Choose an apple not a lemon – the power of strong branding

Forbes recently published its 2015 edition of the World’s Most Valuable Brands list. For the fifth time in a row, Apple has topped Forbes’ list. Forbes estimated Apple’s worth at over US$145 billion – more than double any other brand. Other brands to make the 2015 list include Microsoft, Google, Coca-Cola, IBM, and McDonald’s.

Considering that the value of a successful brand can be higher than any other business asset, it is alarming how many companies fail to choose a name that has the potential to generate and sustain such value, or fail to clear this core asset for use and registration in key markets.

Selecting a name that can carry and sustain goodwill

Firstly, let’s not kid ourselves: the success of any business depends upon the foresight, innovation, and good old-fashioned hard work of the people behind it. Without these elements, a business is unlikely to be successful no matter how stupendous its name.

But this is precisely why it is such a shame when a business that has done everything else right gets held back, or even dragged down, by something as deceptively simple as a lacklustre name.

So what are the most important rules to follow when choosing a name?

Rule No. 1 – make your name stand out from the crowd

Do you ever wonder whether brands such as Apple, Google, and Coca-Cola could have reached and sustained such a level of global renown and popularity if they had been given less distinctive names? I believe the answer to this question is no. I can’t see myself paying much notice to products sold under names like Steve’s PCs or Tasty Cola.

Fame depends at least in part upon the ability of consumers to instantly recognise a brand, and associate it with the positive qualities of the product or service offered under it. If a name is not distinctive, it is arguably impossible for it to generate any considerable amount of goodwill.

So, how do you know if a name is distinctive? We often talk to clients about the ‘spectrum’ of distinctiveness: at one end you have terms which are entirely descriptive of the product or service offering (like APPLE for apples), and at the other end you have terms which make no reference at all to the products or services offered (like APPLE for computers).

Distinctive Trade Mark

Very few businesses choose names that are entirely descriptive, because such terms simply can’t ‘do the job’ of distinguishing their goods or services from those of other traders.

That said, many businesses choose names that sit somewhere on the left of the distinctiveness spectrum. There is logic to these sorts of names, because business owners want consumers to see their name and instantly know what the business is offering. So, for example, a business selling environmentally friendly lighting chooses the name ECO-LIGHT. That makes sense, doesn’t it? Well, yes and no.

Having a name that makes an obvious reference to your goods or services can be helpful for a start-up business, because customers will (in theory) be more likely to find your goods and services through a simple web search. But in the long term, having a non-distinctive name is not helpful at all, because chances are there will be other businesses out there using very similar names for the same products or services – no doubt they all chose their non-distinctive names for the same reasons.

Which brings us back to our point about getting the fundamentals right. If your business is innovative, has foresight, and works hard there should not be any need for you to adopt an obvious name. If you get these things right, your customers will find you. You just need to make sure they remember you.

Take a look again at the Forbes list: it is no coincidence that most of these businesses chose highly distinctive names or logos.

Rule No. 2 – make your name inspire

There are undoubtedly numerous studies about the causal association between brand recognition and emotional response. However, common sense will tell you that people choose products and services based on feelings.

Some feelings about brands are learnt through direct experience or word of mouth, but other feelings about brands are evoked from the words or images themselves and are frankly irrational. For instance, when I see the word Lego, I feel good. Is that because I recall playing with Lego brand building blocks as a child, or is it because I perceive the word Lego as inventive and playful? It is probably a bit of both. However, there are games with far less inspiring names which I enjoyed more than Lego building blocks.

There may be a certain je ne sais quoi about how inspirational brand names inspire us, but that is precisely why they provide a competitive edge.

Further, in today’s global economy where businesses offer their products and services to customers in different countries around the world, it isn’t sufficient to choose a name that is inspiring only in one language. Businesses need to choose a name that is inspiring at least in the languages spoken in key markets of interest. If not, you could be forced to choose alternative names for different markets.

Rule No. 3 – avoid negative connotations

More telling evidence of the importance of choosing a name that evokes positive emotions is the reaction consumers have to names that evoke negative emotions.

As noted above, it is important to consider the meanings and consequent associations your name has in all key markets. Barf, which means ‘snow’ in Farsi, has a perfectly acceptable connotation in Iran where it is a used for detergents, however it is clearly not a brand that you would want to use to sell detergents in Australia.

Generally speaking, invented words are ‘safe’ choices when it comes to avoiding negative connotations, because they are less likely to have any meaning or association in a foreign language. For example, names such as Kodak, Intel, and Microsoft do not have negative connotations in other languages. Put simply, the risk of inspiration being lost in translation is significantly lower if there is no translation.

It may seem that avoiding negative connotations would be a natural consequence of choosing an inspiring name, however it is important to remember there is an ongoing need to be vigilant about negative connotations.   Because language naturally evolves, and the connotations of words, letters and images change according to social and political developments, businesses must keep themselves informed about any negative associations that may arise from their use of a name which may originally have had none.

