non-registered).
  • Against other similar registrations, you can defend yourself by proofing you used your non-registered trademark before. The owner of a new trademark cannot prevent others from using older signs to the same extent as already previously used (prior to the filing of the application). For cases like this, it helps if you document the use of your brand as well as possible, e.g. by collecting newspaper articles, pictures of events, or uploading your website to the internet archive.

Conclusion

There are many good reasons to register a trademark: A registered trademark guarantees you the freedom to operate under that sign and enables you to strengthen your brand by enforcing your rights against competitors. You will receive a valuable, tradeable business asset, can improve the trust of potential investors or even generate income through licensing. More on these advantages will be described in our upcoming blog post.

However, there are also many good reasons why not to register, and most of them are money. Each registration costs, and each jurisdiction requires its own registration. A registration brings legal risks: Your trademark might be refused by the trademark office for its descriptiveness, or you might attract the attention of large companies who claim to own similar trademarks already. All such procedures are requiring time and money.

Before registration, you’ll want to ensure that you know why, where and for what you actually need trademark protection. Also, you should be aware of the actual and potential costs. If you are aware of the points mentioned above, a trademark is a great asset. But sometimes, it pays off to wait with registration or to not register at all.

By Thomas Kuster

Legal Counsel

Related

Let’s Go!

Book a free, non-binding discovery call to talk about how we can help you achieve your business goals.

Or feel free to reach us directly via email at contact@lexr.ch

Book a free call