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Q&A: Intellectual property law with Drew Smith, founder of Resonate IP
Intellectual Property is key to protecting and building the value of your climate tech business and mitigating risk.
But when should climate tech companies consider protecting their brands and IP? What are the different concepts of IP law and the steps to consider? We sat down with Drew Smith, founder of Resonate IP: an intellectual property law firm, where he answered some common questions when it comes to IP law.
Q: The concept of intellectual property is vague to most of us. Can you break it down for us — What is it? What does it do?
Intellectual Property (IP) can be broken down into four subparts: (1) patents - which cover new inventions; (2) copyrights - an original work of expession, like a piece of music, painting, plays, playwright or play script; (3) trade secrets - anything that derives commercial value from being kept secret. A great example of that would be the formulation [of] Coca Cola. It has immense commercial value as their competitive advantage.
Finally, there are trademarks (4). A trademark can be a brand like Nike and its ‘swoosh’ symbol. It can be a combination of the two or it could be anything that represents to consumers the source of the product. It could be a smell or a color, like the UPS brown. Each of those things in their own right act as a trademark.
What trademarks do is protect the consumer and their purchasing affiliation. If a purchaser sees the product, and has a favorable interaction with it, that generates goodwill. Trademarks protect consumer goodwill, so it’s almost like a consumer protection concept because you don't want consumers to be confused in the marketplace. You want to make sure that the goods you're getting [are] in fact what you think they are.
Q: The first step for a climate tech founder is to find a strong name and logo mark for their business and protect it with a trademark. Why is it important to have a strong trademark?
As a business owner, you want to choose a strong business or product name that is memorable and sets your services apart from the competition.
There’s a kind of spectrum of strength when it comes to trademarks. On one end, you have marks that are completely invented. They're not a word you can find in the dictionary and these fanciful words are considered strong trademarks.
Next, you have arbitrary words that have a known definition, but don’t have a common meaning with respect to that business or the goods or services on which they are used. A great example is Apple and computers. Everyone knows what an apple is, it's a piece of fruit. But with respect to computers or phones, it is going to be considered arbitrary. Arbitrary marks will be considered strong trademarks because the business has the opportunity to define what that arbitrary term means with respect to that business.
In the middle are suggestive marks. Suggestive marks are great from a marketing perspective because they kind of insinuate a key characteristic, feature, or maybe a desired outcome of that product in a way where you're able to really harness consumer perceptions or emotions. Coppertone is a suggestive mark for sunblock because it evokes this [feeling of] ‘Okay, I'm going to be very tan when I'm done using it.’
Finally, on the opposite end of the spectrum are descriptive marks. They describe a characteristic, feature or component, an ingredient, a purpose of the product or the services. You'll see this a lot with beer, cider, coffee, or consumer packaged goods where people will say “Portland Ketchup”, or “Bend Brewing Company”; each of those marks is descriptive, not only because they use ketchup or brewing company as part of the marks, but also because it's geographically descriptive.
If you're using a descriptive or geographic location, that's going to be considered a descriptive mark. Consumers will know almost immediately what you're talking about, but it'll be much more difficult for that descriptive mark to function as a trademark. The United States Patent and Trademark Office (USPTO) generally will not allow registration of purely descriptive marks unless it can be shown it's been used for five years or more. Descriptive marks are also more difficult to enforce against competitors, and therefore will be a less valuable business asset when compared to a fanciful or arbitrary mark.
Q: A climate tech founder has a lot on their plate. At what point should they think about protecting their IP?
I would say it's at its beginning, because once the creative work is done, you really want to make sure that the trademark is available to use. Businesses should know the relative risk before they begin this long journey of building consumer goodwill around that brand. The last thing you want is to change your business name after going to market because you have to rebuild all that consumer goodwill all over again.
After you’ve determined that the name is available, the next step is to secure the name by filing a trademark application to build your business asset.
Anytime I talk to prospective new clients [I ask] “What are your goals?” Do you want to build a business that you can sell? Do you want to take on VC money to grow the business? Do you want to sell into new markets? Do you want to build a legacy business that you hand down to your children? Intellectual property, trademarks, and the other types all factor into that.