Clearing a name for use and enforcement

We are often asked by clients whether they need to register a trade mark and conduct pre-filing clearance searches. Then we get into a conversation with the client about risk. Although there is no strict requirement to conduct clearance searches or to register your trade mark (at least not in Australia*), by failing to do so you run the risk that you will:

  1. infringe a third party’s prior rights; and/or
  2. be unable to enforce your own rights.

The potential costs of failing to insure your business against these risks cannot be underestimated.

Rule 1: clear your name for use

Ironically, Apple Inc fell afoul of this rule.

In 1978 the Beatles-founded Apple Corps sued Apple Computer (as it was known then) for trade mark infringement. Apple Corps is known for its eponymous records division, whereas at the time Apple Computer had no ties with the music industry. Nonetheless, the goodwill in the Apple trade mark was so substantial that Apple Corps objected to the tech start-up’s adoption of the same name.   This first round of litigation settled in 1981, but further conflicts ensued over the following decades, all concerning Apple Computer’s use of the Apple trade mark.

Eventually, Apple Inc. acquired all rights to Apple Corps’ Apple trade marks following a final settlement reached in 2007. However, the 30 year saga cost Apple Computer significant sums in legal fees and settlement payments, all of which could have been avoided with some astute clearance searches.

Sadly, clearance searching is a commonly cut corner in the intellectual asset management life cycle. Having chosen a brand, many businesses simply choose to file an application and deal with any potential obstacles later. This isn’t just false economy, it is false thinking. If another business owns a conflicting registration for similar goods or services, this prior right could block registration and use of a trade mark. Further, use of a registered trade mark may amount to passing off in light of prior unregistered trade mark rights.

The kinds of problems outlined above are only compounded when a business decides to forego clearance searches in multiple jurisdictions.

Clearance searching may not be the panacea for all a trade mark owner’s woes, but it is an essential risk mitigation tool.

Rule 2: secure a registration for your name

If you have ticked all of the above boxes, registering your name is usually a simple process.   However, delay in securing a registration can lead to problems such as unenforceability and trade mark squatting.

Imagine building a successful business up from scratch, with a distinctive and inspiring name that has been cleared for use, only to find that you cannot enforce it. In common law jurisdictions such as Australia, it is possible to enforce an unregistered trade mark via an action for passing off. However, this approach is extremely costly in comparison to an infringement action, because a passing off action requires substantial reputational evidence. Further, common law trade marks are territorial in nature, so it is only possible to enforce a common law trade mark in the States/Territories where it has been used.   Unless subject to special restriction, a registered trade mark is enforceable throughout Australia, regardless of where the owner’s trading premises are located.

More importantly, there are many countries in which common law trade mark rights are not recognised at all. For all intents and purposes, unregistered marks are unenforceable in these ‘first to file’ countries.

This brings us to the problem of trade mark squatting. Some brands are so well known that they become victim to trade mark squatters who register marks purely for the purpose of selling the rights on at an extortionate price. This practice is particularly common in first-to-file countries such as China, where the rights of the first person to file a trade mark will (generally) have priority over the rights of others, regardless of who adopted the mark first.

A recent example of trade mark squatting involved the internationally renowned Penfolds wine brand. The owner of the Australian trade mark registrations for Penfolds, Southcorp Brands Pty Limited (Southcorp), failed to promptly secure a registration in China for the Chinese equivalent ‘Ben Fu’, despite burgeoning sales in the region. In the meantime, trade mark squatter Li Daozhi registered the Ben Fu trade mark in China and raised allegations of trade mark infringement in light of Penfolds’ sales in China. Some suppliers and sellers of the Australian wine were so spooked by the chain of events that they withdrew the wines from sale. It remains to be seen whether Southcorp will be able to gain control of the Ben Fu mark in China and, if so, at what expense.

To avoid falling into these traps we recommend businesses register their core brands in all major markets as early as possible, and conduct regular gap analyses to identify any emerging markets of interest which should also be considered for registration.

Final thoughts

With so many brands flooding the marketplace in nowadays, the task of choosing a brand that is consistent with your values, inspires your target customers, and isn’t already taken can seem like a daunting task. The good news is there are people who can help.

Your first step should be to retain a creative marketing agency to assist your business to find a brand that ‘fits’. The better agencies will have an awareness of intellectual asset management, and will therefore ensure that you walk away with at least one ‘Plan B’ brand.

Once you have chosen a preferred brand (and possibly a back up brand), a trade mark attorney can help your business clear the brand for registration and use in key markets. Your attorney can also make sure that you maintain, enforce, and (if necessary) increase the scope of your brand protection as your business expands into different markets and into different product or service offerings.

The process of selecting, clearing, and registering a good brand may not be quick, and it certainly isn’t easy, but nothing so important should be.

*Australia is one of several countries (including the United States, the United Kingdom and Canada) in which common law trade mark rights can be established through use. In countries which do not recognise common law rights trade marks must be registered.