• Intellectual Assets of Your Business
  • July 4, 2013
  • Law Firm: Kalikova Associates - Bishkek Office
  • What is “intellectual property”?

    Today, almost every company has at its disposal, both tangible and intangible assets. The latter include intellectual property. The concept of “intellectual property” includes two major areas of human rights: commercial property, mainly covering inventions, utility models, industrial designs, trade names, trademarks (service marks) and names of goods origin , and copyright, mostly covering the works of science, literature and art.

    However, these two components do not exhaust the meaning of the concept of “intellectual property”. There are the results of intellectual activities which have legal protection, but outside the framework of copyright and patent law and legislation on the means of individualization. They also include non-traditional objects of intellectual property - breeding achievements, topology of integrated circuits, trade secrets.

    Legal protection of intellectual property arises by virtue of the fact of their creation (for example, works of science, literature and art) or as a result of legal protection by the state authority (for example, an invention must be given a title of protection - a patent).

    As noted above, any company has intellectual assets, as it provides services and carries out works or produces goods. Thus the company uses and/or creates intellectual property. The most popular subject of intellectual property are trademarks, whose main objective to personalize products and services of one manufacturer from the goods and services of another manufacturers.

    Trademarks

    In the business world, trademarks are an important part of marketing strategy. A trademark is considered unique among all objects of intellectual property, because when properly maintaining it in force, it gives its owner a monopoly on its use on almost indefinitely period of time. Therefore, trademarks are an essential element in the company's strategy in creating its own wealth.

    One example of a successful strategy for the use of trademarks is the Coca-Cola trademark. According to the “Interbrand” company the Coca-Cola ranked first in the ranking of global brands for 2008 year . In Russia, according to Forbes magazine in 2007 as the best Russian brand has been recognized Lada trademark .

    The more successful is the strategy of the company, the higher is the risk of trademark use by unscrupulous competitors who are by using someone else's trademark could harm the image of the company (the trademark owner) and still receive financial rewards. Company can prove its rights to the trademark and prevent the possibility of its use by others only through official registration of their rights.

    Registration of Trademarks

    If a company will register a trademark, and thus will have exclusive rights to its use, it can prevent or allow others to use its mark. Trademark registration can be made both domestically and abroad.

    Exclusive trademark rights are to be confirmed by certificate of trademark issued by the entitled authority.

    Use of the registered trademark

    By use of the trademark is meant to use at the discretion of the owner of the trademark by any lawful way, including:

    •    on goods, including packaging;
    •    by performance of work and services;
    •    on the documentation associated with the introduction of goods into free circulation;
    •    in advertising;
    •    on signs, advertisements, commercial offers, etc.;
    •    in Internet, including domain name.

    In this case, the trademark owner has the right to prohibit all other persons from any use of registered by him trademark. Moreover, he is entitled to prohibit the use not only of registered by him trademark of a trademark, but also any designation confusingly similar to a trademark. Such confusion may be semantic, audio and/or visual.

    Warning Notice

    The trademark owner to announce their exclusive right to trademark is entitled to affix the trademark warning notice. The most common warning label consists of a capital letter “R” or the capital letter “R” in the circle. Warning Notice may also be expressed in the form of verbal designation “registered trademark” or “trademark” or as a reduction, for example, TM, Reg. etc.

    In whatever form labeling is expressed, its value lies in alerting consumers and competitors that used is a trademark registered and protected in the territory of the State.

    Commercialization of the trademark

    Once a trademark is registered, its “spins” in the market and becomes recognizable. Recognizable trademark as a powerful marketing tool for companies and acquires significance in its activities. For example, the trademark is able to:

    •    increase sales of the company;
    •    increase revenues;
    •    earn money through licensing and franchising;
    •    affect the value of the financial transactions of the company.

    Sales and profitability of sales increase

    It is well known that the recognition of trademark by consumers increases sales, provided that the trademark has a distinctive character, conveys a positive and necessary for the consumer information and related to the company's business and its strategy of improving the product. The trademark also serves as a means of increasing profitability from the sale as a whole, as the consumer prefers a recognizable trademark, even if they have a higher price than similar products with less recognizable trademark. It shows the importance of loyalty or commitment to a particular type of goods from consumers.

    A classic example of the use of a trademark for strengthening consumer loyalty is the story of the trademark Kodak. The main strategy of the manufacturer was to conduct an effective campaign to create associations with the trademark Kodak with quality film. For example, Kodak film is necessary for capturing fleeting moments of “home comfort” and family relations. The key objectives of the strategy are to transfer the idea to consumers that the Kodak film known to them, that they can trust it, and it is reliable. The company was betting that consumers accustomed since childhood to see how the Kodak film used in their family will give it the preference, even if by then there will be new and cheap films competing companies. Thus, consumer loyalty film Kodak was one of the factors that contributed to increased sales and, consequently, the profitability of the company.

    Profit derived from licensing agreements and franchises

    Trademarks may be the subject of licensing agreements on transfer of rights to use them. The granting of licenses to use trademark can be a very profitable operation, particularly if such a trademark has a good reputation.

    Some licensing agreements are called franchises, since they include the brand name of the company, trademark, trade style, ways and procedures for the operation of the company. According to the International Association of franchisees license, entered on a franchise provide one-third of all retail sales in the United States, including sales of companies such as McDonalds, Coca-Cola and General Motors .

    Effect of trademarks on the value of financial transactions

    Trademarks are becoming more important, acting as a component in the valuation of financial transactions, for example, the acquisition or merger of companies. In this case, the value of a trademark can sometimes exceed the value of tangible assets. Thus, the company Philip Morris acquired Kraft firm for 13 billion U.S. dollars, exceeding the carrying value of the Kraft firm up to 600%! The aim of the company Phillip Morris are loyal consumers of the Kraft firm, which Philip Morris expects to acquire through the use of franchises in grocery trade, and thereby expand the scope of the trademark. Another example of the effect of a trademark on the value of the company is selling the American carmaker «Dodge» of 146 million U.S. dollars. About 50% of the company cost was the trademark.

    «Dodge», which was estimated 74. million dollars, that is, $ 15 million for letter . Other examples of the value of trademarks in the table below

    Rank   Trademark  Country   The cost of a trademark in million U.S. dollars

    1     Coca-Cola   USA     66,667
    2     IBM       USA     59,031
    3     Microsoft    USA     59,007
    4     GE        USA     53,086
    5     Nokia      Finland   35,942
    6     Toyota     Japan    34,050
    7     Intel       USA     31,261
    8     McDonalds   USA     31,049
    9     Disney     USA     29,251
    10    Google     USA     25,590

    In conclusion, it should be noted that, generally, the increasing role of trademarks in the company's business also means that the company may receive the risks associated with losses from violations of its exclusive rights to the trademarks. Therefore, we must once again emphasize the importance of trademark registration for the company, which not only benefit from a strategically thought-out use of trademarks in developing and promoting business, but also effectively deal with unscrupulous competitors.