Why are trademarks intangibles

A trademark can take on numerous forms, including letters and words, logos, pictures, slogans, colors or a combination of those things. A trademark can even be a sound. The key is that when the consumer sees or hears the trademark, they immediately associate the mark with the source the company of the goods or services. Over time, effective marks create and bolster corporate and brand recognition, goodwill, and value. Trademark rights emerge once a mark is used in commerce.

Common law trademark rights are geographically limited to the area in which the mark is used, and the extent of trademark protection from infringement is difficult to quantify or prove under basic common law rights. When a mark is registered with the U. To go through this process, it can be worth hiring a trademark attorney to ensure that the legal requirements are met. Intangible Business is experienced in providing expert independent trademark valuation services for IP management, owners and their legal or other advisers in particular for: dispute resolution; corporate deals; IP management; and supporting other legal services.

Skip to main content. Search form Search. You are here Legal Valuing Trademarks. An intangible asset can be classified as either indefinite or definite.

A company's brand name is considered an indefinite intangible asset because it stays with the company for as long as it continues operations. An example of a definite intangible asset would be a legal agreement to operate under another company's patent, with no plans of extending the agreement.

The agreement thus has a limited life and is classified as a definite asset. While an intangible asset doesn't have the obvious physical value of a factory or equipment, it can prove valuable for a firm and be critical to its long-term success or failure.

For example, a business such as Coca-Cola wouldn't be nearly as successful if it not for the money made through brand recognition. Businesses can create or acquire intangible assets. For example, a business may create a mailing list of clients or establish a patent. If a business creates an intangible asset, it can write off the expenses from the process, such as filing the patent application, hiring a lawyer, and paying other related costs.

In addition, all the expenses along the way of creating the intangible asset are expensed. However, intangible assets created by a company do not appear on the balance sheet and have no recorded book value.

Because of this, when a company is purchased, often the purchase price is above the book value of assets on the balance sheet. The purchasing company records the premium paid as an intangible asset on its balance sheet. Intangible assets only appear on the balance sheet if they have been acquired.

Indefinite life intangible assets, such as goodwill, are not amortized. Rather, these assets are assessed each year for impairment, which is when the carrying value exceeds the asset's fair value.

While the competitive advantage offered by intangible company assets can be immeasurable, the budgets for protecting these assets can be limited. Therefore, it is important for businesses to understand the basics of selecting and protecting trademarks, and to seek counsel who will help guide them in developing the best strategies for selecting and protecting trademarks within a reasonable budget.

This article provides a basic trademark overview and identifies several tips and common pitfalls for companies as they select trademarks. A trademark is a word, name, symbol or device that is used in trade with goods to indicate the source of goods and to distinguish them from the goods of others.

Examples of trademarks include:. A service mark is essentially the same as a trademark, but a service mark distinguishes the source of services rather than goods. The terms "trademark" and "service mark" are often used interchangeably, or both are simply referred to as "trademarks. Some businesses tend to select marks that are descriptive so that consumers know what the goods are simply by seeing the name.

Unfortunately, descriptive names are generally not registrable, are considered "weak" and can be difficult to enforce against others. This is because descriptive names are considered incapable of distinguishing the source of goods, and thus would not have much value to the owners or to consumers.

However, if a company has a large budget and is willing to fight subsequent uses of similarly descriptive names by third parties, then the mark might eventually acquire "secondary meaning" in consumers' minds. Challenging these uses can be tough because third parties may have a legitimate need to use the descriptive terms for their competing goods.

If "secondary meaning" is achieved, consumers begin to associate the descriptive name with the company using it and not just with the type of goods or services.

An example of a mark with "secondary meaning" is the restaurant "California Pizza Kitchen. Trademarks on the stronger end of the spectrum are:. While companies may see marketing benefits in choosing the below types of names, a trademark should generally avoid including:. It is important to search a mark prior to use so that there is no inadvertent infringement of third-party trademark rights. In addition to the expense associated with changing a name, there is the risk of damages arising from trademark infringement.

A proper trademark search will cover numerous databases to determine whether another entity has prior rights to the trademark or to a mark that might be considered confusingly similar to that name.

Marks do not have to be identical to be confusingly similar. Further, the clearance process is not as simple as searching the U. Trademark rights can be based upon use or an application to register the mark, and a registration is not a prerequisite to using a name. These are called "common law" rights, and they provide some limited protection that can sometimes form the basis of a claim of infringement and can also block registration of another's mark.

It is important that the scope of the search covers common law rights as well as registered rights. CAVEAT: Not all marks are registered and no search is guaranteed to uncover all possible common law unregistered uses.