Having your IP protected will drive the valuation of your business. The more protection you can show upon the exit or sale of your business, the higher the valuation will be. For instance, you're a business and you’re looking for outside capital to be invested into your entity. If you're able to show a prospective investor that you know that you have your company name protected, that shows to the investor that their investment is going to be safer. There is less risk associated with them putting money into the business.
At its most basic level, intellectual property acts as a risk mitigation tool. It's almost like an insurance policy. It doesn't remove all risks, but it significantly reduces the risk associated with a business.
If properly managed, trademarks can last indefinitely. Some of the most famous trademarks like Coca-Cola, or even some of the newer tech IP such as Facebook and whatnot, those trademarks can live indefinitely, so long as they're being used. By protecting that at the outset, you can really just build a very valuable business asset.
Q. What are some steps that climate tech founders can take to protect their trademark(s)?
I'd say do clearance, make sure it's available. Once you know it's available, take the next step to protect it, such as filing a trademark application with the United States Patent and Trademark Office.
There is a common misconception among small businesses that protecting IP is a luxury that you can only afford once the business is successful. I’d argue that the best time to protect your brand is at the very beginning by filing what’s called an “intent-to-use” trademark application. Intent-to-use applications start the examination process with the USPTO and can allow a trademark owner up to four years to launch the business. Once the business is launched, the federal, nationwide trademark rights will go all the way back to the filing date of the intent-to-use application.
Q: Climate tech founders know the benefits of having good branding. What about having a strong brand? What does a registered trademark have to do with it?
Besides protecting the consumer goodwill associated with that business, having a registered trademark with the USPTO gives a business an upper hand. It can help grow a business into other channels and markets that it might not currently be in. A federal trademark provides brand protection in all fifty states, even if the business may not have expanded nationally when the trademark was filed.
Even if you're a small business, you still need to have some type of online presence. Be it through social media or having an e-commerce website, almost every business is going to have some type of interstate or countrywide component to it. Having a registered trademark is a great way to protect those growth areas.
Finally, a registered trademark with the USPTO becomes “incontestable” after the fifth year of registration, which means that no one can demand that you change your business name based on their prior use. This is really where federal trademarks get their “teeth” and become indispensable business assets.
Q: Protecting climate is a global responsibility. What if climate tech founders want to grow internationally?
Having your brand assets protected nationally allows a business to establish itself and then grow into the world market. There are ways to protect brands in each country or each region, depending on the nature of the business or the goals of the business.
In the United States, trademarks are based on use. You have to actively sell a product or render a service to earn trademark rights or to build that consumer goodwill.
Most countries in the world are going to be “first-to-file” jurisdictions'. This means that anyone can obtain a trademark in a first-to-file country just by filing an application; even if they do not sell a product or actually render a service. This is something companies looking to grow their business should be concerned with. Businesses should be proactive about filing in first-to-countries before they expand operations, not only to protect that area of expansion, but also to prevent bad-faith trademark filings, especially in Asia.
For instance, when you file a trademark in the European Union, which provides protection in all 20+ member countries, you don't have to wait until you sell in each of those individual countries.
Referring back to what I said earlier, think about “What are your goals? Are you looking to build a strong domestic company? Are you looking to have an international component to it?” Start small and steadily build your trademark portfolio as your business expands into new markets. Before you know it, you’ll have a business asset that will drive the company valuation.
Q. I’m sure our readers are ready to dive into trademarks. Do you have any resources that you recommend to people where they can read more?
The USPTO has a large amount of public information where they can learn more. They have videos to learn more about what a trademark is, what a trademark application consists of, and the fees. The US Library of Congress also has a lot of publicly available information. You can really become a student of that information by just putting in some time online.
In the way that I tell everybody, if you want to take this on and try to figure it out, that's better than not doing it. You don't have to go through an attorney. I like to offer my services on a flat or a fixed rate because it allows people to understand what the costs are at the outset. But for people that really want to dive in and to learn more about this, there's quite a bit of information online.
Thank you, Drew, for sharing your insights with the Tofu community and giving us the opportunity to learn more about IP law and how it will benefit climate tech founders.