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Strengthening Commercial Identity: Trademarks and Small Businesses

Insight October 05, 2012

Somewhere in the suburbs of Seattle, never mind where exactly, there is a little apocryphal, bakery called FRIAR ANGELINO’S.  It makes the best bread imaginable – a circle of sourdough, with a flaky outer crust and a warm, spongy interior.  Above the entrance is an old weather-beaten sign depicting a rotund, smiling monk, with a bottle of wine in one hand and a loaf of bread in the other.  Not long ago, an investor approached the owner.  A deal was struck, and now FRIAR ANGELINO’S bakery franchises are springing up throughout the region.  The loaves of bread have also begun appearing in supermarkets, wrapped in simple brown paper bearing the bakery’s trademark:  the name FRIAR ANGELINO’S and a picture of a fat, smiling monk.

Customers are buying the bread.  They see the name and the picture of the fat monk, and they buy.  They buy because they know all the loaves come from the same source, and are of the same high quality.  They buy because they want that particular kind of bread, not some other kind.

The owner is pleased.  In addition to his little bakery and his wonderful recipe for bread, he now has a valuable trademark.  He can put the smiling monk and the name FRIAR ANGELINO’S on any bakery product, and thousands will try it.  He can also sell or license the trademark to others.  That picture of the smiling monk, together with the name FRIAR ANGELINO’S, is now worth quite a bit more than the ancient, vine-covered stucco and brick building where he opened his first bakery at the age of 31.

This allegory reveals one of the best-kept secrets of commercial law:  the potential value of a good trademark for small businesses.  A trademark is any word, name, symbol, device, or combination of these things, that is adopted and used by a business to identify its goods and distinguish them from those of its competitors.  The smiling monk in combination with the name FRIAR ANGELINO’S is an example of a trademark.

Trademarks serve several functions.  First, they identify a business’s goods and distinguish them from those of its competitors.  Second, they signify that all goods bearing the trademark come from, or are controlled by, the same commercial source.  Third, they suggest that all goods bearing the mark will be of the same quality.  Finally, they act as powerful marketing tools, stimulating demand for goods labeled with the trademark.

Used to advantage, the trademark emerges as one of the most powerful legal devices available to business.  A trademark can become the repository of all the consumer goodwill developed during the life of a business.  If, for example, the Coca-Cola Company were suddenly to lose all its tangible assets, it could borrow billions on the strength of its trademarks alone.

Nor is the value of trademarks limited to large companies.  Registering a trademark typically costs less than $1,000, and limited trademark rights accrue to a business before a trademark is even registered.  Reduced to its essence, a trademark is simply the symbolic embodiment of a business’s commercial identity.  And any business, small or large, can benefit from strengthening its commercial identity.

A future article will explore the factors a business should consider in selecting a trademark.